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Abstract: Governments worldwide are increasingly concerned about the booming CBD (cannabidiol) products. However, little is known about the impact of their liberalization. We exploit a loophole in the Italian legislation that in 2016 unintendedly liberalized light cannabis. In the limited time in which the market was left unregulated, light cannabis availability led to a significant reduction in the sales of anxiolytics, opioids, anti-depressants, and anti-psychotics. Such medical non-adherence is consistent with a rational self-medication hypothesis. Results are informative for regulators and suggest that policies contrasting this “green oil” boom might be welfare-reducing for patients' seeking effective reliefs of their symptoms.
The cannabis market has gained momentum worldwide. Low-strength versions of cannabis such as hemp (or industrial hemp), rich in cannabidiol (CBD), have blossomed in the form of herbal cannabis, lotions, extracts, and candies. For its similarities to medical marijuana, which requires a doctor's prescription, these are often advertised as effective to treat pain relief, anxiety, and sleep disorders. Notwithstanding, little is known about the impact of this new market, which has raised several concerns in the US and UE on the possible health risks associated with these products. We ask the following question:
- Does the availability of cannabis-derived products suitable for self-medication lead to a reduction in the consumption of existing drugs?
Moreover, we provide a "rational self-medication" argument for the diffusion of this product.
Approach & methodology:
We exploit a rare case of unintended liberalization in Italy in which light cannabis was liberalized and commercialized on a large-scale thanks to a loophole in the legislation. We exploit the territorial heterogeneity in the access to the product in the very short-period after the policy (May 2017 to February 2018) using monthly data on 106 Italian provinces (NUTS-3) Italian provinces in a staggered difference-in-differences (DiD) framework.
In the analysis, we consider those prescription drugs for which medical marijuana (but not light cannabis) can be effective. These include opioids, anxiolytics, sedatives, anti-migraines, anti-epileptics, antipsychotics, and anti-depressants.
The local availability of light cannabis led to a significant decrease in the number of dispensed boxes of anxiolytics by approximately 11.5%, a reduction of dispensed sedatives by 10%, and a reduction of dispensed antipsychotics by 4.8%. More nuanced but still significant effects are found for anti-epileptics (-1.5%), anti-depressants (-1.2%), opioids (-1.2%), anti-migraines (-1%). Substitutional patterns are more accentuated, starting from the third month after the introduction of the product in the local market. Indeed, in the short window considered, Italians started abandoning traditional drugs when light cannabis became largely available and suggest that their experience with the product outperformed conventional medicine.
This result further corroborates a rational interpretation of the inferred self-medication: the latter arises when risky products are perceived as more effective in improving the quality of life than existing drugs. Moreover, as light cannabis is paid out-of-pocket, individuals must have compared the perceived benefits of a new non-medical product at market prices and the costs of abandoning a formal therapy at (almost) no cost for them. As such, the increase in the consumer utility from the new product must be at least as equal to the price differential of a dose.
- The Italian case translated into unwanted savings for the State (fewer reimbursements for prescription drugs).
- Banning light cannabis (e.g., Italy, North Carolina, Kansas State) can be welfare-diminishing as patients do not find suitable alternatives.
- Regulatory authorities should be cautious about the potential unintended effects of liberalization policies.
- Trade-off costs with potential benefits.