What The Johnson & Johnson Opioid Ruling Means For The Cannabis Industry

In late August, Johnson & Johnson (NYSE:JNJ) was hit with a hefty $572 million fine for its role in the opioid crisis in Oklahoma, which was still not as bad as it could have been. In what could prove to be a monumental case in the U.S., it could just be the beginning of a much larger fallout. As many as 130 people die daily as a result of overdosing on opioids.

Johnson & Johnson and other pharmaceuticals have reason to be worried, as Oklahoma's opioid problem is not nearly as severe as it is in other states. According to 2017 data from the Centers for Disease Control and Prevention, the state had a death rate relating to drug overdoses of 20.1 per 100,000 people, with 775 total deaths occurring that year. In contrast, West Virginia had the highest rate of death at 57.8 per 100,000 people while Pennsylvania, Florida, and Ohio each had more than 5,000 people lose their lives as a result of overdosing. While the fine in Oklahoma may not be that big of a burden for Johnson & Johnson, the amount could be a drop in the bucket compared to what a potential payout may be in other states should they be successful in pursuing similar types of litigation. The company said it plans to appeal the ruling.

The cannabis impact

The importance of the issue is evident from a cost standpoint, especially if the ruling against Johnson & Johnson holds up. Companies are likely to start taking opioids more seriously and look into alternative treatment options. One industry where healthcare companies may start to focus on is cannabis. Colorado, New York, and Illinois already allow doctors to recommend cannabis in place of opioids.

The challenge when it comes to cannabis is that while there's a lot of anecdotal evidence claiming marijuana use helps users deal with pain, there just isn't hard data to support that. To make matters worse, it's also hard to get research done on cannabis to be able to even prove or disprove its effectiveness since it remains a Schedule I drug, illegal on a federal level. These limitations make it difficult to prove whether cannabis can help the situation or not.

In addition, there has been research to suggest that cannabis is not a blanket solution to the opioid crisis. However, the research is by no means comprehensive and there's a clear need for more research before any definitive links can be drawn. Even one of the more critical studies acknowledged that "a great majority of adults who used cannabis did not go on to initiate or increase their nonmedical opioid use." Meanwhile, veterans are urging the government to help them access medical marijuana, which has been more effective for some in treating post-traumatic stress disorder than opioids.

Unfortunately, there's no one right answer to the question of whether cannabis can help the opioid crisis. What is evident, though, is that more research is needed to help understand in which circumstances it may be helpful and in which it may not be. To say conclusively that it does or doesn't help would be premature given the conflicting data.

We're still early in the process

To date, only GW Pharmaceuticals (NASDAQ:GWPH) has successfully launched a cannabis-based drug in the U.S., called Epidiolex. And it could be a long time before we see any others get approved as well given the legal hurdles involved. However, the Johnson & Johnson ruling could be the catalyst that at least gets pharmaceutical companies looking into potential alternatives, ones that include cannabis.

Why this matters for investors

From an investment standpoint, there's obviously a lot of potential growth that could be at hand for a company with a significant position in the medical marijuana segment like Aurora Cannabis. If cannabis is shown to be an effective treatment option in place of opioids, we could see much more demand for Aurora's products and for the industry as a whole. It could also lead to a big pharmaceutical company finally dipping its toes into the medical marijuana market. It's very early on, but last week's ruling could help lead to some medical professionals taking another look at cannabis, and that could be huge for the industry.

This article originally appeared in the Motley Fool.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.