The legalization of medical cannabis has picked up steam over the past couple years, with 23 states and Washington D.C legalizing the drug in some form. While legalization has expanded access for many patients, the tight regulatory environment and high taxation has kept prices far from affordable for patients that have the greatest need for the substance to treat conditions like epilepsy.
For example, consider children suffering from childhood epilepsy – a condition that has been dramatically reduced with the help of medical cannabis. The parents of these children have been so desperate to even obtain medical cannabis that they have moved in droves to states like Colorado. Even there, the costs associated with obtaining a steady supply of medical cannabis can be prohibitively expensive.
In this article, we’ll take a look at how Novus Acquisition & Development Corp.’s (OTC: NDEV) plan to offer medical cannabis “insurance” could help solve these issues.
Tallying Up the Costs
Medical marijuana costs about $10 to $15 per gram in many states, with the average user consuming one to three grams per day. Over longer time periods, these costs add up to $300 to $1,350 per month or between $3,600 and $16,200 per year. These costs are especially significant given that many medical cannabis patients and their families are already suffering from costly medical conditions.
For the average U.S. family with a median income of $51,017 per year, or $4,251 per month, these costs represent 7% to 32% of their income. Many of these families may already be facing higher medical bills, as we mentioned, including excess doctor visits, surgeries, and prescription drugs that aren’t covered by insurance. In many cases, medical cannabis is also the only viable option for the patient.
By comparison, the cost associated with taking prescription drugs is negligible when the patient has insurance. The co-pay for many prescriptions amounts to $10 to $40 for a month’s supply, depending on whether they are branded or generic pharmaceuticals. In fact, the healthcare system is designed to ensure that prescription pharmaceuticals are affordable for nearly everybody.
Since cannabis remains a Schedule I Controlled Substance on a federal level, traditional health insurance plans do not cover medical cannabis. The medical cannabis industry also lacks the proper systems to support insurance programs, including nationwide standards for quality control, distribution, prescription writing, and even simple things like reliable access to formal banking services.
Filling the Void
Many companies like GW Pharmaceuticals plc (NASDAQ: GWPH) and Insys Therapeutics Inc. (NASDAQ: INSY) have been focused on bringing cannabinoid-based therapies through clinical trials in order to provide legal prescriptions. If that occurs, patients will be able to purchase the prescriptions using their existing health insurance plans and pay the affordable co-pays associated with them.
The problem is that many of these clinical trials take time to complete and they are only covering specific conditions. In the meantime, patients are left paying high costs, relocating, giving up work, or forgoing other expenses to obtain medical cannabis treatments. As a result, there’s a clear void in the market for a health insurance-like program designed to make the medicine more affordable to everyone.
Novus’ MedPlan aims to fill the void by offering an “insurance” plan that provides patients with medical cannabis discounts if purchased in-network. The company’s network of patients, physicians, and manufacturers creates the capacity to deliver economy-of-scale benefits to all parties, and especially patients who gain access to considerable healthcare savings and a safe and reliable source of product.
For instance, assuming that Novus is able to offer patients a 20% discount and offers a plan priced at $20 per person, a patient spending $600 per month could save $100 per month by enrolling in the program ($120 savings minus $20 cost). For many families already facing high medical bills, the costs savings could add a lot of money to their budget to be used for basic expenses like food or housing.
Investors have clearly embraced the idea of providing insurance-like services to the medical cannabis sector. Over the past three months, Novus’ stock has risen approximately 150% to reach a market capitalization of over $66 million, according to OTC Markets data. The rise could just be the tip of the iceberg as the company has already begun rolling out its program in new states.
According to the Marijuana Policy Project, there are approximately 2.4 million medical cannabis patients in the United States, representing about 0.7% of the population. Capturing just 1% of the market would translate to 24,000 covered patients paying $480,000 per month in premiums and generating nearly $5.8 million in annual revenue for Novus shareholders.
Investors in the medical cannabis space may want to diversify beyond companies providing treatments, such as Medical Marijuana Inc. (OTC: MJNA), and into companies like Novus that are providing high-value ancillary services with limited competition. As medical cannabis continues to grow in popularity, driven by new research showing efficacy, the company could be positioned for growth ahead.
Novus plans to roll out its Novus MedPlan on October 15, 2014 and patients can pre-enroll now, without cost, and receive one month free in states that currently have MMJ legislation passed or have MMJ legislation on the November 4, 2014 ballot at http://novusmedicalgroup.com/preenrollment.htm
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