Source: GW Pharmaceuticals.

Whether you're ready to admit it or not, the marijuana movement may be unstoppable.

As Gallup reported in October of last year, for the first time in history, more respondents were in favor of legalizing marijuana than were opposed to its legalization. To put this into some context, just 34% of respondents were in favor of legalization in 2004, demonstrating just how swiftly the tide has turned in favor of legalization.

Marijuana's medical benefits take stage
But, the legal marijuana movement may yet gain even more steam on the heels of its possible medical benefits. GW Pharmaceuticals (GWPH) has devoted its pipeline to discovering cannabinoids from the cannabis plant it plans to use to effect biologic change via the natural cannabinoid receptor system discovered by GW within our bodies. GW Pharmaceuticals already has Sativex approved in more than a dozen countries outside the United States to treat spasticity associated with multiple sclerosis and has the hope of bringing its cannabinoid-based drug to U.S. pharmacy shelves soon, depending on the results from its three late-stage clinical studies examining Sativex as a treatment for cancer pain.

GW Pharmaceuticals isn't alone, either. Insys Therapeutics (INSY) is in the process of developing a longer-lasting version of THC-based Marinol which it hopes can be used to prevent nausea in patients who are undergoing chemotherapy.

Source; GW Pharmaceuticals.

Furthermore, additional studies have emerged that hint at medical marijuana's benefits over traditional medicines. As we examined in late August based on an abstract published by JAMA Internal Medicine, medical marijuana may also be a smart solution to lowering long-term medical care costs due to its ability to divert chronic pain sufferers from using and potentially overdosing on opioid-based therapies.

With more states forecast to legalize marijuana on a recreational level, and a handful of states expected to allow marijuana to be used for medical purposes, the value of the legal marijuana industry is soaring. However, quantifying how much this industry is actually worth has been practically impossible to do... until recently.

How much is legal marijuana actually worth?
According to a report released by Marijuana Business Daily in April, the legal marijuana industry is expected to grow from just $1.4 billion to $1.6 billion in 2013 to between $7.4 billion and $8.2 billion by 2018.

Specifically, the report estimates that recreational use will outpace medical marijuana in terms of sales by 2018, with recreational marijuana accounting for $3.8 billion to $4.2 billion in legal marijuana sales in 2018.

Graph by author using midpoint of estimated sales by year. Data source: Marijuana Business Factbook via Marijuana Business Daily. 

MBD's predictive model assumes that four to five new recreational states will enter the fray by 2018, while another two or three states will legalize marijuana, bringing the nationwide total of medical marijuana-legal states to nearly half of all states.

Furthermore, MBD estimates the black market for marijuana is worth about $40 billion, leaving states plenty of opportunity to generate revenue through the taxation of sales of the schedule 1 drug following legalization. In Colorado, for instance, which recently legalized marijuana for recreational use, tax revenue has more than doubled from a hair of $3 million in January to more than $7 million as of July.

Of course, it's worth noting that states are rarely forthcoming with accurate marijuana sales data, making the idea of estimating current and future legal marijuana sales a genuine challenge. Colorado is among the few exceptions. It also will depend entirely on how individual residents vote in key states that have recreation marijuana up for vote. These totals could certainly swing up or down depending on the way elections swing in the coming years.

Source: Damian Gadal via Flickr.

Should insurers and hospitals rejoice?
With medical marijuana usage projected to nearly triple (based on this report) between 2013 and 2018, it could actually be a reason for insurers and hospitals to jump for joy. It remains to be seen if any cannabinoid-based drugs will be approved by the Food and Drug Administration in the U.S., thus we have no idea on the potential pricing of these drugs, but the idea that marijuana-based medications could replace opioid therapies that have highly addictive qualities could be good news for hospitals and insurers, which spend a fortune on opioid overdose/abuse costs.

Additionally, having a new treatment pathway in medical marijuana could improve drug competition across a number of diseases and ultimately make pricing more competitive for the industry as a whole. Increased competition should help push prices down, allowing insurers and hospitals to pay out less and boost their margins in treating select ailments. Now, keep in mind I'm jumping ahead, here, and assuming that a handful of marijuana-based experimental drugs will be approved, so there's certainly plenty of wiggle room to my interpretation.

It's important you don't forget this
However, the most important thing investors can remember as they observe the evolution of the legal marijuana industry is that the federal government still hasn't changed its stance on marijuana as a schedule 1 drug. Don't get me wrong -- the U.S. Drug Enforcement Agency has developed a hands-off approach to legal marijuana, allowing individual states to regulate the drug on their own. However, the idea can't be ruled out that the DEA won't get involved in the future if the regulations that guide growing and distribution standards in legal marijuana break down at the state level.