Although medical marijuana is legal in over half the United States, not all of these programs are created equal. Some are comprehensive, giving patients with a laundry list of qualified conditions the freedom to access various strains of marijuana with a recommendation from a licensed physician. Others are more restrictive. These typically only give patients with specific debilitating conditions, like certain types of epilepsy, the freedom to treat their symptoms with a legal form of cannabis.
This toe-in-the-water approach to medical marijuana forces participants to rely almost exclusively on expensive, low-THC cannabis products. It also requires them to jump through a series of hoops (approval from more than one doctor, etc.) before they can even begin to think about visiting a dispensary. These factors alone prevent many qualified patients from leaning on legal sources. Instead, they continue frequenting the black market, where they can get their hands on the real medicine they need.
Despite all of the problems surrounding low-THC medical marijuana programs, cannabis companies scramble like wild-eyed fiends to get in on the action whenever a state approves a program of this kind. But as many of them have learned, the restrictive nature of these programs does not come with the promise of a golden goose at the end of the day.
Louisiana is set to launch its medical marijuana program in the coming months. The law was designed to give patients with around 10 “serious conditions” access to low-THC cannabis products. Because the state has a no smoking rule, no raw flower can be sold.
But now the companies approved to service Louisiana patients are starting to panic because they say the current business model does not provide them with an opportunity to turn a profit. There simply isn’t a strong enough customer base for any of them to operate in the black.
Needless to say, Louisiana’s cannabis industry is nervous.
“They’ve said, ‘When I look at the numbers, when I look at the disease states, and the amount of recommendations it will generate, this business model is going to be tough to be profitable,’” State Senator Fred Mills, who introduced the state’s medical marijuana legislation, told the New Orleans Advocate.
As it stands, the state expects 1,441 patients will have access to medical marijuana. It has been said that a program needs at least 30,000 patients for dispensaries to stand a fighting chance at survival. But the only way to increase patient participation is by expanding the law – adding more qualified conditions is the most logical start.
A recent study by LSU AgCenter suggests that “once legislators expand the list of debilitating medical conditions,” making sure to include “chronic pain,” the program will service more patients.
Until that happens, however, cannabis companies can expect to hear crickets when they open their doors later this year. It is a situation where only the most financially sound organizations can push through without their coffers entering starvation mode.
Sadly, all of dispensaries set to sell cannabis products to Louisiana patients are expected to operate at a loss.
“If our program stays the way it is, these companies are going to lose their shirts,” Kevin Caldwell, president of the cannabis reform organization CommonSense, told the Advocate. “Our concern is that because of the cost associated with getting this program off the ground, the medicine they provide to patients is going to be so expensive, patients aren’t going to be able to afford it.”
The complaints coming from Louisiana’s cannabis sector is not anything new. Every state that has passed similar medical marijuana laws has driven its cannabis businesses to the brink of bankruptcy.
Minnesota and New York are two prime examples.
The two medical marijuana dispensaries operating in the Land of 10,000 Lakes reportedly lost $11 million during the first two years of operation. The situation has improved slightly since the state approved “intractable pain” as a qualified condition. But the additional patients generated from this expansion are only expected to bring these companies to the point of break-even.
In New York, the state’s initial five medical marijuana producers struggled to get by on only around 1,000 patients during the first year of operation. In fact, the state’s cannabis industry generated only around $16 million during that time. That was before operating expenses and taxes. These businesses also invested millions of dollars in lobbying funds before ever receiving approval to set up shop
Just as the state’s medical marijuana program saw a modest expansion last year, with the addition of chronic pain and PTSD to the list of qualified conditions, health officials approved another round of medical marijuana licenses that continues to prevent any of the companies from turning a profit. This in spite of the fact that patient numbers have increased significantly. The state now has more than 30,000 registered participants. Still, the cannabis firms connected to the program aren’t getting much relief.
Perhaps the only hope for these companies is that the New York will eventually move to legalize for recreational use. A step in this direction could leads to billions.
Some cannabis companies get involved with restrictive medical marijuana states based on the possibility that the program will improve, allowing them to secure the ground floor of a budding industry. But so far, none of the states that have implemented restrictive medical marijuana laws (CBD-only) have moved into more comprehensive programs. This means some of the cannabis businesses that deal with these so-called medical marijuana states could be on borrowed time. It’s a situation where a seemingly good first step could be their last.
By: Mike Adams, Forbes