Is Washington’s Medical Marijuana Industry Dying?

October 27, 2016

In Marijuana Business Daily, reporter John Schroyer penned a seemingly ominous warning in his article, Medical Cannabis Industry in Washington State on Life Support. Schroyer argues the medical cannabis industry is (essentially) dying in Washington State. Quite a bold statement, and if true, it’s one with serious implications; not just in Washington, but the country as a whole, where many states  have been closely watching Washington State’s cannabis industry as they consider their own approaches to legalization of medical and adult-use recreational.

Schroyer believes that as a result of Washington State voters enacting legislation in 2012 to consolidate the previously unregulated (or under-regulated) medical cannabis market with the heavily regulated adult-use market, there is now “almost no distinction between medical and recreational.” Well, he’s right.

Certainly, as the industries have morphed, the lines have become increasingly blurred. But, is this a good thing — or a bad thing? There’s no indication that fewer people are using cannabis to treat medical conditions. (In fact, as the virtues of medical cannabis continue to be validated by study after study, and accepted by mainstream medicine, the number of patients continues to grow across the country.) Unfortunately, it does appear that it is harder for businesses to serve medical patients than it is adult-use recreational users. And, at face value that certainly doesn't seem to be a good thing for patients who genuinely use cannabis for medical purposes.

Schroyer points to the fact the number of collectives and medical dispensaries in the state once eclipsed 1000, but new regulations in the recreational market mandated they obtain new business permits from the newly formed Liquor and Cannabis Board (LCB) by July 1, 2016, else face closure.

Regulatory changes increased the number of retail permits from 334 to 556, leaving only 222 additional retail permits that medical dispensaries could apply for. So what happened?

Hundreds of previously legitimate medical dispensaries either had to secure a retail permit, or be left with no means of operating legitimately. Some went quietly, while others were raided by law enforcement for serving patients without the required permits.

As Schroyer notes, according to the Washington Department of Health, out of estimated pool of 100,000 patients, only 13,014 medical cannabis patients registered to purchase “medical grade” cannabis products such as high-potency edibles.

Why wouldn’t patients sign up for the registry? Could it be because they weren’t legitimate patients to begin with? That may explain a small portion of the numbers. But, there may be other reasons. Notably, patients may not want their name on a state registry when a medical card doesn’t provide much benefit. As far as financial savings, patients are exempt from paying the 9.6% sales tax, but are still required to pay the 37% excise tax. And, as far as high-potency “medical products,” those products are probably not as important to patients as some would lead us to believe.

(As I reported in Leafly, Less is More: Why Low-Dose Cannabis is Important, numerous studies have shown that high-potency products are less therapeutically effective than moderate dose products. Moreover, studies have also shown that most consumers prefer the effects of moderate-potency products to their high-potency counterparts.)

Nonetheless, perhaps most distressing is what dispensaries have to go through to continue serving medical patients: they need to have a state-certified clinical cannabis consultant on staff and secure an endorsement from the LCB. Having a certified clinical cannabis consultant on staff is a good idea, however, it doesn’t come cheap. Each consultant must go through 20 hours of training and pay $395 for the certification and pay a $95 fee to the Department of Health. Clearly, many dispensaries don’t see a business benefit to jumping through the extra hoops, especially if your shop’s consumer base is mainly recreational users.

And if that wasn’t enough, there are more regulations that disincentivize business from serving medical patients. Regulations require additional testing and distinct labeling that increases their costs and affects their bottom line.

On the surface, it clearly seems patients end up on the losing end of the deal. But, maybe not.

In spite of all the new hurdles, 155 retailers have opted to adhere to the new regulations in order to serve patients and serve a key demographic that most benefits from medical cannabis. “Because of our tradition and our roots in medical marijuana and helping people, myself as a business owner, I suck it up and I do the stupid thing for the business,” medical dispensary owner Karl Keich told Marijuana Business Daily.

Schroyer notes that many owners believe medical cannabis will survive, if not thrive, and that: “It’s just a question of how the industry is structured and whether businesses will focus on medical uses and manufacturing medical-specific products.”

Ultimately, it may just be a lot of hoopla about nothing. The industry is still young and learning how to serve distinct, but often overlapping markets. Even when all dispensaries were technically “medical,” there was little assurance that patients were being served to their best interests. And, when there’s a void to be filled, someone will fill it. Web-based companies like HelloMD and Zana Medical provide clinical guidance and even connect with patients with experienced physicians who are knowledgeable and qualified to advise patients. As medical and recreational markets continue to consolidate not just in states like Washington, but soon California and other states, an effective model of coexistence will not only evolve, but thrive. And, as that happens, everyone wins!


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