Why are some states’ cannabis programs lagging behind?
As more states legalize adult cannabis and expand their medical marijuana programs, the cannabis market continues to grow. However, this does not mean that all states’ cannabis programs will grow equally. Indeed, some states lag well behind.
State regulations are one of the biggest barriers that cause states’ cannabis programs to lag behind state regulations. These rules can have far-reaching implications. From the speed at which a new program is launched and consumers have access to legal cannabis products to the growth of the market, government regulations have a direct impact.
For example, social justice issues have delayed the rollout of programs in Maryland, Connecticut, and New York. License caps in states like Florida and Minnesota have limited industry growth and patient access, and in some states lawsuits challenging the fairness of licensing applications have prevented companies across the cannabis supply chain from opening up .
Let’s take a closer look at some of the ways government regulations directly affect the accessibility of products, which greatly contributes to the success (or failure) of a state’s legal cannabis program.
8 key factors limiting the growth of the state cannabis program
Observing the state cannabis markets over the years provides insight into a number of key factors related to the growth, breadth, and depth of the state cannabis program. If a country is lagging behind in any of these areas, accessibility will be negatively impacted and the program’s growth potential will be limited:
1. Who is responsible?
Politicians, lobbyists, and regulators in each state play a role in how quickly cannabis programs start and grow within their borders. For example, some states’ programs may take years to get up and running, but both New York and Virginia have accelerated their adult programs to get started.
In New York, legislation to legalize recreational cannabis was “accelerated” by Governor Cuomo in March 2021, and in April 2021, Virginia lawmakers approved measures that extended the schedule for personal cultivation, use and possession of small amounts of marijuana from 2024 to July 1, 2021.
2. Program age
The longer legal cannabis (medicinal and / or recreational cannabis) is available in a state, the larger the legal market is likely to be in that state. Common sense tells us that a program that has been around for a short time has not had time to grow and mature. For example, the programs in Minnesota and New York are newer than the programs in Washington and Colorado.
Ideally, when a state’s program is mature, the rules should be set up so that the program can grow. In this ideal situation, more licenses will be granted, more conditions qualified for medical cannabis, prices stabilized, accessibility improved, and the program having a chance to be successful. If this doesn’t happen (California is a good example), industry growth will be limited.
3. Conditions covered
Research by Cannabiz Media found that four major medical conditions must be covered in order for a state’s medical cannabis program to have a chance of significant growth. If a state covers all of these conditions, its medical cannabis program has a much greater chance of success than a program in a state that covers one, two, three, or none of these conditions.
These four conditions are chronic pain, muscle spasm, spinal cord injury, and post-traumatic stress disorder (PTSD). However, the most important condition that needs to be covered in order for a state’s medical cannabis program to grow is chronic pain.
High taxes can affect or interfere with a state’s legal cannabis program. This includes taxes that businesses and consumers have to pay, e.g. B. Cultivation, consumption and sales taxes.
Additionally, the federal tax structure like Section 280E of the Internal Revenue Code is affecting the growth of the state cannabis industry by limiting the profit licensed companies can make. Without enough profit to reinvest in the business, growth is virtually impossible. Instead, companies struggle to stay open.
5. Local rules
Rules set by counties, cities, and even neighborhoods can affect the potential growth of a state’s cannabis program. In many states, municipalities are allowed to prohibit legally licensed cannabis companies from operating within their borders.
In this case, patients and consumers will have to travel further to obtain cannabis products, which makes them far less accessible to them. Given that many municipalities do not allow the delivery of cannabis, this restriction can be extremely problematic. As a result, consumers could choose to shop through the black market rather than the state’s legal cannabis market.
6. Program and license structure
Some states have extreme restrictions on marijuana business licenses to grow, manufacture, and sell. For example, some states require vertical integration of cannabis operations so that a single license holder controls the cannabis from seed to sale. Florida is an example of a state that requires full vertical integration.
Stacked licensing structures make it much easier for states to oversee activity in the industry, but the structure also limits competition and market growth. This licensing structure has given rise to controversy in several states.
In addition, a state’s licensing process can cause delays in opening new businesses. Depending on how licenses are issued, it is not uncommon for lawsuits to follow when non-licensed applicants turn to the courts to give them another chance by saying the process was unfair.
7. Doctor registrations and dispensary and retailer licenses
People need to have access to a product in order to buy it. If they can’t buy it, the market can’t grow. Some states have far fewer registered doctors recommending medicinal cannabis than others, which can make it difficult for patients to find and visit participating doctors.
Additionally, some states have approved very few adult medical cannabis dispensaries or retailers, meaning patients and consumers may have to drive hours to buy marijuana products.
To put those numbers in perspective, think of it this way: Minnesota is 87,000 square miles, and the state originally limited the number of medical marijuana dispensary licenses to eight. That meant there was a license for more than 10,000 square miles (if the licenses were evenly distributed across the state, which they weren’t). Fortunately, Minnesota regulators announced in December 2019 that the number of pharmacies would double to 16, but in many other states the number (and locations) of pharmacies continue to hamper accessibility.
Fast forward to 2021, and the latest census data shows some shifts in the state population. In states (e.g. Missouri) where the number of licensed pharmacies is determined by population, new licenses must be issued to ensure adequate accessibility. Only time will tell how quickly these licenses will be issued. In the meantime, market growth will be limited.
The bottom line is that in many states, patients and consumers have to travel long distances to gain access to legal cannabis products. There is no doubt that this decreases overall sales, limits the success of a state’s legal programs, and strengthens the black market.
8. Problems with the supply chain
State and local regulations can also create bottlenecks in the cannabis industry’s supply chain – from testing to sale. This can lead to a shortage of products, increased prices, and decreased accessibility for medical marijuana patients and recreational marijuana customers.
For example, research by the Michigan Marijuana Regulatory Agency has found that there aren’t enough testing laboratories to test cannabis products before they can be put on the market. In fact, the investigation found it could take up to a month to complete the required tests. The researchers concluded that the test jam is directly affecting cannabis prices and one of the reasons is that prices in the state remain high.
Not all states are created equal
While the eight factors discussed in this article directly affect the growth of the cannabis industry in many states, they are not the only factors at play, nor are every factor affecting every state. This is an industry full of state nuances, and it’s safe to say that no two states are alike.
What is clear is how these barriers affect a state’s cannabis program and its growth potential. In the simplest sense, they cause less competition, higher prices, and less accessibility for consumers, and neither of those results is what you want in a free and open market.
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Originally published on 9/9/16. Updated 05/07/21.