Ripples of medical marijuana good for local business
The state of Missouri needs to know how many patients will be asking for legal medical marijuana in the next few years, but first officials must decide which estimate to believe.
Advocates who spearheaded November’s successful ballot measure legalizing the drug have put the number at about 200,000 users.
But a University of Missouri team commissioned to study the market is predicting a much smaller demand — more like 26,000 by 2022.
“I would love to know where they got their numbers,” said Joseph Haslag, an MU economics professor who co-authored the study with two other researchers. “I don’t know where they’re getting their stuff, but I can’t say they’re wrong.”
The debate over demand matters because the Missouri Department of Health and Senior Services will have to decide by the end of the year how many licenses to issue for businesses seeking to grow, manufacture and sell marijuana products. The state wants enough dispensaries to meet demand from medical users, while minimizing overproduction that could spill into the illegal market.
It matters more in Kansas City than anywhere else because, at least right now, demand for dispensary licenses is stronger here than anywhere else.
Jack Cardetti, who led the marijuana advocacy group New Approach Missouri, said its projection of 200,000 patients came largely from studying Colorado and Oregon, where about 2 percent of residents had medical marijuana cards before those states expanded to allow recreational use.
Cardetti, who now works for a cannabis trade organization, said that’s more in line with what Missouri should expect, and Haslag’s projections are “extremely inaccurate.”
“The idea that after three years that we would have less than one-half of 1% of Missourians with medical marijuana cards is just not based in reality,” Cardetti said.
Under the ballot initiative voters passed, Missouri has to issue at least 192 dispensary licenses, a minimum of 24 in each of the state’s eight congressional districts.
It’s an unusual system that will force the state health department to weigh both statewide demand and geographic distribution in deciding how many licenses to issue. While all congressional districts have roughly equal population, so far dispensary applications have not been equal.
District 5, which includes Kansas City, led all districts with 63 applications as of March 28, the most recent figures available. No other district had more than 40.
So unless the health department decides to give out more than the minimum number of licenses, it will be issuing more denials in Kansas City than anywhere else, at least as it stands now.
Lisa Cox, a spokeswoman for the agency, said it’s possible some congressional district will get more than 24 dispensaries. She also said the pre-filed applications are based on where the applicants live, not where they’re hoping to open their business.
“We may not know exact locations of these businesses until official applications are submitted in August,” Cox said. “With that said we don’t expect the numbers and locations to be far off from what pre-filed fees show us.”
Haslag’s analysis estimated that Missouri won’t even need the mandated 192 dispensaries, that 115 to 132 would suffice. But he said it wasn’t easy to get good data, and his patient projections may be low.
“I did the best I could and I used models that I thought were reasonable, but I will say I wish I had better data from the states that have implemented this,” Haslag said. “It is hard to get good data from those guys.”
Cardetti said he’s confident that there will be enough legal medical marijuana patients to support 24 or more dispensaries in each congressional district, though some of them may have to be small.
He said the minimums were set with patients in mind, more than profit margins.
“With 192 dispensaries we think that would be really good access points for patients,” Cardetti said. “We want there to be enough to where there is competition within a closed market.”
Colorado and Oregon had many more dispensaries, he said, and smaller populations than Missouri’s.
He also pointed out that Oklahoma, which just legalized medical marijuana last June, has already approved more than 1,000 dispensary licenses. The law that Oklahoma voters approved has few limits on dispensaries and gives the state just two weeks to vet each application. But it remains to be seen whether the new market there will support all of the businesses looking to start up.
Comparing demand for dispensaries from state to state is difficult because the numbers shift quickly and each state has different rules about who qualifies as a patient.
Some also set strict caps. New Jersey, for example, had a limit of just six dispensaries statewide until last year, when lawmakers doubled it because the six were overwhelmed by demand.
But it appears that even if Missouri only has the legally mandated minimum of 192 dispensaries, that would be among the most of any medical-only state.
New Mexico, which has had legal medical marijuana for more than a decade, has 90. Maryland, with a relatively new program but roughly the same population as Missouri, has 71. Even Arizona, with a well-established program and 186,000 qualified patients, only has about 130.
But Miles Light, an analyst with the Denver-based Marijuana Policy Group, said those states all have fairly restrictive medical cannabis programs and are rolling them out slowly.
Light said a dispensary needs a minimum of about $800,000 in gross sales per year to be viable. A state of Missouri’s geographic size and population certainly could support 192 dispensaries or more, he said.
There won’t be enough business for 192 shops if Haslag’s patient projections prove right, Light said. But he doesn’t think they will.
“This happened in Massachusetts in 2016,” Light said. “The legislature selected local economists with no prior cannabis experience. As a result, the state is now 24 months behind schedule regarding store rollout, supply, sales, taxes and legal market capture.”
That won’t happen in Missouri, where the constitutional amendment sets out a clear and tight timeline for the health department to start accepting applications and issuing licenses.
The state will begin accepting business applications in August and will then have 150 days to determine who will get them. Meanwhile, in June the state will publish application forms for patients seeking to use medical marijuana and will begin evaluating them the following month.
Haslag said whether his projections turn out to be accurate or not, his team’s main recommendation for the health department stands: that it carefully monitor, in real-time, the price and quantity of medical marijuana moving from growers to dispensaries to patients to determine whether most of it is going where it’s supposed to rather than being diverted for illegal use.
“I will say that they have been extraordinarily open to the ideas of what kind of data they’re going to need and what kind of data they’re going to release,” Haslag said. “I shared my frustration with so many states withholding critical data.”