Why is New York’s Medical Marijuana Program Already Burning Out?

Projected Success for Medical Marijuana Programs

When Colorado reported booming monetary success for its medical marijuana program, we all presumed that a medical marijuana program would be a hit success in other states. After all, Colorado confirmed with a study that it generated major tax revenue. The study was conducted by the University of Denver economics professor Jack Strauss, who took a look at two of Colorado’s local dispensaries. In the study, it was discovered that Evergreen Apothecary and Colorado Harvest Company pay roughly 10 times the amount of taxes that an average restaurant, or retail store, in the city pays. The study also approximated sales for both the stores at $11.2 million, and postulated that these businesses will pay nearly $1.5 million in state and local taxes. So what’s not to love, right? And why hasn’t New York been able to replicate this kind of success? Why has New York been, in fact, crashing and burning with its medical marijuana program?

Restrictions, Restrictions, Restrictions

When the New York medical marijuana program was in its earlier stages last year, the state health commissioner declared it a success. Currently, that couldn’t be further from the truth. And as it turns out, the reason why New York’s program hasn’t been so much of a success is its surprisingly restricted access. New York restricts the conditions upon which a person can be prescribed medical cannabis, more than other states. Up until very recently, the conditions that could earn you medical marijuana prescriptions included only Cancer, ALS, epilepsy, HIV/AIDS, Huntington’s Disease, IBS, Parkinson’s, Multiple Sclerosis, Neuropathy and spinal cord damage [Barry Bard, New York’s Medical Marijuana Businesses Are Failing. Marijuana.com. Published on March 14th, 2017] Even though this might appear to be a decent enough list, it’s missing a key condition that a very large number of medical marijuana users suffer with: chronic pain. Luckily, New York is finally doing something about this. Chronic pain is to be added to the list later this year. “Improving patient access to the medical marijuana program is a top priority for DOH,” the department said in a statement to The Cannabist. [Michael O’Keeffe. New York medical marijuana program improving, but will it ever reach full potential? The Cannabist. Published on January 20, 2017] This is expected by many to bolster the crumbling dispensaries that are currently spending more than they make.

But there’s a second problem that makes people view the DOH’s move as somewhat half-baked. Kate Bell, legislative counsel for the Marijuana Policy Project, is among those critics. The proposal to add chronic pain will only allow medical professionals to recommend cannabis if all other options, basically opioids, have failed. People looking to forego going through messy painkiller addiction or withdrawal altogether are in a tough spot. Quite understandably, they’re more likely to turn to the black market instead since it is less of a hassle, even though doing so wouldn’t be exactly safe either. Illicitly grown cannabis could have potential mold or pesticide risks that regulated cannabis wouldn’t. “New York adding chronic pain is somewhat misleading,” Kate Bell said. “What they are really saying is ‘We are going to let some people with chronic pain use medical marijuana.’”

The other problem is with patient ability to connect with licensed medical marijuana doctors and personnel. Even though there are 800-plus practitioners, there isn’t a public listing. There is a private list provided by the state, if you log into the state’s Health Commerce System. Other patients have resorted to using the website MarijuanaDoctors.com.

Finally, what a lot of it comes to is a bad supply and demand model. The supply is high but the demand is low. Some of this is due to expense. A vape cartridge that might go for $35 in Colorado is running around $100 in New York. And we all know New York is already an expensive place to live already. Perhaps, with those kinds of prices, medical marijuana is seen as a luxury medication. Even though, for many, it is an absolute necessity.

How Bad is Business?

So far, you’ve heard all about why it’s so bad. But how bad is it? The industry was preparing for an estimate of 200,000 patients to start with. [Tom Precious, Medical marijuana business in New York is a bust so far. The Buffalo News. Published on March 12, 2017]. However, a mere 14,000 patients have enrolled in the program to buy from any number of the 20 licensed dispensaries around the state. And sometimes these dispensaries are in clusters and not conveniently located for the patients. This disarray in the numbers is a huge blunder for business, since getting into the cannabis business can be a huge investment. Back in 2015 when Hawaii was looking at dispensary applicants, experts cautioned that it can take $3 to $5 million just to run a dispensary. [Lorin Eleni Gill, Potential Hawaii medical marijuana dispensary license applicants map strategies. Pacific Business News. Published on July 17, 2015] That’s not including the licensing expenses, which are also outrageous, costing hundreds of thousands.

“The five companies now producing medical marijuana have cut production or are sitting on huge stockpiles. At PharmaCannis, $40 million worth of cannabis sits in a vault waiting to be processed into its final form while three-quarters of a metric ton of cannabis hang on wires in drying rooms waiting to be processed. Production is running at 10 percent capacity after cutting production in half because inventory was backing up.” —-The Buffalo News

One licensee has already been forced to sell the business and license to a Californian entity. It is uncertain how well the other ones will be able to sustain this bleak market. If it is to turn around then New York will need to see an easing of the restrictions on chronic pain users, more medical professionals on board and signed up to offer prescriptions, lower prices on the product, and better ease of access. Hopefully, the New York medical marijuana program will be able to weather this storm.


Daniels College of Business, University of Denver
The Business Journals
Buffalo News
The Cannabist

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