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MA Medical Marijuana Biz: Boom or Bust?

Saturday, November 24, 2012

 

Entrepreneurs are already jumping at the chance to get in on the ground floor of the Commonwealth's medical marijuana industry, but pot activists said opening a dispensary could end up costing more time and money than it's worth.

Bay State voters approved ballot Question 3 to legalize the medical use of marijuana by a 63 percent to 37 percent margin. The proposed Medical Use of Marijuana law will remove state criminal and civil penalties for the medical use of marijuana by qualifying patients. In order to qualify, patients must be diagnosed with a debilitating medical condition, such as cancer, glaucoma, Parkinson's disease, multiple sclerosis or several others.

Under the law, patients will be permitted to possess up to a 60-day supply of marijuana for personal medical use, the amount of which would be determined by the Commonwealth's Department of Public Health (DPH).

Non-profit medical marijuana treatment centers will be permitted to grow, process and provide marijuana to patients and registered caregivers. A maximum of 35 treatment centers can be established in 2013, with at least one but no more than five in each of the state's counties. The number of treatment centers can be modified in later years by the DPH.

The law takes effect on January 1, but patients won't wake up on New Year's Day to find treatment centers having sprouted up overnight. The DPH will still have the first 120 days of 2013 to develop and release its official registration applications, licensing and distribution systems.

"The Department will work closely with health care and public safety officials to develop smart and balanced policies and procedures over the coming months," the DPH said in a statement following the ballot measure's passage.

"We will work carefully, learn from other states' experiences, and put a system in place that is right for Massachusetts."

A Budding Opportunity

Even though the specifics of the Massachusetts medical marijuana industry are still up in the air, many would-be pot providers are already starting to lay the groundwork so they will be able to take advantage of the potentially lucrative business coming down the pipeline. And medical marijuana consultants have set up shop to help them get the most green for their green.

According to SeeChange Consulting Inc., an independent financial analysis firm that specializes in new and unique markets, the medical marijuana industry generated $1.7 billion in 2011. That number is expected to climb to nearly $9 billion in the next four years.

Consulting company DispensaryPermits.com, which has worked with treatment centers in California, New Jersey and Arizona, recently opened a new office in Boston to help guide entrepreneurs through the complex legal, financial, and still-in-progress application requirements of the Bay State's medical marijuana program.

With Colorado and Washington both passing legalization laws this Election Day, DispensaryPermits.com partner Jig Patel said most of the major companies in the marijuana business will be focusing their efforts on the West Coast. And while New Jersey only granted six permits for treatment centers in the entire Garden State, Massachusetts will grant 35, creating a substantially larger playing field.

"It's still going to be very competitive in Massachusetts," said Patel, who has already received inquiries about obtaining a dispensary permit from interest parties in the Commonwealth and as far as Tennessee and Florida.

Once the DPH starts taking applications next spring, Patel was hopeful that they will be turned around in a few months, and the Commonwealth could see its first dispensaries opening in January 2014.

A Sticky Business

Bill Downing, the treasurer for the Massachusetts Cannabis Reform Coalition (MassCann), the state affiliate of the National Organization for the Reform of the Marijuana Laws (NORML), was less optimistic.

"I wouldn't expect that you'd see any operations like that until 2015," he said.

Like DispensaryPermits.com, MassCann has also heard from many people interested in being a part of the budding medical marijuana industry in the Bay State, but Downing has tried to temper their enthusiasm in light of the financial and political realities of how the new law will likely be implemented.

"Once a dispensary gets state approval, that just starts their process," he said. "They have to go through all kinds of stuff. The town process might be quite onerous."

In Worcester, City Councilor Konnie Lukes raised the subject last week, requesting a report on the process for the location of distribution centers and the zoning, permitting, licensing, storage, security and production issues associated with the dispensing of medical marijuana.

"There are more questions than there are answers, I thought we better start on the path early and see where we're going with this," she said.

"I wouldn't want them in here, but we're the second-largest city in the Commonwealth so I don't know how we're going to keep them out."

Downing predicted a similar reaction from many municipalities where dispensaries may try to locate.

The other major hurdle that many people are not aware of, he said, is the sheer amount of money required to set up a marijuana cultivation and distribution operation.

"It's going to take literally hundreds of thousands of dollars."

And with marijuana, in any form, still illegal under federal law, which trumps state statutes, buying into the medical marijuana industry could prove to be a risky investment.

"People who are going to invest a lot of money in this in order to start this up, all that money is going to be potentially taken by the federal government," Downing said.

Yet even if federal agencies opt to let the budding industry grow in Massachusetts, it may still find itself uprooted in four years if a legalization initiative, like those passed in Colorado and Washington, appears on Bay State ballots in 2016. Downing said such a law would have passed this time around, and related public policy questions on local ballots have received majority approval across the board.

"It wasn't MassCann's choice to finance the medical marijuana initiative. We would have gone right for the legalization initiative."

As entrepreneurs continue to line up for a shot at serving medical marijuana patients at one of the state's 35 permitted dispensaries, Downing said it would actually be a good thing if those treatment centers did not open.

Under the law, patients who do not have a treatment center within a reasonable distance from their home can receive an individual cultivation permit on the basis of hardship.

"Until a treatment center opens near them, patients can grow their own or have a friend grow it for them." 

 

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