Clearing the missing link in the supply chain, last week Missouri cannabis regulators approved the state’s first medical cannabis testing facility, EKG Labs, generating expectations for sales by the end of October. But, even though the first joint hasn’t been sold, Missourians are heatedly debating whether or not it has approved enough medical cannabis licenses, or even if there should be limits on licenses at all.
Lodged between two states with radically different regulatory regimes, Illinois and Oklahoma, Missourians are arguing over whether the state should be more like Illinois, with licenses closely controlled by the state, or like Oklahoma’s totally free market, where little more than an online form and a $2,500 fee gets you a two-year medical marijuana business license.
“If you take Oklahoma and Illinois, which are polar opposites, the two of them are pretty good examples,” says Eric McSwain, chairman of the Missouri Cannabis Industry Association. “An ounce in Illinois is costing $450 for retail, but in Oklahoma prices are settling down at $150 an ounce. That’s a big difference for the exact same product.”
Between July 1, 2019 and June 30, 2020, Oklahoma sold $606 million of medical cannabis to over 300,000 registered patients through about 2,000 dispensaries. In contrast, Illinois sold $359 million of medical cannabis to 121,000 registered patients through 55 dispensaries during the same period. Illinois has 11.5 million residents, while Oklahoma has 4 million residents, which McSwain and other advocates say proves the Illinois system is over regulated.
As of Friday, the Missouri Department of Health and Senior Services (DHSS) has certified five dispensaries for operation, out of a possible 192 licenses approved by the agency. The state also has a great deal of pent up demand, as relatively low standards of approval for medical patients has already generated 74,837 state-approved patients as of October 1. Missouri is currently signing up about 5,000 new patients a month, but that curve is expected to go up, as dispensaries partner with doctors offering telehealth diagnoses and referrals.
McSwain, whose group is volunteer-based and represents a broad spectrum of patients and cannabis businesses, advocates for Missouri to have a free market approach closer to Oklahoma.
“In limited markets, like Illinois, there could be all kinds of stuff going on, price manipulation. Stuff like that,” says McSwain. “The value of a company should be based on the bottom line, not the rarity of a company.”
In contrast, a representative of the Missouri Medical Cannabis Trade Association (MoCannTrade), an organization made up of licensed cannabis companies, says the current process exists because that’s what was in the 2018 approved referendum.
“When it comes to licenses, [the law] says there should be a merit-based process. Anyone who wants one, gets a license, is clearly not what voters intended. That’s what’s in the constitution,” says MoCannTrade’s Jack Cardetti, who argues creating a stable playing field should be the chief concern.
“The first challenge on any ballot initiative in Missouri, is will the legislature in any way come in and alter the will of the voters. That’s what happened on a number of different issues in Missouri. I think the law remaining intact is one of the biggest challenges.”
Jeremy Unruh, a Kansas City-native who heads up government affairs for PharmaCann, a multi-state operator that did not apply for licenses in Missouri, thinks state regulators likely have a great deal of issues to resolve before thinking about expanding licenses much further.
For instance, Unruh thinks Missouri’s address-based licensing system, where state regulators issue licenses tied to specific addresses, will cause snafus.
“There is some discrete number of sites that just don’t work out at first blush. It’s zoned correctly, but they didn’t check the asbestos in the walls. Or the state comes back and says you are too close to something as the crow flies. Or there is community opposition that comes out of the woodwork. Or the landlord gets cold feet,” says Unruh. “Moving a dispensary location, that’s pretty important. That’s an area where people get jammed up in developing dispensaries.”
And Unruh’s thinking is probably spot on, as 129 licensees, 34% of the total approved, have already submitted change orders to Missouri regulators.
Regardless of bureaucratic limitations, cannabis-access advocates say the state is using bad data to limit the number of licenses.
“The number of patients that have qualified is dramatically higher than was predicted,” says Dan Viets, an attorney who chaired the Article XIV Campaign, the referendum group that organized the state’s 2018 medical marijuana referendum. “When DHSS decided to limit the number [of dispensaries], it turned out to be erroneous,” says Viets referring to a University of Missouri market study that predicted the state would have only 19,000 medical patients in 2020.
Viets says the Missou study made it easy for regulators to justify license limits. “We were not shocked the state began with minimum numbers. It would be very easy for them to justify doing so.”
Meanwhile more licenses could be created through the courts. 853 applicants who didn’t get a score high enough to obtain one of the 388 cannabis licenses issued are appealing through Missouri’s Administrative Hearing Commission. Eric McSwain is one of those applicants, and the first appeals aren’t scheduled until June 2021.
“It’s a long time away,” says McSwain. “Through back channels I’m hearing that some of the administrative judges are a little crazy that DHSS is dragging their feet every single possible way they can. It’s pretty absurd.”