Leaders of multi-state cannabis companies have been grousing off the record about Michigan’s caregiver system for months, pointing to it as a reason why they’ve held off on investing in the state. In an interview with Grown In, AYR Wellness CEO Jon Sandelman said it outright.
“Michigan is not a limited license state. It feels similar to California where there’s still a significant illicit market, which they haven’t controlled yet. With the caregivers. It’s not easy for us to figure out,” Sandelman said in a September interview. “You don’t see a lot of the large MSOs there.”
A Michigan House committee took steps Tuesday to ease large cannabis company concerns by reporting out newly introduced caregiver legislation that would sharply reduce the amount of usable cannabis and live cannabis plants a caregiver can maintain at any one time. The House Regulatory Reform Committee passed H5300 and H5301 by votes of 10-2-3, setting up a fight on the House floor to obtain a three-quarters vote, the minimum needed to alter the caregiver laws first passed by referendum in 2008.
The new legislation, which was not made available before the vote to the public or the state’s largest cannabis business association, keeps the original number of patients a caregiver can serve at five, while restricting the amount of usable cannabis a caregiver can keep on hand to 2.5 ounces and total plants allowed to twelve. Current law does not have caregiver possession limits, but recreational users are limited to 2.5 ounces. In addition, current law allows caregivers to maintain up to 12 plants per patient, up to 60, plus 12 more if the caregiver is also a registered patient.
Earlier this month, the House Regulatory Reform Committee conducted a charged hearing on the issue, where Chair Roger Hauck (R-Mt. Pleasant) cut the mic for one testifier and another requested security accompaniment on the way out of the hearing.
Michigan’s caregivers provide about 30% of all cannabis – legal and illegal – consumed in the state, according to a study commissioned by the Michigan Cannabis Manufacturers’ Association, a trade group of the state’s biggest producers that’s pushing the changes to caregiver laws. That number puts a significant dent in Michigan’s total possible commercial sales, making the state a less attractive investment opportunity. Nationally, large cannabis companies, like AYR Wellness, Ascend, and Cresco Labs have been purchasing local dispensary chains left and right – except for in Michigan.
2021 has been called “the year of consolidation” for cannabis and for investors in smaller cannabis companies – like those that specialize in only one state, like Michigan – acquisition by a bigger, multi-state operator is an important path to obtaining investor returns.
Opponents of the changes to caregiver laws, including Robin Schneider, executive director of the Michigan Cannabis Industry Association (MiCIA), say the structure of the new law makes it impossible for caregivers to operate.
“This is not a viable business model at all. How insulting,” said Schneider, who says if enacted, it would likely take over a year before caregivers could operate again under a new license type legislators have proposed to replace much of the caregiver activity.
“First the municipalities have to opt in [to allow the license]. You have to shut down for the municipality to opt in. Then you have to wait a year for the state to create the license. There’s no help with capital to get your new warehouse. You get to grow up to 72 plants. You have to pay into Metric. You pay insurance. You pay the fee to the state, and you can still only have 2.5 ounces per patient, and have to pay for the testing, a person to pick up samples, and guess what? You’re in the red,” said Schneider.
MiCIA and nine other cannabis advocacy groups distributed a letter to members of the House opposing the measures, saying, “As the state’s leading cannabis industry association we strongly oppose this package of bills that are overwhelmingly viewed as harmful to patients and their caregivers.”
Steve Linder, executive director of the MCMA, the lead proponent of changes to caregiver laws, calls the current system a “Wild west” of regulation.
“The cannabis marketplace is unlike any other product that’s sold in Michigan that has regulation. Beer, wine, alcohol, tobacco, and OTC drugs like sudafed: Everything has to be tested, tracked, deemed safe, with sales tracked,” said Linder. “If you’re going to have statewide constituencies you need statewide rules. People shouldn’t be able to vagabond in this industry and pick the place with the lowest standards to locate.”