Momentum is growing for a regulatory end to mandatory vertically-integrated medical marijuana companies in Massachusetts.
During an Oct. 26 advisory board meeting for the state’s Cannabis Control Commission (CCC), board member Alan Balsam explained that vertical integration of medical companies has resulted in limited access to medical patients.
“As you know on the Cape and Western Massachusetts, there’s a dearth of places for people that are medical patients to get their medicine,” he said.
When medical marijuana was first legalized in Massachusetts in 2012, the state mandated vertical integration for all companies. This means that a single company had to own cultivation, production and dispensing of the cannabis – a significant financial undertaking.
CCC Executive Director Shawn Collins said in Tuesday’s board meeting that the commission was in favor of eliminating the requirement for vertical integration, but that such a change would require a significant re-work of existing regulations.
“It’s a topic that the commission has raised as long as the next round of regulatory review goes,” said Collins. “There are some elements that are absolute formalities and requirements, such as the publications of a draft and public testimony. It’s not a small topic, but it is a necessary one. Equity in cannabis includes medical too.”
From a business perspective, this limits access to prospective companies that may lack expansive financing.
“The biggest problem we face with vertically integrated cannabis markets is that it’s inherently discriminatory by nature,” said Alex Milligan, co-founder of NuggMD, a service that provides telehealth services for medical marijuana permits. “This creates a barrier to market entry because it requires a lot of capital.”
For patients, this means fewer options.
“This hurts patients’ access in those areas and leads to more patients believing that growing their marijuana at home is the only way to meet their medical needs,” said Frank Shaw, who is a member of the CCC’s advisory board.
Shaw argued in a public presentation that the state should consider a semi- vertically-integrated model for medical dispensaries as a means to transition toward a more independent model for dispensaries, producers and cultivators.
“Having to own every step of production makes it much tougher for smaller operators to enter the medical market,” said Shaw. “The lack of capital is among the top three reasons why entrepreneurs are unable to enter the cannabis industry in general. The MTC (marijuana treatment center) license itself is $50,000 annually, which is more expensive than any adult use cultivator license.”
Shaw also noted that medical dispensaries that are collocated with adult-use dispensaries are able to sell products from third-party cultivators, which defeats the purpose of requiring vertical integration.
“If wholesaling is meeting the patients’ demand, what is the purpose of continuing the vertical integration requirement?” he asked.
Eliminating the vertical integration requirement would be critical for serving the medical marijuana patient population in the state, according to Nichole Snow, executive director of the Massachusetts Patient Advocacy Alliance (MPAA).
“One of the unfortunate consequences of the high costs created by the vertical integration requirement on businesses has been a lack of patient access in many areas of the state that are devoid of Medical Marijuana Treatment Centers including parts of the Cape and the Berkshires,” said Snow. “We believed then as we believe now that removing this vertical integration requirement is essential for full participation by minorities, women, veterans in the medical cannabis industry as well as maximum patient access statewide.”
Snow said that the MPAA opposed mandatory vertical integration back in 2013 when the state’s Department of Public Health was establishing the medical marijuana program, as well as in 2018, when the responsibility was shifted to the Cannabis Control Commission with the legalization of adult-use cannabis.
“Our preference is for the Commission to move forward on changes that will benefit patients one way or the other,” said Snow.