Medical cannabis in PA

Why PA only has 2 pot growers to supply 7,000 medical marijuana cardholders

Creating demand before supply was a smart way to launch the program, industry lawyers say.

The Pennsylvania State Capitol in Harrisburg bathed in green lights to celebrate the passage of PA's medical marijuana law in 2016

The Pennsylvania State Capitol in Harrisburg bathed in green lights to celebrate the passage of PA's medical marijuana law in 2016

Gov. Tom Wolf / Flickr
colindeppen

Pennsylvania has received praise for how fast it got the medical marijuana program off the ground, but its first weeks of operation were not without hurdles.

Mostly, there wasn’t enough pot to go around.

While nine dispensaries are up and running statewide, growers have been slow to come online. As of the end of February, only one grower out of a possible 12 was supplying product: Cresco Yeltrah in Jefferson County. In March, one additional processor came online, White Haven’s Standard Farms.

But there are already 7,000 permitted cardholders looking to buy weed, so — as any amateur economist could have predicted — demand quickly outpaced supply, prompting shortages. A handful of locations had to close temporarily at times, until reinforcements arrived.

“One dispensary thought they’d get about 60 patients in the first month and got 100 on the first day,” said April Hutcheson, director of communications with the Pa. Department of Health, which oversees the program.

That’s a problem, Hutcheson acknowledges. However, the methodology adopted by the DOH was a solid way to approach the rollout, two industry lawyers told Billy Penn.

Create demand, follow with supply

Although the state approved thousands of patients and directed dispensaries to open before more suppliers were ready, that makes sense when you consider market forces, said Judy Cassel.

Cassel, a Harrisburg-based lawyer whose clients include licensed medical marijuana growers, said building demand was a crucial first step from a commercial standpoint. Though the program is run by the state, it remains dependent on commercial enterprise and private sector companies to survive, she explained. The survival of those companies, in turn, depends on the program being financially viable.

“[I]f you waited to certify patients until the product is ready, demand could be so low that the product just withers on the vine,” Cassel said. “You put plants in the ground and nobody’s there to buy the product, those plants die and you don’t get to write that off. That’s hundreds of thousands of dollars out the window, potentially. I agree with the way DOH did it.”

Steve Schain, a cannabis industry lawyer with the Hoban Law Group in Philadelphia, also approves. “Pennsylvania’s program is built to last,” he said, “and to have short-term pains which will benefit the overall program, it’s really just a hiccup.”

If you wanted to play Monday morning quarterback, Schain said, “you could have licensed grows first and then let them become functional and then licensed dispensaries. But it’s very easy to say ‘shoulda, coulda, woulda.’ And Pennsylvania is to be lauded for the speed with which it did all this following the statue being passed.”

Gov. Tom Wolf signed Act 16, the legislation legalizing medical marijuana in Pa., into law in April of 2016.

Councilman Derek Green proposed a resolution to stop testing Philly parolees for THC.

A cannabis plant's medical designation

Andy Colwell / for Billy Penn

Dept. of Health: Prices will stabilize

Supply and demand hasn’t been the only issue for the program in its first month. Where there is weed available for purchase, prices have been found to be very high, and at times wildly inconsistent.

Less than two weeks after the program launched, per PMN, one registered medical cannabis patient in central Pennsylvania paid more than $700 for legal products, while another estimated her bill to be close to $1,000.

Part of the price issue is because marijuana is still prohibited by the federal government. “If the federal government legalized marijuana,” Cassel said, “prices in Pennsylvania would come down automatically.”

The DOH does monitor for price gouging, Hutcheson said, and can enact a cap if it feels prices are wildly out of sync with what’s happening in comparable states and markets. But that has yet to happen, and the DOH expects prices to fall — or at least stabilize — as the nascent program continues to mature.

Both pricing and supply are expected to get better in Phase Two of the program, which launches at the end of this week.

Starting April 5, the DOH will begin accepting applications for 13 new grower/processor licenses and 23 more dispensary permits.

Meanwhile, patient enrollments continue to accumulate. Before long, experts say, Pennsylvania’s medical marijuana program could be among the largest in the country. Per Hutcheson, 26,000 patients have registered to participate, with 9,000 certified by a physician and 7,000 already cardholders

“We know of a potential one million patients with one of the qualifying conditions under the program,” Hutcheson said, “and we needed to build the infrastructure, which we did in the first phase, to be able to bring it up to scale in the second.”

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