Medical Pot Will Survive the Recreational Onslaught
As a state embraces recreational marijuana, is the prescription-driven medical marijuana industry destined to wither and die? Or does the medical marijuana industry have its own distinct role to play, in a way that may give the host state two parallel but distinct markets for years to come?
One recent report that focused on the development of the medical marijuana industry in Colorado in the year following the legalization of recreational use stressed that both medical marijuana sales and the issuance of new medical cards declined in 2014. This happened despite an obvious advantage to having the card: the medical purchases are taxed at a lower rate.
Although Matthew Karnes, the author of the report for GreenWave, said that he expects the two legal markets to “recalibrate,” so that medical marijuana will continue its distinct existence side-by-side the recreational market, his report has generally been taken to suggest that the recalibration amounts to a retrenchment on the medical side.
The report also suggested that one of the drivers of lower medical use is fear, aka privacy concerns. People do not want their names to be on a list if they can avoid it, and with recreational use they indeed can avoid it.
CNBC’s headline for its article on the GreenWave report said, “Medical marijuana business may have met its match.” The gist of the story below that headline is that the medical side probably will not die, but it will wither, in those states that have legalized medical use.
In an interview, Jeffrey Miron, senior lecturer on economics at Harvard University, discussed the possibility that (former) buyers of medical marijuana are now migrating into the recreational market in Colorado. He said this is “obviously a plausible hypothesis.” He added some important caveats, though.
On the one hand, he said that the movement observed by GreenWave might be, in whole or in important part, just statistical noise, not signal. He said, “data collection in this area is not perfect.”
On the other hand, Miron observed that the market—both halves of it—is changing rapidly, so prognostication is tricky. Both sides, medical and recreational, are for example making more use of targeted products. “There will be competition in targeting from both directions,” he said, because entrepreneurs (and medical researchers) have discovered that cannabis is not a fungible commodity.
Examples of targeted medicines include “Charlotte’s Web,” an oil made from marijuana that has lots of cannabidiol, but little THC. This is valuable in treating seizures associated with autism, or epilepsy.
The chemical constituents of marijuana can likewise be tailored for treating digestive troubles such as Crohn’s Disease or ulcerative colitis. A recent research review indicated that 50% of gastrointestinal patients who are not now using marijuana say that they would consider some use only if it becomes more broadly lawful.
These are among the medical developments that may well keep that side of the market a vital and growing one.
Another keen observer with informed views on the relationship of the recreational and medical marijuana markets, Leslie Bocskor of Electrum Partners, stressed recently that the medical side of the market is the more entrenched. “There are so many people who rely on medical marijuana and they’ve got a strong voice, that is a lot of motivation.”
Yes, he agreed, privacy “is one big issue,” there is a some migration of patients out of the medical market by those who want to stay off lists. But “that is a minority tendency,” not something that will undermine the market.
Bocskor agreed that much of the apparent drop-off is just statistical noise. There “probably has been some slowdown,” but it is small, because the reasons impelling it are countered by reasons driving people into the medical arena. People who need to use marijuana regularly, not as a luxury but as therapy or pain mitigation, will not want to continue paying the higher costs on the recreational side.
Both Bocskor’s and Miron’s views are consistent with a recent report of Colorado’s Department of Revenue. The Department observes that there are 321 local jurisdictions in the state. As to what happens in those various backyards, the numbers break down this way:
Allow both medical and retail licensees: 67
Allow only medical: 21
Allow only retail: 5
Allow neither medical nor retail: 228.
This suggests that a lot of room remains for growth for both parts of the market. Much may depend on grassroots work overcoming the reluctance of those 228 still-blank spaces on the industry’s map.
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