Maryland Medical Marijuana Law: Limited Opportunities for MMJ Businesses, Entrepreneurs

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The next domino appears ready to fall. The Maryland Senate approved a measure to legalize medical marijuana and will send the bill to the state’s governor, who has indicated he plans to sign it.

Maryland is now poised to become the 19th state to allow residents to use medical cannabis and the third to pass such legislation in the past year, following similar moves in Connecticut and Massachusetts in 2012.

The development is welcome news to the cannabis industry and – if the law officially passes – will further fuel momentum for cannabis efforts in general. It also could help build support for medical cannabis measures in nearby states such as New York.

But business opportunities could be somewhat limited.

Under the measure, hospitals that provide research for the government and also have physician residency programs would provide the drug rather than individual dispensaries. These facilities would essentially each set up their own sub-programs, determining whether or not to allow caregivers, creating the list of qualifying medical conditions and setting other criteria patients must meet to get medical cannabis. (You can read the entire bill here.)

Entrepreneurs, therefore, will be blocked out from medical marijuana sales to patients, and the overall market size in general will likely be tiny compared to other MMJ states.

However, there could be some solid opportunities on the cultivation side. The bill stipulates that participating hospitals could get cannabis from either the federal government or state-licensed producers. It’s highly unlikely that the federal government will be growing medical marijuana for Maryland anytime soon, so we could very well see private cultivation operations spring up.

And there could potentially be as many as 25 growers/cultivation sites, as the bill allows up to five research centers to start programs at any one time, and each could have up to five growers. Cultivation sites would operate under heavy regulations covering everything from safety to inventory tracking, creating additional opportunities for ancillary companies that could help the operations meet those requirements.

But that’s still a best-case scenario: Even if the governor signs the bill, it’s uncertain whether the program will actually get off the ground. Participating hospitals would have to take on some significant risks, given that they would be violating federal drug laws and heading into uncharted waters. So far, just one medical facility – Sinai Hospital in Baltimore – has expressed strong interest in participating, while Johns Hopkins Hospital has indicated it will at the very least consider the idea.

It’s unclear if any others are interested. Each facility would have to come up with its own program and get various approvals from the state, adding another layer of complexity that could deter hospitals from participating.

“It will take some pretty bold hospitals to get this program up and running,” said Karen O’Keefe of the MPP. “I wouldn’t say it’s anywhere near 100% that this is going to happen, because there is some risk, and hospitals are usually risk averse.”

Additionally, the program wouldn’t be up and running until 2016 at the earliest, and possibly later. The governor also could suspend the program if the federal government indicates it will crack down on state workers.

The laws are so strict and limiting that several industry organizations – including the Medical Marijuana Project (MPP) – said they will not lump Maryland into the same category as other MMJ states should the measure pass. They will continue to say there are 18 states with “effective” medical marijuana laws.

The patient population could also be extremely limited, as hospitals would likely set a high bar and could choose to exclude patients for various reasons, like addiction.

“We would not suggest that any other state leap to implement this model,” O’Keefe said. “It will put pressure on the government and hopefully show that hospitals are interested (in medical cannabis), but I don’t think this is going to serve every patient in the state who would qualify under these programs.”