Big changes are on tap for Delaware’s tiny medical marijuana industry.
State officials recently decided to award two additional medical marijuana dispensary licenses, acknowledging that the market is robust enough to support more than the one storefront currently operating.
The decision to issue more licenses – which emerged about six months after the state’s first dispensary opened – surprised some observers who thought Delaware would be slow to expand the program.
Adding more dispensaries will certainly help buoy the market and potentially convince more patients to get involved, which will translate into a boost in overall sales.
It also will likely introduce new competition for the state’s existing dispensary, First State Compassion Center in Wilmington.
Since opening, First State has had the market all to itself, with some patients driving two hours from the southernmost ends of Delaware. That will likely change, although First State is seriously considering applying for one or both of the new licenses as well.
If it’s successful, the company would have a tight grip on the market.
“That’s certainly something we’re going to look over as a team,” said Mark Lally, president of First State, which opened in June. “We can support whatever the market brings us. We have the space and size. We have the capabilities. We have the production right now to service all the patients in Delaware and more if they come.”
Through early December, 776 medical marijuana patients were registered in Delaware. It’s a tiny patient base, but more than enough for just one dispensary – especially since home growing is not permitted.
Under the state’s MMJ law, each of Delaware’s three counties is allowed to have one dispensary – though officials initially only moved forward with one.
First State is located in New Castle County, where 68% (or 528) of the state’s registered patients reside. The new dispensaries might have a tough go of it unless the patient counts increase. Just 112 patients live in Kent County, while 136 reside in Sussex County.
Fortunately, the trends are going in the right direction.
The number of MMJ patients in Delaware has more than quadrupled from the 170 who were registered when First State opened in June, and additional growth will likely materialize when more dispensaries open.
“We did see a significant increase in patients seeking cards after the opening of the first center this summer,” Emily Knearl, a Delaware health department spokeswoman, said in an email.
Indeed, increased access usually translates to higher patient numbers and a bigger spend per visit. In Massachusetts, for example, patient numbers increased sharply after the state’s second and third dispensaries opened following a slow roll-out process.
The new application deadline in Delaware is March 30, and anyone considering it will be required to attend a Feb. 1 meeting with state medical marijuana officials.
Application fees are $5,000, while certification fees run $40,000. Winners will be announced by Aug. 1, according to the state’s request for bids.
There were seven applications for the first license.
When the new centers open depends on factors such as contract negotiations, construction issues and producing the inventory necessary to open, according to Knearl.
“As such it is difficult to pinpoint an opening date,” Knearl wrote. “Without any major unforeseen issues, the two new compassion centers are expected to open fall 2016.”
First State thinks the market is poised for significant growth.
“Our patient population increases by the month and we’re happy with the numbers we’re having,” said Lally, a retired member of the Delaware State Police. “Certainly that’s not what we’d like to settle for, nor was that in our business plan, but certainly we’re starting to reach those numbers that are making us feel a little more comfortable with the investment we’ve made to start the business.”
He would like to serve about two percent of the state’s population, which translates into almost 1,900 patients.
Also in the market’s favor is a relatively loose qualifying conditions list that includes debilitating pain and post-traumatic stress disorder.
Should First State apply for either one or both of the two remaining licenses, Lally believes the company would have an advantage because it is already operating.
“We already have the growth of the product. So we wouldn’t have to start with a full-blown cultivation center like the other applicants would,” Lally said. He noted that under Delaware law, one dispensary is allowed to sell to another, which would allow First State to sell its product to the other two dispensaries.
But state officials scoring applications may also worry that awarding one or both of the last two licenses to First State could create a monopoly.
According to the state’s request for bids, applications will be based on several factors. Security and location suitability will carry the most weight, followed by scope of service aspects, such as the applicants’ plans to provide product without using pesticides, diversity of strains, training staff, record-keeping and patient access.
The least weight will be given to experience and qualifications of the applying vendors
Even if First State doesn’t win either of the two last compassion center licenses, Lally doesn’t think it will have a big impact on his business since it is located in Delaware’s most populated county with more than two-thirds of current patients.
“I don’t believe the amount of patients we would actually lose would affect our operations that significantly that we would have to do anything different,” Lally said. “Maybe some minor adjustments.”
Lally declined to discuss First State’s sales figures or customer visitation and spending habits, but he said staying in business would not be a problem as long as customers remained happy.
“If you take care of your patients, they’ll come back, no matter where you’re located,” Lally said.
Omar Sacirbey can be reached at email@example.com