Unexpected Obstacles, Low Patient Count Lead to Medical Marijuana Price Hike in Minnesota

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By John Schroyer

With less than a month of sales under its belt, one of Minnesota’s two licensed medical marijuana companies is making adjustments to cope with unexpected challenges that have cropped up.

Minnesota Medical Solutions, also known as MinnMed, recently announced that it is raising prices across the board at its dispensaries by an average of 15-20%. The company also said it might delay opening its other two dispensaries until the climate improves.

The other licensed MMJ company in the state is holding firm on prices. But MinnMed’s move shows how difficult it can be for businesses to predict demand and set prices in a new market – especially one as unique as Minnesota’s, where only non-smokable forms of cannabis are allowed.

MinnMed said it underestimated how many patients would take advantage of its low-income discount program, meaning the company took an unexpected financial hit after opening its first dispensary on July 1.

“There’s a lot of reasons we missed the mark on price initially,” said MinnMed CEO Kyle Kingsley. “First and foremost, we have the discount, and a lot more people used the discount than we expected. We were also the only CBD provider in the state for the first three weeks in July, so that’s another thing that changed the price equation pretty substantially.”

Another factor is the state’s paltry patient count, which stood at 250 late last week. An additional 225 patients have been certified but are still waiting for formal approval, a health department spokeswoman said.

Kingsley said MinnMed’s estimates are that between 600 and 1,000 patients will be enrolled in the program by the end of the year.

While the company lifted average prices by 15-20%, the spike in some cases is much higher. A vaporizer pen, for instance, now costs $66, up from $47 before, according to the Associated Press.

Aside from the price hike, MinnMed plans to at least temporarily roll back its discount program, which applies to any approved patient who also qualifies for assistance under the state’s Medicaid program. A majority of MinnMed’s patients ended up qualifying under that provision.

Kingsley said MinnMed is going to do everything it can to restore the discount because the firm is dedicated to getting medicine to patients who need it.

“Every quarter, we’re going to re-analyze our prices and break down the discount,” Kingsley said. “It’s imperative that we control costs, and it’s my hope that with time, costs will go down. But yes, it’s possible that there are people who won’t be able to get this medicine (without the discount).”

MinnMed is also in the process of establishing a nonprofit charity called CannaCare, Kingsley said, that will be dedicated to helping low-income MMJ patients obtain affordable medicine. That same nonprofit will be operational in New York once Kingsley’s Empire State Health Solutions is up and running (the company was one of five license winners announced in New York on Friday).

Still, the price hike in Minnesota is something of a wakeup call. Kingsley said MinnMed has enough capital to weather some hard times, and he’s confident the patient count will continue to rise.

But he acknowledged that the financial setback may be enough to delay the opening of MinnMed’s two other dispensaries. So far, two are open: one in Minneapolis, and another that just recently launched in Rochester.

“Our plan is still for the other two dispensaries here in the next month or two, but is it possible that those may move a little bit? Yes,” Kingsley said.

Minnesota’s other MMJ company, LeafLine Labs, has no plans to increase its prices, co-founder Andrew Bachman said.

“We set our prices based on our desire to be a long-term and affordable option for patients, and we’ve seen no data thus far that suggest that they need to be modified,” Bachman said. “We will remain adaptable as the demand evolves, but our plan is to have no price increases in the near future.”

LeafLine so far has one dispensary open, in the Minneapolis suburb of Eagan. It plans to open another in St. Cloud in a few months, Bachman said, and its other two likely next year.

Minnesota attorney Chris Parrington, who works with the cannabis industry, said he wasn’t surprised that MinnMed was forced to raise its prices. But he doesn’t think it’ll have an adverse affect on the business or create issues with customers.

“It is a big hike, but it’s not a very competitive market here,” Parrington said. “You could take a look at all businesses, and they budget one thing and expect one thing, and reality winds up being something else.”

Parrington added that he hasn’t heard any “significant criticism” over the move, saying that everything is still going relatively smoothly.

When asked what could help bolster the industry in Minnesota, both Kingsley and Bachman said they had no interest in selling cannabis flower, as opposed to the non-smokable forms their companies are currently required to produce. Instead, they said they’d prefer if the state added chronic and intractable pain to the MMJ qualifying conditions list.

“That’s something the state is considering. I think that would be helpful. There are a lot of patients with that,” Kingsley said.

The addition most likely won’t happen until next year at the earliest, however.

Parrington added that further public education campaigns and simply word of mouth will likely help grow the customer base.

John Schroyer can be reached at johns@mjbizmedia.com