Dispensary Owners, Beware: Big Pharma to Make Run at Medical Pot Business

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Forget Colorado and California. The medical pot regulatory structure of the future will highly favor pharmaceutical firms and health professionals, who will use their political clout and business heft to win dispensary licenses and push out the little guys.

This is the future of the industry as Robert Kane sees it. Kane is the founder of Kaneabis, which is starting a fund for investors who want to put money into ancillary companies that provide products and services to the MMJ industry but are not directly involved in buying, growing or selling pot. Think publicly traded  hydroponics and gardening companies, businesses that make lights used in grow operations, etc.

I spoke with him yesterday to get an idea of the investment climate in the medical marijuana industry and what the future holds for the sector.

Here are some of his thought on various issues:

-Despite Colorado’s strict regulations, Kane still dubs it the Wild West. He has a point, as there are more dispensaries in Denver than Starbucks. Going forward, Kane thinks states will severely restrict the number of dispensaries that can operate and primarily award licenses to people connected to pharmaceutical firms. That will help push a greater acceptance of medical marijuana, but the dynamics will change. Would you rather go up against the guy down the street who used to grow in his basement or a veteran healthcare executive with deep pockets and extensive connections?

  • Prepare for a watershed development in 2016. Kane thinks more than half the states in America will have adopted medical marijuana laws by then, marking a turning point as a “green curtain” blankets the country. Once that happens, the federal government will have no choice but to legalize medical pot, Kane said. At that point, the medical marijuana industry – including ancillary businesses that provide related services – could easily hit $87 billion in sales.
  • A rule of threes governs the industry: Everything is three times harder, takes three times longer and is three times more expensive than in other sectors.
  • Medical marijuana should not be taxed,  as it’s a type of medicine like, say, Prozac.
  • The investment climate is pretty bleak right now. Everyone’s afraid to put money into the industry – and specifically into dispensaries, as their entire investment could go up in smoke overnight if the federal government initiates a crackdown on the industry.