Lawsuit Tied to Home Grows Could Alter Arizona Medical Marijuana Market, But Industry Skeptical

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Arizona’s medical marijuana industry has already dealt with enough turbulence to last a lifetime. But MMJ professionals might have to brace themselves for more uncertainty and change in the near future.

Two residents have filed a lawsuit seeking to overturn the state’s ban on home growing for medical cannabis patients who live within 25 miles of a dispensary, arguing that it violates their rights under a provision in the Arizona Constitution tied to health care. The ban – a highly controversial piece of Arizona’s medical marijuana law – essentially ensures that the lion’s share of the 40,000 registered patients have to buy cannabis from state-licensed MMJ centers rather than cultivate their own or buy it from caregivers.

Dispensaries benefit greatly from this regulation, of course, as they have almost total control of the market.

So a change in the law could have repercussions for those already operating dispensaries as well as the dozens of entrepreneurs preparing to open one soon. If the suit is successful, it’s conceivable that a few thousand patients would opt to cultivate their own cannabis, deeming it cheaper than paying dispensary prices. That would shrink the overall market available to MMJ centers and limit their future potential.

Many dispensary owners have invested a considerable amount of money – in some cases hundreds of thousands of dollars – to obtain licenses and launch, developing business plans based on a certain number of patients. A decrease in the customer pool could force some dispensaries to scale back or, in a worst-case scenario, even close.

On the bright side, however, companies that sell cultivation equipment and provide related services targeting home growers would have a sizable market going forward.

“A lot of this has to do with price,” said attorney Michael Walz, who is representing the two men behind the lawsuit. “Many people who are qualifying patients have severe financial problems. At dispensaries it costs about $400 an ounce for medicinal grade marijuana now. A lot of people can’t afford that.”

The lawsuit estimates that home growers can produce medical-grade cannabis for $50 an ounce after the initial investment, once they know what they’re doing and have the proper equipment, Walz said.

Many patients in Arizona have been growing their own cannabis due to delays in the roll out of the state’s dispensary program, which has been beset by delays and challenges. Dispensaries began opening up late last year, and several dozen are now operational. That’s forced patients within 25 miles of these centers to stop growing their own.

So what are the chances the lawsuit will be successful?

Several industry professionals said it doesn’t appear to have much merit, with one even calling it “laughable.”

“Voters voted for the 25-mile rule, so anybody taking the other side and saying that it’s unfair is basically saying that voters didn’t know what they wanted,” said Moe Asnani, who runs the consulting firm Arizona Dispensary Solutions and operates several dispensaries. “They are taking the approach of those on the far right (who have tried to sink the program). The truth is that when people went to the ballot and picked a side on this issue, they did it with the understanding that this would be regulated through dispensaries.”

Indeed, the whole provision tied to home growing was deemed a necessary inclusion to sway voters in favor of MMJ and get the law passed. The Arizona Medical Marijuana Act passed by the slimmest of margins (just 4,300 votes), and it very well could have failed without the home-grow provision.

Walz, however, said that the Arizona Constitution still overrides any state statue.

“The fact that voters passed it has no bearing whatsoever,” Walz said. “It’s an absurd argument.”

Even if the suit is successful, some dispensary professionals believe the impact will be minimal, saying that most people who try to grow their own fail and that the vast majority of patients will prefer the convenience of MMJ centers.