Louisiana medical marijuana market expected to grow after program changes, but headwinds remain

Louisiana’s medical marijuana market is poised to grow in the wake of new legislation that allows more physicians to authorize the drug for added medical conditions.

But the state’s nascent regulated cannabis sector still faces significant challenges to its business outlook, including:

  • Low patient numbers to date.
  • A limited number of retail outlets, limiting access by geography.
  • Comparatively high prices for available product forms.
  • Constraints on allowable forms of MMJ that prevent the sale of cannabis flower in plant form.

Still, Louisiana medical cannabis retailers and licensed growers told Marijuana Business Daily they’re optimistic the program will improve as it matures, attracting more patients by lowering prices, increasing access and eventually permitting cannabis flower.

Increase in patient numbers expected

Louisiana’s medical marijuana program launched in August 2019, and the Marijuana Business Factbook estimated MMJ sales in the market last year totaled only $1 million-$1.5 million.

For 2020, the Factbook estimates sales between $15 million and $20 million.

Louisiana patients currently need a doctor’s recommendation to buy MMJ products from dispensaries called medical marijuana pharmacies.

But MMJ can be used only for specific medical conditions – and it can be recommended only by physicians explicitly authorized to do so by the Louisiana State Board of Medical Examiners.

That will change when Louisiana House Bill 819, signed into law by Gov. John Bel Edwards on June 15, takes effect in August.

The bill permits any physician in good standing with the board of medical examiners to recommend MMJ for any condition that a doctor considers debilitating to the specific patient.

“This essentially allows every doctor to practice medicine and participate in the program, and it allows every patient to have access to talking with their doctor about whether (medical marijuana) is appropriate for them,” said John Davis, CEO of Louisiana cannabis producer Wellcana.

For now, patient numbers remain low.

Only nine medical marijuana pharmacies are licensed to serve Louisiana’s population of around 4.7 million that’s scattered across nine large regions.

The most recent available figures from the state show those pharmacies served relatively few customers at the outset: Just 4,350 total patients accessed medical marijuana between the program’s launch in August 2019 and the end of that year.

Retailers constrained by regional demographics, high prices

Louisiana’s low patient count suggests “the lion’s share of cannabis medicine in Louisiana is being supplied by the black market,” said David Brown, owner of Willow Pharmacy in Madisonville and former president of Sensible Marijuana Policy for Louisiana.

Brown said his pharmacy serves the highest number of patients in Louisiana, which he attributes in part to the relative affluence of his region in the southeastern sector of the state, on the north shore of Lake Pontchartrain.

In other regions with less wealth and fewer physicians recommending medical cannabis, he added, a pharmacy’s business outlook might be less rosy – in the state’s northeast region, he pointed out, the licensed medical marijuana pharmacy is open ony two days a week.

The sheer size of the regions served by each pharmacy also creates a barrier to success, said Kevin Caldwell, co-president of Sensible Marijuana Policy for Louisiana.

“There are many cases, specifically up in northern Louisiana, where a patient would have to take on the undue burden of really traveling a long distance to get to the dispensary,” he said.

Joe Williams, CEO of The Medicine Cabinet Pharmacy in the central Louisiana city of Alexandria, hopes the anticipated increase in doctor recommendations “opens up a whole new market for us, with access – but we also know, obviously, that prices are too high.”

Williams’ pharmacy averages about 12 transactions per day for regulated products containing THC.

He said the business is currently breaking even.

“It’s still very disappointing, don’t get me wrong, but I do feel some momentum, and I’ll tell you what’s really been good is (over-the-counter) CBD sales,” Williams said.

“Why? It’s about a third of the price, but more importantly, you don’t have to go through the hassle of going to a doctor … We can’t keep it (in stock) – we’re making $12,000 to $15,000 in profit every month on CBD.”

Limited number of producers

Two state universities hold licenses to produce medical marijuana in Louisiana. Both have contracted operations to private companies.

Wellcana, partnered with Louisiana State University, is the only producer currently selling THC-containing products to medical marijuana pharmacies.

CEO John Davis acknowledged wholesale prices for Wellcana’s tinctures have been high but said his company’s ability to lower prices is constrained by its contract with the university.

Under that agreement, Wellcana’s wholesale prices are based on the company’s cost of goods sold, Davis said.

With low patient numbers limiting the number of completed sales in that equation, he explained, Wellcana’s cost of goods sold is higher than it would be in a mature market.

“We have not sold enough products to remotely get into the black,” Davis added.

“We’re working in the red, and this change in the law that would allow for greater patient access and greater physician participation, we’re anticipating that that is going to allow us to provide an even more affordable product, and array of products, and allow us and (LSU) to hopefully move from the red to the black.”

In fact, Davis told Baton Rouge newspaper The Advocate this week that Wellcana is cutting its wholesale prices.

Louisiana’s other cannabis producer, Ilera Holistic Healthcare, is partnered with Southern University.

Ilera currently sells a hemp-derived, over-the-counter CBD product to client pharmacies, but CEO Chanda Macias said the company’s upcoming THC line will be focused on affordability.

The flower question

Wellcana plans to introduce new marijuana product forms, including topicals and buccal strips, later this year.

But Louisiana’s ongoing ban on dried cannabis flower means the market might be failing to capture some potential clients.

A bill proposed this year would have removed the restrictions on allowable forms of medical marijuana to permit flower, but the measure didn’t make it through the legislative session.

“Until we get flower in the state of Louisiana for the patients, then we’re just nibbling around the edges at reform,” Willow Pharmacy’s Brown said.

Ilera’s Macias said she plans to keep lobbying for removal of the flower restriction.

“The forms that we need to expand, to be comparable or, even at this point, surpass, any medical marijuana program in the nation would be vaporizables … and a flower market,” she said.

Wellcana’s Davis said any legislative change permitting cannabis flower would depend on “continued education of those governmental stakeholders,” including law-enforcement groups and regulators.

“But it’s going to take time, because there has been a very effective campaign to thoroughly demonize and stigmatize medical cannabis and cannabis in general,” he said.

Solomon Israel can be reached at [email protected]

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