Washington DC’s medical marijuana program progressing, though more change in store

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The District of Columbia’s medical cannabis companies have been ramping up in the past month, largely because of new business-friendly regulations that have reshaped the future in terms of possible market size.

But those companies still face big questions, especially with regard to expansion and uncertainty over the customer base’s potential size.

For instance, District Growers plans to increase its production space by adding 4,000 square feet to its existing 5,200-square-foot space, in part because the company is expecting “significant increases” in product demand, CEO Corey Barnette said.

The company is using only about 60% of its production capacity, Barnette said.

But District Growers saw about a 10%-15% boost in sales the past month because of the new purchase limit that allows patients to buy four ounces of marijuana every 30 days instead of two ounces.

“Our growing process is flexible enough … to ramp up to match what we think is going on in the market,” Barnette said.

While other growers are eyeing similar expansions – which are permitted under the regulatory changes – several said they haven’t cemented plans, partly because they’re not sure how much demand may increase.

What’s changed

Starting in late 2016, DC city officials approved a series of MMJ regulatory updates, including:

  • A sixth dispensary, to be licensed by the DC Department of Health.
  • An increase in purchase limits for MMJ patients, from two ounces to four ounces every 30 days.
  • Mandatory cannabis lab testing.
  • Reciprocity for MMJ patients from other regions allowing visiting cardholders to make purchases at DC dispensaries.
  • A new inventory track-and-trace system for MMJ businesses.
  • Allowing DC patients to make purchases at any dispensary, not only at a primary location.
  • Permitting nurses, physician assistants, dentists and naturopaths to recommend MMJ.
  • Allowing expansion of MMJ cultivation facilities.

The only new rule that has gone fully into effect is the increase in patient purchase limits in February. Another proposal, to remove a 1,000-plant count limit for growers, was removed from a City Council bill before it became law.

The city hasn’t implemented most of the changes, so businesses are uncertain how much demand for MMJ will grow as the local patient pool expands and reciprocity potentially boosts sales.

“They’re all very positive,” Matt Lawson-Baker, co-owner of the DC cultivation operation Alternative Solutions, said of the system changes. “We’re just trying to drive the implementation now.”

Sustainable market boost?

Many in the DC cannabis business agree with Lawson-Baker’s assessment the changes are good for their companies.

But many wonder whether recent upticks in sales will hold steady in the coming months. Because the boost from two to four ounces for registered patients took effect only a few weeks ago, they wonder whether the early jump in sales will last through the year.

But several owners are hopeful this is only the beginning of the DC industry’s maturation.

“We’ve seen a 20% increase in sales, and we were anticipating 10%,” said Rabbi Jeffrey Kahn, owner of Takoma Wellness Center. “It is still early, so we’re still watching it closely. We’re seeing patients max out on the four ounces … I don’t think it’s a sudden bubble, because the people who are purchasing more do need more every month.”

Those sales bumps have also been felt by cultivators.

“It has affected us positively. We’ll see if it keeps up,” said Kyle Cassidy, facility manager at Apelles, one of DC’s licensed MMJ cultivators. “Hopefully we didn’t just oversupply the market in March, and hopefully we continue to see these trends keep up.”

More to hammer out

A health department spokeswoman wrote in an email to Marijuana Business Daily that while no new rules have been promulgated regarding the local industry changes and no timeline has been set for that to happen, “DOH is aggressively working” to do so. She also noted that as of March 28, the department had received only one letter of intent from a business about the city’s sixth dispensary license.

As for a timeline for mandatory testing, an inventory tracking system and reciprocity for MMJ tourists, industry insiders who have been in contact with agency officials say the regulations may not be implemented until 2018.

Once the revamped regulations kick in, however, it’ll mean more changes for DC’s medical cannabis businesses.  They’ll have to cope with the costs of complying with testing as well as a new traceability system.

But such worries are offset by the potential for new customers through MMJ tourism and reciprocity.

“We turn away at least a dozen people a day who come with out-of-state (MMJ) cards and hope they’re going to be able to buy their medicine while they’re in Washington,” Kahn said.

According to the DOH website, the number of registered DC patients has been slowly ticking upward but remains fairly small, with only 4,993 patients as of March 1. That number, however, is up from 3,430 a year ago. And allowing more medical practitioners to recommend MMJ may expand the patient pool even quicker.

Add to registered patients the roughly 20 million tourists that DC gets every year, and the potential for a boom in the capital’s cannabis market looks likely to industry insiders.

“With reciprocity implemented, it’s difficult to tell” how much demand could go up, Lawson-Baker said, before adding, “It’s going to be substantial.”

For now, DC cannabis companies are forced to play the waiting game.

“It’s in the hands of the gods, unfortunately,” Lawson-Baker sighed, referring to the DOH’s relative silence on the time frame for implementation. “But we’re going to be doing everything we can to push the agenda, because it’s critical to the success of the program in DC.”

John Schroyer can be reached at johns@mjbizdaily.com