New Market: Smooth rollout expected for Arkansas MMJ industry

This is the second article in a series looking at the potential cannabis market in each of the eight states that approved recreational or medical marijuana initiatives in the 2016 election. Check back each week through mid-January for new entries. Click here for previous installments

By Bart Schaneman

The Arkansas medical marijuana industry is expected to experience a smooth launch and will likely serve a small, but not tiny, market.

After a previous legalization measure failed narrowly in 2012, voters in the Bible Belt state passed an initiative on Nov. 8 to allow the use, cultivation and sale of medical cannabis.

The proposal passed by a margin of 53% to 47%.

According to initial estimates by Marijuana Business Daily, annual sales via dispensaries could hit $30 million to $60 million a few years after the industry launches.

Several aspects of the law work in the business community’s favor.

For one, the state’s MMJ conditions list is relatively broad, which could bring many patients into the fold and help create a viable market for businesses. Medical marijuana dispensaries also will be able to sell to out-of-state patients who get an MMJ card after obtaining a written certification from an Arkansas physician; that certification must then be submitted to the state health department. Such patients would boost the market.

Additionally, the state plans to award dozens of business licenses, which will create ample opportunities for both plant-touching and ancillary companies that serve them.

Although Arkansas is in the South – where resistance to cannabis remains fairly strong – local marijuana proponents anticipate a straightforward industry rollout.

“We’re not going to have a problem at all,” predicted David Couch, an Arkansas attorney who led the legalization effort.

Licenses and fees

Couch said since the election he’s had a number of physicians call him wanting to know how to open a dispensary. He’s also had several queries from people interested in becoming cultivators, as well as insurance brokers and those wanting to sell dirt, lights, greenhouses and security services.

“I can’t even tell you how many have called,” Couch said.

The law allows for 20-40 dispensary licenses. Each dispensary will be able to grow up to 50 plants and be able to trade strains with other operators. Licenses will be limited to four per county.

Other licensing details:

  • Between four and eight cultivation licenses will be available, and growers will be allowed to sell to any dispensary.
  • A license holder will be limited to one dispensary and one cultivation facility.
  • The law mandates that those seeking a license be residents of Arkansas (meaning they have lived there for seven years). But a minority interest of up to 40% will be allowed “in case somebody in Arkansas needs to get capital” from out of state, Couch said.
  • The application fee for a dispensary license will cost $7,500 and the fee for a cultivation license will be $15,000.

Andrew King, a cannabis lawyer in Little Rock, advises potential proprietors to own land prior to applying for a license, because a facility address is an application requirement.

He said entrepreneurs should watch who is appointed to the five-member oversight commission, which could happen as soon as today, Dec. 7. The commission will oversee the licensing and application process. Members of Arkansas’ legislature – where Republicans hold a majority – will have a say in the commission’s makeup, and GOP lawmakers had opposed the initiative.

Conditions list, patient count

The MMJ conditions list includes the following:

  • Intractable pain that has not responded to other treatment for at least six months
  • HIV/AIDS
  • Cancer
  • Glaucoma
  • Crohn’s disease
  • Post-traumatic stress disorder
  • Seizures
  • Hepatitis C
  • Amyotrophic lateral sclerosis
  • Tourette’s syndrome
  • Ulcerative colitis
  • Severe arthritis
  • Fibromyalgia
  • Alzheimer’s disease

In addition, patients with doctors’ certifications can qualify if they have a chronic or debilitating medical condition that produces cachexia or wasting syndrome, peripheral neuropathy, severe nausea, and severe or persistent muscle spasms.

The Department of Health can expand the list.

Based on the current conditions list and other factors, Marijuana Business Daily estimates that .05%-1% of the population will participate in the MMJ program three to five years after the first dispensaries open, or about 15,000-30,000 patients.

Timeline

The Marijuana Policy Project estimates it could take up to a year before patients can start using medical cannabis.

As soon as Dec. 7, Arkansas’ governor and legislators will appoint a five-member Medical Marijuana Commission.

Regulations are scheduled to be released within 120 days of Nov. 8.

The state will begin taking applications for dispensaries and cultivators June 1. Couch expects the commission will set up a merit-based, minimum-qualifications application process. If the state gets too many applicants, Couch anticipates a lottery may be used to dole out licenses.

Regulations

The Associated Press reported that under proposed rules from the Arkansas Department of Health, MMJ products would be required to have labels detailing laboratory analysis, dosage, source and warnings. The draft rules are slated to be presented to the state health board in January, according to the AP. Draft regulations haven’t been issued for dispensaries, cultivators or the application process.

Cities will zone dispensaries under the same regulations as pharmacies.

The state Alcohol Beverage Control Board and Department of Health will regulate dispensaries and cultivation facilities, while the Medical Marijuana Commission will also regulate cultivators.

The amendment requires a two-thirds vote in the legislature for anything to be added or removed, other than the conditions list. For example, lawmakers would need to secure a two-thirds majority to increase the number of licenses for cultivators. A two-thirds vote wouldn’t be enough to reverse the legalization of MMJ. That would require another initiative.

Biggest challenges

King thinks some doctors might be wary of risking any conflicts with the federal government. But he predicts the majority won’t be deterred.

“They just want to be comfortable,” King said. “It’s just a matter for them making sure they don’t run into any problems with their other licenses.”

As in other states, banking will be an issue.

“We need a bank in Arkansas who’s willing to try to do banking for marijuana dispensaries and cultivators,” King added.

Bart Schaneman can be reached at [email protected]

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