New Market: Fierce competition for licenses in Pennsylvania’s emerging MMJ program

This is the 10th article in a series looking at the potential cannabis market in states that are rolling out new marijuana programs. The first eight articles examined states that approved recreational or medical marijuana initiatives in the 2016 election. This new round of installments focuses on states that have approved new markets through legislation. Click here for previous articles.

By Bart Schaneman

Pennsylvania’s medical marijuana market is positioned to become a large one, but the business opportunities will be limited with hundreds of applicants from across the nation expected to compete for a finite number of licenses.

Gov. Tom Wolf signed the state’s medical marijuana act into law in April 2016. The law took effect in May 2016, and regulators have begun drafting rules governing the new industry.

Pennsylvania could become one of the nation’s larger medical cannabis markets, thanks to a population of nearly 13 million and an extensive list of medical conditions that are treatable with MMJ. An estimated 100,000-200,000 patients could sign up for MMJ cards once the market matures, depending on how smoothly the program rolls out and how many doctors participate.

According to Marijuana Business Daily estimates, the state’s dispensary sales could exceed $100 million annually – and potentially go far beyond that – a few years after the first outlets open, which is expected to happen in 2018.

Entrepreneurs looking to enter the market could do so through ancillary businesses, especially testing labs. Unlike dispensaries and cultivation centers, prospective lab operators currently don’t face a license cap.

Construction contractors also will be needed to build grow operations. Similarly, heating and cooling businesses will be in demand given that all MMJ must be grown indoors.

But the main question is: Who will get the dispensary and grower licenses? With 50 dispensary and 25 grower/processor licenses open to local and out-of-state applicants, the permitting process is likely to be hotly contested.

“This is such a competitive application process,” said Christine Brann, a cannabis attorney in Hershey, Pennsylvania. “I hope that means Pennsylvania will provide quality products for the patients and long-standing, sustainable businesses.”

Business opportunities

Judith Cassel, a cannabis attorney in Harrisburg, Pennsylvania, said the opportunities for testing labs have been overlooked. Regulations require all products to be tested, and no limit has been set yet on the number of licenses for laboratories – though a cap could be established at some point.

In terms of construction firms, Cassel already is seeing success among contractors that design and build expansions and retrofits for existing buildings so they meet compliance and security standards. Contractors, for example, are remodeling old banks with built-in vaults to serve as future dispensaries.

The indoor grow requirement, meanwhile, should be a boon for heating and cooling contractors.

“Everything that’s related to inside growing is going to get a boost,” Cassel said.

While state regulations bar patients from buying or consuming flower, Brann considers that an opportunity for producers to develop new ways to ingest marijuana.

Pennsylvania’s law allows the following forms of consumable MMJ:

  • Pills
  • Oils
  • Gels
  • Creams
  • Ointments
  • Tinctures
  • Liquids
  • Forms medically appropriate for vaporization
  • No flower or edibles, though patients can mix cannabis products into food or drinks

Number, types of licenses

The state is offering the following licenses, spread across six districts:

  • 50 dispensary licenses, with each permit holder given the option of opening two additional locations; dispensary licenses will be doled out based on each district’s population
  • 25 grower/processor licenses
  • Laboratories (no current limit)

The permitting process will be rolled out in phases. Phase 1 will make available 27 dispensary licenses and 12 grower/processor licenses.

No timeline has been released for Phase 2, and some industry experts think it may be a ways off.

Timeline

The Pennsylvania Department of Health will begin accepting applications for Phase 1 on Feb. 20, with a final deadline set for March 20.

Applicants will face no in-state residency requirement. However, applications are scored on a 1,000-point scale, and community involvement is worth 100 points.

Cassel said it’s possible the health department could receive up to 900 applications, which would take time to process. However, she anticipates many applications will easily be culled for lack of professionalism.

Grower/processors have six months to get up and running from the date they win licenses. Brann said she expects to see dispensaries operating some time in 2018, but probably not before mid-2018.

Conditions list, patient count

The state allows MMJ to be used for 17 conditions:

  • Cancer
  • HIV/AIDS
  • Amyotrophic lateral sclerosis
  • Parkinson’s disease
  • Multiple sclerosis
  • Epilepsy
  • Inflammatory bowel disease
  • Neuropathies
  • Huntington’s disease
  • Crohn’s disease
  • PTSD
  • Intractable seizures
  • Glaucoma
  • Autism
  • Sickle cell anemia
  • Spinal cord damage
  • Chronic pain
  • In cases where conventional or opiate therapy are ineffective

Cassel sees MMJ as possibly helping with Pennsylvanians’ addiction to painkillers.

“Like most states, we have a chronic opiate problem and we think that legalization of marijuana may give people alternatives to opiates,” she said.

She anticipates about 250,000 patients will sign up for the MMJ program in the first year to 18 months.

Pennsylvania’s law doesn’t allow out-of-state cardholders to buy MMJ. Children under 18 can legally possess medical cannabis from another state if they qualify for a “safe harbor” letter and suffer from one of the approved medical conditions.

Biggest challenges

As noted, the competition for cultivator and dispensary licenses and the lack of residency requirements will mean limited opportunities for many entrepreneurs angling to participate in Pennsylvania’s new MMJ industry.

Industry veterans may have an advantage. Brann pointed out that because so many other states have MMJ programs, the businesses there are savvy at securing licenses.

Doctors appear receptive to the program, Brann said, but may be willing to recommend MMJ only in certain situations.

“The hurdle for them,” she said, “is that unless you’re in a private practice, you’re under the umbrella of a corporate system and they need to get the approval of their employer to be a registered physician.”

Bart Schaneman can be reached at [email protected]

3 comments on “New Market: Fierce competition for licenses in Pennsylvania’s emerging MMJ program
  1. Tom on

    I really don’t know why out of state residents are allowed to come in to Pa and be favored to secure a license because they have more experience than Pa. residents?! And why is Pa the only state not to allow the sale of cannabis flowers? One can vape flowers just as well and the relief from pain is much quicker. There is also less chance that the patient will consume too much because they didn’t wait 1 1/2 hours for the cannabis to kick in. Also God forbid that the Pa patients could grow 4 plants starting immediately and have medicine in as little as 60 days instead of waiting to 2019 because you know there are going to have delays. And will insurance pay for this prescription? They are paying for all the other drugs that don’t even work. Smells like big money has infiltrated another business and screwed the little man. Why couldn’t we just model another state’s program and make a few changes? Hopefully they will make some changes afterwards.

    Reply
  2. Brett Roper on

    Unfortunately the State’s new law does nothing to reduce the black market (flower) as it is an oils only market to begin with and those growers out there providing quality black market materials to their customers will likely continue to do so … additionally there are no flower or edibles allowed, just oils so as noted we are advising our clients applying for permit to be very conservative with their performance numbers as we suspect that the $100M mark for the marketplace as a whole will be some time in arriving … timing question – so if the State actually awards permits in late June as it has indicated (90 days to evaluate and award would be a record as well as a minor miracle unless the actual number of apps anticipated drops due to higher competition and tighter timelines from original prognostications) which would seem to suggest that it will very likely be late 2017 or early 2018 before any cultivation effort begins in earnest which would seem to suggest 1st products to market (still have to grow, dry, cure, process test, etc.) would likely be summer of 2018 at best and quite possible on into the fall of 2018. I am sure most in this industry recall Hawaii’s claim that products would be arriving to the market by late summer of 2016 and today there are still no products in the dispensary marketplace at last check. Time will tell.

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  3. Bob on

    The laws are to strict in Pennsylvania. This is supposed to be compassionate care? Where is my right to grow my own medicine? I can’t afford to buy anything because I’m disabled and have been going through hell trying to get my pills and if you have cannabis in you urine you don’t get your pills for chronic pain. I had 6 surgeries on my groin and I feel like I get kicked in the balls and these Dr’s are patient shopping and making it impossible for me to get a dr who understands. Most pain Dr’s are neck and back specialists not groin and the Dr’s don’t know how to treat my condition and smoking cannabis relieves the sickness I feel from the ball pain. I get sick to my stomach from it and the pain is unbearable at times and Dr’s don’t give a crap. The whole system is set up for the corrupt Dr’s and politicians but if I grow it I go to jail. All this bull shit because I want to live a decent quality of life and what does our politicians do for us? They come up with a way for THEM TO MAKE MONEY!!!

    Reply

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