New Market: Louisiana’s MMJ program offers limited opportunities but gains momentum

This is the 13th 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

Although it has one of the oldest medical marijuana laws on the books in the United States, Louisiana took steps just last year to lay the groundwork for a regulated MMJ program and a viable cannabis industry.

Business opportunities are expected to be limited, however. And some observers argue the new law is unworkable, given that it doesn’t specifically protect patients and businesses from state-level prosecution.

But Louisiana officials are moving ahead with plans to launch the program, and the two public universities authorized to grow and process MMJ have said they hope to begin cultivating by the end of the year.

The state’s new program represents a novel approach to legal medical cannabis, given that two state-run institutions will oversee the cultivation and processing of all MMJ. Both universities are seeking private businesses to operate their programs.

The 2016 law authorizes the establishment of “pharmacies” – rather than dispensaries – to sell medical cannabis. Still, the pharmacies will operate much like dispensaries. They could be open in 2018. MMJ entrepreneurs will have the opportunity to own the new establishments.

With a limited conditions list and a strictly controlled program, Marijuana Business Daily projects the Louisiana market will grow to 10,000-20,000 patients with $15 million-$30 million in annual sales three to five years after the first dispensaries open.

On the plant-touching side, business opportunities will be more limited for growers-processors because of the virtual monopoly granted to Louisiana State University and Southern University.

There should be more ancillary opportunities in areas such as seed-to-sale tracking technology, security and transport.

Louisiana’s legislature first passed its Therapeutic Cannabis Law in 1978. However, the law was drafted in a way that it required doctors to “prescribe” MMJ – a move that would violate a physician’s U.S. Drug Enforcement Administration license. Prescribing a Schedule 1 controlled substance is illegal.

Last year, Louisiana Senator Fred Mills offered legislation changing the word “prescribe” in all sections of the law to “recommend.” Gov. John Bel Edwards signed the measure into law.

Following that, LSU and Southern opted to become the state’s only marijuana cultivators and processors.

“We are surprised that LSU has been eager as they are to undertake this process,” said Maggie Ellinger-Locke with the Marijuana Policy Project. “Potentially they are risking some federal funding.”

University model

LSU and Southern had the right of first refusal to turn down the producer-processor contracts. Initially, both universities planned to do everything on their own but were advised to create some separation, according to David Brown, director of Sensible Marijuana Policy for Louisiana.

To avoid jeopardizing their federal funding, both institutions decided to enlist subcontractors to perform the job.

LSU is slightly ahead of Southern in terms of hiring outside help. Southern will issue its request for proposals from subcontractors in mid-March. LSU issued its call last month.

LSU’s cultivation will be done off campus. The university cited security concerns and a wish to maintain some distance from students.

LSU also requires that a producer-processor allocate 5,000 square feet of a laboratory for the university to conduct MMJ research. LSU will require some payment from the subcontractor. The university can acquire any intellectual property from the research.

Southern’s cultivation site will be located at the university’s agricultural experiment station, approximately 5 miles from the main campus.  The winning vendor must invest roughly $5 million-$7 million in automation equipment and technology.

Business opportunities

The two subcontractors ultimately tapped to run the producer-processor facilities can hire ancillary firms – a security company, for example – to help with the operations.

On the sales and distribution side, nine pharmacies will be scattered around the state. An additional pharmacy will be located based on patient demand – likely in East Baton Rouge Parish or Orleans Parish, given the size of their populations.

Under Louisiana’s new law, an entrepreneur can own a pharmacy without being a licensed pharmacist. But a pharmacist must be employed to run the dispensary.

The pharmacies are structured to be similar to a dispensary, because they will be dealing almost exclusively in cannabis medicine.

“They’re going to look like dispensaries around the country,” Brown said.

Pharmacies will be able to carry sublingual drops, transdermal patches, pills, edibles and topical lotions. Flower and vaporization are not allowed.

Under LSU’s proposed guidelines, greenhouses would be allowed. Brown expects to see a mix of both indoor and outdoor growing, opening a business opportunity for a greenhouse company. The size of the cultivation facility is left up to the individual applicant, Brown said, but properties are likely to range from 20,000 to 50,000 square feet.

Other opportunities will come in the shape of tracking, ag businesses that provide soil amendments, packaging companies and transportation firms.

Licenses, timeline

For LSU, applications for the subcontractor job are due March 21. Finalists will be invited to deliver oral presentations the week of April 24. And one subcontract will be awarded in mid-May. Applicants face no residency requirements.

For Southern, Brown said it appears the university is only about a month behind LSU. Southern has said “more likely than not” there will be some type of accommodation for Louisiana residents who apply for subcontracts.

“We’ll hope to get plants planted by the end of 2017,” Brown said.

The next step will be full production, extraction and creation of medications, then transporting those medications to the 10 pharmacies.

Pharmacies could be open by mid-2018, Brown estimated.

Conditions list, patient count

Too few patients could be a problem for the industry. The state’s initial projection for only 1,440 patients was “woefully low,” Brown said. Intractable or chronic pain and PTSD are not among the following acceptable conditions for MMJ treatment:

  • HIV/Aids
  • Cancer
  • Cachexia
  • Crohn’s
  • Glaucoma
  • Spastic quadriplegia
  • Seizure disorders
  • Multiple sclerosis
  • Muscular dystrophy

Before MMJ can be recommended, physicians will be required to create an individualized treatment plan documenting that other methods were considered or tried but lacked reasonable success.

“That’s something we’re going to have to try and get overturned,” Brown said.

There is no reciprocity for out-of-state cardholders.

Biggest challenges

To MPP’s Ellinger-Locke, the law as now written – without patient protections or protections for transporters or pharmacy workers – doesn’t allow for a workable program.

“If a patient is consuming cannabis pursuant to the program they could still be arrested under the law,” she said.

Also, the ban on flower and vaporization will limit available business opportunities.

“I think the industry suffers from not having enough delivery methods,” Brown said.

However, a bill is circulating this legislative session that would allow vaporization. Brown said vaporization would help patients to alleviate their pain more quickly than consuming it orally.

Another bill would add chronic or intractable pain to the conditions list, a move that would boost the patient count and MMJ sales. And a third would provide explicit legal protections for anyone participating in the system.

“That’s a problem that needs resolution,” Ellinger-Locke emphasized. “You don’t want patients subject to arrest for consuming medicine.”

Bart Schaneman can be reached at [email protected]

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