Possibility of new competition concerns New York’s existing medical cannabis companies

By Omar Sacirbey

Medical marijuana businesses in New York are hopeful that recent and proposed changes to the state’s MMJ program will increase patient numbers and boost sales.

But the five existing companies, currently operating below their capacities, worry those gains could be negated by plans to allow newcomers to enter the market.

“Adding new registered organizations will divide up the patients even more. They need to fix the demand side first and then adjust supply,” said Jeremy Unruh, general counsel at PharmaCann, one of the five registered MMJ organizations that are licensed to grow, produce and dispense medical cannabis.

Earlier this month, the New York State Department of Health added chronic pain to the list of qualifying conditions and expanded the types of products companies can sell.

In other states that allow patients to obtain marijuana for pain, typically 1%-2% of the population signs up for the medical cannabis program. In New York, with a population of almost 19.8 million, that translates to 198,000-396,000 patients – although much will depend on how regulators decide to define chronic pain and if there are any other restrictions around it.

Officials also decided in November to permit nurse practitioners to recommend medical cannabis to patients. And regulations are being drafted to give physician’s assistants recommendation privilege and to establish a home delivery program.

The DOH’s hope is these changes will improve patient access, which has been hampered by a relative dearth of physicians who recommend medical cannabis, high prices and dispensaries that are just too far away for many potential patients.

New York’s MMJ program launched Jan. 8, and as of Dec. 12, 11,291 patients were enrolled in the program and 771 doctors were certified to recommend.

Now, state health officials are working on a plan to allow up to five new medical marijuana businesses to enter the market over the next two years – which would double the number of companies.

“We’re undertaking a cautious, phased-in approach to ensure a smooth integration,” the DOH said in a statement to Marijuana Business Daily. “The parameters of that expansion, including the timing of any entry and the location of dispensaries, are still being examined carefully.”

The five current registered organizations strongly oppose the additions.

“It’s foolish because you’ve already got five registered organizations that are operating at literally fractions of their capacity,” Unruh said.

PharmaCann, Bloomfield Industries, Columbia Care NY, Etain and Vireo Health of New York – which essentially comprise the New York Medical Cannabis Industry Association – made clear they don’t unconditionally oppose more registered organizations. They just don’t see the need to do so now.

“There aren’t enough patients to keep just one registered organization going at full capacity,” said Ari Hoffnung, CEO of Vireo Health. “We’re all taking operating losses at the moment.”

Unused capacity

A major reason New York’s current license holders oppose more competition is cultivation capacity. All the current licensees have built or plan to build huge grow spaces, but they are using only small portions of them because there are not enough patients to justify more growing.

“We’re only using about 10% of our overall capacity,” Unruh said. “I have an entire second set of greenhouses that are about 80% of the way built out, but we didn’t finish them because there wasn’t sufficient demand to meet the supply that was out there.”

Vireo is using only 5% of about 20 acres it has set aside for cultivation, Hoffnung said, while Etain COO Hillary Peckham said her firm is using roughly 60% of the 13,000 feet it has in greenhouse space – and still has significant amounts of surplus product.

“New York has a problem with demand, not with supply,” Hoffnung said.

Looking for solutions

The five registered organizations argue that regulators should measure what kind of patient growth the recent changes may bring before awarding new licenses.

“I believe it’ll take at least six to 12 months before the effects of this become visible,” Peckham said.

Once regulators can determine how these changes will boost patient numbers, then they can figure out how many licensed businesses will be required to serve them, she said.

Though adding chronic pain and delivery services will benefit the MMJ program, Peckham said, the bigger issue is the lack of physicians willing to certify patients in the state.

“Chronic pain increases the number of people who qualify, but it doesn’t make access any easier,” Peckham said. “We need to find a way to incentivize the community to be on board.”

She would also like the health department to make public the list of doctors who are certified to recommend medical marijuana. At the moment, that list is not public; patients can find out about a certifying doctor only through primary care physicians.

Another solution, Unruh said, would be to allow existing MMJ businesses to expand their number of dispensaries while supplying them through their existing grow sites. Or, he said, the state could allow new licensees into the market but authorize them only to dispense, not to cultivate, so existing companies could wholesale their product to the new clinics.

A fight over extra licenses?

The New York Medical Cannabis Industry Association voiced its concerns about five additional licensees in a letter to the health department, Unruh said.

He believes a decision to award such licenses must be made by state legislature, not health regulators.

“If I needed to get a ruling on that (in court),” Unruh said, “then that’s something I would have to think about.”

Omar Sacirbey can be reached at [email protected]

3 comments on “Possibility of new competition concerns New York’s existing medical cannabis companies
  1. Lawrence Goodwin on

    Great coverage, Omar Sacirbey. Thank you. New York state lawmakers and regulators have botched this process from Day 1 and directly caused all of the financial difficulties faced by the current 5 medical cannabis producers. Many of the current “changes” (including more “registered organizations,” or producers) were in the original law until Gov. Andrew Cuomo demanded they be removed under the threat of his veto. One obvious solution is to “allow” the 5 producers to double or triple their “dispensaries,” since a total of 20 for the entire state of New York has been widely ridiculed as insufficient. This is a blatant case of state government smothering a free market, all in a vain attempt to “recreate the wheel” of medical cannabis without smoking in NY and other states. There is a general hatred of “pot smokers” in NY among officials and doctors alike, which completely eradicates the possibility that the 5 producers can sell raw flower, hash, shatter, budder, etc to patients—by far the cheapest ways for the companies to start boosting profits tomorrow. It’s common knowledge that smoking (or vaporizing) also happens to be the easiest ingestion method for patients to control their medical dosages. The arrogant CEO of Vireo Health, Dr. Kyle Kingsley, is partly to blame for this nonsense, since he was quoted by local media early on disparaging recreational “cannabis enthusiasts” as if they are scum of the Earth. NY patients should be allowed to purchase medicated topicals, drinks and edible products, too. But the anti-“marihuana” tyrants stubbornly refuse to “allow” such commerce. The shadow of drug war zealot Nelson Rockefeller—who’s been dead for decades—still keeps the Empire State’s cannabis industry in utter darkness.

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  2. Dub on

    The best weed in the world are grown in upstate NY. Hands down.

    If they intend to make this market grow, NY lawmakers need to make the holders of THE strains comfortable they aren’t going to get raided. Take a page out of LA’s playbook, and the largest city in the country will watch it thrive.

    But there is no incentive right now for the top growers. None at all, really. It’s a shame b/c the quality is second to none and in a true free market, the NYC diesel would export world wide and be the leading strain of choice for both med and rec.

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