Oklahoma approves more than 1,100 medical marijuana businesses, the U.S. Drug Enforcement Administration moves certain CBD medicines off Schedule 1, and New York’s governor signs legislation allowing MMJ as an alternative to opioids.
Here’s a closer look at some notable developments in the cannabis industry this week.
The numbers are mind-boggling: As of Monday, Oklahoma regulators already had approved more than 1,100 medical marijuana business licenses, including permits for 593 growers and 377 dispensaries for a nascent industry projected to reach $100 million-$150 million in annual sales.
Another 500 business applications were in the pipeline.
“It’s a free-for-all,” said Bud Scott, an attorney and executive director of New Health Solutions Oklahoma, a cannabis trade group.
“A lot of people who think it’s a good thing (to have a business-friendly market) also want to protect the mom and pops. But when you have a free-for-all, it’s the well-financed and larger guys who survive.”
Scott, who said he is advising about 75 clients, listed the following things that businesses can do to improve their chances to succeed:
- Identify niche markets.
- Reassess business plans and financial projections in light of the number of competitors.
- Think about partnering with other businesses to gain more leverage.
- Look at ancillary services, which could likely generate higher profit margins.
- Take more time to work with researchers and identify strains that target specific medical conditions.
Scott said he has an interest in a couple of projects, and “we’re taking our sweet time” to develop a sustainable business model.
Not only does Scott predict a flood of products when the market launches, he said it is concerning that patient registrations are so low. As of Monday, the state had received 5,724 patient applications and had approved 3,786.
“Regardless of what we do, patient numbers have to get up,” Scott said.
Green lights, red lights for CBD
A big shift this week in federal classification for some CBD won praise from cannabis entrepreneurs happy to see long-awaited federal validation of cannabis’ medical value.
But the DEA’s move of CBD medications with THC content below 0.1% from Schedule 1 to Schedule 5 comes with a lot of potential pitfalls for the broader cannabis industry, too.
Some fear the move could embolden the U.S. Food and Drug Administration to crack down on cannabis products made outside pharmaceutical channels. That’s because the FDA is not barred from spending money to fight cannabis, as is its sister agency, the Department of Justice.
Also, the FDA gave drugmaker GW Pharmaceuticals exclusive rights to sell the CBD drug for several years, opening the door for lawsuits against any other CBD maker, said Orion Inskip, a Seattle attorney who advises the cannabis industry.
“In the long term, it’ll be good news,” Inskip said of the rescheduling decision.
“But, in the short term … GW Pharma is the only company in the country that will be allowed to sell CBD extract. Anybody else is going to risk FDA enforcement.”
Too little, too late?
New York’s medical marijuana market got a lift this week when Gov. Andrew Cuomo signed legislation that formally allows MMJ to be used as an alternative to opioids.
But even if the latest development is positive, it’s little more than an incremental improvement to a still highly restricted market that bans smokable products, said attorney Noah Potter of the Hoban Law Group in New York.
“It’s now loosening up, but it’s too slow and too late,” Potter said of New York’s MMJ market, noting that high barriers to entry remain on the supply and demand side.
“It’s really unjustifiably late because there was no reason to enact legislation that strict in the first place.”
While New York is moving toward possibly legalizing adult-use marijuana, the issue of smokable flower becomes a countervailing factor that few are discussing, Potter said.
He noted that New York’s health department has been espousing a zero-tobacco future and predicted the ban on smokable flower in the MMJ industry won’t be lifted anytime soon.
At this point, Potter estimated there’s a 60%-70% chance that smokable flower won’t be permitted as part of the initial round of recreational marijuana legislation.
Jeff Smith can be reached at [email protected]
Kristen Nichols can be reached at [email protected]