Authored By: William F. McDevitt, Esq.
Between February 15 and 17, 2018, six dispensaries in Pennsylvania began selling legal medical marijuana to physician-certified patients who hold Department of Health ID cards.
Supply
The six dispensaries were stocked with various products from a single grower/processor, Cresco Yeltrah, including concentrates (budder, wax, sugar, shatter, RSO or Rick Simpson Oil), vape cartridges, pills, lotions and salves. Cannabidiol (CBD) products were in high demand. Those products contain higher amounts of a non-psychoactive compound found in cannabis that is associated with reducing epilepsy. The average reported price was $65 to $70 for a full gram of concentrates and $60 to $65 for 500 mg vape cartridges. Some sites disclosed one-day sales of $15,000 to $20,000. The average transaction was $200.
Over the short term, prices are expected to drop as more grower/processors bring products to market and competition increases. Nine other grower/processors are approved to distribute cannabis products to dispensaries, and their products should hit shelves within the next few weeks.
An additional four dispensaries also are approved to begin operations. Forty-four other dispensaries possess licenses and are working toward regulatory approval.
Demand
The number of patients also is growing, but at a slower rate. As of early February, it is estimated that 17,000 potential patients have registered with the Commonwealth and are awaiting physician certification. Approximately 708 physicians have sought accreditation to certify patients and 376 were certified as of January 2018.
Surplus
One way to lower patient costs is to increase cultivation. Some states, however, are facing problems arising from surplus production. In early February 2018, Oregon’s U.S. Attorney Billy Williams told reporters there is a “massive marijuana overproduction problem” facing the state. It is widely believed that Colorado and Washington are facing similar surplus issues. Excess product finds its way into neighboring states, with Idaho and Kansas reporting significant increases in marijuana distribution.
Pennsylvania’s Medical Marijuana Law (MML) and supporting regulations were designed to avoid surplus production problems. All medical marijuana must be cultivated indoors, reducing the possibility of plants “wandering” away. Grower-processors are required to implement a seed-to-sale monitoring program. Growers must account for the amount of cannabis that has been planted, the amount successfully cultivated and the volume of discarded material (including damaged plants and seeds). Excess production should not be possible under the MML.
Pricing
So, what does this mean for pricing? Unlike other Pennsylvania farmers, cannabis grower/processors cannot “plant more to reap more.” While all legal cannabis products in Pennsylvania are processed and have a longer shelf life than flower or “bud” marijuana, “stockpiling” or overproducing raw cannabis raises questions with regulators. Small harvests represent smaller returns and, ultimately, a higher cost to patients.
Cannabis grower/processors face heavy competition, high start-up costs, regulatory production limits and a relatively small (but growing) customer base. Patients may experience price volatility as the legal cannabis market in Pennsylvania stumbles toward equilibrium.
About the Author
William F. McDevitt is a partner in the Philadelphia office of national law firm Wilson Elser, where he is a member of the firm’s Cannabis Law practice. He can be reached at william.mcdevitt@wilsonelser.com.
