How Will Legalization Affect Medical Cannabis Patients?

Beginning in July of 2018, adults will be able to legally use and possess cannabis in Massachusetts. Medical marijuana is already legal in the state, and has been since 2012.

The looming legalization of recreational cannabis has raised a lot of questions from the medical marijuana industry and patients alike. Will medical dispensaries compete with recreational dispensaries and individual dealers? Will patients benefit or suffer from changes in price and availability? Will medical marijuana simply become obsolete?

You could ask 10 experts for their prediction and you'd probably get 10 different answers. There is still major uncertainty about the legal status of recreational cannabis in the near future, and that makes it hard for dispensaries to develop business plans.

For now though, it is safe to say that medical cannabis will not be going away.

There will be a greater demand for medical cannabis as long as there is uncertainty and inefficiency in the recreational industry. However, many medical dispensaries plan to also pursue recreational sales. The industry’s future is in the details, and those details are still… hazy.

Uncertain Regulations

Despite the overwhelming popular support with which voters passed recreational cannabis, Massachusetts lawmakers still have a lot to say about the issue. Ongoing legislation and litigation will shape the future of legal cannabis.

Here are a few unsettled aspects of Massachusetts cannabis policy:

  1. Will there be an intoxication limit for driving as with alcohol?

In Colorado, another state with legal recreational cannabis, driving under the influence of marijuana is illegal. It remains to be seen if Massachusetts will model its rule on this matter after Colorado and other states with legal cannabis.

  1. Will the state tax change?

As it stands right now, the current tax rate is up to 12 percent (3.75% retail sales + 6.25% sales tax + 2% optional local tax), which is low compared to some other states (Washington's tax rate is three times higher). A bill currently in the Massachusetts House aims to bump this figure up to 28 percent, but as of yet, nothing has been finalized. Whatever the number winds up being, cities and towns can also set additional taxes.

  1. Will legislators lower the number of plants medical users can grow at home?

Some believe the limit of 12 is too high, allowing for grey market sales.

  1. Could the legal age be raised?

This is less likely, but still possible.

Zooming Out: Marijuana in the National Context

It’s important to remember that legalization is not a single vote – it is an ongoing, evolving process of policy and market forces.

Federal regulations are a major force in that evolution. Cannabis, after all, is still illegal in the U.S. Under President Obama, the federal government let states enforce their own cannabis regulations. That could change under the Trump Administration, which has taken a harder line when discussing marijuana.

Attorney General Jeff Sessions has been an outspoken critic of legal cannabis. Now in office, he intends to overhaul drug enforcement, including cannabis. This could encourage patients to keep the added legal protection of registration as a qualified patient, even in states where recreational cannabis is legal.

On the campaign trail, Trump himself supported medical marijuana, but is quick to distinguish between medical and recreational cannabis.

This seems like a clear advantage for medical dispensaries, but the situation is not so clear. Recreational users represent a large potential market for medical dispensaries, but it's not yet settled if they will be allowed to work with those customers. The Justice Department's new attitude puts a damper on those plans. In short, federal enforcement of cannabis could protect the medical industry's current market share, but limit what could otherwise be explosive growth in the near future.

Learning from Others

Despite this very real uncertainty, there are still lessons to be learned from other states. California and Colorado have seen similar dynamics play out.

Data from Colorado support the concern about recreational sales cutting into medical cannabis. From April 2016 to April 2017, medical cannabis sales grew by a paltry 2.5 percent. Meanwhile, recreational sales increased by 44.7 percent.

It must be noted that Colorado’s recreational sector benefits from cannabis tourism, too, which is another consideration for Massachusetts residents. As other states decriminalize cannabis, that boost will level off. Colorado has 6 neighbors with no legal cannabis, recreational or medical. In contrast, Massachusetts is surrounded by states that allow medical marijuana.

Faced with regulating a brand new industry, states use taxes to try to strike an economic balance. Medical cannabis should remain affordable for those who are suffering debilitating conditions. At the same time, recreational cannabis cannot be so expensive that users turn back to illegal dealers.

The power of consumer speculation was illustrated in Arizona, where there was a 73 percent decrease in registration for legal medical marijuana in 2016. Analysts believed the decrease was caused by speculation that recreational cannabis would be made legal that November. It seemed Arizonans were willing to wait for a more convenient option.

Since then, a broader picture has emerged. Patient and care provider registrations follow a quarterly cycle, just like other retail sectors. Applications pick up around the holidays and peak at the beginning of summer. This means that a large drop leading up to an election could just be a seasonal retail trend, and not the abandonment of medical marijuana in anticipation of legal recreational cannabis.

At the same time, if users follow retail trends, it suggests that many do not treat cannabis like other medications. Such users, presumably with less serious medical conditions, are the ones who could jump ship to the recreational sector.

As Arizona residents showed, cumbersome regulation may burden medical cannabis. Regulation also provides safety. In Colorado, a production glut led to a crash in cannabis prices. Overproduction is much less likely to affect medical cannabis.

In the case of medical cannabis, producers know how many patients are registered, so demand is more predictable. Prices and availability will be more stable for medical users whose conditions require dependable medication. Having learned from Colorado’s ups and downs, it is likely medical cannabis will retain its market share in Massachusetts with that promise of predictable prices and reliable dispensaries.

The Middle Path

So what can be gleaned from all this confusion? The most probable outcome is that medical cannabis in Massachusetts will continue to be a complex industry.

It is likely that the first recreational dispensaries will be operated by medical dispensaries, since state law gives them a one-year head start on the retail application process.

In the future, industry analysts have predicted a more fluid line between medical and recreational cannabis. For example, medically-endorsed recreational cannabis, sold at a premium, but without red tape.

State and local governments will continue to tinker with tax rates and other policy levers. These adjustments may tip the balance towards medical or recreational cannabis at times, but many regulators seem as willing as dispensaries and consumers to forgo a clear distinction.

The media happily report on the chaos, and point fingers at lawmakers, but Massachusetts voters will continue to have a say. The old stereotypes of lazy stoners have been shattered. Cannabis advocates are sharp and knowledgeable. Representatives of medical and recreational cannabis have a lot of influence in future decisions.

Patients who rely on cannabis to manage debilitating conditions will continue to weigh in and protect their access to the medication they need, even as recreational cannabis takes root.

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