Sign-ups for marijuana not high
Amid the clamor to set up medical marijuana dispensaries and cultivation centers in Illinois lies an inconvenient truth.
Seven months after the state began accepting applications, just 2,000 people have been approved to legally purchase pot once it becomes available in 60 dispensaries statewide that are supposed to be supplied by 21 cultivation centers, 18 of which have been approved by the state. It is far short of the customer base that proponents of medical marijuana had projected when the legislature approved a pilot project in 2013.
“We certainly expected tens of thousands of people,” says Melaney Arnold, spokeswoman for the Illinois Department of Public Health. “But that could still happen.”
The process for approval isn’t simple, which may help explain why just 2,700 of 19,500 people who have logged onto the state website where applications have been accepted since September have submitted applications. Would-be buyers need to submit photographs of themselves, submit to criminal background checks, find a doctor who will provide written permission to use marijuana, get fingerprinted at a cost of $50, provide proof of residency and pay a $100 nonrefundable application fee.
The list of qualifying conditions is restrictive compared to states such as California, where the state doesn’t license dispensaries and people get medical marijuana cards allowing them to use pot for any illness that a physician deems suitable for treatment with cannabis. In Illinois, patients must suffer from at least one of 37 conditions ranging from AIDS to cancer to nail-patella syndrome. Chronic pain? Forget about it, unless it’s a case of residual limb pain, a condition in which amputees suffer pain from parts of limbs that still exist. And if you’ve got a criminal record, you can be denied permission to use marijuana even if you suffer from all 37 ailments.
Do the math, and the picture isn’t pretty for those who are betting millions of dollars on the cannabis industry in Illinois.
If sales started tomorrow and everyone who now has permission to use marijuana purchased five ounces per month, the maximum allowable, and paid $280 per ounce (a fair figure based on the going rate in other states where medical marijuana is legal), the cannabis industry would generate $33.6 million per year, or $1.87 million for each of the 18 cultivation centers that the state has so far authorized. That’s assuming that dispensaries don’t collect a nickel. And there is no guarantee that sales will be allowed after Jan. 1, 2018, when the pilot program is scheduled to sunset absent an extension by the legislature.
“Given the current customer pool and current license holders, there’s clearly not enough customer base to support all these license holders,” says Ali Nagib, assistant director of the Illinois chapter of the National Organization for the Reform of Marijuana Laws, who points out that five ounces of weed is a lot of pot and reckons that one or two ounces per month is a more reasonable per-customer estimate. “I know there’s a lot of nervous business owners here looking at this pool.”
Joe Caltabiano, president of Chicago-based Cresco Labs that is spending $30 million to set up three cultivation centers, says that he isn’t worried.
“We’re comfortable with the program that’s currently in place,” says Caltabiano, whose company promised a half-percent of gross receipts to five counties, with a $25,000 minimum for each county, in exchange for supporting Cresco’s successful application to build a 40,000-square-foot cultivation center in Logan County. “We’re hopeful and confident that the state will provide a program that is sustainable.”
Nonetheless, Green Thumb Industries, which was awarded three cultivation licenses, has surrendered one for a cultivation site that had been planned for Dixon. PharmaCann, an Oak Park corporation formed last year that has issued $20 million in stock, has been given the abandoned license. Each cultivation license requires a $2 million surety bond and a $200,000 permit fee.
Explanations for the low number of patient applications vary. Some say that doctors are reluctant to recommend marijuana. Investors predict that the customer base will surge when dispensaries open. Caltabiano says that Cresco’s first crop won’t come in until late this year or early 2016.
“The decision on picking up that cultivation center (abandoned by Green Thumb) was made with projections as to what the patient base is going to be,” says Teddy Scott, chief executive officer of PharmaCann, who expects sales to start this fall. We expect it to be higher.”
The state might help things along by increasing the number of ailments for which marijuana can be legally used. The state Medical Cannabis Advisory Board is considering whether 14 conditions ranging from anxiety to diabetes essential thrombocythemia with a JAK 2 (a rare blood disorder) should be added to the list, with the director of the state health department making the final call. Meanwhile, the General Assembly is considering a bill that would extend the pilot program now due for sunset in 2018 so that the industry would have a full four years of operation before legislators would consider its future. The long-term future, proponents say, is bright.
“I think, for awhile at least, there’s going to be the belief that these are going to have to be specialty shops,” Nagib said. “Eventually, I think, we’ll get to the point where cannabis will be sold over the counter, like tobacco or liquor.”
