Hopes For Budding Medical Marijuana Industry High, Yet Hazy

Apr 30, 2014

Clayton Dalton (center), owner of a high-end landscaping company, hopes to enter the medical marijuana business.
Credit Maureen Harvie/WYPR

Changes to Maryland's medical marijuana program are expected to set off a “green rush” of entrepreneurs eager to get in on the action.

But until new rules governing the nascent industry are finalized, no one is quite sure what the economic impact will be.

The General Assembly voted to overhaul the state's flawed medical marijuana program during this year's session so patients can more easily get the drug. The fiscal note accompanying the bill predicted the program could have a “potentially meaningful” effect on small businesses.

Paul Davies, chair of the state’s Medical Marijuana Commission, acknowledged Maryland stands to benefit financially from the program. But he said it’s tough to make predictions about jobs and revenue when the commission has only just begun discussing the fees, regulations and taxes that will guide the industry.

“We can only go on the experiences in other states,” Davies said, “and it appears that it’s had a significant impact on their economies.”

For example, Colorado’s Department of Revenue reported $1.4 million in taxes and fees collected from January’s medical marijuana sales.

The Maryland commission’s finance subcommittee has been studying the fee schedules of 14 states with active programs—which vary widely--to understand how to shape its guidelines.

Colorado’s application fees range from $7,000 to $18,000 for medical marijuana facilities, depending on the number of patients served.  Connecticut requires a $25,000 application fee, a $75,000 registration fee, and two million dollars in escrow for a cultivation license.

Corey Barnette, president of District Growers, a cultivation center in Washington, DC, says he wants to expand his business to Maryland, but he is concerned about the yet-to-be-determined fees. “I know for a fact it doesn’t take $200,000 to even set up a dispensary…Some of these states are coming up with requirements and hurdles that, you know, actually restrict the little guy. And that’s unfortunate,” he said.

Unfortunate, Barnette said, because this business creates skilled jobs “making products, creating technologies that can be used by patients.”

“These are jobs that pay two, three, four times the living wage,” Barnette said.

The medical marijuana law passed last year allowed medical marijuana to be sold only at academic medical centers.  There were only five in the state that qualified and none of them stepped up to the plate. Now the state will directly license marijuana cultivators and distributors so doctors can recommend the drug to patients.

Under the revised law, the state can license up to 15 marijuana cultivators in the program’s first year. There is no cap on dispensary licenses.

Commission Chair Davies agrees that the changes make the potential for job growth far-reaching. There will be inspectors, security officers, lab technicians, and, as Davies points out, “I’m sure that like every business in the state of Maryland and throughout the United States, we’ll all need attorneys in the process.”

It’s hard to say exactly how many jobs will be created by the medical marijuana industry. Debra Borchardt, Markets Analyst for The Street, tried to figure out the number of cultivators and distributors in states with operational medical marijuana programs. She estimated the number of employees that facilities would need to function. Her best guess: “The marijuana industry may have already added over 175,000 jobs and that's just the beginning.”

Uncertainty about the fees hasn’t dampened the enthusiasm of Maryland’s prospective entrepreneurs. The commission’s April meeting was packed.

Bill Cotton, director of operations for Pinkerton, a global investigation and consulting firm, attended. He’s already started networking. “I’ve been approached by one of the growers to provide protection when they transport their product from the growing farm, shall we say, into their packing area, from their packing area then into the distribution centers,” Cotton said.

Clayton Dalton, who owns a high-end residential landscaping business in Maryland, also attended the meeting. He said he sees opportunities beyond cultivation.

“There’s a lot more openings than just to grow. I’m also looking into opening a store to sell equipment to grow,” he said, “the hydroponics equipment, the fertilizer and nutrients, and the grow lights, tents.” A store would also be useful if Maryland allows patients to grow their own plants.

Still, some have concerns about Maryland’s foray into the medical marijuana industry. Ryan Vandrey, a behavioral pharmacologist at Johns Hopkins Bayview Medical Center, pointed to California’s lax regulations.

“You have dispensaries that sell one hundred different kinds of marijuana, with all kinds of crazy names,” Vandrey said. “They sell 150 o 200 kinds of edible products, some of which contain incredibly high doses of THC. And that’s not medicine. That’s free market capitalism.”

A loosely regulated program may increase jobs created and revenue collected, but that strays from the medical purpose behind it, he argued.

It’s up to the commission to address these concerns. They will adopt regulations by September 15 and submit them to the Department of Health and Mental Hygiene for review. The new law requires Maryland to measure the economic impact of the nascent industry by adding a representative from the Office of the Comptroller to the commission. Additionally, the commission must report on hiring practices, taxation levels, and the impact of the program on financial and banking transactions.