On July 1, it became legal for any adult to buy marijuana in Las Vegas. An eighth ounce (3.5 grams) of top-grade buds costs just $25. Philadelphia is getting a few medical cannabis dispensaries some time next year, but there won’t be any cheap weed for sale.
Pennsylvania has only legalized things like vape-pen cartridges, edible cannabis extracts and topical creams for registered patients. It’s known as a “no-smoke” law.
From a patient perspective, there was absolutely no good reason to bar seriously ill residents from simply using the plant with a pipe or rolling papers. That was all politics. To get back the most cost-effective form of marijuana, it will take action by the Department of Health or an amendment to the law.
Sometime next year, warehouses across Pennsylvania will have lush cannabis growing in orderly rows. The flowers won’t be dried, cured and carefully trimmed. The vibrant greenery — sticks and stems included — will be macerated and put into steel vats, their essence drained with something like supercritical carbon dioxide. This is the “processing” part of the law.
Originally — and still precariously — done underground in garages with butane, cannabis extraction has now been industrialized through several techniques. Closed-loop gas systems and massive “rosin” press machines are the most common. Vacuum-pressure ovens turn the base extracts into honey oil, wax, or shatter forms.
The result is an array of products that are the most expensive in the shop, even in fully legal states.
How about tincture containing 100mg of THC and/or CBD for $100-$200? That’s the going rate in some regulated states right now. Patients might need two to 10 bottles per month. They could make that much a home with access to a few ounces of dried marijuana.
Or maybe a single pre-filled vape-pen cartridge for $50-$90? That’s the price now in regulated stores and from local underground suppliers. Patients might need one a week, or one a day.
Or a just 1 gram of medical-grade live resin for $75? Already happening in Colorado … and underground in Philly.
The real trade secret is that while the cannabis industry has been keeping prices high on extract products, the wholesale production costs have been declining. It’s much cheaper to grow for oil than for flower.
That means the markup on some regulated medical cannabis products in Pennsylvania could make Martin Shkreli (the villain of EpiPen price gouging) jealous.
Wholesale production estimates would put the 100mg tincture at about $12.50, the cartridge at $7.50 (including the pen and battery) and that 1 gram dab at $15.
According to several sources, a full pound of hash oil can be be purchased wholesale today in California’s consignment market for as low as $6,700 or $14 per gram. That means the producer is already earning a healthy profit.
Still, that pound of oil sold by the gram retail will easily cash out for $25,000 or more. It could also infuse up to $60,000 of cartridges, tinctures and edibles, which are then marked up even more.
To put this into perspective: Gold trades at about $40 per gram today; or $1300 per troy ounce and $20,000 per pound. And that precious metal is a lot more labor-intensive to extract from rocks than cannabinoids are from plants.
Some of Pennsylvania’s newly permitted cannabis producers already have operations in Illinois, New Jersey, New York, Minnesota and Colorado. Pennsylvania’s wholesale market is estimated at $150 million, putting millions on the table for each of those 12 permit holders.
But there’s one thing being taken for granted: Patients to fork over their cash.
It will take 10,000 registered patients paying $1,250 per month, every month, out of pocket to add up to $150 million. There’s no health insurance to defray the costs. Every penny in profit and taxes on medical cannabis will come from our most severely ill residents.
Consumer safety measures, especially confirming labeling or end-user product testing claims, are still new compared to the more agricultural oversight of pesticides, fungus and general cannabinoid content.
Doctors also increasingly rely on the THC and CBD potency numbers. It really does matter if the lab testing and labeling are correct. Patients shop less by strain names than by lab results.
Under Pennsylvania’s law, the newly permitted grower/processor operations must contract with an independent laboratory. These will also be overseen by the Department of Health. In fact, Pennsylvania will be attempting some of the most rigorous lab testing in the country, right at the start of its program.
Accurate lab testing invariably adds to the price patients will pay. The deep scrutiny may also be a surprise to some of the out-of-state operators who have won Pennsylvania’s limited permits.
A final add-on for patients is the tax. It won’t be levied when a vet with PTSD hands over cash for a vape cartridge, but will instead be levied as a 5 percent excise tax between the grower/processor and dispensaries.
Does it all need to be this expensive?
Not really. Prices are declining for patients and consumers in states that operate a free market in cannabis. Underground prices are even going down as quality increases. Most medications, even over-the-counter drugs like codeine, are tax free.
But by restricting the access and limiting the operating permits, Pennsylvania is joining states that keep up an artificially inflated price model not just to benefit the nascent industry but also to realize some tax revenue.
Again all the money comes directly from people who are so sick they are often paying for medical cannabis with cash from their disability checks. Favorable polling for medical marijuana is above 90% in Pennsylvania. No one was asked what they thought of legalizing a limited hash-oil program.
Pennsylvania is trying to implement a model that has already failed in other states. If the legislature is sincere in this effort, we can revisit the law and remove the biggest hurdles for patients.
Eliminating the doctor registry and allowing whole-plant, dried cannabis flower buds to be distributed to patients would be a strong start.
Without some immediate attention to this program, we could see the players and the house lose. For now, Pennsylvania’s patients are better off in Vegas when it comes to medical cannabis.