What is the result of a oligopoly in control of your medical marijuana supply chain? How about extreme prices and huge business losses. Minnesota is suffering the consequences of a bad law and strict limitations on production.
In 2014 Minnesota passed one of the most useless medical cannabis laws. The law not only limited the medicine to people with just a few qualifying conditions, they also did not allow smoking of flower or using any part of the actual plant. One of the most contentious parts of the legislation was the restriction of production licenses.
The first problem the law created was the limit of cannabis to only 10 qualifying conditions which include: Amyotrophic Lateral Sclerosis (ALS), Cancer/cachexia, Crohn’s disease, Glaucoma, HIV/AIDS, Intractable pain, Seizures, Severe and persistent muscle spasms, Terminal illness, and Tourette’s Syndrome. They also only allow a 30 days supply of the natural medicine and do not allow home cultivation.
The second, and most restrictive part of the law, was to allow only eight dispensaries statewide. This limitation has created a unnecessary hardship for many patients that have to travel hundreds of miles, every 30 days, to get their medicine from one of only two producers in the state. Registered by the Minnesota Department of Health (MDH) on Dec 1, 2014, they are responsible for the cultivation, production, and distribution of medical cannabis for the entire state. The manufacturers are Minnesota Medical Solutions, LLC and LeafLine Labs, LLC.
You might think that would be a major advantage to the businesses, having an effective oligopoly on the supply in the “Land of 10,000 Lakes,” but it has not proven profitable at all. In fact, according to an open record request, the two businesses have lost $11 million between them. The Associate Press reported:
LeafLine chief executive officer Andrew Bachman said his patients should not worry about the company’s performance and what it means for their long-term future, saying that LeafLine was still beating its own financial plans. He chalked up the large loss to a rapid expansion in year two, which included opening three dispensaries and hiring the necessary staff.
“This is the cost of doing medicinal cannabis correctly,” Bachman said. “The goal was never to post a profit early. It was to take care of people, always.”
Minnesota Medical Solutions chief executive Kyle Kingsley painted his company’s decreasing losses as a positive, and said he hopes to break even in 2017 as the company continues retooling its business to reduce costs. But the key, he said, was boosting awareness for physicians and prospective patients that medical marijuana is an option.
Even though both companies expected big losses to occur in the first years, the large numbers are of concern to MDH. They found Minnesota Medical Solutions to be shipping marijuana oils to a New York subsidiary company, and that case is still in the courts.
With the strict limitations on conditions, the banning of smoked flower, and a limit on production, you can expect Minnesota’s program to continue to fail miserably. And, with the continued enforcement of the IRS tax code that discriminates against cannabis, making a profit will be truly impossible and the investors in these start-up businesses were foolish to invest in a business that is subjected to such a ridiculous regulatory scheme. The green rush continues to gobble up millions of dollars with bad regulations, unscrupulous actors, and economic imprisonment by the Internal Revenue Service.