Imagine that you’ve recently made a six- or a seven-figure investment in a new business in a new industry; an industry that only recently was made legal in Maryland, with pent-up market demand and fairly limited competition.
That almost ensures that you’ll get a marvelous return on investment.
But you also know that, while the new industry is legal in Maryland and 28 other states, plus the District of Columbia, it’s not legal under federal law. That had new business license holders a bit nervous from the get-go.
Then imagine that the new presidential administration comes in and the attorney general states that the feds can prosecute state license holders at their will even though the Department of Justice (DOJ) is understaffed and has announced that it will not aggressively arrest business owners that are operating under state rules legally. Similar statements have come from the U.S. Attorney’s office in Maryland.
Got all that?
That semi-flux is part of what the pioneers of these early days of Maryland’s medical marijuana industry are dealing with. For their part, they’re proceeding with business as usual, but they also wonder what might, perhaps suddenly, lie ahead.
A Strange Space
The political environment, along with the various other moving parts in the new industry, such as establishing distribution channels and product procurement, make for “an interesting space to find ourselves in,” said Jason Klein, principal, Cannabis Practice Group, in the D.C. office of Offit Kurman. “Many states have set up cannabis programs, but under federal law, nothing has changed. Cannabis is still on the Schedule 1 (the most dangerous) controlled substances list, so it’s illegal (while cocaine is on Schedule 2).
“What the [U.S. Attorney General Jeff] Sessions’ announcement did,” said Klein, “was overturn the Cole Memorandum regarding enforcement priorities [as well four other memorandums].”
And no matter how well the new industry progresses, he said, the feds “will never tell the license holders that they’re in the free and clear. They’ll tell them that they have limited resources, but say, ‘When you’re within state law, you’re probably all right,’ although the feds can enforce what they want to, when they want to.”
Still, Klein said what those involved can also see: Little has happened since Sessions’ announcement.
That’s especially true in Maryland, he said. “The setup here is one of the most tightly-regulated in the country,” he said, “and remember, the acting enforcement czar in Maryland, Brian Schenning, acting U.S. attorney, is not necessarily being directed by the honchos in D.C.”
That’s good news for license holders, since Schenning recently stated that his office does not plan to enforce federal anti-drug laws against medical marijuana growers and distributors, and will continue its focus on fighting threats to national security, violent crime, the opioid epidemic (more on that later) and public corruption.
“Schenning may be a lame duck,” said Klein, “but his contemporaries in other states have made similar statements, and Gov. [Larry] Hogan and Attorney General [Brian] Frosh can come to the license holders’ aid if the feds come after them.”
This entire scenario could have been avoided, he said, if the previous administration had taken steps to prevent it.
“The knock on [President Barack] Obama was the he didn’t further the case, in any way, so that couldn’t be undone by the stroke of pen,” he said. “We needed legislation, not an executive order.”
Klein also noted that the Rohrabacher-Blumenauer amendment states that the U.S. Attorney General’s office of the DOJ can’t file charges against state dispenseries and growers since they’re not allowed to spend money on it. “So, the DOJ will have a hard time cracking down on anyone,” he said. “Plus, medical marijuana is popular with the public.”
The people Klein thinks should be worried today are those operating on the black market.
“From the industry’s perspective, no one should be doing that. You don’t know where their product comes from. Anything you’d buy from a licensed seller is clean, safe and accounted for,” he said. “So, we’d like a crackdown. That would be good for everyone, from the federal government and local licensees to the patients and the public, concerning medical and safety matters.”
Phil Goldberg, CEO of Green Leaf Medical, in Frederick County, and president of the Maryland Cannabis Industry Association, called the Sessions announcement “a scare, but I don’t think it was as bad as everyone thinks.”
Goldberg feels the reaction by Sessions was really directed to the adult (recreational) use markets that are expanding in the U.S., including California. “What we’d all been waiting on is to find out how the U.S. Attorney in Maryland was going to react, since Sessions basically left it up to the U.S. Attorney in each state to decide on their own priorities.
“Schenning said he had other priorities, including combating the opioid epidemic, which is one of the main benefits of medical marijuana, Goldberg said. “That’s really big for the industry.”
And the medication is working, Goldberg said. “We’re getting great feedback. I just heard from a woman on social media who has neuropathy who’s waiting for one of our specific strains, Painkiller XL. She said if medical marijuana doesn’t work, she’ll have to have spinal cord surgery to relieve her nerve pain.”
Medical marijuana is also key for kids who have attention deficit disorder or autism, for instance. “It medicates the kids without giving them drugs that leave them in such a stupor they can hardly function,” he said.
While there “are still people who think this movement is about getting high,” he said, “it’s really about providing therapeutic options. If [naysayers] could see some of the sick people who visit dispensaries, many of them elderly, with walkers, wheelchairs and breathing devices, they might start to understand why this option is important.”
That’s also the feeling of Gina Dubbe, managing director of Greenhouse Wellness, in Columbia.
“We’ve seen far sicker patients than we ever anticipated, and I mean terminally ill, sicker than I could have imagined,” Dubbe said. “It would be difficult to see an arcane government regulation result in patients not getting the relief they need.”
And those patients in need aren’t necessarily coming from the sectors of society that Dubbe suspected they would.
“We’re seeing 70–80 patients a day. It’s overwhelming and many more than I expected,” she said. “Our largest demographic is older than 30. We have 85-year-olds on walkers come in because they don’t want to take opioids; they want to be cognizant and functioning. They’re in so much pain that they’re doing something that they had never considered.”
Speaking of opioids, Dubbe said a “considerable chunk” of Greenhouse’s business has resulted from the opioid crisis, “and we’ve also seen a number of opioid patients drop their dosage from six opioid pain pills a day to just two.”
Dubbe also feels that the sector of the public that won’t accept medical marijuana hasn’t seen how it improves lives.
“When I see how sick people are, I can end up going home in tears,” she said. “Who can really say to someone who’s terminally ill that they shouldn’t have the ability to do this?”
That question is also asked by Alan Sharp, co-owner of Revolution Releaf, in North Laurel, which recently opened.
“We just gave a tour to a group from the Howard County Police Department. They asked a lot of questions, but didn’t really offer much in the way of their thoughts; they weren’t supportive or negative, but bear in mind that they’ve been dealing with the underbelly of this market for decades,” said Sharp, adding, “I’d certainly sleep a lot better at night to know that cannabis was no longer a Schedule 1 controlled substance.”
All told, he thinks the county and the state have been supportive of the new cannabis industry.
Cary Millstein, CEO with Zen Leaf, in Elkridge, has some short term concerns about today’s environment, but feels good about what he sees on the horizon — as long as the feds don’t make any sudden appearances.
“It’s been slow start in the industry, especially concerning the tremendous shortage of product. As soon as new product is available, it’s purchased,” he said. “I think the shortage of cannabis product will get worse in the short-term.”
But that also means that the demand is there, especially given that states with cannabis programs report 23% less opioid-related addiction issues than those that do not, according to research by the University of California San Diego, Millstein noted.
“We see, on average, about 35 patients a day, but on our busiest days, we’ve seen 90,” he said, “and the infrastructure is finally up, the growers and dispensaries are getting up to speed and the quality has been extraordinary.”
And then comes that sunny horizon. “I think the supply will right itself within the first quarter of this year,” Millstein said. “In fact, I think we’ll have a surplus of product by the end of the year.”
But even with all that said, he’s still “nervous about the whole thing.
“If I let [the feds] bother me, I’d never get any sleep. If Congress wants to make changes to the federal rules, I’m OK with that,” he said. “However, until we get there, these unknowns make everything in this wonderful new industry — like getting loans, following regulations, marketing, etc. — more tenuous and harder than they already are.”
Goldberg concurred. “I don’t feel like we’re on easy street by any means; [but] we’re taking big steps in the right direction,” he said.
Klein, too, is feeling a little more secure about the market.
“It could change, and l think Maryland operators have to be ready, in this dynamic industry, for whatever might come,” said Klein, “but as long as license holders are in unambiguous cooperation and compliance, they should be O.K.
“The roll-out is still going strong, and patients are still registering,” he said. “I don’t see any reason to be more concerned about the industry than anyone was the day before the Sessions announcement.”