State of the state's cannabis industry
As of late January, all of the available medical cannabis business permits have been awarded by the Office of Medical Cannabis under the Bureau for Public Health under the Department of Health and Human Resources. There are now 10 permits to grow, 10 permits to process, and 100 permits to dispense medical cannabis being held by different companies.
Some of the companies are well known multi-state operators (MSOs) whose CEO’s frequent CNBC to talk about “Pot Stocks.” Some are “Mom and Pop” operations made up of West Virginia residents or natives coming back home. Some are somewhere in between.
Many who were once excited about the program have become disillusioned by the many delays. Of course, the Medical Cannabis Act was passed in 2017. It’s March 2021 and there’s still no legal way to purchase medical cannabis, not until the permitted businesses become operational.
Though statute builds in exceptions and extensions, the companies are supposed to be operational within 6 months of award. With that in mind, it’s reasonable to expect products on shelves at some point this summer. Over my time in the cannabis industry, I’ve been very pessimistic about timeline predictions, federally and in our state. But things feel like they are changing for the first time since Nixon.
Nevertheless, we’re far away from a successful cannabis industry at this time. Patients have to clear considerable hurdles to get their card like paying a doctor up to 200 dollars to certify their condition. On top of that, there are only 30-40 doctors in the state that have completed the 4-hour training course, and they’re not allowed to advertise that they can certify medical cannabis patients.
As of February 23, the Office of Medical Cannabis indicated there had been 380 patient registration submissions. Not surprising considering the $50 dollars fee and, if you register now, you would only be able to use your card for half a year before you have to recertify and pay another fee. The OMC should immediately and formally move to push back the recertification deadline for those that sign up before product is available.
The most important issue is access, and price is the greatest barrier to access. I spoke to a WV veteran that told me the prices we see in other medical states is totally prohibitive for West Virginians. Insurances will not cover it, and there’s pressures driving the price up that include but are not limited to:
The nature of the program such that a lot of capital, expertise, and hard costs are required to launch and operate a facility.
Growing must take place in an industrial indoor facility
Substantial capital requirements and fees
A healthy excise tax on top of regular business taxes, 10 percent of the gross receipts at dispensaries
Brand new industry
Yes, in some east coast medical states, the price has not reached or fallen below black-market levels. Truth be told, it’s impossible to say exactly what prices will be over the first three years. But we know products are very affordable in states that have been working on it for a while like Oregon and Colorado.
The End of Federal Prohibition
You don’t need insider information to see massive amounts of institutional capital pouring into the cannabis industry for the first time. Former Senate Majority (now Minority) Leader Mitch McConnell has been the single biggest roadblock to federal cannabis reform. But he’s been replaced by Sen. Chuck Schumer. Schumer and other senators announced recently that they plan on introducing a sweeping cannabis reform bill.
So, given the leaders of both houses of Congress are on board and presuming President Biden wouldn't veto what his Democratic leadership passes on cannabis, full legalization on a federal level seems likely. And they’re not talking about rescheduling; we’re talking about descheduling. Regulation similar to alcohol. Federal expungement. And even restorative justice elements, though that’s a lot easier to talk about than to do right.
My official prediction is federal reform passes before the 2022 midterms.
What’s Next
When President Biden signs a bill ending the War on Drugs, that doesn’t change any state laws. If the federal government legalizes cannabis on Tuesday, recreational use will still be illegal in West Virginia on Wednesday. The feds are not going to compel states to reverse their laws currently on the books by withholding highway funds like they do with the drinking age.
Make no mistake, the descheduling (not rescheduling) of cannabis off the Controlled Substances Act will change everything. But West Virginia laws are more pertinent for West Virginians. Only the state legislature can end the Drug War in WV. The Governor would also need to sign it presuming there’s not the legislative support and spine to overturn a veto.
Luckily, state drug policies all over the country are changing rapidly. November 2020 was a clear win for cannabis with New Jersey, Arizona, Montana, and South Dakota all passing ballot initiatives to legalize the plant for adult-use. Not to be forgotten, Mississippi's ballot initiative legalized medical use. And on February 28th of this year, Virginia’s legislature effectively set the date of full cannabis legalization for January 1, 2024.
It just goes to the fact that such a large percentage of the country wants to see reform. According to Pew, two thirds of Americans support legalization. With such overwhelming support, it’s getting harder for politicians to say their constituents aren't on board, because that’s patently false.
78% of Democrats support full legalization, and 55% of Republican support it as well. It truly is a bipartisan issue, just look at Montana and South Dakota.
Real Change in West Virginia?
HB 2291, currently in the House Health and Human Resources Committee, would do the following (if passed as is):
Legalize cannabis production, sales, and adult consumption
Legalize possession of cannabis up to one ounce
Provide procedure for county commissions to authorize county referendum on legislation of production and sales
Tax it
15% excise tax for the state
½ to PEIA
¼ to Fight Substance Abuse Fund
⅛ grants to state and local law-enforcement
⅛ General Fund for state employee pay raises
6% for local government
½ to counties
½ to municipalities
It’s not a bad bill. First of all, it’s a win for counties. You don’t want a dispensary in your town or county? Go ahead, turn down the money. I almost hope supposedly pro-revenue, pro-economic development leaders expose themselves by fighting to keep jobs out of their community. Either way, the people decide.
Though we can’t afford to, as a state, burn resources solely because politicians can’t make up their minds. And thus, counties shouldn’t be able to ban businesses after they’re awarded permits. To the prohibitionists, you’re outnumbered and out of time.
Like any new bill, it could use some TLC to be more comprehensive. I don’t see anything about expungement. Details about exactly how adult-use permits would be dealt out and regulated are sparse. Virginia’s legalization bill has legal sales of cannabis starting no earlier than 2024. If West Virginia passed a similar bill, it would give us time to iron out these details in subsequent sessions. The medical industry has taken 4 years to get off the ground; adult-use regulations can be even more complicated.
State and national advocates are concerned about the lack of diversity. State advocates are uneasy with the number of out of state operators in the medical industry we already have. As West Virginians, we’re sensitive to outsiders making a profit off our people and resources. The state legislature intended to have a 50% ownership requirement by West Virginia residents, but it was nixed by a supreme court decision.
“Due to a recent Supreme Court decision (TENNESSEE WINE AND SPIRITS RETAILERS ASSN. v. RUSSELL F. THOMAS, EXECUTIVE DIRECTOR OF THE TENNESSEE ALCOHOLIC BEVERAGE COMMISSION, ET AL.), the residency requirement referred to by West Virginia Code §16A-6-3 Grant of Permit will not be applied to applicants seeking a West Virginia permit to operate as a medical cannabis organization.”
One thing is for sure, it’s wrong people who suffered under the War on Drugs are largely not the ones benefiting from legalization, because so often the damage was disproportionately dealt along lines of race and socio-economic status.
Other states have added elements to their adult use programs intended to diversify the industry and otherwise promote social justice. Unfortunately, it’s a lot easier to write a law than to effectively implement something, and many states have bungled it. Illinois, for example, has largely screwed over its “social equity applicants.”
Cannabis is not a silver bullet for all of our problems. But if that’s the requirement to get started in solving our problems, we have no chance. Fortunately, we do have a strong chance if our local and state leaders act boldly.
Governor Justice, I don’t hate the idea of eliminating state income tax (even though it happens to benefit you tremendously). At least it’s bold. But the numbers don’t add up. Personally, I want to be taxed to help the community I live in.
But if you want, tell the legislature to allocate funds in a way that decreases income taxes by the amount of revenue generated. That being said, a booming adult-use cannabis industry in West Virginia would not cover the 2 Billion dollar hole from eliminating the state income tax entirely.
And if you’re a politician that thinks “we just don’t know enough”, that’s your problem. There’s plenty of information and research available, you just haven’t read it. We all know politicians get paid the same whether they put in the work or not. But purposeful ignorance on cannabis policy will not be tolerated anymore (by me and many others at least).
