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Medical Cannabis Industry Grows Despite Challenges

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Sales have been brisk. Unanticipated challenges are still unresolved. But Maryland’s medical cannabis business is moving forward.

It’s been an “uneven” roll-out for the first medical cannabis dispensaries licensed to operate in the state.

It’s great for the dispensaries when sales are brisk and one customer after another walks through their doors. However, software glitches – that don’t provide customer verification that is necessary – are putting a crooked dent in a still healthy bottom line.

While it’s frustrating, most dispensary owners feel that it’s an issue that will improve as the industry grows.

Software Saga

According to Phil Goldberg, president of the Maryland Cannabis Industry Association and owner of GreenLeaf Medical, a dispensary in Frederick, performance of the software setup provided by the Linthicum-based Maryland Medical Cannabis Commission, known as METRC, is the major concern.

METRC is the seed-to-sale tracking software.

“The business owners can be checking limits, then the software goes down. It happens frequently,” Goldberg said. “If the amount of retail sales has reached $45 million since the dispensary doors initially opened, if [the software] hadn’t been down so often on Fridays and Saturdays, that number would have been significantly higher. Furthermore, it damages the patients’ confidence.”

Still, Goldberg said he “would never blame” the cannabis commission for the problem, and feels that it is doing more to correct it than many people realize.

The commission “has a huge task, with limited resources,” he said. He added that METRC, a division of Lakeland, Fla.-based Franwell Inc, is dealing with an increase in business and that it needs more help. “For instance, there is often a 48-hour wait to get an answer from Level 2 support. That can cost up to $100,000 per day.”

Goldberg said, “There are so many transactions and METRC is simply overwhelmed.”

Requests for comment for this article by MMCC Executive Director Joy Strand and Director of Program Analytics and Quality Assurance Fakiza Rahman were not returned; nor was a similar request to METRC.

There’s more

There are several other industry issues that need to be addressed, said Jason Klein, principal, Cannabis Practice Group, with the Washington, D.C., office of Offitt Kurman, in Maryland, which is home to 65 dispensaries, with 37 more licenses that are not yet operational.

“The industry still has to figure out secure transportation,” said Klein, noting that some dispensaries offer delivery services.

He also said that House Bill 2, which passed last year, needs to be refined.

HB 2 alters the definition of “grower” to mean an entity that cultivates or packages medical cannabis, as well as establishes a Compassionate Use Fund to heighten access while altering the number of medical cannabis growers that may be licensed. The bill passed during the 2018 legislative session, but has yet to be fully implemented.

Klein added that more discussion is also needed about license ownership and transfer, drug testing for employees who hold medical cards (employers can test and fire someone if they don’t pass the test, since there is no worker protection), issues related to housing regarding status as a medical patient (landlords can tell residents they can’t consume) and the industry’s limited relationship with the banking industry.

“Movement is needed on those topics,” he said, adding, “Concerning the issue of disability or worker’s compensation, if an employer wants to know if cannabis was in an employee’s system if they were hurt, they can deny a claim.”

All told, all good

But back at retail level, the complaints, first and foremost, concern the frequent software crashes.

“It’s gotten worse lately because of the increased number of people who have been signing up,” said Alan Sharp, co-owner of Revolution Releaf, in North Laurel, “and people can’t buy products when that happens, sometimes after an hour drive. So they wait and hope it starts working again.”

Maryland does allow deliveries, but not shipping, usually within a certain radius and for a certain dollar amount.

That’s the bad news, Sharp said. “But the good news is, there are more dispensaries opening, more products coming on to the market and prices are coming down, which is another trend in what is proving to be a very competitive business. There are large concentrations of dispensaries in the more liberal areas, such as Howard and Montgomery counties. However, Anne Arundel and Prince George’s were tougher to enter, from a zoning standpoint.”

Gina Dubbe and Tony Toskov feel that, while they’ve felt the growing pains, too, the early part of their respective businesses have been a success. Dubbe, CEO of Greenhouse Wellness in Columbia, feels the state “is getting better with accommodating patient needs and doing real-time fixes to METRC, and the system in general.”

Another of her issues concerns businesses obtaining more than one license. “When we bid for our license, I was under the impression that you could only have one license in the state,” she said, “but less than a year in, there are already companies that own or manage multiple dispenseries in Maryland, which gives them greater economies of scale.”

Toskov, owner of Greenpoint Wellness, in Linthicum, believes that, despite the METRC controversy, “everything is going well. The most I’ve been down is 15-20 minutes,” he said, “and while at such times we all lose the ability to verify usage, know that the MMCC just released a memo that allows dispenseries to sell a certain amount (up to 12 grams) of product to clients during such instances. My view is, it could always be worse.”

So, he’s not complaining. “For the amount of people we’re getting in here, I think [the industry roll-out] has worked great. We attract about 150-175 clients per day.”

The general buzz has been, as roll-outs go, the medical cannabis industry is off to a solid start, despite its issues.

On that note, the MMCC is taking steps to improve outreach, said Jennifer White, spokesperson, pointing out that the agency has “learned that certain populations do not have technological access, like the elderly and members of certain religions.”

Still, until its problems are resolved, moving to what has been long anticipated — legalization of recreational cannabis, which has occurred in several states — is on the back burner in Maryland.

“The state has to get the medical program right and locked down before the personal use issue is a possibility,” said Klein. “There will certainly be further and ample tweaking of the program as it moves along.”

Still, he thinks there will be a vibrant discussion about adult use and a recreational bill in the 2019 legislative session. “I don’t think it will pass,” Klein said, “but there will be plenty of talk about what lies ahead.”