Texas’ limited medical marijuana program is considered economically unviable for MMJ companies, generating sales that represent a fraction of what one industry executive described as a potential billion-dollar market.
But that situation could begin to change this year if Texas lawmakers agree to significantly expand the program, which currently serves only a few thousand patients.
Any expansion would offer fresh business opportunities for cannabis entrepreneurs up and down the supply chain.
In its current form, Texas’ MMJ program is costly and financially constrained by a small list of qualifying patient conditions, a low THC cap and minimal physician participation. Fewer than 300 doctors have been approved for the program.
This year, a big legislative push is being made to broaden the current handful of MMJ conditions and increase the 0.5% cap on THC.
Such changes could significantly boost sales and put Texas more on par with other medical marijuana programs across the country.
Texas is the country’s second-most-populated state with nearly 30 million people.
But its medical marijuana program had only 3,811 registered patients as of December 2020, paling in comparison to its neighboring states. (See graphic above).
“The program is not viable as is,” said Morris Denton, CEO of Texas Original Compassionate Cultivation, the leading MMJ operator in the state.
In fact, he said, the state’s so-called Compassionate Use program, enacted in 2015 and expanded some in 2019, doesn’t generate enough sales to support one MMJ company, let alone the three vertical operators that have been licensed.
The other licensees are Atlanta-based Parallel/Surterra Wellness and Florida-headquartered Fluent.
Industry officials optimistic
Industry officials and advocates are hopeful this could be the year that restrictions will be loosened, spurred by lawmakers’ growing acceptance of medical cannabis, the legalization wave sweeping the country and growing pressure from neighboring states with rapidly expanding MMJ programs.
More than 20 cannabis-related bills already have been filed for a legislative session that runs Jan. 12 to May 21.
Many of this year’s bills deal with decriminalization, but a number seek to expand the MMJ program and some to legalize adult-use marijuana.
While adult-use legalization is considered a long shot this year, the argument for legalizing recreational marijuana is growing.
For example, prospects are brightening for adult-use legalization in neighboring New Mexico, which would attract Texans from across the border and put more pressure on Texas lawmakers to act to head off a loss of potential sales.
In addition, Texas is facing a $4 billion-plus budget shortfall because of the coronavirus pandemic and falling oil prices, which increases pressure to find additional revenue sources.
But, Denton said, in a comment echoed by others, “what we have to do as a business and industry is be realistic about what we can accomplish. Be pushing but not shoving.”
The main short-term goal, they say, is to make the program more viable and include these changes:
- Additional patient qualifying conditions. Currently, only eight patient conditions are eligible. The list, for example, doesn’t include chronic pain, post-traumatic stress disorder, anxiety or non-terminal cancer.
- Higher THC caps. The current 0.5% THC cap by weight is barely above the 0.3% ceiling for federally legal hemp.
An even more significant reform would involve lawmakers granting doctors broader authority over dosing as well as deciding who can receive MMJ.
Denton’s pitch is that an expanded medical marijuana industry would be a “massive shot in the arm” to the state’s economy in terms of job creation as well as providing an alternative to a costly battle with opioid addiction.
‘Billion dollar’ opportunity
At the Texas Marijuana Policy Conference after the November election, Denton characterized the industry’s potential as a “billion dollar bird’s nest that’s sitting on the South lawn of the Capitol waiting for the right legislator to pick it up” and go with it.
Heather Fazio, director of Texans for Responsible Marijuana Policy, said some Texans who aren’t able to access medical marijuana are uprooting their lives and leaving the state in order to do so, while others are “angry and rightfully so and are ready to see those laws change.”
“We feel that pressure absolutely as more states continue to allow legal access (to marijuana),” she said.
Reform won’t be easy, however.
While support is growing on both sides of the aisle as lawmakers hear stories about how medical marijuana has improved patients’ lives, Fazio said, “it’s very difficult to say what is doable this legislative session” given the economic climate and lawmakers’ other priorities.
The state’s Legislature meets only once every two years, so if reform doesn’t occur this year, the next opportunity will be in 2023.
The Legislature can place an initiative on the ballot for voters, but the state doesn’t have a procedure for citizen-initiated ballot initiatives.
Marcus Ruark, president of Surterra Texas, noted at the recent marijuana policy conference that the multistate operator saw the opportunity to have an influence in one of the country’s most-populated and fastest-growing states.
“One of the benefits,” he said, is that “we’re able to make a strong investment in the state of Texas, including R&D.”
Other multistate operators and investors are interested in Texas as well, said cannabis attorney Richard Cheng, “but that’s where it stops.”
“In order for investors to really consider Texas a legitimate player, the medical marijuana program has to be more robust and expansive,” said Cheng, an attorney at Dallas-based Weaver Johnston & Nelson.
Hurdles beyond low-THC cap
There are issues in addition to restrictive patient conditions and low-THC levels.
Licensed operators are allowed to store inventory at only one location, which means they have to deliver across a sprawling state larger than most of the countries in Europe.
Compassionate Cultivation uses fuel-efficient Prius cars for transporting medical marijuana.
“No, we cannot make money with our Prius deliveries,” Denton said.
Fazio said Texas also has extremely high license fees: $488,000 for the first two years, more than $300,000 for every two years after that.
Ruark told the recent conference that the biggest issue is consumer awareness and education.
Advocates have said that as many as 2 million Texans currently qualify for medical marijuana – even under the restrictive list of qualifying conditions.
“The average Texan doesn’t think cannabis is legal in the state,” Ruark said. “If you knew there was a program, you probably don’t think you’ll qualify. The next step is finding a doctor, and that’s very challenging.”
Cheng also said more doctors need to be involved in the program for it to be successful. Only 252 physicians had been approved for the program as of December.
In short, Cheng said, a paradigm shift is needed from marijuana use being seen in Texas as “reefer madness” to an “acceptable medical treatment.”
Jeff Smith can be reached at [email protected]