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Haves, have-nots of Missouri cannabis industry in conflict as dispensaries open

Haves, have-nots of Missouri cannabis industry in conflict as dispensaries open

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Legal marijuana growing in Missouri

A strain of marijuana called Power Plant is photographed on Saturday, Feb. 22, 2020, at the University City home of a grower who is cultivating in his basement legally for personal use. Photo by Christian Gooden, cgooden@post-dispatch.com

JEFFERSON CITY — While scores of would-be entrepreneurs sit out, barred from participating in Missouri’s medical marijuana program, a select number of cannabis businesses are racing to cash in on the state’s newest industry.

The Department of Health and Senior Services, as of Friday, had cleared 17 dispensaries to open their doors, as well as 11 cultivators and one manufacturer of cannabis-infused products. Not all of the approved businesses — including the lone manufacturer — have started selling product.

Those lucky winners, critics say, are beneficiaries of arbitrary caps on the number of licenses and of a flawed scoring process, which have reduced the availability of medical cannabis and limited competition.

Joseph Bednar, attorney for the Sarcoxie Nursery Cultivation Center, a losing applicant suing the state to overturn Missouri’s licensing caps, said the limits harm patient access to medical cannabis, in violation of the constitutional amendment that instituted the state’s program.

He said the state’s system has caused more weed scarcity, and limits where it is sold, increasing costs for consumers, some of whom might have to travel long distances to purchase medical marijuana.

“The more expensive the medicine is, the fewer patients that can afford the medicine,” Bednar said. “You have both a geographic issue of access and an economic issue of access.”

Bednar and attorneys for the state made their cases at trial in late October before Cole County Circuit Judge Patricia Joyce. She has not ruled on whether the state’s current licensing scheme can stand.

In addition to the Sarcoxie lawsuit, which challenges the constitutionality of the state’s scoring program, businesses filed 853 appeals with the Administrative Hearing Commission this year seeking licenses after being rejected.

As of this week, 739 cases were still pending, said Lisa Cox, spokeswoman for the state health department.

The flood of lawsuits followed a scoring process applicants said was fraught with perceived conflicts of interest and inconsistent scoring, which undermined trust in the program.

Proponents of the state’s rollout, including Jack Cardetti, spokesman for the Missouri Medical Cannabis Trade Association, or MoCannTrade, say Missouri has licensed more businesses than most other medical marijuana states.

He said prices will decrease as more of the state’s cultivation facilities begin growing, harvesting and processing weed.

“This will be the highest prices are ever going to be in Missouri as more cultivators come online. Those prices will drop,” he said.

State rules

Cardetti is an investor in QPS Missouri Holdings, which won six licenses. No QPS location had been approved to operate as of Friday.

Cardetti is a Democratic strategist who was instrumental in the 2018 passage of Amendment 2, the question legalizing medical marijuana.

He can be heard advocating for licensing caps at least as far back as October 2018, when Amendment 2 was on the ballot alongside two competing ballot measures.

Cardetti said then, at a forum in Kansas City, that the U.S. Department of Justice wouldn’t go after Missouri if it followed certain rules and regulations, one of them being addressing oversupply of marijuana by capping licenses.

“They don’t want more being produced than is going to be legally consumed by medical marijuana patients,” he said at a Kansas City forum in 2018. “So that’s why there has to be some type of cap.”

Bednar argues the state always intended to limit licenses, pointing to Department of Health and Senior Services Director Dr. Randall Williams’ personal views that marijuana is as addictive as opioids, and early contacts regulators had with MoCannTrade officials.

Bednar wrote in his post-trial brief that on Nov. 15, 2018, days after voters approved the medical marijuana amendment, Mitch Meyers, an officer of Beleaf in Earth City — the eventual winner of 12 licenses — contacted Williams by email, “advising Williams that it ‘… is a true disaster’ to allow the number of licenses that Oklahoma does.”

Bednar said the state lacked a rational basis for issuing the caps, violating state law governing the rule-making process. Lawyers for the state disagree.

In an October deposition, Lyndall Fraker, director of the state’s medical marijuana program, said that in general, limits on the number of sellers in a market could increase consumer prices.

“So would you then agree with me that when you limit the number of sellers in the market, it has an impact on price?” Bednar asked.

“There could be an effect,” Fraker said.

Bednar asked why the people of Boonville, for example, wouldn’t have a dispensary nearby.

“There will be many towns and many folks in Missouri that won’t have a dispensary in their town,” Fraker responded.

After some more dialogue, Bednar asked: “It is your rule that prevents others from being licensed in that city, correct?”

Fraker said: “Yes. Yes.”

First to market

Bethanie White, director of marketing for Clovr Cannabis in Kansas City, said the company is planning to stock dispensary shelves with marijuana-infused products as early as this week.

Clovr is the first marijuana-infused products manufacturer to get the go-ahead from Missouri regulators.

The company’s co-founder is Josh Mitchem, who had been on the board of MoCannTrade.

He said in an interview with the Kansas City Star that he will have a built-in advantage over other companies.

“Because we’ll be the first to open, obviously it gives us a really good stronghold on shelf space,” Mitchem said. “And once you get shelf space, you’ve got to mess up pretty bad in order to lose it to competitors.”

But White said the company, despite its advantage, isn’t taking anything for granted.

“We realize that we have to create great products, good-quality products, or we lose that shelf space,” she said.

While dispensaries are limited to selling flower now, shipments of Clovr edibles, pre-rolled joints and other items will open up a world of new products for patients.

As it stands, Clovr is the only company approved to manufacture and sell the products.

White mentioned the Swade dispensary in St. Peters, owned by Beleaf, and two N’Bliss dispensaries, in Ellisville and near Manchester, as three St. Louis-area dispensaries stocking its products. Officers of both BeLeaf and N’Bliss have been involved with MoCannTrade.

Looking forward

Cardetti said “it’s only a matter of when, not if,” when asked whether Missouri would legalize recreational marijuana. But he said it was too soon to discuss specifics regarding possible ballot initiatives.

Rep. Wiley Price, D-St. Louis, filed legislation this month to fully legalize adult cannabis use in Missouri.

Price said he opposes caps on the number of licenses, believing that the more businesses there are, the more money that will be generated for state coffers.

“I want a free market,” Price said. “This is the only enterprise where we’re capping the money that can come back to the state. Why are we doing that? If you open a business and it’s a successful business, go for it, man. Welcome to America. Welcome to capitalism.”

Sixty percent of taxes generated through his plan would go toward general revenue, 20% would go to substance abuse services, 10% would go to K-12 education, 5% to law enforcement for “public education and training” campaigns, and 5% would go to promoting participation in the industry among minorities.

He said the Legislature should take the lead and legalize marijuana in 2021 — in part to deflate any eventual ballot initiative in 2022, which would assuredly dictate where tax money flowed.

It is unclear how much momentum his proposal will have in the GOP-controlled Legislature; no other Republicans had proposed similar legislation as of this week.

Price predicted marijuana legalization in Missouri would trigger an “economic explosion,” and that it would be “the biggest thing to hit Missouri since Budweiser.”

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