Companies from across the U.S. look to cash in on Maryland’s long-delayed medical marijuana infrastructure
After more than three years of delays, Maryland finally granted first-stage approval for 102 dispensary licenses in December 2016, initiating a 12-month countdown for potential licensees to be ready for operation.
If all goes as scheduled — and so far, nothing about Maryland’s medical cannabis program has — dispensaries could be serving patients before the end of 2017.
In the past, many business owners from Western states have avoided the East Coast’s rigid and expensive medical marijuana programs, but Maryland’s patient-friendly regulations have brought a larger number of cannabis industry veterans into the mix.
Two entrepreneurs lending their expertise to the upstart program are brothers Mike and Rich Kwesell, co-owners of the Colorado-based retail chain Strawberry Fields. The Kwesells were approached by a company in Maryland to partner on a dispensary.
Mike Kwesell says he thinks it was smart for Maryland to establish fairly progressive rules and qualifying conditions in comparison to highly limited programs in New York and New England.
“By creating much broader access to medicine, from an economics standpoint, it’s going to let these shops pay their rent and make payroll because they have enough people to prescribe to,” he says.
In August 2016, the state granted first-stage approval for 15 cultivation licenses and 15 processing licenses; seven of those companies were approved for all three license types: Curio Dispensary BC, Doctors Orders Maryland, Holistic Industries, Kind Therapeutics, Maryland Compassionate Care & Wellness, MaryMed and Temescal Wellness of Maryland.
MaryMed is a subsidiary of Vireo Health, LLC, which operates vertically integrated companies within the highly restrictive programs of New York and Minnesota.
“When we look at the regulations in Maryland we think they are sensible, patient-friendly regulations and we think it’s going to be a great market … also in terms of economic opportunities for license holders,” says Ari Hoffnung, CEO of Vireo Health New York.
And unlike the Vireo Health operations in Minnesota and New York, MaryMed will be able to provide patients with smokable flower.
“I think being subject to very rigorous regulations in Minnesota and New York helped us gain a lot of experience in compliance and in developing expertise in all phases of the supply chain,” Hoffnung says. “I think that we will be able to leverage that experience to serve the patients in Maryland.”
Specifically, Hoffnung says Maryland’s wide array of qualifying conditions and the scope of products allowed are strengths of the program.
Maryland patients will be allowed to possess up to a 30-day supply of cannabis products; dried flower is limited to 120 grams, while infused products are limited to 36 grams. Edibles are prohibited. Maryland will also allow reciprocity for out-of-state medical patients — a noteworthy point considering the number of top hospitals in the region.
“We think the market in Maryland goes with our economic perspective and our humanitarian perspective,” Hoffnung says.
“It’s definitely a hybrid of what we’ve seen before on the East Coast, but it’s more relaxed like in Colorado,” says Leif Olsen, managing partner at Denver-based Good to Great Management, which was hired by one company to help secure a license. “I’m from the D.C. Metro area. I was born and raised in the Virginia Commonwealth and Maryland has always seemed to be a little bit more liberal and open, so it’s not a surprise to me that they’ve allowed more opportunities and more of a retail model.”
Olsen says the inclusions of qualifying conditions such as “severe, debilitating or chronic pain” will help produce a broader patient base.
“They’ve created a fair program that is going to allow for a large number of patients, which seems to be the challenge in some markets like Illinois and Florida,” Olsen says.
However, real estate continues to be one of the industry’s biggest barriers. Several businesses requested not to be included in this article due to concerns that landlords would either void the deal or increase the asking price.
“We call that the ‘M-factor,’” Kwesell says. “You call a plumber because your toilet is leaking and that’s $100, but if you let them know it’s a marijuana facility then the price goes up significantly. So, from a purchasing and negotiating standpoint — and as with anything really — we try to play our cards as tightly as possible.”
The reluctance to share details until they have been finalized was shared by numerous Maryland licensees with ties to cannabis businesses outside of the state.
Hoffnung says MaryMed has already secured a cultivation facility in central Maryland and its processing facility is set to open on the state’s eastern shore in August; the location of its dispensary arm has yet to be announced.
“We want to make sure that we are in an appropriate location where we are accessible to patients but also welcomed by the community, as we have been in the past and hope we will be in Maryland,” Hoffnung says. “But in Maryland, from an economic perspective, the real opportunity is wholesale. There will be around 100 dispensaries and we hope to be able to offer our products to dispensaries throughout the state. That is something we are looking forward to.”
In addition to finalizing a physical location for the MaryMed dispensary, Hoffnung notes that the overall brand identity of the company has yet to be decided. Its parent company, Vireo Health, puts a heavy emphasis on the medical side of marijuana in its New York dispensaries. Meanwhile, Kwesell says the Maryland version of Strawberry Fields will be “just like we do in Colorado,” which serves both medical patients and recreational users.
Although patients will not have access to medical cannabis until late 2017 or early 2018, Hoffnung believes Maryland’s geographic location could make it one of the most important markets in the country.
“We are intrigued by the fact that Maryland borders Washington, D.C., so we are close to many federal agencies, such as the National Institute of Health, the Food and Drug Administration and others,” he says. “We look forward to establishing working relationships with those federal agencies in some capacity. There are also excellent hospitals and academic institutions. Maryland has a great public university system, such as the University of Maryland, and there are great private universities, such as Johns Hopkins.
“We think that from a human capital perspective and from a talent perspective, Maryland is a great place to build a business.”