Long a controversial political issue, medical marijuana has suddenly become a major economic issue as well. The pot market, including medical usage and states where the drug is legal such as Colorado, posted $6.7 billion in revenue last year, according to ArcView Market Research.
That was a 30 percent jump from 2015, and the company projects that compound annual growth will continue at 25 percent through 2021. Not many industries can boast such robust growth, so it is little surprise many businesses are interested in entering the medical marijuana marketplace. And many want to do so in Pennsylvania.
The state legalized medical marijuana in 2016, and the Department of Health released applications for growing and selling weed for medical purposes in early 2017. Medical marijuana experts say Pennsylvania could become the nation’s sixth-largest market.
While the money may seem tempting, getting into the medical marijuana business may be challenging. Businesses could face a number of hurdles, and navigating them by themselves won’t be easy. A government relations consultant who understands the scope of these complex issues is highly valuable and can be even critical to a business’s success in the medical marijuana field in Pennsylvania. These issues include:
- Getting the business up and running
- Staying on top of new developments
Let’s take a look at each issue.
Securing Funding for a Medical Marijuana Business in PA
Every business needs capital. Usually, that can be secured by heading to a bank and filling out a loan application or discussing other funding options with a banker.
When opening a medical marijuana business, however, it’s not that easy. Marijuana remains illegal at the federal level. In fact, it is classified as a Schedule I illegal substance under the Controlled Substance Act. This makes taking money from the sale of marijuana illegal and also means that banks or credit unions that do business with medical marijuana businesses could risk litigation from the federal government.
Without backing from a bank, the most basic of financial transactions can become difficult, such as:
- Savings and checking accounts
This means most transactions must be done in cash with a medical marijuana business. That also opens a business to huge security risks. Without a third party involved in financial transactions, it becomes easier for employees to embezzle or misplace the money. Having a cash-only system also poses a security risk — the dispensary or grower-processor business will be vulnerable to targeting from thieves.
These cannabis businesses also need to unravel how they will safely and carefully:
- Accept and protect all cash payments
- Account, track, and report income
- Pay taxes, sub-contractors and employees
Looking to Smaller Sources for Funding
Private charters or a small local bank could be a more realistic target for securing funding. Still, even a bank with branches only in PA could worry about the federal-state law supremacy question. And with the amount of businesses limited from the start — Pennsylvania is issuing a limited amount of grower and dispensary permits— that low client base may not entice private investors or small banks to take the risk.
Furthermore, the state is charging a $10,000 fee for submitting a growing-processing operation application and a $200,000 permit fee, though the latter will be refunded if an applicant is unsuccessful, so even when and if PA expands the number of permits, financial hurdles may likely limit the number of entities entering the market. Still, because of the lucrative potential in the medical marijuana industry, expansion is inevitable.
Competition Within the Medical Marijuana Industry in Pennsylvania
While the PA medical marijuana business is just taking off, many businesses hope to get in early to establish a foothold in the attractive market. The problem for many of those businesses? Only a limited number will get in.
Pennsylvania plans to award 27 dispensaries and 12 grower-processors permits — and over 500 applications have already been logged. That means a good percentage of applicants will be turned away.
Medical marijuana business hopefuls can’t just apply on a whim. Among a myriad of other things, the state requires applicants to submit:
- Business plan
- Pesticide disposal plan
- Waste disposal plan
- Background checks
- Personal financials
The state will offer scores on these and other categories, such as community impact, which outlines how the proposed medical marijuana business will produce a positive impact in the area surrounding it. Applicants must also have plans for incorporating those of different races, ethnicities and genders into the workforce, embracing veterans and people with disabilities as well.
Staying on Top of New Developments in Medical Marijuana
Entering the medical marijuana business has many risks and rewards. The industry is ever-changing. Keeping track of this fluid industry is crucial to developing a successful business in the constantly evolving world of medical marijuana in Pennsylvania.
One way to ensure you stay informed is to enlist the right help. Pugliese Associates tunes into the pulse of relevant changes on medical marijuana policy in the Pennsylvania legislature and employs in-house experts who have seen the evolution of the issue since its early days.
The cannabis industry will continue to grow and evolve, and there are opportunities now to shape its landscape and direction as the Commonwealth explores its options each step on the way.
Whether you are interested in growing and processing, working with a dispensary or entering a market that tangentially supports medical marijuana businesses such as banking, cannabis lab testing, perimeter security, medical marijuana and/or cash transport, working with an experienced Lobbying firm such as Pugliese Associates can help you succeed. Contact us today to learn more about the medical marijuana business in the state.