Medical marijuana industry eyes Massachusetts market

Dixie Elixirs and Edibles, is exploring a production plant in Massachusetts to manufacture marijuana infused soft drinks, and other food products. — Photo courtesy of Dixie Elixirs and Edibles

While the biggest players in the fast growing medical marijuana industry have mostly adopted a wait and see attitude toward Massachusetts, several companies are actively planning to enter the state by establishing offices and forming strategic partnerships with local residents.

Advocacy groups and industry associations are springing up, and a host of ancillary service providers, such as business consultants and law firms, are already operating at a brisk pace.

The Massachusetts Department of Health (DPH) has until April 1 to create regulations to govern who can use, grow, and sell medical marijuana, under the law which took effect January 1.

Few expect DPH to meet that deadline, because of the complexity of the issues surrounding regulation of medical marijuana, industry leaders and state officials say.

In nearly all states that have enacted medical marijuana laws, implementation was significantly delayed. For example, Rhode Island enacted a law making marijuana legal for medical use in 2006, but the first dispensaries are expected to open this year.

Big business

A company that offers business guidance on regulatory requirements and business planning,, opened an office in Boston earlier this year.

“We haven’t heard of any big groups from California or Colorado,” said Jig Patel, local representative for the company. “Right now, people are crawling under the radar until the application process starts.” Mr. Patel says six or seven people, mostly Massachusetts residents, walk into his office every day looking for information about how to start a medical marijuana business.

Some large companies are eyeing the Massachusetts market. Medical Marijuana Inc. has quickly become a dominant company in the medical marijuana industry. The publicly traded firm has acquired several businesses related to the sale, production, and growth of marijuana products.

The company has recorded meteoric growth. In the final quarter of 2012, Medical Marijuana Inc. earned $3.2 million in net income on $5.1 million in revenue, according to its audited financial statements.

Food delivery

Last fall, Medical Marijuana Inc. paid $1.45 million for the intellectual property, including formulas, recipes, and technology, of Dixie Elixirs and Edibles.

Dixie Elixirs and Edibles manufactures food products including carbonated beverages, crispy rice treats, fruit flavored lozenges, and chocolate truffles, all infused with specific doses of medical marijuana.

Tripp Keber, president and chief operating officer, is actively seeking a foothold for the company in Massachusetts.

Mr. Keber, a former real estate entrepreneur, has visited the state three times in the past year and is familiar with both Nantucket and Martha’s Vineyard from recent visits.

He wants to form a partnership with a licensee in the state to build a state-of-the-art food manufacturing operation, and a marijuana production facility.

“The market is probably going to grow to $75 million to $100 million in the first year,” Mr. Keber said in a phone interview. “Within 24 to 36 months, probably $300 million.”

In Colorado, where medical marijuana was legalized in 2000, and where the drug was legalized with no medical restrictions in a ballot referendum last year, Mr. Keber expects the market to triple. “We’ll probably be pushing a $1 billion market here [in Colorado],” he said. He predicts Massachusetts could follow a similar path.

“There’s certainly an undertone within the industry,” Mr. Keber said. “There is some talk that within the next two years, there will be a movement to fully legalize it.”

Balancing benefits

The medical marijuana industry touts jobs and tax revenue for host communities. A report issued by the National Cannabis Industry Association measured the economic impact of the medical marijuana industry on 10 Colorado towns.

One of the towns profiled in the report was Aspen, a resort community with a large seasonal influx of visitors and second home owners, and a population roughly equal to the three down-Island towns on Martha’s Vineyard.

According to the industry group, sales of medical marijuana and related products in Aspen totaled $1.4 million in 2011. The state of Colorado collected $24,973 in sales taxes, and $41,537 in other state taxes, according to the report.

The Massachusetts law does not address tax rates or licensing fees.

Ask your doctor

A trade group that represents doctors in Massachusetts has raised many questions about the role of medical professionals in implementation of the medical marijuana law.

In remarks to Department of Health officials, the Massachusetts Medical Society expressed concern that the law includes an overly broad definition of medical conditions that would qualify a patient to use medical marijuana.

The law says doctors may recommend marijuana as treatment for a debilitating medical condition, and defines those conditions as “cancer, glaucoma, positive status for human immunodeficiency virus, acquired immune deficiency syndrome (AIDS), hepatitis C, amyotrophic lateral sclerosis (ALS), Crohn’s disease, Parkinson’s disease, multiple sclerosis, and other conditions as determined in writing by a qualifying patient’s physician.”

Critics of the law say the phrase “other conditions as determined” would allow a physician to provide a recommendation for any medical condition if, in the doctor’s opinion, medical marijuana would be of benefit.

The group also asked regulators to consider making patient certifications part of the state’s prescription drug monitoring program, and to take into account the effect of medical marijuana in the workplace.

In a letter to Governor Deval Patrick, the Massachusetts Public Health Association also raised concerns about the definition of a qualifying patient, the minimum age of patients, limits on the number of patients a caregiver can provide with medical marijuana, and medical marijuana in the form of foods and beverages.