Grow, Gift, Repair

How to diversify the medical marijuana industry

MASSACHUSETTS MARIJUANA regulators have done yeoman’s work to diversify the cannabis industry, taking numerous steps to ensure that small and minority-owned businesses have an opportunity to enter the legal marijuana market.

But one segment of the industry remains controlled – largely by design – by big companies, including some multi-state operators: medical marijuana. Could an attempt to change that come next?

One reason for the lack of diversity in the medical market is the requirement, in place since medical marijuana was legalized in 2012, that medical marijuana dispensaries be vertically integrated, which means they must have the capability to grow, manufacture, and sell products. That makes getting into the medical marijuana business much more expensive than entering the recreational market, where someone can open only a store or concentrate on manufacturing.

Advocates for medical marijuana patients have, since at least 2019, been asking the Legislature to eliminate vertical integration as a way to open up the market to more businesses – and potentially increase the range of available products. The Legislature has not acted.

In August, amid its latest rewrite of state marijuana regulations, the Cannabis Control Commission asked for public input on a proposal to eliminate vertical integration. Commissioners at the time seemed hesitant to address the issue due to murky legal issues regarding whether it would undermine the licensing system laid out in state law.

When the commission finalized the new rules this week, vertical integration was not addressed.

But speaking to reporters after Monday’s meeting, commission chairman Steven Hoffman said vertical integration will be one of the next areas commissioners will examine going forward. “We’ve made a commitment to look into that, to give it the time and study it deserves,” Hoffman said.

Hoffman said the ongoing issue of equity – ensuring that minority entrepreneurs and those affected by prior drug law enforcement can get into the industry – is “one of the major incentives” to consider eliminating the vertical integration requirement. “Now, the net worth threshold, the capital requirements to open a medical dispensary are significant, much more so than they are on the adult use side,” Hoffman said.

While commissioners have required all marijuana companies to craft “diversity plans,” ways to boost the industry’s diversity, Hoffman acknowledged that unless vertical integration is eliminated, “it’s hard to make a lot of advancement at least on equity ownership.”

Commissioner Shaleen Title, who has been at the forefront of equity issues, said the medical marijuana industry is like a “control group” compared to the recreational industry. The recreational industry, legalized in 2016, was established with a legal mandate to ensure equity for those affected by prior drug enforcement. The medical industry, legalized four years earlier with high fees and capital requirements, was “in some ways its opposite in terms of trying to minimize barriers,” Title said.

“Now we have institutional knowledge and data we can use as we try to improve the diversity and equity in the medical industry, which is important,” Title said.

Title said she – along with other people of color and social justice advocates – supports eliminating vertical integration and potentially implementing an exclusivity period for new medical marijuana applicants, where social equity businesses get priority.

But, Title noted, commissioners have also struggled to ensure equity in the recreational marijuana industry.  And with medical dispensaries already up and running, “It’s more difficult to remedy an existing problem than to prevent it in the first place.”