One possible change could be the introduction of a sales tax
By Adam Goldberg
Oregon’s Joint Committee on Implementing Measure 91 could not pass a final version of its bill intended to “harmonize” medical and recreational marijuana, leaving individual legislators to push such legislation forward outside the auspices of the Committee. These Legislators want to avoid what happened in Washington, which did not pass legislation addressing the relationship between medical and recreational until almost three years after Initiative 502 passed. It is hard to imagine that there wouldn’t be a more robust marketplace under I-502 at this point had the inexorable union of the two systems taken place before the measure was implemented.
Oregon’s legislators may have the benefit of hindsight as they develop a plan to bring medical and recreational together from the outset, but that does not make the task any easier. The Joint Committee, for example, spent the better part of the 2015 legislative session fielding vociferous complaints from a segment of the medical marijuana community that are outraged by the committee’s proposals to reduce plant counts and bring additional reporting requirements to the medical production and processing business.
This opposition has been grass roots in the sense that many individuals have written and called legislators to complain about the legislation, and have traveled to committee meetings in Salem, but it has also been highly organized through social media by people who are very much in the business of medical marijuana. Though the rhetoric of these debates tends to gravitate toward often overblown concerns for patient access, there are numerous other issues in play — issues that will play a huge role in the future success or failure of Oregon’s recreational system.
An unacceptable percentage of Oregon’s current medical marijuana production ends up outside the system. Earlier this year, the Oregon Liquor Control Commission (OLCC) got a lot of attention with its statistic that 75% of Oregon’s medical marijuana ends up in the black market. Though the OLCC did not release its methodology for calculating that figure, this criticism misses the point. Even if the OLCC is wildly off in its estimates, say, by as much as 200%, we would still be left with a full 25% of Oregon medical production ending up outside the system. This is patently unacceptable from the perspective of building a bona fide legal cannabis industry. Allowing this to continue is probably the best way to invite unwanted federal attention on Oregon and the question of whether we are sufficiently regulated to be in keeping with the Cole Memo’s prescriptions.
There is only one way to stem the flow of Oregon medical marijuana out of the system: Regulate it more heavily. Oregon’s medical growers and processors are, comparatively speaking, largely unregulated. No one knows how much these businesses produce or where it all goes. While transfers between growers and licensed dispensaries need to be documented to provide a paper trail of how much is transferred, there is no requirement to similarly document all of one’s production in the aggregate.
It is necessary to much more rigorously track marijuana production. Some medical producers bristle at the prospect of seed-to-sale tracking systems for their gardens. Significantly, those people will have the ability to use some less onerous form of tracking, under current legislative proposals, as long as they are willing to concede on the size of their gardens. Current proposals would restrict growing in residential areas, limit total plant counts for new medical growers, and grandfather in certain growers (depending on when they started growing and where they do it) with a 96-plant maximum.
Growers can quibble with plant counts if they want, but the reality is that we cannot allow commercial-scale growing without seed-to-sale tracking or its functional equivalent and expect not to raise holy hell with the Feds. That means growers who want to remain purely medical and outside the OLCC tracking system must accept a ceiling on the size of their gardens. Put another way, producers who want to grow in big warehouses and try to make a lot of money doing so must accept that they will be licensed by the OLCC and heavily regulated.
It simply is impossible to have two separate commercial systems operating in parallel, one for medical and one for recreational. States that already have legislation in effect for both medical and recreational — namely Colorado and now Washington — allow (or will allow) recreational retail outlets to cater to patients. Patients have (or will have) access to certain products that might not be available to recreational users and tax breaks when purchasing their medicine. Recreational producers and processors are free to design and develop products specifically with patients in mind. The model that inevitably is on its way out is allowing growing under Oregon’s medical law on a commercial scale, with little to no regulation, and with no taxes being paid to the state, while at the same time trying to create a heavily regulated and taxed recreational system where growers with commercial-scale operations are meticulously tracked.
The real way to preserve a medical marijuana system and give it integrity is to prevent growers from producing commercial quantities of marijuana in a mostly unregulated environment at odds with the federal anti-prosecution guidelines. This places the entire legal cannabis industry at risk. It does not help patients nearly as much as it helps certain growers stay in the business of commercial marijuana production without having to abide by the type of regulation that is increasingly becoming de rigeur for the industry.
The best way to create a medical system that truly is patient-focused is to curtail the practice of giving tens of thousands of patient authorizations to individuals on account of nebulous conditions like chronic pain. As of April 1, 2105, according to statistics from the Oregon Health Authority, 93% of the 71,317 registered patients have severe pain as at least one of their qualifying conditions, compared to, for example, cancer (5.4%) or PTSD (5.9%). In light of these figures and the known diversion of some significant portion of medical marijuana production to the black market, is it any wonder that legislators and regulators see the re-envisioning of the current medical system as a necessary step toward a robust legal cannabis marketplace?
A renewed focus on those patients with debilitating conditions who must have access to their medicine without all the bells and whistles of regulated recreational marijuana is the best way to protect patients’ rights. For this purpose, the medical system does not need large commercial-scale grow operations. The sooner people in the business of medical marijuana come to terms with these realities, the better off we all will be — patients, consumers and businesses, alike. An industry that gets shut down by the federal government because of leakage and lack of regulation is not going to provide a future for any of us.
Matt Goldberg is an attorney at Cannabis Lawyers NW, LLC (www.cannabislawyersnw.com). His firm advises cannabis businesses in Oregon and Washington on business law, real estate transactions and regulatory compliance.