During the last six months, the size of Pennsylvania’s medical marijuana program has surged due to the anxiety-producing effects of COVID-19 and some favorable changes to regulation.
The number of patient visits at cannabis dispensaries has risen by more than 70 percent -- rising from 70,000 a week in February to 120,000 each week in August.
Retail sales also have exploded. Since February, dispensaries have sold as much marijuana as they had during the previous two years combined, according to statistics released last week by the state Department of Health, which governs the cannabis program.
Patients bought about $385 million in legal marijuana products from the state’s 89 cannabis dispensaries during the period, according to the state Office of Medical Marijuana. Until February, total retail sales since the inception of the highly regulated industry two years ago in the Keystone State had totaled only about $400 million. There are at least 27 dispensaries now operating in the five-county region.
“The program is doing really well,” said Chris Woods, CEO of Terrapin Care Station, a cannabis grower and processor upstate in Clinton County. “It’s hard not to draw a correlation with COVID-19. In unsettled times, cannabis is a medicine that seems to help people cope with anxiety.”
Anxiety remains one of the most cited reasons for getting a state medical marijuana card. It comes in second only to chronic pain. Post traumatic stress disorder is a distant third.
Why has marijuana suddenly taken off?
It is chiefly attributable to temporary changes to the regulations implemented by the Wolf administration. Marijuana dispensaries were among the first businesses deemed “essential” by Gov. Tom Wolf. But Wolf also streamlined access to medical marijuana in ways that made it safer to join the program.
Patients once had to scramble to find a doctor who could write them a recommendation for legal weed, and then go to the doctor’s office to pick up the recommendation. Now it’s all done electronically.
Wolf made it possible for patients to find and see those doctors by using telemedicine after COVID-19 caused people to shelter in place. After receiving their marijuana cards through the mail, patients are able to place orders at dispensaries by phone. Temporary regulations allow for easy curb-side pickup to reduce the risk of acquiring the virus. Some clever dispensaries found a way to provide home delivery for those patients who did not want to venture out into the pandemic world at all.
About 230,000 Pennsylvanians now are registered and have been issued cards that allow them to buy marijuana products, according to the Department of Health.
“Pennsylvania really has become the model for what medical marijuana programs should do across the country,” said Woods, of Terrapin. “Obviously, there have been a few problems. But the Department of Health and the governor have worked hand-in-hand to increase supply to patients, and increasing patient access has accelerated things.”
The problems are well-known. Stronger than expected demand has led to periodic “flower droughts,” during which customers can’t find the inhalable -- that is, smokable -- form of their medical marijuana.
Due to scarcity, when they can find what they want, it’s also expensive. The price per ounce is stuck at about $350.
Another bottleneck is the state’s required seed-to-sale tracking software, which has been prone to crashing, and can hold up sales for long stretches of time.
Yet those concerns haven’t kept sales from rising. And counter-intuitively, some of the industry’s growth may be spurred by the flagging economy.
“People are at home, they’re stressed out, and many are unemployed,” said Jeff Smith, who reports on legal and regulatory issues for Marijuana Business Daily, a leading trade publication for the cannabis industry. “For those that were jobless, many were getting a $600 a week enhanced jobless benefit. Some of that money has gone to purchase marijuana.”
With the reduction in the jobless benefit and a continuing recession, Smith is not sure how the national industry will be affected. But he’s certain of one thing: “Pennsylvania is one of the strongest and fastest growing medical cannabis markets in the country.”
“We had estimated 2019 sales [in Pennsylvania] at $225 million to $275 million,” Smith said. “We were expecting it to nearly double to $400 to $500 million in sales this year and are expecting sales of $1 billion annually in three to four years.”
Those projections do not include legalization. Because of the budget shortfalls triggered by COVID-19, even some Republicans in the state legislature are considering legalizing marijuana for adult recreational use to prevent cuts in essential services. Legalization would trigger another exponential rise in sales in the state.
Researchers, meanwhile, are pressing ahead to understand more about the drug. Pennsylvania was the first state to embed a research provision into the law. And the nation’s first state-authorized medical marijuana research program was launched in Philadelphia in May, state officials said. It will focus in part on the impact of cannabis on the quality of life of patients suffering from any one of 23 qualifying “serious illnesses” required to get the drug in Pennsylvania.
Industry analysts with the major investment houses have taken note.
In his periodic newsletters for investment firm Cantor Fitzgerald, Pablo Zuanic observed that Pennsylvania is opening dispensaries and growing facilities at a clip that’s much faster than most other states. The number of ailments that patients can cite when asking for a marijuana recommendation — nearly two dozen qualifying conditions — also dwarfs those in other medical marijuana states.
Nineteen growers, out of an eventual 33, currently are shipping marijuana products to Pennsylvania dispensaries. The others haven’t started producing yet. Two more growers are expected to come online as soon as their artwork and package designs are approved, according to John Collins of the state’s medical marijuana office.
And still, demand outstrips supply. Many patients cannot find a consistent supply of their favorite marijuana products — which is overwhelmingly smokable or inhalable flower — at their local dispensaries.
The CEOs of the big multistate marijuana growers are acutely aware of that. They are rapidly expanding the square-footage under cultivation or acquiring older companies with an express purpose of doubling production.
Erich Mauff, president of Jushi Holdings, announced the $37 million purchase last week of Vireo Health’s growing facility in Scranton. Jushi operates Beyond/Hello dispensaries in the Philadelphia market and other states. Mauff said he’s making “a large capital investment” in the cultivation center “to turn this facility into one of the top three in the state for volume. And we plan to expand it quickly.”
Mauff theorizes that the legal marijuana market in the state benefited in another way from COVID-19.
“I have to believe that the unregulated [i.e. the illegal] market took a hit during these past months,” he said. ‘The unregulated market is not as big and robust. In March, April and May there was no traffic in the U.S. It was harder to transport from out of state. The highways were empty. Most flights were grounded. I think that’s why a lot more people started to look to the state-regulated markets.”
“Now people know there’s a great variety of product, with high quality and exact dosings, people will continued to go to our regulated market because they can rely on it, buy exactly what they want, and know there’s nothing wrong with it,” Mauff said.
At Terrapin Care Station in the north-central part of the state, Woods is doubling the size of his growing facility and expanding deep into the company’s 27-acre compound.
“We announced the expansion three weeks ago and we’re moving right along,” he said. Construction crews are already hard at work every day under the August sun.
“Right now we have 50 people getting temperature checks and swinging hammers. And we hope to have the new product from the expansion ready to ship by the end of the year.”