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Refracting Green

Policy and Practice from the Front Lines of Marijuana's Political Economy

Dr. Sabet Goes to Salem

January 17th, 2014

Kevin Sabet appeared at 2pm today before the House/Senate joint judiciary committee to present his anti-marijuana legalization argument (his trip and presentation were paid for by the Oregon Narcotics Enforcement Association–highly ironic considering his persistent railing against the “big marijuana lobby”).  I tried to talk to him after the presentation, but he essentially flipped me the bird and ran out of the capital.  Very professional.  During this presentation, he claimed (among other things) that:

(1)  adolescent marijuana use rates have increased in states where medical marijuana is legal (he used data from a single state–Colorado–to support this claim),

(2)  marijuana use rates will increase in states that legalize adult recreational use of the drug

(3)  1 in 6 adolescents who try marijuana will become addicted

(4)  marijuana use is associated with declines in IQ

All of the above points are demonstrably invalid; furthermore, they are the result of an incredibly narrow and pernicious reading of the collected scientific evidence.  My claim—that Dr. Sabet is willfully misleading his audiences while presenting these claims across the nation—is not new or novel, but my presentation of evidence demonstrating his inaccuracies is.

First, adolescent marijuana use in the United States has traditionally followed what is known as a “cohort effect” over time; what this means is that rates of use by youths has gone both up and down at various times over the past 35 years, but the rates of use between states at any given time are fairly similar.  Most recently, youth use declined in the US from 1999 until 2007, when it started to trend back up (see Figure 1).

Figure 1. 

Screen Shot 2014-01-17 at 5.02.13 PM


Source:  Anderson, Hansen, and Rees 2012

What is interesting about this national trend is that certain states have experienced slower rates of growth in youth usage—contrary to Dr. Sabet’s hypothesis, these states have medical use provisions (Anderson, Hansen, and Rees 2012–link here).  This deserves restating:  states with medical marijuana laws have slowed the national trend of increasing adolescent marijuana use.   Dr. Sabet presented data from Colorado—which has, like all other states in the US, seen an increase in adolescent marijuana use in recent years—without acknowledging this nationwide trend or the research demonstrating that his claim is false and unfounded.

Second, marijuana use is likely to increase in states that legalize recreational use, but only for a few years and, in all likelihood, not in significant proportions.  Policy experts often forget that marijuana is a niche drug and that only a small percentage of any particular population seems to enjoy its effects—it’s legal status is not likely to impact this phenomenon.  The Netherlands and Portugal offer the most illuminating example for states considering legalization of recreational use.  In the Netherlands, marijuana use was legalized (de facto) in 1972; Portugal decriminalized possession up to 28g in 2001.  In both nations, use of the drug increased slightly for 2-3 years following legalization, then plummeted.  Today, the lifetime use rates (i.e. percent of population over the age of 12 who have used the drug at least once) of both the Netherlands (19.8%) and Portugal (10%) are significantly lower than the US (42.4%).  No other nation in the world has higher rates of lifetime use than the US—this should be an indication that our approach to this drug has failed.  If the outcome is similar in the US (and we have no reason to believe that it would not be), legalization will result in lower lifetime use rates.  An important side note:  41% of Dutch teens report that marijuana is easy to obtain in their schools, while 75% of US teens report the same (MacCoun 2011).

Third, do 1 in 6 adolescents (16%) who try marijuana become addicted?  This claim requires some serious twisting of the data.  First, marijuana is not physically addictive in a classical sense; to receive the label of “physically addicting,” the substance must cause physical withdrawal symptoms upon cessation of use.  Many addiction experts now agree that a substance does not need to produce physical symptoms to qualify as “addictive”; instead, users who cannot stop using a drug while it is deleteriously affecting aspects of their lives are considered “dependent”.  Using this definition, approximately 8% of regular users can be categorized as “dependent” on the drug.  It takes a wild stretch of the imagination (and no supporting evidence) to suggest that 16% of all kids who try marijuana become addicted to it.

Finally, does marijuana negatively affect a person’s intelligence?  Dr. Sabet claims lower IQ scores result from using marijuana; however, experts on intelligence testing long ago threw out the archaic notion that this complex concept can be captured in a number (Gould 1981).  Anyone who makes a claim about “IQ scores” today is about 35 years behind the advances of modern science.  The most recent study cited by Sabet is Meier et al.’s (2012) longitudinal research on marijuana use and IQ scores; despite statistically significant correlations between IQ score declines and long term use originating during early adolescence a, the authors of that study are very careful to note that “adult-onset cannabis users did not appear to experience IQ decline as a function of persistent cannabis use” (5).  If IQ scores were a valid metric for intelligence or cognitive functioning, this would tell us that we need laws in place that reduce adolescent exposure to marijuana (which the current prohibition has definitively not accomplished).

More sophisticated versions of this argument examine brain activity in mice; the most recent and widely cited version of this approach (Raver, Haughwout, and Keller 2013) attempted to simulate chronic exposure to marijuana in adolescents by subjecting mice to an intense regime of drug use.  The mice were developmentally equivalent to 13 year olds at the time of exposure and the experiment ended when they were equivalent to 15.5 years old.  The results suggested that chronic marijuana use leads to a modest but statistically significant 30% decrease in cortical oscillation activity.  This study’s methods are more than a bit controversial though:  to achieve this 30% decline in cortical oscillation activity, researchers had to expose the mice to the human equivalent of 100 joints per day for 2.5 years.  The marijuana equivalent consisted of pure THC (one of 483 active chemical constituents in marijuana) and WIN55-212, an incredibly potent, synthetic version of THC (both of these are problematic, as other active cannabinoids present in marijuana flowers are THC agonists and neuroprotectants).  Even more problematic was the delivery of the marijuana equivalent, where researchers had to sedate the mice and inject THC or WIN55-212—to do so, they exposed the animals to a mix of ethanol and ketamine.  Both of these drugs have been shown to decrease cortical oscillations on their own and severely call into question the face validity of the study.  A number of other studies have demonstrated that marijuana use leads to minor, but reversible short-term cognitive impairment (even with heavy chronic use).

Closing note:  the science on marijuana is woefully inadequate, but we do know some things–and what we know directly contradicts what Kevin Sabet presented today.

Marijuana Legalization–Part 4, Taxes and State-Level Solutions

December 17th, 2013

I characterize the current push towards marijuana legalization in America as “refracting green”.  Refraction–or the change in direction of a wave due to a change in its transmission medium–is the phenomenon that leads us to misjudge an object’s position due to distortions caused within our environment.  Many policymakers, having realized that marijuana is a valuable commodity and not nearly as dangerous as our other legal drugs (nicotine, alcohol, caffeine, etc.), are hoping to cash in on this market by “formalizing” it–in other words, legalizing the drug, regulating its production and distribution, and taxing the resulting product.  Conversely, this formalization is also supposed to ensure control where the “war on drugs” could not.  Participants in the marijuana industry see it similarly; legalization ought to bring more profits by allowing access to customers who were out of reach before (due to the robust network characteristics of illegal marijuana distribution networks) and minimizing prosecutorial risk.  The pursuit of money–particularly in the realm of policy making–has distorted (and made impossible) the goal of control.  It has also made it impossible for the burgeoning, legal marijuana industry to operate legally.  How could this be?  It’s all about the taxes.

How should marijuana be taxed?  The answer depends on the goals of policy makers and on the structure of the existing local (informal market) for marijuana.  One of the least-considered issues is how the current, informal market will interact with newly created, formalized markets; researchers often view illegal and legal markets as separate entities, but they are really all part of a unified commodity production market.  I’ll provide an overview of the Washington approach, then offer my thoughts on how the Oregon market requires a unique approach (subsequent post).


Washington’s marijuana law is a sterling example of how to ensure actor non-compliance. Here’s why.  Washington adopted a three-tier distribution system similar to the much-maligned alcohol market (though producers can also hold processor licenses under newly adopted regulations) and has elected to impose a 25% tax at each stage of production/processing/retailing, as well as local sales tax to end consumers.  These rates were codified by I-502 and are, therefore, not alterable by the agencies tasked with implementing marijuana legalization.  Washington’s state budget agency (OFM) has projected that growers will receive $3 / gram, processors will receive $6 / gram, and the pre-tax retail price will be $12 / gram.  Retail sales taxes average 8.87% in the state.  Since the OFM doesn’t tell us if the “pre-tax retail price” includes the 25% excise tax, we end up with a wide range for the predicted average consumer price:  an ounce of legal marijuana should cost consumers between $370 and $465.  The company hired to provide analysis and policy recommendations–BOTEC–has produced a number of white papers analyzing the economics and consumer decision making processes at play in this newly formalized market.  As they note,

“Anecdotal evidence suggests that consumers will pay a higher price for legal, tested, and regulated marijuana than for black market product. What is not clear is how much more consumers would be willing to pay. If the price premium to purchase from a legal operator is set too high, consumers at some point will prefer to purchase from an illicit operator if doing so will save them significant money.”

Time will only tell if these retail prices are low enough to lure consumers in; more information on Washington’s informal market is needed to assess the viability of state-sanctioned marijuana sales.  My research on the Oregon marijuana market–which is only separated from Washington by the Columbia River–demonstrates that the average price per ounce in Oregon’s informal market is $177.  Will consumers willingly pay 200% more to legally purchase their marijuana from a store?

To make matters even more complicated, BOTEC has recently suggested that the original OFM analysis of retail prices is not accurate for compliant retailers due to federal income tax laws and because compliant producers will need to charge more per pound ($3125 vs. $2500) to earn modest profits from their trade.  After providing various income scenarios for growers, processors, and retailers, BOTEC argues that:

“Federal income taxes will have a much larger impact on pricing behavior, especially when we start to consider implications for IRC Section 280E. Retailers, unlike producers and processors, have many costs that might be disallowed for tax deduction purposes under this law provision. In theory, if Section 280E were to be strictly applied, the retail marijuana industry simply could not exist because the economics could not support income taxes calculated on gross margins. Under this theory, the excise tax the retailers pay to Washington would not be deductible. Using the average sized retailer as an example, the federal income tax would be $417,400, but the retailer would only net $392,200 before payment of any excise tax or federal income tax. Thus, even excluding the retailer excise tax, the retailer would not have enough cash to pay the federal income tax (assuming strict application of Section 280E).”

To make a profit under the new legal regime, producers, processors, and, especially, retailers will be forced to either sell marijuana for exorbitant prices (compared to the black market) or become creative in their marijuana acquisition programs.  Washington’s tax structure is essentially nudging would-be legitimate marijuana operators into the black market to remain profitable.

It gets worse.  Washington has set a limit on the total amount of licensable growing space for the state, which will be divided amongst licensed producers; it amounts to 2 million square feet or, roughly, 46 acres.  There is no distinction made between outdoor and indoor production–if it’s used to grow marijuana, it counts toward the 46 acres.  Is this enough to meet Washington’s marijuana demand?  To find out, we need to consider the use patterns among specific demographic groups.  First, no one under 21 years of age will be allowed to use.  Second, the use rates differ between age groups (21-25 are most likely to use).  Third, use amounts differ dramatically between user types (light and heavy).  Since no study has assessed the amount consumed by individual Washington users, we’ll also have to substitute data I’ve collected on Oregon users (grams / month).  This can be formalized as:

Yearly Demand = Light User Demand Model + Heavy User Demand Model


Light User Demand = ((21-25 POP * % Users) * Light Use Amount) + ((26+ POP * % Users) * Light Use Amount)

Heavy User Demand = ((21-25 POP * % Users) * Heavy Use Amount) + ((26+ POP * % Users) * Heavy Use Amount)


Light User Demand = (((470,723 * .15) * 1.75g) + (4,557,153 * .0369) * 3.25g)) * 12

Heavy User Demand = (((470,723 * .219) * 22.4g) + (4,557,153 * .0658) * 17.6g)) * 12

or (with conversion to pounds)

218,437.905 lbs. = 17,727.33 lbs. + 200,710.575 lbs.

The Washington marijuana market demands approximately 218,000 pounds of product each year.  With the capped growing space policy (46 acres), each acre licensed for marijuana production will have to yield a minimum of 4,748 pounds of finished product to meet the state’s yearly demand.  And those are perfect conditions (which do not exist in Washington!).  Throw in a conservative 15% loss rate for pests, molds, and bacteria and each acre will need to produce close to 5,500 pounds.  Many outdoor marijuana farmers in Southern Oregon have suggested that each plant should have a footprint of 20 feet x 20 feet (400 square feet).  This reduces the spread of disease, maximizes air flow, and allows farm workers enough space to operate without damaging plants.  Using this calculation, each outdoor acre can safely support 109 marijuana plants; the entire state would have 5,014 legal marijuana plants.  Each of these plants would have to yield over 50 pounds of finished marijuana to meet consumer demand.  Have you ever seen a 50 pound marijuana plant?  No one has.  How about a 25  pound plant (218 plants per acre)?  No one has.  A more likely scenario–involving large-scale green houses and costly supplementary lighting–is a 10 pound average per plant @ 109 plants per acre:  this would result in about 50,000 lbs. of finished marijuana and a 168,000 pound shortfall.  Where will it come from?  Well, who’s located nearby and grows a lot of pot?

It’s no wonder that BOTEC’s president–Mark Kleiman–responded to questions about marijuana “leakage” out of Washington as “a non-problem”.  The Washington system was designed to underproduce expensive marijuana; it will not be economically feasible for individuals to ship legally produced marijuana out of the state (a win for advocates of marijuana control in the state).  On the other hand, it forces the legitimate marijuana industry to rely on illegally produced marijuana, both from within and outside of the state–which limits the likelihood of collecting excise taxes and a full reporting of marijuana-related incomes (BOTEC calculates two compliance rates for their tax estimates:  100% and 97%–neither seem likely).

This approach strikes me as a 20th century solution for a 21st century problem.  We have much more effective tools available to us to enable compliance and protect new participants in the formal market.  Things are taking off at the Oregon legislature and I’ll post my thoughts on appropriate ways forward soon.

Marijuana Legalization–Part 3, Drugged Driving

December 12th, 2013

Using Marijuana While Driving

The Oregon legalization bill tackles getting high while driving, but leaves DUII laws unchanged.  If you light up (or its equivalent) in the car, you would be subject to the following, new proposed penalty:

Section 73.  Use of marijuana while driving; penalty. (1) A person commits the offense of use of marijuana while driving if the person uses any marijuana while driving a motor vehicle upon a highway. (2) The offense described in this section, use of marijuana while driving, is a Class B traffic violation.

Because this section does not alter DUII laws in any way, it serves as an additional punishment for those who are caught using marijuana while *safely* operating a motor vehicle.  The violation is similar to speeding (more than 10 MPH over posted limit, but less than 20 MPH), following to closely, etc. and results in a $300 ticket.  As a cogent reader can surmise, a cop who pulls you over for smoking marijuana while driving has probable cause to assess your ability to drive via field sobriety tests and/or breath/blood tests.

This legalization bill does not set THC blood concentration limits (as Washington did) and makes no alterations to the DUII laws–it seems that law enforcement personnel and future recreational users could use some clarification on marijuana’s effect on driving and the current tools available on DUII enforcement.  Others simply want to know:  does marijuana legalization require alterations to current DUII laws?

Stoned Drivers

First, lets address what the research has found on individuals’ driving behavior while under the influence of marijuana (and only marijuana).  It’s really important to emphasize upfront that the trifecta of marijuana, alcohol, and driving do not mix well (Robbe 1998; Ronen et al. 2010)–even in small amounts, the combination of alcohol and marijuana dangerously impairs drivers.  There is consensus within scholarly research on several important issues:  (1) marijuana does impair driving, (2) marijuana users compensate for that impairment by driving slow (well, not that slow, but 5-10 mph slower than their uninhibited selves), and (3) alcohol intoxication is far more dangerous in commonly used amounts of each respective drug.  Research on stoned drivers finds that–when results are statistically significant (they are not usually with low doses of marijuana)–they have slower reaction times and more difficulty maintaining their lane of travel than non-inebriated, non-distracted drivers.  As could be reasonably expected, this is accentuated by higher doses.  In all real world driving and marijuana consumption studies, stoned drivers were able to safely operate their vehicles and performed better than their legally drunk (> 0.08 BAC) counterparts.  Robbe (1998) notes at the conclusion of his double-blind comparative study of marijuana, alcohol, and marijuana+alcohol intoxicated drivers in the Netherlands that the “evidence from the present and previous studies strongly suggests that alcohol encourages risky driving whereas THC encourages greater caution, at least in experiments.  Another way THC seems to differ qualitatively from many other drugs is that the former’s users seem better able to compensate for its adverse effects while driving under the influence”.  This finding is echoed in much of the literature on stoned drivers (real world and simulated driving).

Dosing Issues and Cannabinoid Interactions

Real World Dosing

Dosing in these studies, however, is an issue; the most empirically valid research protocols control for body weight and administer real marijuana (much of it grown at the National Institute on Drug Abuse pot farm at the University of Mississippi) in doses based on micrograms of active THC per kilogram of body weight.  In the highest administered THC dose studies with real world driving assessments (300 micrograms THC / kg body weight) (Robbe 1998), stoned drivers performed about as well as drivers who had blood alcohol content (BAC) levels of 0.04%–affected, but well below the legal limit.

How does this dosing regime stand up to real world conditions?  Let’s take a 170 pound person (77.11 kg) using high quality marijuana with approximately 15% THC content as an example; how much real marijuana would it take to achieve similar levels of inebriation (300 micrograms / kg body weight) studied by scholars?

300 micrograms THC * 77.11 kg = 23,133 micrograms = .023 grams THC

.023 grams / .15 grams (i.e. 15% THC per 1 gram marijuana) =

0.153 grams of 15% THC marijuana

How does this stack up to the consumption patterns of regular marijuana users?  My research suggests that regular users of marijuana consume about .46 grams per day, though the concentration of THC and the amount per “use” is unknown.  If our fictional 170 lb user were to consume the Oregon average (.46 grams) of 15% THC marijuana in one sitting, he/she will receive a dose of 900 micrograms of THC per KG body weight–or exactly 300% of the most commonly used dose used in research on stoned drivers.  How do drivers perform at that level of intoxication?  No one has systematically studied this yet and it seems very important to conduct research on the effect of real-world doses on real-world driving performance.  Is it safe to assume that all marijuana users consume their daily allotment in one sitting?  Probably not, though such an occurrence cannot be discounted and also warrants further research.

Cannabinoid Interactions

The most glaring issue with all studies of marijuana dosing is derived from our nascent understanding of the interactions amongst cannabinoids when ingested.  Unlike alcohol, every individual marijuana plant has a unique effect on its users because of the variability in  their chemical composition (particularly cannabinoids and terpenes); in this regard, there is no realistic possibility of perfect standardization across marijuana studies or perfect extrapolation of clinical studies to real world situations.  Certain cannabinoids are known to interact with each other, with the two most important being THC and CBD (which is now viewed by many researchers as more medically beneficial than THC).  CBD is not psychoactive and is not likely to affect psychomotor abilities (that aspect has only been studied in mice so far).  Additionally, CBD inhibits the psychoactive effect of THC (i.e. the anti-marijuana drug is present in marijuana!), which means that varieties of the plant with higher CBD to THC concentrations will affect end-users’ driving ability less than their low CBD to THC counterparts.  Even with less or no impairment, individuals would have higher concentrations of active THC in their blood after consuming CBD-rich marijuana products (which calls into question the validity of THC ng / ml tests).  This means that measurements of THC are problematic (in plants or human bodies) without accounting for the antagonistic effects of other cannabinoids or terpenes.  Again, this is another area that requires significant scientific advances before any standard should be adopted.

THC in the Blood vs. Standardized Field Sobriety Tests (SFSTs)

5 nanograms of active THC in 1 milliliter of blood (5 ng / ml) is the marijuana impairment limit adopted by Washington.  This level appears to be based on Ramaekers et al. (2006) study on non-driving psychomotor performance exams and active THC concentration tests (blood), the authors recommended that 2 ng-5 ng THC / 1 ml of blood be established as the “lower and upper range of a THC limit for impairment” (114).  Unfortunately, the study is problematic in many critical ways.  First, in terms of research design, the authors themselves conclude that “the present study will be criticized for the face validity of the performance tasks and their ability to reflect driver impairment or crash risk” (120).  In other words, the tests used to assess impairment do not necessarily relate to real world driving performance.  That’s problematic when constructing a legal standard, though not surprising–the study was funded by the German Federal Police Academy and the German Society against Alcohol Drugs and Driving (Ramaekers et al. 2006: 121).  Second, other researchers flatly reject the notion that THC concentrations in the blood are related to impairment; instead, they suggest that high THC concentrations in the blood simply indicates very recent use (Robbe 1998; Papafotiou 2005a, 2005b; Karschner et al. 2009).  Ramaekers et al.(2006) study has been the only one to date that has recommended a standardized threshold for active THC in the bloodstream.

This point is driven home graphically in Papafotiou et al.’s work (2005a; 2005b) on Standardized Field Sobriety Tests (SFSTs) and marijuana intoxication (though dosing differs from gold-standard studies).  Papafotiou et al. provide mean THC ng / ml results over time for their 40 research participants (Fig.1, 2005a: 109), who ingested a placebo, low dose (0.813 grams@ 1.74% THC), or high dose (1.776 grams of 2.93% THC) of marijuana.


As the figure illustrates, marijuana smokers (an important, additional caveat) experience huge spikes in their THC/blood concentrations immediately after ingesting the drug (55-70 ng / ml, dose dependent).  Within 20 minutes, that concentration is reduced to 12.8-13.8 ng /ml, and after 100 minutes, all participants were below the legal limit established in Washington (3.18 & 3.72, respectively). How could this be?  The answer is remarkably simple.  Active THC in the bloodstream has not made it to receptor sites in the body yet and, therefore, have no effect on a person.  As active THC in the bloodstream is absorbed by the body (and declining in concentration), intoxication increases.  For this reason, Robbe (1998) notes this important finding from his study:

“Inter-subject correlations between plasma concentrations of marijuana and driving performance after every dose were essentially nil, partly due to the peculiar kinetics of THC.  It enters the brain relatively rapidly, although with a perceptible delay relative to plasma concentrations.  Once there, it remains even at a time when plasma concentrations approach or reach zero.  As a result, performance may still be impaired at the time that plasma concentrations of the drug are near the detection limit.  Therefore, an important practical implication of the study is that it is not possible to conclude anything about a driver’s impairment on the basis of his/her plasma concentrations of THC and THC-COOH determined in a single sample (S77)”.

In addition to measuring THC to blood concentrations, Papafotiou et al. (2005a; 2005b) also subjected their study participants to separate driving performance tests (at three time points) and three SFSTs at two time points (horizontal and vertical gaze nystagmus, walk and turn, and one leg stand tests).  At time point one, (30 minutes after smoking; all participants had more than twice Washington’s legal limit of THC in their system), all participants were “not significantly impaired in comparison to the placebo condition,” though no SFSTs were conducted (2005b: 175).  At time point two (80 minutes after smoking; participants’ average THC concentrations were below Washington’s legal limit), “driving was significantly impaired, as indicated by the ‘straddled the solid line’ variable..and the ‘straddled barrier line variable'”.  In other words, most stoned participants would pass Washington’s blood test standard, had trouble maintaining their lane of travel, and failed their SFSTs–however, that was the extent of their impairment.

Here’s the really important piece that may explain why Washington adopted a scientifically invalid standard.  Comparing the results of the SFST battery and driving impairment standards at 80 minutes after smoking resulted in the following findings:  “of the participants who were [scored as] impaired on the driving task, 88.5% were correctly identified as impaired but only 38.5% of participants who were not impaired on the driving task were correctly identified as not impaired” (176).  This means that stoned drivers who could not maintain their lane of travel were correctly identified as stoned 88.5% of the time, BUT 61.5% of non-impaired drivers failed the SFSTs and were accused of stoned driving when they really were not–even though all drivers were likely to pass the Washington THC / blood standard.  Even worse, a remarkable 0% of non-impaired drivers were identified 105 minutes after smoking.  Others have demonstrated the lack of face validity and scientifically tenuous nature of SFSTs (Rubenzer 2008); this finding corroborates that criticism in a demonstrative manner.  Field sobriety tests appear valid as a predictor of one form of marijuana impairment (inability to maintain lane), but are dangerously ineffective–0%!–at protecting citizens from false/erroneous accusations of impairment.  Restated, the THC / blood standard is invalid as a measure of impairment, but has the potential to protect citizens from DUII arrest if they wait an hour after smoking to drive.


People who consume marijuana products containing the full range of active cannabinoids experience diminished psychomotor abilities, but, like alcohol, moderate doses do not impair their driving ability enough to consider them unsafe.  That said, we need further research on “real world” dosing and its effects on driving ability.  There is no reliable lab measurement or standard (i.e. blood tests) to quantify marijuana impairment, in part due to the multitude of active constituents in the drug and because common reference tools (i.e. THC ng/ml) are not correlated with impairment in any meaningful way.  SFSTs remain the most effective tool for law enforcement to assess driving impairment; paradoxically, the problematically high “false positive” findings of SFSTs in research settings suggests that drivers suspected of marijuana use may require a more efficacious mechanism to demonstrate their lack of impairment.  In short, current DUII laws are more than sufficient to deal with marijuana intoxication–we do not need new standards for this particular drug.

Oregon’s Medical Marijuana Dispensaries–Part 3: Dispensaries as Wealth Extractors

December 9th, 2013

Dispensaries as Wealth Extractors

As the previous posts have alluded to, the majority of marijuana will be sold in the Portland metro area, while most marijuana is produced in rural Southern Oregon communities.  Critical scholars of economic development have long pointed out that rural communities are often maldeveloped by external economic forces emanating from large, neighboring cities; the rural areas become export centers for specialized raw natural resources or processing centers offering cheap labor, while losing their ability to produce the necessities of life and thus becoming reliant upon imports for survival.  The leads to a “race to the bottom” with other rural areas struggling for survival and pushes the price of their specialized exports lower (through larger economies of scale, environmental exploitation, lax labor laws, lower wages, etc); in the long term, the relative price of imported necessities increases, the purchasing power of rural residents declines, and the ecological capacity of the area is degraded.  These areas have also been shown to become increasingly unequal in terms of wealth/income distribution (another feature of distorted export markets).  Once the area has lost its (relative) self-sufficiency, it’s very difficult to restart those industries; this, in large part, explains why so many rural areas are reliant upon extractive industries (logging, mining, farming), become locked into cycles of poverty and experience increasing economic inequality.  A little known aspect of Oregon’s new dispensary law is likely to contribute to this phenomenon.

In basic terms, the Oregon Medical Marijuana Law (ORS 475.300 through 475.346) does not allow marijuana producers to sell the fruits of their labor.  There are explicit protections in place throughout the production stages (from the seedling stage to storing finished marijuana), but growers are left exposed when transferring their product to patients.  This has always been a sticky issue for marijuana growers, as no other sector of the economy is forced by law to operate at a loss or face legal prosecution for calling a “customer” a customer.  A grey area in the law does allow growers to recoup their expenses, but there hasn’t been a formal declaration of what qualifies as an “expense” (Dirt? Lights? Utilities? Rent?) or what the appropriate depreciation schedule for capital investments is.  The legal burden of proof is on the grower to demonstrate (after arrest) that his/her expenses were legitimate and appropriate–worse yet, criminal defense attorney fees are not tax-deductible!  It’s a precarious situation for those wanting to operate above board and, by law, sets the minimum wage for marijuana growers at $0 an hour/week/month/lifetime.

The latest draft rules for dispensaries provides some clarification on this grey area by directing dispensaries to explicitly account for “costs related to transferring, handling, securing, insuring, testing, packaging and processing useable marijuana and immature marijuana plants and the cost of supplies, utilities, and rent or mortgage”.   This formalization still, however, prohibits growers from receiving compensation for their labor. Dispensary owners, on the other hand, will be allowed to profit from the sale of marijuana and receive compensation for their labor.

What incentive does a Southern Oregon grower have to participate in the newly legitimized medical marijuana economy if they cannot receive compensation for their labor?  The black market does not force growers to work for free.

How does this process of economic formalization help the embattled Southern Oregon region recover from a generation of extractive resource dependence (timber)?   It doesn’t.  Instead, it sets the effective wage for growers at $0 and tells them:  “If you want to survive in this field of farming, you must do so dishonestly.  You must lie for your wages.”  Marijuana is simply (formally) replacing timber as the region’s primary export commodity.  If history is any predictor, we can expect to see further dislocation, maldevelopment, and rising levels of economic inequality with this formalization, particularly in light of the dispensary law’s directives:  dispensary owners have a legal obligation to only pay growers for their production costs.  The exploitation is codified.  Growers can rightly claim exploitation by Oregon’s urban core.


Oregon’s Medical Marijuana Dispensaries — Part 2: County-Level Estimates

December 9th, 2013

Geographic and Demographic Constraints

A $96 million market?  It sounds like a modern day gold rush to many entrepreneurs.  The size of this rush is heavily dependent upon dispensary location and medical patients’ willingness to purchase marijuana from store-fronts.  I’ve constructed some estimates on potential gross sales at the county level (using the same data from Part 1:  Market Overview).  Table 1 presents the market size of each Oregon county.

Table 1.  Estimated County-Level Gross Sales of Medical Marijuana Dispensaries

County Dispensary Revenue

There are some very large discrepancies that emerge in this data.  For one, many counties–particularly those in Southern Oregon–appear to have enormous markets, literally on par with the entire Portland metro area.  Obviously, this is a product of Southern Oregon’s status as one of the world’s primary marijuana exporting regions; in this case, medical cards legitimize (small-scale) production rather than demonstrate a need for dispensaries.  Second, a number of counties have such a small market that they are not likely–especially with the stringent security (video surveillance systems, safes capable of storing all marijuana products in the store, encrypted electronic record keeping, etc.) and product testing requirements–to be economically viable.  This may be a small boon to those dispensaries who can attract rural residents from neighboring, low cardholder-density counties; however, for this to occur, the store fronts will have to displace already-established local marijuana distribution networks (easier said than done, especially considering the low cost of marijuana in these networks).

Some (future) dispensary owners are teaming up with physicians in hopes of expanding their customer base (i.e. getting people medical cards).  While it seems like a good business practice, I doubt (for two reasons) this will markedly expand newly formalized, local marijuana economies.  First, obtaining a medical marijuana card in Oregon is not incredibly difficult (though much harder than in California), as there are several non-profit organizations that exist to facilitate entrance into the program; however, under Oregon law, applicants are required to visit a primary care physician within the last year for treatment of the qualifying condition claimed on their cardholder application (and these records must be shared with the doctor responsible for recommending marijuana as a treatment).  Because most primary care physicians in Oregon do not (for a number of reasons) recommend marijuana for their patients, prospective applicants must make at least two trips to the doctor before submitting their paperwork (and $200 fee) to the OMMP.  This is a difficult proposition for the biggest marijuana consuming segment of the population (18-30 year olds), who often lack health insurance, disposable income, established relationships with primary care physicians, and the wherewithal to navigate OMMP bureaucracy.  For this group, informal markets are likely to provide easier access to marijuana than a medical dispensary ever could.

Second, my research suggests that the medical marijuana cardholder population is not likely to expand much.  The reason for this is numeric.  97% of all medical marijuana patients in Oregon are in the program for chronic pain. Why?  There’s a double edged-explanation at work here: (1) cannabis provides a unique pain suppression quality (binds to pain receptors in the spine) and anti-inflammatory properties, so it works very well for severe pain and in ways that other medications do not, and (2) “chronic pain” is the easiest documentable condition for medical professionals to accept from patients (savvy prospective patients know this).  Data collected by the World Health Organization suggest that approximately 10% of the state’s population suffers from real chronic pain. Data from the US DHHS suggests that 14.1% of Oregon’s population will use marijuana this year.  Right now, only 1.4% of Oregonians are currently registered for the medical marijuana program.  If all chronic pain sufferers or all marijuana users were ACTUALLY registered for the program, we would have somewhere between 387,000 and 546,000 registered patients. Not all people with chronic pain are comfortable with marijuana use though–it’s still a social taboo in many ways and not all people enjoy its effects.  That last number (marijuana users in Oregon) is important: if, as the World Health Organization suggests, chronic pain afflicts marijuana users at the same rate as the general population (which by all accounts it should), we would expect that about 54,000 of them would have this medical condition. How many registered medical marijuana patients do we have in Oregon?  About 54,000.  What’s the moral of this story?  Medical marijuana patient counts have increased rapidly since the programs inception in 1998, but the numbers are EXACTLY where the data suggests they should be, and, if the program is operating correctly, they should remain in a similar state regardless of how marijuana is sold.

My concluding thought on this little aspect of dispensaries is this:  a majority of Oregonians support full legalization of marijuana and a bipartisan group of legislators has crafted a bill to make this happen within the next year.  The bill will be discussed in the February 2014 legislative session.  If it passes (we’ll know before dispensaries are allowed to submit their initial applications to the OHA), the benefit of obtaining a medical card will be minimal for the average marijuana user.

Marijuana Legalization–Part 2, Minor Issues

December 9th, 2013

Referenced by section in the bill are in bold followed by my commentary:


Section 29:  Grounds for refusing to issue license…


(2Ba): that the applicant is in the habit of using alcoholic beverages, habit-forming drugs, marijuana, or controlled substances to excess.

This is completely indefensible under Oregon law and is simply bad public policy.  How would the OLCC  be able to track an individual’s use of any type of drug in excess?  Who gets to define what “in excess” means?  Will a self-admitted 5-cup-day-coffee drinker be denied a marijuana production/processing/retail license?  What about chain smokers (the cigarette variety)?  And here’s another beauty a few lines down:

(2Be and 2Bf):  has maintained an insanitary establishment and/or is not of good repute and moral character

Nowhere in the bill does it require that producers, processors, or retailers abide by state or county health codes, which calls into question the usefulness and/or applicability of 2Be. Again, 2Bf poses intractable issues as well:  what does this mean and how could it ever be legally enforceable?  This is a verbatim transcription of one of the worst sections of the failed 2012 voter initiative and it makes zero sense to include it.

Take a look at Section 29 2Bd:  doesn’t this cover everything that a licensing agency would need for legally defensible decisions?  I’m not an attorney, but it seems to cover the situation.

The same issues are present in Section 30 (grounds for cancellation or suspension of license) as well and should be removed.


Section 57:  Homemade marijuana extracts prohibited.

You can’t do this if you define marijuana as “all parts of the plant Cannabis family Moraceae, whether growing or not; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant or its resin” (ORS 475.005).  ANYTHING made from marijuana is considered marijuana.  Plus, it just seems like bad form to allow individuals over the age of 21 to grow marijuana but not use it how they deem appropriate.


Marijuana Legalization–Part 1, The Bill is Here

December 9th, 2013

State Senator Floyd Prozanski has a legalization bill ready for introduction at the February 2014 legislative session.  The bill–you can get your copy here–is entitled “Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act”.  The legislature has been interested in passing a thought-out legalization bill before a less articulate version is passed by Oregon voters (and public opinion polls suggest that will occur in November 2014):  this just might be “the one”.

I’ll say from the outset that I think this is a tremendous piece of public policy.  It’s well-thought out, responsible, and, in most cases, informed by the best science available.  This bill makes Washington and Colorado’s legalization bills look rudimentary (which it should–thanks to them, we have the advantage of hindsight).  That said, there are a number of items that need to be addressed for this bill to work:  I’ll go into the details in subsequent posts.  I really don’t like having marijuana placed under the regulatory scope of the Oregon Liquor Control Commission.

Legalization is a complex topic when you get into implementation;”back of the envelope calculations” often fail to consider the structure of the existing marijuana market and, in so doing, can mire the formalization process with unnecessary impediments.  Marijuana at the store can’t be significantly more expensive than its black market counterpart.  The greatest mistake of the early proposals are high tax rates applied at various stages of the marijuana production process.  This is inappropriate for a number of reasons, but, most importantly, simply because the brunt of tax revenue will be generated through income tax collection, not marijuana-specific taxes.  In fact, at the early stages of legalization more revenue is likely to be generated by having no tax at all on marijuana itself.  I’ll get into more details on this particular point in a future post.

Here’s an overview of the analysis I’ll provide on this bill:  part 2 will detail the small issues that need to be remedied in the bill; in part 3, I’ll tackle the “drugged driving” section of the bill and apply the most recent scientific evidence to offer some recommendations on how to handle this particular issue; part 4 will get into the nuts-and-bolts of appropriate tax structures by demonstrating the unity between formal and informal markets.  I will have these sections up in the next couple weeks (way before the legislative session begins on January 27th).

Oregon’s Medical Marijuana Dispensaries — Part 1: Market Overview

November 22nd, 2013

Today’s post focuses on the size of the medical marijuana market in Oregon.  I do this by combining some publicly available data with proprietary information I’ve collected in the course of researching Oregon’s marijuana market structure.

Market Size

First, how big is the market?  To answer this, we need to know:  (1) patient count, (2) average consumption amount per patient, (3) price of marijuana, and (4) rate of self-sufficiency among patients.  This can be formalized as:

Market Size = (((Patients – (Self-Sufficient Rate * Patients)) * Consumption) * Price


Patients = 58,484

Consumption = 29.16 grams per month

Self-Sufficiency Rate = 25%

Price = $177 per ounce (28.3 grams) or $6.25 per gram

Using these figures, Oregon’s estimated medical marijuana market can be valued at $8 million per month and $96 million per year.

Caveats:  Individual characteristics play a strong role in determining consumption amounts for patients.  My research has demonstrated that use frequency (+), age at first use (-), education (-), and having children in the home (+) are all statistically significant predictors of a person’s monthly consumption.  Another issue–and probably the most important–is obtaining valid estimates of self-sufficiency among the medical population.  My research suggests that only 8% of users (legal and illegal) reported to be fully self-sufficient, but 25% of medical users report self-sufficiency.  A larger sample size is likely to only reduce this figure for the medical population, so the total market size is probably slightly underestimated by this procedure.  The price paid per ounce underestimates the market value of smaller purchases (i.e. less than an ounce), leading to another underestimate of the market size.

Oregon’s Medical Marijuana Dispensaries — Analysis

November 22nd, 2013

HB 3460–a bill allowing medical marijuana dispensaries in Oregon–was signed into law August 14th, 2013. Draft rules are being developed by a committee of 13 individuals and the state projects that the dispensary application process will open on March 1st, 2014.  The state expects to collect enough revenue from application and compliance fees to fund rule enforcement ($401,638 per year for 4 new employees), and envisions around 250 dispensaries to be in operation once the market matures.

The legalization of medical dispensaries has the potential to radically alter the Oregon marijuana market in a number of ways.  In the following weeks, I will examine some of the potential ramifications of this new market.

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