Refracting Green

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

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.