What Factors Drive Success in the Medical Cannabis Market?
What factors fuel success in the medical cannabis market? Investors and entrepreneurs entering the marijuana market often leap before they look, enticed by the opportunity a forest of cannabis presents – rather than seeing the log jam the trees of legalization leave in their path. And the devil is always in the details, as Andrew Livingston, analyst of legal, regulatory, and economic effects of adult and medical marijuana use laws, director of economics and research for leading cannabis-focused law firm Vicente Sederberg, has unearthed…
In Regards to Market Potential, Law Matters Most
Though under the right conditions, marijuana products will fly off the shelves, restrictions within cannabis laws limit market potential. Despite the pent-up demand of the existing patient/customer base, state laws and regulations can quickly put the axe on qualifying conditions, available products, and retail stores. Laws define a market’s possible size and income potential more than any demographic difference.
Laws Vary by State, Each Market with Unique Facets/Restrictions
There are only two U.S. states with no form of medical marijuana law. Twenty-nine states and D.C. have comprehensive legislation; 19 with limited, CBD-only programs strictly limiting the amount of THC in medical marijuana products. For the most part, however, states can be divided by these 5 sub-groups:
- States that allow commercial sales…
Versus those that are medical-only.
- States that permit products with full-strength THC.
This includes only Arizona, California, Colorado, Nevada, Oregon, and Washington. The rest – the majority – are much more restrictive. A difference which can make/cost business owners billions per year.
- States that allow the sale of the cannabis flower.
Again, only the 6 states above allow this.
- States that include chronic pain as an independent qualifying condition.
This designation encompasses 11-17% of the U.S. population, opening cannabis shop doors to more potential patrons than lower level qualifiers, such as epilepsy, at 0.84% of the population.
- Number of distribution centers.
Lack of access severely limits potential, as is seen in Minnesota’s just 2 licensed businesses.
How Do You Tell a Profitable Medical Cannabis Market from a Potential Dud?
Those looking to enter the market should consider a number of factors, some of which were briefly touched-on above, including…
- Market size.
Assessing the number of qualified/registered patients (the market’s consumer base) in a way that allows comparison between states is essential. Typically, successful markets boast a patient-to-population ratio (PPR) of more than 1%, while unsuccessful markets typically show a PPR of less than 0.5%.
- Qualifying conditions.
Though states may approve medical marijuana for a range of conditions, again here the most important qualifier is chronic pain. Every state with a PPR over 0.5% includes chronic/severe pain as an independent qualifier. The addition of this condition in New York in 2017 nearly doubled patient registration. In Minnesota, the addition of intractable pain tripled registration.
- How new qualifying conditions – and products – are added.
Most medical cannabis states allow qualifying conditions to be added any time, pending approval by an independent medical review committee. Product additions, however, often require legislation.
- The smokeables conundrum.
Many states prohibit the sale of flower, leaving the most common consumption method (vaping/smoking) off-the-table. With flower purchases prohibited, registration (and PPR) will suffer, making program success questionable.
- How barriers to entry will effect official enrollment.
In short, is it worth it for patients to jump through the hoops necessary to obtain a legal script (finding a prescriber, paperwork, registration, finding a store, product selection/cost) when medical marijuana is readily accessible on the black market?
- Number of access points (dispensaries).
While being one of a limited number of dispensaries might seem great at first-glance, this can backfire: A long drive coupled with excessive lines/waiting will quickly drive patients to other solutions – or illegal ones.
Now that you’ve invested in the marijuana market, do you have the packaging and marketing expertise necessary not only to ensure legislative compliance, but stand out to your end-user? Drive added business with the right cannabis packaging. Learn how with the help of MMC Depot today.