BLOG: Class I holding all canna-business back
Welcome to the beginning of The CannaBiz Kid blog, where I'll be covering the rising business world that encompasses the marijuana industry, with an emphasis on Pennsylvania.
I recently attended a conference in Philadelphia called "Innovation in the Cannabis Industry," and I found that this unique community is full of passionate — and talkative — people who are genuinely excited to stake out their claim in an industry that "materialized basically out of nowhere," as one hopeful entrepreneur said to me.
Multiple people during the conference referred (reefer-ed?) to the new industry as a 21st-century version of the California Gold Rush. Naturally, I will henceforth use my newly coined phrase, "Pennsylvania Green Rush," when speaking on the multitude of new medical marijuana businesses popping up around the state.
Throughout this blog, I'll cover pot topics including updates on regulations, new technology, market trends and medical research.
Before I can dig into any of those topics, though, we must discuss the single largest factor holding this industry back: Cannabis is illegal in the U.S.
I'm certainly not breaking any major news here, but having heard about the financial successes West Coast states were experiencing since creating cannabis industries — Oregon collected nearly $3.5 million in taxes from its first month of legal marijuana sales — I figured the federal restrictions weren't offering major restrictions in states where the plant had been legalized.
However, of the five panels held during the conference in Philadelphia, each one spoke at length about marijuana's classification as a Schedule I drug preventing major growth.
The U.S. Drug Enforcement Agency's classification system includes five schedules, with Schedule I, which includes marijuana, LSD and heroin, serving as the "most dangerous" with "high potential for abuse." Schedule V drugs include low doses of cough medicine and Lyrica, while Schedule II drugs include oxycodone and cocaine.
The most obvious restriction this classification places on the industry is the ability to conduct research on the plant. The DEA recently announced it would be relaxing marijuana-related research restrictions, but details were scarce.
Without large-scale research, physicians are, rightfully, hesitant to prescribe the drug to patients. As Pennsylvania prepares for the day when doctors will be permitted to prescribe medical marijuana, the medical community is still predominantly forced to use a guess-and-check method when it comes to dosage and strain.
Already a "conservative bunch" to begin with, doctors are worried about losing their medical licenses by issuing a prescription for a drug they learned nothing about in school, according to Dr. David Cassarett, a director of hospice care at Penn Medicine who served as a panelist at the conference.
On the business side of things, banks largely refuse to allow cannabis-related companies to open accounts for fear of penalties from the Federal Deposit Insurance Corp.
Panelists said these financial strains don't just exist for growers or dispensaries but even for ancillary companies.
"Ancillary businesses pose less risk," panelist Marc Ross, of Sichenzia Ross Friedman Ference, said, "but banks could still close their account, even if they're public."
As industry leaders continue attempting to legitimize a product that has long been associated with black market sales, these businesses' inability to hold money in the bank can encourage illegal financial behavior that will continue to set the industry back.
Until cannabis is reclassified on a federal level, these problems will undoubtedly persist in a market that is otherwise set to explode. Many experts at the conference expressed confidence that DEA will make this decision within the next five years.
"Time is on our side," panelist Steven Schain, an attorney, said. "Younger people support this, and the older people who oppose it are dying off."
No one knows for sure, though, and until it happens, the cannabis industry will not live up to its financial potential.