When Jim Champion goes to a medical marijuana dispensary in Illinois for the first time, his wife, Sandy, plans to take a picture to mark the victory, after years of fighting for an alternative treatment for his multiple sclerosis.
“It’ll be like going to the candy store for his birthday,” she said.
Champion, a military veteran from Somonauk in north central Illinois who said he already takes marijuana to ease his symptoms, probably should plan on bringing plenty of cash.
Most health insurance doesn’t cover medical marijuana, and major credit card companies generally won’t process payments for it, industry consultants say, so many of the dispensaries that will soon be opening in Illinois will be cash only.
And the cost itself could be significant. Industry experts say the price, which will not be regulated by the state, could rival or even exceed what illegal users pay for marijuana, which law enforcement sources said can top $400 an ounce. Illinois patients will be allowed to buy up to 2.5 ounces every two weeks.
As Illinois begins accepting the first patient applications Tuesday, industry officials expect the state to be one of the most expensive places in the country to buy medical marijuana. Because Illinois has one of the most restrictive laws around, with hefty high fees, taxes and investment costs, program advocates say the drug won’t come cheap. And with only 60 dispensaries allowed statewide, there will be limited free-market pressure to keep the prices down.
The DuPage County Metropolitan Enforcement Group, which makes undercover purchases during criminal investigations, said street prices generally run $300 to $400 an ounce for high-grade illegal pot. An International Business Times analysis of prices in Colorado and Washington, the two states where recreational pot is legal, found that prices for the medicinal variety were higher than for street pot, but not as high as the legal recreational stuff, due mainly to taxes.
In Illinois, much of the upward pressure on pricing could come from businesses passing on their startup costs. For example, the state is charging a $25,000 application fee and a $200,000 permit fee for grow centers, while those who wish to open a dispensary must pay a $5,000 application fee and have $400,000 in liquid assets.
Businesses also face expensive requirements for inventory tracking and security, including lab testing and around-the-clock streaming video that must be stored for six months. By law, there will only be a maximum of 21 grow centers, fewer than in many other states, which could limit supply and competition.
“It’s going to be a seller’s market,” said Chris Lindsey, legislative analyst for the Marijuana Policy Project, which pushes to legalize marijuana. “The costs to cultivate and run a dispensary are very high, and all these things are going to drive up prices.”
The state will also tack on a 7 percent wholesale tax, and a 1 percent retail tax, plus potential local taxes. All this likely will drive prices well above the black market.
In return, customers will get a product that is still illegal under federal law, but legal under state law, where the vast majority of prosecutions occur. Those who receive permission to buy pot for medical purposes still may not use it in public, cannot drive under the influence and must keep the drug in a sealed container when transporting it.
Unlike states like Colorado, which has more than 500 dispensaries, and where 94 percent of patients there get the drug for broad conditions like severe pain, Illinois doesn’t allow pain as a qualifying condition. Patients must qualify by having any of about three dozen specific conditions.
Patients in Illinois must go to the physician treating them for referrals for the drug. They must also submit their fingerprints electronically and pass a felony background check.
Some patients said they may not sign up for medical marijuana because they don’t want to jump through those hoops and give up private information, like their Social Security disability pension information.
All that may limit demand, which may make it difficult for entrepreneurs to recoup their investment.
Some prospective business owners have said they expect to lose money initially, possibly for the length of the four-year pilot program, to position themselves in an expanding industry.
Some consultants, like Adam Bierman, managing partner of The MedMen consultants in Los Angeles, said it’s too early to see how restrictive “oligopolies” like Illinois compare with wide-open models in Western states.
He predicted a huge shortage of supply initially, as growers must still apply and be awarded licenses, then plan and build elaborate growing facilities. And it’s expected to take up to four months to produce the first crop.
“I think prices will be significantly higher than the free-market states for the foreseeable future,” Bierman said.
Whatever the price, patients will generally have to pay it out of pocket.
Blue Cross Blue Shield of Illinois will not cover medical marijuana because the U.S. Drug Enforcement Administration still considers it an addictive drug with no medical accepted use.
Even if the federal government legalizes marijuana one day, that doesn’t mean Blue Cross would start covering it, Blue Cross spokesman Mike Deering said.
“We don’t cover scotch and vodka, either,” Deering said. “It would have to be clinically validated through trials and some clinical testing to indicate that, in fact, there is a clinical efficacy for marijuana to be applied to a certain condition or malady.”
Aetna will not cover medical marijuana, because it only covers drugs approved by the U.S. Food and Drug Administration, company spokesman Rohan Hutchings said.
Under certain circumstances, Aetna does cover Marinol, an FDA-approved drug that contains synthetic tetrahydrocannabinol, or THC, a component of marijuana.
Business owners in states with medical marijuana argue that their product, which can be smoked, vaporized or consumed in prepared food or oils, is vastly superior to synthetic or street drugs and well worth it.
In Connecticut, where owners plan to open the first medical marijuana dispensaries in September, supply may be limited initially, and an ounce may go for $500 or more, said Angela D’Amico, co-founder of the Compassionate Care Center of Connecticut.
It may be pricey, she said, but added, “You don’t know what you’re buying on the street. Everything we sell is tested. You know the exact amount of THC.”
And in Rhode Island, the market has given consumers choices from $200 to $400 an ounce, said Seth Bock, owner of Greenleaf Compassionate Care Center.
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