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Tuesday, November 4, 2014

Medical marijuana coming to New York - Not for small-time businesses

Medical marijuana dispensaries
Numerous states have legalized medical marijuana
Medical marijuana will be legalized and launched in the state of New York, but the barrier for entry is showing it's not for small time businesses. The market has potential to make big companies very rich, but it won't even be a possible market for business owners that lack the cash needed to invest. 

Selling medical marijuana in New York will be much like how it is sold in any other state, through dispensaries where medical marijuana users can visit after obtaining their recommendation or "green card." For businesses that are able to obtain a license, there's a lot of profit to be made. Medical marijuana dispensaries can use markups of 30% to 50%, making approximately $3,000 to $5,000 per square foot of space. Apple makes around $4,500 per square foot, which means medical marijuana has potential to make money from day one and very rarely does this present itself as a business opportunity for entrepreneurs. 

New York lawmakers finally connecting the strings that were needed to bring medical marijuana to the area. Just two months ago, the law passed and began to introduce medical marijuana compromises, but many of them remain highly regulated and make it complicate for business owners to launch in the market. Only five grow licenses were issued that can supply only four dispensaries each and those growers have to verify they can afford a 2 million dollar bond. The bill even specifies that the entire operation can be eliminated if the New York health commissioner calls for it. The bill has 7 years and if it's not renewed at that time, it will expire. 

The good part about New York's limitation on growers and dispensaries is that only big businesses with enough capital to do this right will get involve. It limits the market and makes it near impossible for small business owners to make money off medical marijuana, but it ensures things launch in a quick and profitable fashion. Businesses will likely need to be pre-established in the medical marijuana field in order to compete and get off the ground with a dispensary. 

State lawmakers are concerned that New York will see a series of medical marijuana shops sprout up throughout the cities, which would make cannabis easy to obtain and cause prescription sales to plummet. This could cause prescriptions to flood the black market, leading to a huge surplus in the illegal sale of drugs. Instead, the state plans to start with a small number of dispensaries in effort to limit how available marijuana is to the public. The more difficult it is to obtain, the less likely it will reduce prescription sales. 

Many say that it's not fear of these prescriptions making their way to the black market that led to New York's slow implementation of medical marijuana, but that lobbyists have vested interests with prescription companies and don't want marijuana to affect their sales. We've seen other states slowly introduce medical marijuana as well, but most states have allowed for competition in the small business sector and didn't implement a policy that favors large companies. 

About the author: Dylan is a writer for Green Wellness. He enjoys writing about lifestyle changes, healthy habits and marijuana legalization. Based out of Seattle, WA, Green Wellness schedules patients with marijuana evaluations at a clinic served by real doctors. A marijuana recommendation card can be obtained if patients have qualifying conditions.

Image: Laurie Avocado; "Medical Marijuana Sign" CC BY 2.0