One of the most critical aspects of a state’s marijuana program that could mean success or failure is access. I’m referring to access to marijuana for patients and consumers. Unfortunately, some states have created barriers that keep people from accessing the marijuana products they need or want. Aside from limited physical access to marijuana products, one of the biggest barriers is money.
The money obstacle can be broken down into two parts for the marijuana market. First, patients in most states that have legalized medical cannabis are required to pay a fee every year to register for a medical marijuana ID card. Without the registration, they cannot access medical marijuana, but the fees to obtain those cards can be quite expensive.
Second, the cost of marijuana purchased at retail for adult use can be excessively high as fees and taxes trickle down through the supply chain and are passed on to consumers. Taxes are also added on at the retail level in the form of sales tax, excise taxes, local taxes, and more. In fact, the final price that consumers have to pay for adult-use marijuana in many states is significantly higher than what they would pay on the black market.
Let’s take a closer look at each of these barriers.
Medical Marijuana Patient Registration Fees
Medical marijuana patients face barriers when they enter the marijuana market and on a yearly basis to stay in the marijuana market. Most states that have approved medical marijuana require that patients pay an initial registration fee, which can range from $1 to $200 depending on the state.
On the high end are Minnesota and Oregon with a $200 entry fee followed by Arizona at $150 and Delaware at $125. Connecticut, the District of Columbia, Illinois, Nevada, Washington, D.C., and New Jersey each charge a $100 entry fee (although New Jersey requires that patients pay for a two-year registration for $200). Even Californians could pay up to $100 to register for medical marijuana. In the Golden State, counties choose the patient registration fee, and it can be a maximum of $100. All other states charge an entry fee of less than $100 with Washington the lowest at $1. Only two states do not charge a patient registration fee at this time – Maine and New Mexico.
Staying in the marijuana market is also a problem for many patients because most states that have approved medical marijuana charge an annual patient registration renewal fee which ranges from $20 to $200 depending on the state.
Additional fees can also add up in some states. For example, many states charge a minor registration fee that could be hundreds of dollars. Some states charge a patient lost identification card fee, which could be hundreds of dollars, and for patients who want to change the information on their medical marijuana patient identification cards, some states charge $25 to do it.
Nine states offer discounts on medical marijuana fees for individuals who are veterans or are part of the Supplemental Nutrition Assistance Program (SNAP) or other benefit or entitlement programs. For example, the initial patient fee and the renewal fee for eligible individuals in Arizona both drop from $150 to $75 for patients receiving SNAP benefits.
Taxes and Rising Marijuana Prices
For adult-use marijuana consumers, the biggest barrier to purchasing marijuana products aside from physical accessibility is the high cost of those products, primarily due to the hefty taxes they’re forced to pay.
For example, Californians saw the prices of some marijuana products increase by up to 70% after recreational marijuana came to market in January of this year. The cost of medical marijuana rose at the same time, but not as much as adult-use marijuana.
That’s because the state began including a 15% excise tax on all adult-use and medical marijuana. Local governments are allowed to add more taxes to marijuana products, and those rates vary from one city to the next. Contrast that to medical marijuana, which is taxed at 6% at the city level but is not taxed at the federal level. Additionally, most cities in California charge a 10% business tax that marijuana retailers will have to pay, too. Of course, that tax will pass down to consumers.
In Massachusetts, medical marijuana patients will pay the list price for marijuana products when recreational marijuana becomes available, but retail consumers will pay the list price plus a 17% excise tax, local sales tax, and an additional 3% local tax.
Bottom-line, adult-use marijuana consumers are being charged more than medical marijuana patients in many states due to taxes. This leads many people to keep their medical marijuana registrations (other benefits of keeping a medical marijuana registration include being able to get more marijuana each month as well as being able to get marijuana with more THC in it). If they don’t have medical marijuana registrations, many people will buy from the black market rather than incurring the high prices of the legal adult-use market.
The Effects of Marijuana Barriers to Patients and Consumers
When patient fees and consumer taxes are high, fewer people can afford to purchase marijuana. As a result, demand at marijuana dispensaries and retailers likely drops. This leads to lower sales at dispensaries and retailers. To make up for the lost revenue and profits, some dispensaries and retailers might raise prices. In fact, this trickle up effect could negatively affect marijuana producers and growers in time.
In other words, it’s a vicious cycle of demand that can’t be met forcing prices up and ultimately decreasing demand in the legal market as a result. The winners in this situation appear to be the states, which are collecting a lot of money, and the black market, which can capture the sales the dispensaries and retailers will lose.
Originally published 5/25/17. Updated 9/7/18.
Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. She has been working with clients in the cannabis industry since 2015. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.