In 2015, limited use of medical marijuana to treat intractable epilepsy was approved in Texas. At the time, the Texas Department of Public Safety (DPS), a law enforcement agency, was put in charge of regulating the program. It was estimated that 12 dispensaries would receive licenses to ensure the approximately 150,000 patients with intractable epilepsy across the state would have access to medical marijuana. Fast forward to May 2017, and only three dispensary licenses were awarded for the entire state after the Department of Public Safety completed its review and ranking of 40 applications earlier this month.
The Department of Public Safety has until September 1, 2017 for final approval on dispensary licenses, but based on news from the Houston Chronicle, it doesn’t seem likely that more licenses will be granted. The Department of Public Safety says the three awarded licenses are enough to meet demand for medical marijuana in the state.
Rippling Negative Effects
Awarding just three licenses has more negative effects for patients in Texas than you might think. Here are just five problems critics are already talking about:
1. Lack of Accessibility
As you’d expect, patients, marijuana advocacy groups, and other license applicants are not happy with the results of the license application review process in Texas. The Compassionate Use Act (which named the Department of Public Safety as the regulators of the state’s medical marijuana program) only mandates that three companies grow and dispense medical marijuana, but Texas is a very big state.
It doesn’t take a cartographer to understand that it will be very difficult for many patients to access medical marijuana if there are only three dispensaries in the state and none are located in two of the state’s biggest cities – Dallas and Houston.
2. Oligopoly Conditions
With just three companies getting licenses to dispense medical marijuana in Texas, basic economic theory (and history) tells us that an oligopoly is likely to form in the state’s marijuana industry. In fact, we’ve already seen it in different forms within the medical marijuana industry in states like Florida.
Whenever a few companies control an industry, capitalism is not allowed to thrive and there will be problems. The question is how quickly those problems will arise in Texas.
3. Higher Prices
When only a few companies are allowed to participate in an industry for a product that is not easy for people to access, prices will undoubtedly go up. Without competition, there is little motivation to reduce prices.
This problem is exacerbated by the fact that the Department of Public Safety is allowing the three companies that were awarded dispensary licenses to set their own prices and decide how their employees will dispense medical marijuana. In other words, there is really no incentive for these three companies to lower their prices at all.
4. Business Departures
Surprisingly, only one of the three licenses granted in Texas went to a company with Texas ties. That company is Compassionate Cultivation where two attorneys from Texas have ownership stakes. Information on the other owners of Compassionate Cultivation is not yet available.
The other two companies that were awarded dispensary licenses in Texas are based in Florida and Georgia. As a result, many Texas marijuana-related businesses are looking beyond the state and are making plans to do business in other states such as Colorado instead of their home state.
5. Lack of Trust in the State’s Medical Marijuana Program
First, it’s unusual for a law-enforcement agency to make the rules for a state’s medical marijuana program and to choose the companies that are awarded dispensary licenses. Cannabiz Media’s Marijuana Licensing Reference Guide: 2017 Edition identifies that 74% of states with active medical marijuana programs are regulated by each state’s Department of Health, and 11% are regulated by special marijuana boards, commissions, or divisions.
Just 15% of states’ programs are regulated by other state departments including the Department of Revenue (Colorado), the Department of Consumer Protection (Connecticut), the Department of Licensing and Regulatory Affairs (Michigan), and the Department of Public Safety (Vermont).
Furthermore, critics of the Texas licensing process claim applicants were never told about the ranking criteria used to review applications. They also claim the review panel lacked the expertise needed to analyze the applications. Given all of these negative effects, it’s not surprising that the Department of Public Safety is under widespread criticism for its role in the state’s marijuana program so far. As a result, the entire medical marijuana program is losing trust among the state’s constituents.
Is DPS Setting Texas up for Failure?
The question people are asking at this point is why a law enforcement agency was put in charge of creating rules for the state’s medical marijuana program. Is the Department of Public Safety setting the Texas program up for failure by keeping medical marijuana inaccessible to the greatest extent possible and allowing prices to be controlled by three companies with little or no ties to the state?
What do you think? Weigh in using the comment form below.
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.