Medical marijuana regulations in each state, particularly regulations related to qualifying conditions, significantly impact cultivator, producer, dispensary, and other marijuana license valuations as well as consumer accessibility and pricing.

For example, while the market of people who could benefit from medical marijuana might include a larger number of state residents, research conducted by Cannabiz Media revealed that in 2017, less than 1% of those people on average were registered as medical marijuana patients or had doctor recommendations entitling them to medical marijuana use.

5 Key Things to Know about Medical Marijuana Qualifying Conditions

Cannabiz Media also discovered that the quantity and quality of qualifying medical conditions has a measurable impact in each state’s marijuana economy. Here are five key things you should know about the effect of qualifying conditions on the marijuana industry and license value:

  1. 57 qualifying conditions had been approved for marijuana treatment across 26 states and Washington, D.C. at the time of this 2017 research study.
  2. On average, most states covered 12-15 conditions in 2017.
  3. Four qualifying conditions accounted for the vast majority of medical marijuana recommendations from doctors: chronic pain, muscle spasticity, spinal cord injuries, and post-traumatic stress disorder (PTSD).
  4. The majority of medical marijuana patients across the country (59%) received medical marijuana recommendations for chronic pain in 2017.
  5. On average, only 0.86% of the population in states that had approved medical marijuana in 2017 were accessing it or were registered to access it to treat their conditions.

In other words, because a state covers a long list of conditions doesn’t mean more patients will access medical marijuana within its borders. If a state doesn’t cover one or more of the four qualifying conditions for which most patients receive their medical marijuana recommendations from doctors, then the penetration rate in that state will likely be low.

Furthermore, with an overall population penetration rate of less than 1%, this is an industry with a lot of growth potential. Of course, in states where recreational marijuana has been legalized, the story could be quite different as people abandon medical marijuana and its many restrictions for recreational marijuana.

Marijuana License Value Considerations Based on Qualifying Conditions

While it might seem that quantity matters in terms of how the number of qualifying conditions affects marijuana license value, the data presented above clearly shows that other factors, such as the four most important conditions, play a larger role. Therefore, a license valuation must account for:

  • Maturity of the license program in the state
  • Which specific conditions the state has approved
  • Relative likelihood that additional conditions will be approved, specifically, chronic pain, muscle spasticity, spinal cord injuries, and post-traumatic stress disorder (PTSD)
  • How many approved medical professionals are writing medical marijuana recommendations for their patients
  • Age of the population in the state and the propensity of that population to suffer from one or more of the state’s approved conditions
  • The likelihood that the state will legalize recreational marijuana

Each of the factors above could significantly impact the value of a marijuana license in the short-term or long-term and should be considered before investing in a marijuana business or starting a new business within a state.

The Bottom-line on Qualifying Conditions and Marijuana License Value

Based on the data presented above, states that are likely to have more valuable marijuana licenses are those covering the top four conditions (or at least one of them), have large populations that increase the market size, and have a greater than average penetration rate of 0.85%, which shows traction and room for growth.

Originally published 3/29/17. Updated 2/9/18.

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. 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.