Medical dispensaries a challenge for Washington state's pot market

Bob Young / The Seattle Times /

SEATTLE — In a nondescript Seattle building, with a strip mall Starbucks across the street, dozens of marijuana plants sway under electric fans in 79.5-degree warmth, their limbering, strength-building version of hot yoga.

To some this is a garden of Eden, full of healing plants that will be sold in the medical-marijuana dispensary out front.

To others in the strange new world of regulated, taxed recreational pot, medical marijuana has become a threat, a rival dealer, an enemy of the state.

The state’s pot consultant, Mark Kleiman, says competition from medical marijuana could easily undercut the recreational system the state is trying to create, siphoning away millions in potential taxes.

The going price for pot in the largely unregulated, untaxed medical system is about $10 per gram, said Kleiman, a UCLA drug policy expert. For the state’s new highly taxed system, he said, that is a “very hard number to hit.”

Unlike the recreational system, the medical market also serves minors. And while the recreational system limits adults to possessing an ounce, the medical system allows patients to have a pound and a half of weed.

“I don’t think the legal market (state officials) are imagining will be able to compete with the medical market if it remains as wide open as it currently is,” Kleiman said.

A medical pot tax?

Some lawmakers share his concern. Key House Democrats sounded the alarm earlier this year with a proposal to slap a 25 percent tax on medical marijuana. Now Senate Republicans and Majority Leader Rodney Tom, D-Mercer Island, are pitching the most sweeping revision of the medical system in the Legislature this year.

The bill would impose taxes on medical pot, tighten rules on dispensaries and medical authorizations, and put medical weed under regulators at the Liquor Control Board, the agency implementing Initiative 502, which enacts the state’s recreational-pot system.

In Washington’s marijuana policy hothouse, where views are balkanized, suspicions flourish and egos clash, pot advocates are divided about what — if anything — needs to be done about medical weed.

Some support the bill, SB 5887. “We need regulation. I’m tired of the murkiness of the system,” said John Davis, a longtime legalization activist and owner of two Seattle dispensaries.

Others are adamantly opposed. Doug Hiatt, an activist and criminal-defense attorney, says I-502 all but requires the state to throw medical marijuana patients under the bus. “You’ve got to keep a war on drugs going in perpetuity to prop up your state system,” Hiatt said.

Sen. Jeanne Kohl-Welles, D-Seattle, prime champion of medical marijuana in the state Legislature, is undecided. “I have to think it through,” said Kohl-Welles, adding that she sees “major issues with the bill.”

Still others, such as I-502 author Alison Holcomb, say leave medical marijuana alone for now and give the new law a chance. Most medical patients will migrate to the recreational market, Holcomb believes, because of its clear legality, lack of stigma and product quality standards.

“The bottom line is no one knows what’s going to happen,” Davis said, about the state’s new system, untested on the planet. “I’ve been working in drug policy for 20 years and I’m flabbergasted every day because nothing like this has ever happened.”

The state medical system was approved by voters in 1998, and nobody knows just how large it is.

Of the 18 states allowing medical marijuana, Washington is the only one without a patient registry, and lacks a reliable head count.

In Seattle, where green-cross insignia are as prominent as CrossFit gyms, city officials estimated last year there were as many as 150 pot businesses.

Most guesses put the number of statewide medical patients above 100,000. Anthony Martinelli, spokesman for pro-pot Sensible Washington, says it’s more likely 200,000 to 400,000.

Like Holcomb, Kleiman expects the recreational market to offer one big advantage to consumers: quality standards, including testing for contaminants.

“The existing system mostly doesn’t tell patients what’s in the plant,” Kleiman said. “My anticipation is that the board is going to require a level of labeling like food products that tells you what the ingredients are. Could that better serve patients? Yes.”

Some consumers will pay a premium for that peace of mind, Kleiman said, which could keep lower medical prices from undercutting the recreational system.

Kleiman also expects that once a recreational system is in place — by December at the earliest — many medical patients will prefer it to exaggerating their illnesses to qualify for medical weed.

Recreational users with medical access

Key to those who want to clamp down on the medical system is a belief that much of the market is a fiction. Rep. Chris Hurst, D-Enumclaw, chairs the I-502 oversight committee. Hurst says the vast majority, perhaps 90 percent, of the state’s medical patients actually are recreational users.

Martinelli says that’s a politically motivated attack on medical marijuana. Martinelli contends that 80 to 90 percent of patients are legitimate. Not all are gravely ill, he said, but still use marijuana medicinally for migraines, achy joints, sore backs and digestive problems.

At the least, though, there seems to be laxity in the medical authorization system.

The state Department of Health brought disciplinary action against two naturopaths after they spent a weekend writing authorizations at last year’s Hempfest.

The two were charged with running a medical marijuana “assembly line,” writing authorizations at the festival without following the proper standard of care. The state investigated them after a Seattle Times reporter wrote about how he received a medical authorization for back pain after an 11-minute consultation absent any medical records.

For those suspicious of SB 5887, its prime sponsor, Sen. Ann Rivers, R-La Center, Clark County, says the last thing she wants to do is attack medical marijuana.

When her father was dying of lung cancer, marijuana was the only thing that gave him comfort, she said, and allowed him to eat. “I saw him tortured by the ravages of cancer and nothing took care of him like cannabis,” she said.

But she also maintains the medical system needs to be tightened, saying a 14-year-old can now get medical authorization via Skype conference without ever seeing a doctor in person.

“The medical system provides incentive to sidestep 502,” she said. “The age issues, the tax issues included in 502 make medical a safe haven.”

Her bill, drafted by pot lobbyist Ezra Eickmeyer, calls for the Liquor Control Board to license all medical dispensaries, processors and producers. Rivers would give the board such authority because it’s regulating recreational weed and there’s no sense in duplicating its work at another state agency.

She also would require face-to-face visits between patients and primary caregivers, and require patients under 18 to have at least two separate office visits before authorization.

Her bill would impose a 20 percent tax on wholesale medical pot. (I-502 mandates a 25 percent tax at three different junctures in the recreational system: production, processing and retail.)

A patient-driven system

Kohl-Welles has not signed on to Rivers’ bill, even though it’s modeled, in part, after legislation Kohl-Welles wrote but then-Gov. Chris Gregoire vetoed in 2011.

Kohl-Welles is concerned about a 20 percent tax on what many patients believe is medicine. “More than anything it’s the timing for me,” she said. “So much has changed with voter approval of 502. Rather than react quickly I think it’s better to do it in a reasoned, deliberative way.”

Others are more blunt in their criticism.

Muraco Kyashna-tocha runs the Green Buddha Patient Co-op in Seattle and said she’s the only dispensary offering tested, organic weed. She admits the medical system is a mess. But Rivers’ bill isn’t the needed fix, she said.

It’s not patient-driven, she said. It would require, for instance, a permanent note on patient records about their medical-marijuana use. That’s a problem, she said, for most of her staff, who receive federal disability payments, because marijuana remains strictly illegal under federal law.

The bill’s taxes also are a problem for people living on disability payments. Such changes to the medical system “need to pay attention to the most fragile patients among us,” she said.

Martinelli said Sensible Washington objects to the Liquor Board oversight above all. “We just have a fundamental issue with taking medicine and putting it in the hands of a board that’s controlled nothing but alcohol up to this point,” he said.

What would Kleiman, the state’s consultant, do?

“I’m going to duck that question,” Kleiman said, stressing his job is research and advising the Liquor Board about the likely consequences of different policy decisions.

But he did offer a suggestion that might help recreational pot better compete with medical weed.

Under I-502, new retail stores face severe location restrictions: They’re not allowed within 1,000 feet of schools, parks, libraries and other venues frequented by youth. Seattle’s Capitol Hill would probably not be allowed a retail store.

But what if the recreational system allows deliveries? Would that give, Kleiman asked, the recreational system a competitive boost?

I-502 is silent on deliveries, Holcomb notes, so they are possible.

“Not only would a delivery system address access issues presented by the 1,000-foot rule, but it might help minimize youth exposure and access by reducing the need for storefronts on heavily trafficked thoroughfares,” she wrote in an email while returning from a pot-consulting trip to Uruguay. “Age enforcement would presumably happen just like it would in a store,” she added, with an “ID check before handing over the marijuana.”

While some say Rivers’ bill doesn’t have much traction in Olympia, state Rep. Ross Hunter, D-Medina, chair of the House Appropriations Committee, remains concerned about medical marijuana as an untaxed, unregulated system parallel to the recreational market.

“Everyone is going to be going through this medical loophole,” Hunter said, adding he would have a better sense soon if legislators are interested in addressing the issue.

To longtime medical pot activist Hiatt, the talk from Olympia is evidence that the state eventually will dispatch a new generation of “The Untouchables” to crack down on medical marijuana. He says it’s inevitable because of the state’s appetite for up to $434 million in projected annual taxes from recreational pot.

“Doug (Hiatt) also said we were going to be locking up hundreds of black and brown youngsters for driving under the influence (of recreational pot) and that hasn’t happened,” said Seattle City Attorney Pete Holmes, a 502 sponsor. “So far none of the doom-and-gloom predictions have come to pass.”