In Delaware, cannabis activists and some state lawmakers hope to legalize adult recreational use of the substance soon. But they’ve found an unlikely foil in Delaware’s existing medical marijuana industry.
At a hearing last month, representatives from Delaware’s medical cannabis industry lauded efforts to increase legal access to marijuana but said the way House Bill 150 goes about doing so would be detrimental to their businesses.
“The proposed bill would visit violence upon the economic well-being of those who have chosen to take a material stake in this state,” said David White, chief legal officer for Fresh Delaware, a Newark compassion center (the term used for medical dispensaries in the First State).
“We strongly support legalizing cannabis for adult use but do have some concerns with the proposed legislation in its current form,” said a Friday statement from four Delaware medical marijuana companies — Columbia Care Delaware, CannTech, EzyCure and Fresh Delaware.
But Zoe Patchell, executive director of the Delaware Cannabis Advocacy Network, believes these representatives want their businesses to be protected at the expense of consumers and other Delawareans looking to make money off marijuana.
“It’s basically an oligopoly that’s being sponsored by the Delaware medical marijuana program,” which exists under the Department of Health and Social Services, she said Wednesday. “They want the General Assembly to protect their private business interests and arbitrarily reduce the amount of competition in the market.”
Rep. Edward Osienski, D-Newark, the bill’s primary sponsor, said these companies don’t have anything to worry about.
“This bill really doesn’t affect the medical marijuana industry,” he said. “I was kind of surprised by their concerns.”
Corporate compassion centers
The compassion centers in Delaware are part of large, multi-facility companies, Ms. Patchell said. These aren’t simple mom and pop operations.
Ms. Patchell believes the bill as it currently exists would help dismantle the “oligopoly.”
“HB 150 is a model piece of legislation that promotes market participation by skilled entrepreneurs that operate on a small scale, rather than limiting licenses to a small group of large companies,” she said.
But Aaron Epstein, chief operating officer of CannTech Delaware LLC, said his business and the other medical marijuana providers in the state would struggle to survive without the state preserving their position, at least in the short term.
“We’re shocked to see a bill that would put us out of business before we even have a chance to open our doors,” he said.
As Ms. Patchell explained, CannTech is one of three firms that received a license to open a compassion center last December, which will bring the total number of medical marijuana outlets in the state to six. At one point, the DHSS did expect CannTech to start selling in Dover and Georgetown this fall, but the opening may be pushed back a few months.
Mr. Epstein wants his company and others in the same position to have first dibs at the recreational market.
“In this bill, medical dispensaries don’t automatically get grandfathered into recreational. Other states have all done the opposite,” he said. “Medical suppliers are the only ones to supply recreational for that initial few years (in those states). Then, you open it up to additional vendors, so that the medical and small-business operators have the chance to recoup.”
Jennifer Stark’s Harrington-based EzyCure, which Ms. Patchell said is the only completely Delaware-based company selling medical marijuana in the state, is in a similar position.
“We were fortunate to be awarded a medical marijuana license a few months ago,” Ms. Stark said. “We have barely begun establishing our new small business to join the three current medical operators in Delaware.”
But the bill’s passage would create a lot more competition.
“HB 150 proposes 30 retail licenses, 30 manufacturing licenses and 60 cultivation licenses,” Ms. Stark said. “Wow.”
Rep. Osienski doesn’t want to give already established businesses an extra leg up, however.
“We don’t want to give a head start to somebody who’s already active in the industry,” he said. “We think that would be unfair to other potential business license applicants.”
Ms. Patchell believes these existing operators have enough of an advantage already.
“Having those years of experience and access to the existing capital they’ve collected by charging some of the highest rates in the country for medical cannabis gives these license holders the significant advantage that will make it difficult for new market participants to compete anyway,” she said.
Competition and supply
“HB 150 doesn’t prevent any of the current medical facilities from obtaining a license in the adult-use industry. It simply prevents them from cutting the line and from receiving special privileges that are not offered to the new market participants,” Ms. Patchell said.
“If they wish to get a license for the adult-use industry, they’ll just have to go through the same process as all the other new applicants,” she said.
Ms. Patchell thinks competition is exactly what Delaware’s cannabis industry needs.
“In order to outcompete the illicit market, new markets must be better than the current market, which means low prices, a large assortment of strains and products that have been tested and labeled,” she said. “There must be a considerable amount of competition, and anything less will lead consumers to continue utilizing the (illicit) market we already have.”
Rep. Osienski agreed. He said concerns about a lack of supply have been an issue for Delaware’s community of medical cardholders in the past.
“In 2019, a piece of legislation did grandfather (existing compassion centers) in to start selling adult recreational product, and we got massive pushback from cardholders,” he said. “They felt they were not being provided adequate product from the medical industry, and they had huge concerns that if we allowed them to get into the recreational use, it was even going to eliminate more of their product. We thought that was a sound concern.”
But those who oppose parts of the bill say oversupply is the real concern.
“The proposed number of growers in this bill would allow a sufficient canopy for Delaware to supply all the legal and illegal marijuana on the East Coast,” Mr. Epstein said.
Sharice Ward, the retail director of Columbia Care Delaware’s three compassion centers in Smyrna, Rehoboth Beach and Wilmington, concurred.
“This legislation as proposed would increase cultivation capacity by nearly 650%,” she said. “Have there ever been market studies conducted by the legislature that suggest this is an appropriate amount?”
A drastic increase in the supply of marijuana could become a problem for the medical part of the industry, which is what happened in Oregon when the substance was legalized for recreational use in 2015.
“Without reasonable caps on cultivation, in 2017 and 2018, Oregon authorities estimated that demand in the adult-use cannabis space was running at just 50% of the supply,” Mr. Epstein said. “That left Oregon with over 1.3 million pounds of cannabis. That staggering amount was enough to last until mid-2025 without the state having a single more plant.”
This hit the medical sector of the industry particularly hard.
“Oregon, in 2016, had over 400 medical dispensaries, and today, only one is in existence,” Ms. Ward said. “How will the state guarantee products for our cancer and pediatric patients once the recreational market is established?”
Rep. Osienski said his legislation empowers the medical marijuana program’s commissioner and oversight committee to track plants “from seed to sale” to keep tabs on the supply.
Preserving medical cannabis
Ms. Stark said she is sure passing HB 150 as it currently exists would be the end of Delaware’s medical marijuana industry.
“Plainly stated, HB 150 would just crush Delaware’s medical program and our nearly 10,000 patients, many of whom are cancer and pediatric patients,” she said. “If medical cannabis groups aren’t included in the adult use, then the medical program will fall apart.”
Edward Miller, chief medical officer for the Compassion Care Research Institute, which has medical oversight of Newark’s Fresh Delaware compassion center, said that in other states, this has forced patients to seek out their medication at recreational dispensaries.
“Physicians complained routinely that their patients were being pushed by the dispensaries to high-THC products,” he said. “Many of these patients are new to the cannabis world and are experiencing adverse side effects and requiring further medical intervention.”
But Ms. Patchell said that by encouraging lawmakers to leave prohibition in place, at least longer than it would be if HB 150 passed unamended, the Delaware medical marijuana industry is sacrificing the consumers it claims to care about.
“The fact of the matter is cannabis prohibition is still being enforced, and consumers are being subjected to law enforcement interactions, arrests, various searches, sometimes worse for a plant these companies have already been making money off of for years,” she said.
“Anyone who opposes or obstructs legalization in our state shouldn’t make hypocritical future attempts to profit off the consumers, against whom they’re willing to enforce prohibition,” Ms. Patchell said.
The compassion centers’ statement said, “As providers of medical cannabis for the state’s registered patients, we stand with advocates who want to ensure that any new program will help eliminate criminal justice disparities, usher in a new and diverse group of cannabis entrepreneurs, bring economic growth and much-needed tax revenue to our communities and help strengthen the state’s medical cannabis program.
“We look forward to working with stakeholders through the legislative process to craft a licensing model that makes economic sense for new and existing entrepreneurs, and achieves public safety and regulatory objectives,” it continued.
“If what these dispensaries are asking for is included in the adult-use legalization bill, then it will completely undermine the intention and objective of creating a fair and legal market that consumers will want to participate in,” Ms. Patchell said.
HB 150 was released by one House committee last month but still needs to be heard by another when state representatives return April 20. There should be a vote on the bill at some point in the coming weeks.