Medical marijuana businesses unsure about future in Iowa

Linley Sanders | Associated Press

Show Caption Hide Caption Support grows for medical marijuana, Iowa Poll shows Iowans overwhelmingly support legalizing marijuana for medical purposes, but they don't support allowing recreational uses, an Iowa Poll from 2017 shows.

Iowa's medical marijuana oil program will start in weeks, but obtaining the medicine will be difficult and manufacturers said it's unclear if the state's effort will be viable.

Although the cannabis oil program approved during the last legislative session will begin July 1, there is no immediate supplier of the oil in Iowa, and manufacturers in other states question whether enough people will enroll in the limited program to make it self-sustaining.

Last week, the nonpartisan Legislative Fiscal Office forecast that 6,022 people will enroll in Iowa's new program, which allows use of cannabis oil for those suffering from cancer; multiple sclerosis; seizures; HIV or AIDS; Crohn's disease; Amyotrophic lateral sclerosis; Parkinson's disease; untreatable pain; and terminal illness with a life expectancy of under a year.

Albert Gutierrez, CEO of MedPharm, a Colorado-based cannabis distributor, said Iowa's projected participant level of 6,000 patients comes true, profit margins could be slim.

"I think 6,000 is probably a little bit conservative, based on some of the numbers, for a business or dispensary to operate in the Iowa market and be able to be successful," Gutierrez said.

And it's possible those projections are overly optimistic.

In Minnesota, a similar medical marijuana law is nearly 2 years old but still has less than 6,000 people enrolled, said Andrew Bachman, the CEO for LeafLine Labs, one of two licensed cannabis manufacturers in Minnesota. He notes that Minnesota's population of 5.5 million is significantly higher than Iowa's 3.1 million, and that fewer patients could mean less revenue.

"We are 23 months into the program... and we are not yet profitable," Bachman said.

Bachman said LeafLine anticipated low initial patient numbers and is ahead of its business plan, but he thinks companies in Iowa should expect to wait before seeing consistent profits.

"With the population size being smaller, I would anticipate that ramp up to be somewhat slower," he said.

Under Iowa's program, officials will license two in-state manufacturers that can start supplying marijuana oil in December 2018. The state will license up to five dispensaries to supply the drug.

Sen. Joe Bolkcom, D-Iowa City, said manufacturers may compete for an Iowa license and then try to lobby lawmakers to expand the program.

"They know right now it's a money-loser. It's not sustainable," he said. "The folks who make an investment, they'll roll the dice and think they can get the law changed."

Some states with existing medical marijuana laws recognize cardholders from other states. A proposal to provide Iowans access to Minnesota's medical marijuana market failed when Minnesota lawmakers did not approve the measure this session.

Although nearly 30 states have at least limited programs, the federal government still considers medical marijuana a Schedule I drug that can't be moved across state lines.

For potential manufacturers, another challenge could be the amount of tetrahydrocannabinol, or THC, allowed in the oil. Iowa caps that level at 3 percent, a standard some say is too low to make the treatment effective. The state also bans smoking, vaporizing or eating marijuana-laced food.

"If you expanded the products they could offer or the range of conditions for which you could use this... that would dramatically increase the size of the market and boost profits," said Robert Mikos, a Vanderbilt law professor who specializes in marijuana policy.

The Iowa Medical Cannabidiol Advisory Board could recommend expansion of the state's program, but the Iowa Department of Public Health has not started the application process for the panel and it's unclear when members will be appointed. Any recommendation by the board would require approval from the Legislature or Board of Medicine before being implemented.

The Legislature didn't allocate specific funding for the program, so state agencies are figuring out how to finance the program through their 2018 fiscal year budgets.

Mikos said Iowa should expect a long process of fine-tuning the program with hopes of making it more lucrative.

"Keep revisiting these issues," Mikos said. "No state has gotten this right the first time around, and later adopters like Iowa can learn a lot from all those states that went before them."

Associated Press reporter Kyle Potter in St. Paul, Minnesota, contributed to this report.