Michigan's medical marijuana dispensaries could run out of pot to buy

Kathleen Gray | Detroit Free Press

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The 40 newly licensed medical marijuana dispensaries around the state are facing a shortage of pot from licensed growers, meaning some may have to shut their doors until spring.

Michigan so far has licensed only 12 marijuana growers. From the time of planting to usable product, it takes between four to six months — and since the growers didn't start getting licensed until August, an abundant supply of marijuana from them won't be available until next year.

That could create hardships both for patients, as well as for business owners and their employees.

Before getting their state-mandated licenses, the dispensaries could buy the pot from a network of more than 40,000 registered caregivers in the state who have been growing and selling marijuana under a law that was passed by voters in 2008 to legalize medical marijuana. Under that law, each caregiver can grow up to 72 plants, and sell the excess to dispensaries.

Under new state rules, however, once the dispensaries get their licenses, they have to buy from licensed growers. They can only sell marijuana grown by caregivers for 30 days after licensing.

Anything left over after the 30-day window is supposed to be destroyed.

Chris Norman and her son Derek Norman have built their medical marijuana business from the ground up in tiny Frederic, a northern Michigan town with a population of just over 1,300.

They paid more than $100,000 in state license fees for their HumbleBee Products dispensary and processing facility and developed a loyal following of customers, especially since HumbleBee is the only licensed marijuana business in the northern Lower Peninsula.

But in a matter of weeks, they — along with many of the other 39 dispensaries licensed by the state since August — may have to shut their doors until more pot becomes available.

“We paid good money for a license and now we’re getting punished. And the unlicensed dispensaries are flourishing,” said Chris Norman. “Everyone who got a license is screwed.”

As the regulated medical marijuana industry tries to get off the ground in Michigan, the timing of how licenses are granted and court cases is threatening to stop the budding market in its tracks. And that doesn't even take into account the fact that Michigan voters approved legalizing marijuana for adult recreational use on Nov. 6.

Unlicensed dispensaries — about 215 around the state — continue to operate under emergency rules until they can get a license. Many are dragging their heels until the last minute, in part to avoid state rules and the $66,000 in regulatory fees for getting a license. That means they can continue buying from caregivers.

Each of the 43,056 registered caregivers in the state is allowed to grow up to 72 plants — 12 plants for each of five medical marijuana cardholders and themselves. There are 297,515 registered medical marijuana patients in Michigan. Even with a fully regulated medical marijuana market and the impending recreational pot business, the caregiver system won't change because of the 2008 law passed by voters.

If the caregivers have excess marijuana, much of it has gone to the temporary dispensaries that have been operating with the approval of the communities where they’re located, as well as the blessing of the state under the emergency rules.

The state has been trying to shut down those temporary operators in order to more quickly establish a fully regulated and taxed marijuana market in Michigan. It set a Sept. 15 deadline for the dispensaries to get a license or shut down. But the temporary dispensaries sued and got a Michigan Court of Claims judge to stop the shutdown. The state set another deadline for Oct. 31, but another lawsuit followed and the judge ruled against that date, too.

The state department of Licensing and Regulatory Affairs and the dispensaries are eagerly waiting for yet another decision from Court of Claims Judge Stephen Borrello after a hearing last week. The City of Lansing also has intervened in the case, hoping to prohibit the state from shutting down dozens of unlicensed dispensaries in Lansing as the city decides who, among the 100 marijuana business applicants, will get one of the city’s 25 dispensary licenses.

“It is unfair for legitimate businesses to have to shut down,” Lansing Mayor Andy Schor said.

But allowing the unlicensed dispensaries to continue operating with product from caregivers puts the licensed weed retailers at a distinct disadvantage because the medical marijuana from licensed growers is either nonexistent or exorbitantly expensive, said Stuart Carter, the owner of Utopia Gardens in Detroit, who is facing a shutdown in two weeks because his 30-day window is closing.

“When we run out of product, I’m going to be forced to close my doors,” he said. “I spent all this time and have gotten the proper permits to create a viable medical marijuana dispensary and we’re going to be thwarted unless the state opens up the channels for us for a little longer.”

Carter transformed an old elevator parts warehouse on the east side of Detroit into Utopia Gardens, an upscale, open and airy dispensary filled with classic motorcycles, a knowledgeable staff and tested product that he has gotten from a network of caregivers.

As he tried to transition from the caregiver market, where pot sold for $1,800 to $2,200 a pound, he found the price from licensed growers jumped from $3,200 to $3,700 a pound, plus the $2,700 in costs for a licensed and secured transport company to get the weed from a grower in Chesaning to Detroit. And that’s if there is even fully grown product available for sale.

Meanwhile, unless there’s a legal ruling on the unlicensed dispensaries, those businesses will be able to continue operating indefinitely with a much lower-priced product from caregivers. That’s the rub for licensed dispensary owners.

“We need some relief or we’re going to be out of business until more product is available in the spring,” Carter said. “For guys like me who have done it right, the system has turned into a blockade, a logjam.”

Another dispensary owner in Ann Arbor, who didn’t want his name to be used for fear of consequences from the state, said it’s really the medical marijuana patients who are getting the short end of the stick.

“This is affecting people’s health. It’s just a whole slew of problems that trickles down to them,” he said. “We’re running out of things right now and we’re not allowed to reach out for products from caregivers and that’s creating problems. We were expecting this, but no matter how much you anticipate these things, it’s hard to transition.”

The licensed dispensary owners hope that the state will extend the 30-day transition period. But LARA, which has been made aware of the supply shortage, hasn’t given any indication that it will.

The state has continued the fight to get the temporary dispensaries shut down until they get a license. Many haven’t completed their applications either because they don’t have necessary approvals from the towns where they want to locate or they want to continue operating outside of the more expensive regulated market.

“We have been somewhat frustrated by the process because we want to move the applications through the pipeline as much as the applicants and get the regulated market up and running,” Andrew Brisbo, director of the state’s Bureau of Medical Marijuana Regulation, said after a licensing board meeting last month.

The one advantage that the medical marijuana business owners will have is that they will be the ones to get the first licenses when the legal recreational marijuana market starts in early 2020.

As for the Normans, the licenses they laminated and have hanging on the wall have just become a source of “unfathomable stress.”

“I should have been excited that they wanted to give me a license. I don’t want it now. By handing me that license, they hurt me,” Chris Norman said. “I think we’ll survive, but I’m concerned about my employees. It’s almost Christmas and if we have to shut down, we have multiple people who rely on us to feed their families.”

Related stories:

Legal marijuana in Michigan: What you need to know

Finding seeds to grow marijuana at home in Michigan will be hard

Kathleen Gray covers the marijuana industry for the Detroit Free Press. Contact her: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.