Pubdate: Tue, 02 Sep 2014
Source: Chicago Tribune (IL)
Copyright: 2014 Chicago Tribune Company
Author: Robert McCoppin
Page: 1


Experts Predict Illinois Prices Could Be Among Most Expensive in 
U.S., Thanks to Restrictive Rules

When Jim Champion goes to a medical marijuana dispensary in Illinois 
for the first time, his wife, Sandy, plans to take a picture to mark 
the victory, after years of fighting for an alternative treatment for 
his multiple sclerosis.

"It'll be like going to the candy store for his birthday," she said.

Champion, a military veteran from Somonauk in north-central Illinois 
who said he already takes marijuana to ease his symptoms, probably 
should plan on bringing plenty of cash.

Most health insurance doesn't cover medical marijuana, and major 
credit card companies generally won't process payments for it, 
industry consultants say, so many of the dispensaries that will soon 
be opening in Illinois will be cash only.

And the cost itself could be significant. Industry experts say the 
price, which will not be regulated by the state, could rival or even 
exceed what illegal users pay for marijuana, which law enforcement 
sources said can top $400 an ounce.

Illinois patients will be allowed to buy up to 2.5 ounces every two weeks.

As Illinois begins accepting the first patient applications Tuesday, 
industry officials expect the state to be one of the most expensive 
places in the country to buy medical marijuana.

Because Illinois has one of the most restrictive laws around, with 
high fees, taxes and investment costs, program advocates say the drug 
won't come cheap. And with only 60 dispensaries allowed statewide, 
there will be limited free-market pressure to keep the prices down.

The Du Page County Metropolitan Enforcement Group, which makes 
undercover purchases during criminal investigations, said street 
prices generally run $300 to $400 an ounce for high-grade illegal pot.

An International Business Times analysis of prices in Colorado and 
Washington, the two states where recreational pot is legal, found 
that prices for the medicinal variety were higher than for street 
pot, but not as high as the legal recreational stuff, due mainly to taxes.

In Illinois, much of the upward pressure on pricing could come from 
businesses passing on their startup costs.

For example, the state is charging a $25,000 application fee and a 
$200,000 permit fee for grow centers, while those who wish to open a 
dispensary must pay a $5,000 application fee and have $400,000 in 
liquid assets.

Businesses also face expensive requirements for inventory tracking 
and security, including lab testing and around-the - clock streaming 
video that must be stored for six months.

By law, there will be a maximum of only 21 grow centers, fewer than 
in many other states, which could limit supply and competition.

"It's going to be a seller's market," said Chris Lindsey, legislative 
analyst for the Marijuana Policy Project, which pushes to legalize 
marijuana. "The costs to cultivate and run a dispensary are very 
high, and all these things are going to drive up prices."

The state will also tack on a 7 percent wholesale tax and a 1 percent 
retail tax, plus potential local taxes. All this likely will drive 
prices well above the black market.

In return, customers will get a product that is still illegal under 
federal law, but legal under state law, where the vast majority of 
prosecutions occur.

Those who receive permission to buy pot for medical purposes still 
may not use it in public, cannot drive under the influence and must 
keep the drug in a sealed container when transporting it.

Unlike states like Colorado, which has more than 500 dispensaries and 
where 94 percent of patients there get the drug for broad conditions 
like severe pain, Illinois doesn't allow pain as a qualifying 
condition. Patients must qualify by having any of about three dozen 
specific conditions.

Patients in Illinois must go to the physician treating them for 
referrals for the drug. They must also submit their fingerprints 
electronically and pass a felony background check.

Some patients said they may not sign up for medical marijuana because 
they don't want to jump through those hoops and give up private 
information, like their Social Security disability pension information.

All that may limit demand, which may make it difficult for 
entrepreneurs to recoup their investment.

Some prospective business owners have said they expect to lose money 
initially, possibly for the length of the four-year pilot program, to 
position themselves in an expanding industry.

Some consultants, like Adam Bierman, managing partner of The MedMen 
consultants in Los Angeles, said it's too early to see how 
restrictive "oligopolies" like Illinois compare with wideopen models 
in Western states.

He predicted a huge shortage of supply initially, as growers must 
still apply and be awarded licenses, then plan and build elaborate 
growing facilities. And it's expected to take up to four months to 
produce the first crop.

"I think prices will be significantly higher than the free-market 
states for the foreseeable future," Bierman said.

Whatever the price, patients will generally have to pay it out of 
pocket. Blue Cross Blue Shield of Illinois will not cover medical 
marijuana because the U.S. Drug Enforcement Administration still 
considers it an addictive drug with no medical accepted use.

Even if the federal government legalizes marijuana one day, that 
doesn't mean Blue Cross would start covering it, Blue Cross spokesman 
Mike Deering said.

"We don't cover scotch and vodka, either," Deering said. "It would 
have to be clinically validated through trials and some clinical 
testing to indicate that, in fact, there is a clinical efficacy for 
marijuana to be applied to a certain condition or malady."

Aetna will not cover medical marijuana because it only covers drugs 
approved by the U.S. Food and Drug Administration, company spokesman 
Rohan Hutchings said.

Under certain circumstances, Aetna does cover Marinol, an 
FDA-approved drug that contains synthetic tetrahydrocannabinol, or 
THC, a component of marijuana.

Business owners in states with medical marijuana argue that their 
product, which can be smoked, vaporized or consumed in prepared food 
or oils, is vastly superior to synthetic or street drugs and well worth it.

In Connecticut, where owners plan to open the first medical marijuana 
dispensaries in September, supply may be limited initially, and an 
ounce may go for $500 or more, said Angela D'Amico, co-founder of the 
Compassionate Care Center of Connecticut.

It may be pricey, she said, but added, "You don't know what you're 
buying on the street. Everything we sell is tested. You know the 
exact amount of THC."

And in Rhode Island, the market has given consumers choices from $200 
to $400 an ounce, said Seth Bock, owner of Greenleaf Compassionate Care Center.

"Price will depend on supply and demand ratios," he said. "If those 
21 growers (in Illinois) can produce unlimited quantities, then I 
would expect there to be price wars."
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MAP posted-by: Jay Bergstrom