Pubdate: Fri, 27 Feb 2015
Source: Seattle Times (WA)
Copyright: 2015 The Seattle Times Company
Author: Joseph O'Sullivan


State Forecast

Much Cheaper Prices of Illegal Suppliers Could Lure Medical Users

OLYMPIA - Black-market marijuana costs a third as much as its 
state-sanctioned counterpart, and two-thirds of medical-marijuana 
users could head there instead of a newly regulated medical system, 
according to state estimates.

The analysis from the state Department of Revenue comes as lawmakers 
wrestle with how to regulate medical-marijuana shops and products in 
a way similar to the recreational system voters approved in 2012. The 
numbers outline the difficulty legislators will face in bringing all 
marijuana use into a state-controlled system.

Sales of medical marijuana now amount to about $85.6 million per 
year, according to the department analysis.

The leading proposal to emerge this session to regulate the industry 
is the Cannabis Patient Protection Act, or SB 5052, which would 
license medical-marijuana stores, and mandate testing of the medical 
products. Illegal marijuana sells for between $9 and $12 per gram, 
according to the analysis. State-regulated recreational marijuana 
sells for $25 to $40 per gram.

The analysis assumes that two-thirds of medical-marijuana smokers 
could bypass a new legal system and buy instead in the black market. 
The assumption comes from an earlier version of the bill that only 
allowed for medical marijuana as a non-smokable product.

The bill, which the Senate has approved, now allows smokable medical 
products. So the number of medical patients bypassing the legal 
market could come down in new estimates due next week.

Nonetheless, state Liquor Control Board (LCB) Director Rick Garza 
acknowledged a black market for marijuana likely will remain even 
after a system overhaul.

Garza assumes about 25 percent of the state's current black market is 
considered to be people under 21 who aren't allowed to buy 
recreational marijuana legally. And the lower prices of the illicit 
market - which doesn't face a series of state taxes - are a factor.

Sen. Ann Rivers, R-La Center and sponsor of SB 5052, says she doesn't 
think the black market will be as big as the Department of Revenue analysis.

"I think people by and large want to be good actors," said Rivers.

King County Prosecuting Attorney Dan Satterberg also says he expects 
medical patients to move to the legal market.

"My guess is that many will choose the legal licensed outlet, where 
the transaction is safe and legal and the product is tested for 
purity and potency," Satterberg wrote in an email.

"Consolidation of all legal marijuana sales into one system that is 
licensed by the state is the only logical option," he added. "We will 
never completely eliminate the black market, but the legal system is 
currently being undercut by the proliferation of 'medical' stores 
that don't have to meet any of the requirements of the state-licensed stores."

Lawmakers are working on separate bills to simplify and lower taxes 
to bring prices down for recreational marijuana - and likely medical 
marijuana, too, if that system is folded in.

"The market has to be pretty competitive to get those prices down," 
said Garza. "I think it's going to take another year or two for this 
thing to settle."

Under SB 5052, authorized medical patients would be exempt from 
taxes, though it is unknown how much medical products might cost 
under a regulated system. Some medical dispensaries also give away 
products for free, which might not be allowed under a new system.

Right now there are about 1,100 medical-marijuana dispensaries in the 
state, according to a separate analysis by the LCB.

If a licensing system is opened up, the LCB assumes it would issue 
413 licenses off of 825 applications. Those numbers dwarf the state's 
recreational market, where the LCB has so far given out 123 retail licenses.
- ---
MAP posted-by: Jay Bergstrom