When capitalism meets cannabis, zany hijinks ensue:
Since [the Farmacy, a medical-marijuana dispensary in Boulder, Colorado] opened in January, it’s been one nerve-fraying problem after another. Pot growers, used to cash-only transactions, are shocked to be paid with checks and asked for receipts. And there are a lot of unhappy surprises, like one not long ago when the Farmacy learned that its line of pot-infused beverages could not be sold nearby in Denver. Officials there had decided that any marijuana-tinged consumables had to be produced in a kitchen in the city.
“You’d never see a law that says, ‘If you want to sell Nike shoes in San Francisco, the shoes have to be made in San Francisco,’ ” says Ms. Respeto, sitting in a tiny office on the second floor of the Farmacy. “But in this industry you get stuff like that all the time.”
One of the odder experiments in the recent history of American capitalism is unfolding here in the Rockies: the country’s first attempt at fully regulating, licensing and taxing a for-profit marijuana trade. In California, medical marijuana dispensary owners work in nonprofit collectives, but the cannabis pioneers of Colorado are free to pocket as much as they can — as long as they stay within the rules.
The catch is that there are a ton of rules, and more are coming in the next few months.
Americans spend roughly $25 billion a year on marijuana, according to the Harvard economist Jeffrey Miron, and investors are starting to see opportunities.
As in the past, the real money is in gaming the system:
If there is a historical precedent for what’s now happening in Colorado, it could be the 1920s and the era of Prohibition. During America’s dry age, the federal alcohol ban carved out an exemption for medicinal use, and doctors nationwide suddenly discovered they could bolster their incomes by writing liquor prescriptions.
Pharmacies, which filled those prescriptions, and were one of the few places whiskey could be bought legally, raked it in. Through the 1920s, the number of Walgreens stores soared from 20 to nearly 400.
Gaming the modern system means winning customers’ caregiver rights:
First is the importance of nabbing a lot of “caregiver rights,” which every person with a medical marijuana certificate can assign to a seller of choice. The caregiver rights of each patient, as customers are universally known, allow a dispensary to sell the marijuana of six plants, though the pot can be sold to anyone with a certificate. So the more caregiver rights a dispensary collects, the more pot it can sell.
The second essential: grow your own. A pound of marijuana can be sold at retail for somewhere between $5,500 and $7,500. To buy that quantity wholesale will cost about $4,000. Grow it yourself and the same pound will cost just $750 to $1,000.
Are those wholesalers operating legally?
It doesn’t look like Colorado has levied any excise or “sin tax” on marijuana:
Pot sales so far are expected to generate about $2.7 million in license fees, in addition to the more than $681,000 in sales tax collected from July 2009 to February 2010. These figures seem a decent-enough start, but are far less than the $15 million in annual taxes predicted by some of the state’s more optimistic lawmakers.
Naturally, regulators work with established businesses to crush competition:
A batch of regulations known as Amendment 1284, signed by the governor on June 7, is expected to put many dispensaries out of business, eliminating the amateurs and semipros who jumped in because there was nothing to stop them, but greatly strengthening those who have the wherewithal to remain standing.
Qualifying for medical marijuana means “passing” a medical exam:
And that exam, surprisingly enough, might be the easiest money in this aromatic field.
To see why, visit the office of Dr. James Boland, about nine miles outside of Boulder, in a strip mall in Broomfield. The place is a marvel of work-flow efficiency. In a matter of minutes, patients are greeted by a secretary, have their papers notarized by a notary public and are escorted to a waiting room — which on this day has a TV playing an instructional video on making your own hash.
“Today, I saw about 40 patients, but sometimes we’ll have 100 patients come through here,” Dr. Boland says, sitting in his small examination room.
He is dressed in dark green scrubs, like a man on a work break from a MASH unit. Until last year, he earned a modest income handling worker’s comp claims for a local furniture manufacturer.
Then he decided to enter medical marijuana full time, and he opened this place, which technically isn’t a doctor’s office, but a “managing/marketing firm” called Relaxed Clarity. His employees are allowed to do what he can’t — show up in dispensaries to pitch his services.
And when patients arrive, they find a highly streamlined operation. Each examination lasts three to five minutes.
“All you’re doing is answering the narrow question: does this person have a condition that qualifies them?” says Dr. Boland. “And do they have anything else that would place them at risk for an adverse outcome if they use medical marijuana?”
Yes to the first question, no to the second — those are the answers about 90 percent of the time, he says. And he stands by every one of those decisions.
By the standards of a workaday medical practice, this is simple and headache-free work, according to Dr. Boland, unless you count the hidden-camera TV journalists who have dropped by hoping to find misconduct, or the lingering fears that if you’re too liberal with your signature, the state’s medical board might discipline you. A very small number of doctors approves a majority of certificates, and Dr. Boland is one of the most prolific of them all.
In one year alone, working just three days a week at Relaxed Clarity, he’s seen 7,000 patients, each paying an average of $150 for a visit. He takes out a calculator and does some quick arithmetic. That’s more than $1 million, grossed in 12 months.
“There’s no waiting for an insurance company to pay you a fraction of what you billed,” Dr. Boland says. “It’s just boom, you know, cash on the spot. So you can make a significant amount of money doing this.”