The Looming Impediment for Medical Sales Growth: Limited Physician Participation

By Matthew A. Karnes, CPA
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The overall growth in the United States legal marijuana industry is substantial and will be fueled by the implementation of additional legalized markets across the country as momentum continues in favor of changes to existing federal laws. However, based upon our analysis, we believe that investors may call attention to the inherent evolution of consumer spending preferences in a dual marketplace, as the easing of recreational use restrictions has disrupted the growth rate of the presently constituted medical marijuana market. That said, we believe that the medicinal use market will recalibrate when the pipeline of new, more targeted medications become available and as the medical profession gains more comfort in pushing a marijuana treatment rather than a patient having to pull a recommendation from a doctor. 

Until that time, the success of a state regulated marijuana program will be largely dependent upon the active participation of the medical community and there is a ways to go, even in those markets that do not coexist with recreational use. Why are doctors so resistant to recommend marijuana? For one reason, there has been no real incentive to participate in a state regulated marijuana program and secondly, the standard protocols for prescribing FDA approved medications have not been proven ineffective (which would lead to an alternative treatment). Also, most doctors are not comfortable recommending a schedule 1 substance (illegal at the federal level) for treatment.  Some states have been more proactive than others in establishing educational programs but as we note there is a long way to go in getting more active participation. 

In the 23 legal marijuana markets and DC there are about 453,000 licensed physicians. If we look at just those states where a doctor registration is required, the percentage to total state licensed physicians is a mere 2%, clearly a very low percentage relative to the full population of licensed practitioners. As more adult use markets are implemented, we would expect these numbers to decrease even further. greenwave_logo_small

Analyzing National Trends for Marijuana Policy: Q&A with Matt Karnes

By Aaron G. Biros, Matthew A. Karnes, CPA
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According to Matthew Karnes, founder and managing partner of GreenWave Advisors, LLC, looking toward the growth of the cannabis industry requires analysis of the changes in state and federal laws. “Eventual rescheduling or de-listing of marijuana as a federally prohibited drug, will hopefully lead to consistent and uniform national regulation and taxing authorizations that will ultimately change the structural and economic landscape of the industry,” says Karnes in an article here.COLOR-PIC-200x300

Looking at the sales trends in current legal states is a viable option to make financial projections, but much of that relies on the changing legal and political landscape of our country. According to Karnes, because it is impossible to accurately predict federal rescheduling or full legalization, investors must look at short, medium and long term trends to guide their decision making process. Cannabis Industry Journal sat down with Matthew Karnes to discuss some of the foreseeable trends.

 

Cannabis Industry Journal: What are some of the trends happening presently, that you can expect to continue?

Matthew Karnes: Just as states continue to pass legislation in some form of legalization measure, there is talk at the federal level of minimizing interference with state policies and removing prohibition statutes. We can see this national progression continuing until rescheduling cannabis eliminates the current obstructions that have limited industry growth.

Where states continue to roll out legislation to legalize cannabis, the rate of retail and cultivation license granting will have a large effect on the growth rates for each given state. Free market approaches as seen in Colorado and California will allow for faster growth rates than more restrictive states.

Recreational and adult use measures being introduced are notable disruptions in the medical sector that once fueled legalization. Medical research and development of strains for specific ailments is still in its early stages due to the impact of federal policy on research.

With an eye forward to eventual federal rescheduling or possible de-listing it is reasonable to assume that uniform national testing and operational standardization protocols will eventually be implemented at least as a baseline binding thread that will steadfastly assure consumers of an expectant consistency of product.

CIJ: Where do you see medium term trends taking the industry?

Matt: With more and more states legalizing cannabis in some form, we can expect the federal government to make a policy change. This will be accomplished via a DEA policy change or through congressional avenues in conjunction with federal agencies like the FDA, USDA and Department of Agriculture administering regulations.

With FDA or Department of Agriculture implementing cannabis policies, we can expect increased interest from outside the industry in research and development of cannabis-based drugs. This will lead to a medical market with more targeted medicine with precise dosing. We can expect more physicians to gain comfort in treating ailments with cannabis as well.

The recreational market will expand greatly with normalized commerce, enabling larger cultivation operations and infused products brands could grow to the national scale with interstate commerce.

CIJ: Where do you see the industry going long term?

Matt: When the cannabis industry matures down the road, we can expect multiple offshoots occurring. The recreational industry will involve local, regional and national policy much like the alcohol industry, and will likely resemble a liquor store model with individual “mom and pop” type businesses.

We anticipate that the medical market will recalibrate as more targeted products with precise dosing and efficacy are developed. At that point it will experience increased competition and consolidation. Without medical research and clinical trials, we cannot accurately project the growth of the medical sector.

Regulations involving tax revenue will most likely use a similar mechanism that states use for alcohol and tobacco taxation. Entities like state liquor control boards will oversee cannabis regulations. When that time comes, the cannabis industry will no longer be a novel idea and will become another conventional ‘consumer staple.’