Rhode Island: Compassion center cuts in House budget benefit monopolies over patients

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Buried under mounds of drama surrounding the House budget proposal, up for a vote on the floor Friday afternoon, those considering opening a medical marijuana dispensary in the state can find bad news and a rate hike to make your head spin.

The House has stubbornly rebuked Gov. Raimondo’s previous proposal to increase the number of dispensaries in the state from 3 to 15, and it has raised the licensing fees those current dispensaries are required to pay from $5,000 to $250,000—an increase 50 times over.

The fee hike may appear to plug some holes in the state’s finances, if not as much as the governor was hoping for with her initial proposal to expand the number of dispensaries, euphemistically called “compassion centers” here in Rhode Island, which was projected to generate around $5 million in revenue. 

The Thomas C. Slater Compassion Center, in Providence, had previously offered the governor that much to prevent the state from allowing more dispensaries to crop up in the state, according to previous reporting by the Providence Journal.

The governor didn’t take the Slater Center up on its offer, which demonstrated a staggering ability, not to mention confidence, on the part of Rhode Island’s compassion centers in retaining their economic dominance. The exorbitant spike in licensing fees in the budget proposal, however, tells an eerily similar story of compassion centers maintaining a stranglehold over medical marijuana revenue in the state.

It appears that this is exactly the state of affairs Rhode Island’s three compassion centers are hoping for. Rep. Moira Walsh (District 3, Providence) told RI Future that she “didn’t put up a fight” regarding the hike in licensing fees because she was assured that it was legislation specifically requested by the dispensaries themselves.

“They wanted us to be more in line with other states to increase the competition among dispensaries,” Walsh said. She added that the legislation will increase the funds dispensaries pay back to the state to be more commensurate with their revenue. But while $750,000 between the three compassion centers might seem like a sizable paycheck for the state, it pales in comparison to the amounts they bring in.

The state made around $3.1 million back from approximately $28.2 million in sales between the three dispensaries in 2017 according to a Providence Journal report last year. Much of that amount stems from the 4 percent surcharge Rhode Island receives from medical marijuana sales, on top of a 7 percent sales tax.

Representatives from the Slater Center in Providence and the Greenleaf Compassionate Care Center in Portsmouth could not be reached for comment.

“The House’s decision to not include an expansion of the number of compassion centers in the budget was very misguided,” Jared Moffat, executive director of the marijuana legalization advocacy group Regulate RI, told RI Future in an email on Wednesday. “First, patients need more options, more locations, and more competition in the market. Second, the newly licensed cultivators are now in a very tough spot without more compassion centers to buy their products.”

Maggie Kinsella, a spokesperson for the Massachusetts Cannabis Reform Coalition, told RI Future that opening a medical dispensary in her state isn’t cheap either; potential dispensaries need $500,000 set aside in escrow to even apply, and face application fees totaling over $100,000, in addition to annual registration fees and rates dispensaries pay per employee. “Only big business has been able to enter this market, and on top of that you need millions of dollars to build, let alone maintain your facility if it’s cultivating,” she said.

When asked about Rhode Island compassion centers hiking fees to prevent out-of-state competition, however, Kinsella was skeptical:

“I think I’m just gonna call B.S. on that one, and that they’re looking to maintain their monopoly. That’s pretty much as simple as it gets. I understand wanting to secure your state, but I think that should be done by approving people who are from Rhode Island. Somebody’s going to hand those licenses out, and if they’re concerned about that, they should be choosing local applicants rather than just handing them out to out-of-staters. There’s ways around that where you don’t need to raise the fees at all—I think that’s B.S.”

Kinsella’s statement becomes all the more stark when you consider who owns compassion centers in Rhode Island—two former State Police officers have managed the Slater Center, alongside their association with a Massachusetts consulting firm, according to this Providence Journal report.

In a state where many Rhode Islanders have criminal records for nonviolent drug offenses which have yet to be expunged, the fact that one of three compassion centers has been overseen by former cops, as well as the maintenance of these compassion centers’ economic dominance (with the House’s apparent backing), means Rhode Island is far behind Massachusetts’ efforts to extend the benefits of marijuana revenue to those communities—especially Black residents—which have been historically targeted by the criminalization of marijuana.

Massachusetts’ Cannabis Control Commission released a document stating that it is “required to ensure that people from communities that have been disproportionately harmed by marijuana law enforcement are included in the new legal marijuana industry.” The provision gives priority to applicants for commercial licenses based on a number of criteria, including applicants from “areas of disproportionate impact” and those of Black or Latinx descent; it also offers these applicants training and assistance in raising capital for marijuana businesses.

These provisions pertain only to Massachusetts’ adult-use program, and medical marijuana licenses are far more restrictive there and in Rhode Island. Yet even solely considering medical marijuana, the cap on dispensaries will continue to maintain the industry as a market many, particularly those disproportionately harmed by criminalization, will struggle to enter—especially considering that the state’s currently licensed cultivators of marijuana are forced to sell their product at a rate set by only three facilities.

Norman Birenbaum, principal policy and economic analyst for medical marijuana at theDepartment of Business Regulation and a key contributor to the governor’s increased dispensary proposal, sees this as a problem.

“The fact that we’re not getting an expansion on the distribution right now is definitely an issue for cultivators,” he told RI Future in an interview Thursday. “We have licensed qualified cultivators to give them the opportunity to participate in a market and set up a regulatory scheme where, if cultivators are manufacturing good medicine that patients need, they should be able to get that distributed through the dispensaries. The issue that we’re having is that with only three dispensaries, the distribution is not there, so it’s not creating a fair and even market that would best suit the needs of patients.”

Birenbaum noted that Rhode Island has seen an approximately 20 to 30 percent growth in medical marijuana patients year over year. Without an appropriate expansion of the industry, he says that the state can expect more people to grow in their homes or in an unregulated, illicit market. He cited Massachusetts, which has only two to two-and-a-half more medical marijuana patients than Rhode Island, and nine times the number of dispensaries, as an indicator of the mismatch of supply and demand for marijuana in this state.

He added that typically, states have one dispensary for every 1,500 patients—and Rhode Island has one for every 6,300.

If people are trying to make sure that we have parity and consistency with our peers,” Birenbaum stated, “they should make sure that we’re doing this in a way that meets the needs of patients, and that’s not just necessarily just taking in additional revenue for the state.”

Given the legal barriers and rising costs of opening dispensaries here in Rhode Island, however, the House appears to be setting up the state’s medical marijuana industry to maintain the profit of a select number of facilities to the exclusion of any new stakeholders, especially those whom the state’s history of criminalization continues to target.  

In his email to RI Future, Jared Moffat wrote:

“[Regulate RI’s] position is that Rhode Island should be expanding legal access to marijuana—both in the medical marijuana program and through full adult-use legalization. We also believe the market should be open, diverse, and inclusive, particularly for people who have been harmed by a marijuana arrest. Right now, that is not the direction we’re going. We hope that more lawmakers—particularly progressive ones who make social and racial justice a central focus of their legislative agenda—pay more attention to the way the marijuana industry is developing in Rhode Island. We need them to raise their voices and put the state on a better path.”

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