Medical Marijuana pioneered legal weed in Michigan and now it's withering away
The reality is there are fewer dispensaries selling medical marijuana in Michigan as demand for adult-use recreational marijuana dominates.
Michigan's medical marijuana industry is wilting.
The portion of the cannabis business that stood up legal weed in the state is now at its lowest point since its inception in 2008, according to data from the Cannabis Regulatory Agency. Sales crept to just $6.14 million in July, down nearly 71% from a year ago and down 86% from July 2022 when sales reached nearly $43 million. The cost of an ounce of medical marijuana is down 52% over the last 12 months to $102.03, but consumer pricing is only part of the cost conundrum.
Much of the medical marijuana drawdown is linked to industry costs associated with maintaining a medical and recreational license and the costs associated with marketing and selling both. Plus there are fewer and fewer markets that are medical marijuana only, such as Waterford Township and Pontiac, both of which are merging toward the adult-use market. Detroit was the last major city that maintained the distinction and prohibited recreational marijuana, but sales finally began earlier this year after legal squabbles.
The reality is there are fewer dispensaries selling medical marijuana as demand for adult-use recreational marijuana dominates — recreational sales totaled $270.6 million in July, compared to $188.8 million a year ago. And with those prices near historic lows, it's simply easier and cheaper for all consumers, recreational or medical, to purchase marijuana on the recreational side of the business.
"For us, it's expensive to maintain both licenses and follow both sets of rules," said Ankur Rungta, CEO of Ann Arbor-based C3 Industries, a vertically-integrated company with a grow operation in Webberville and 13 High Profile Cannabis Shop locations across the state. "It's a tighter market right now and managing costs is critical. As the market shrinks, it just makes less and less sense (to sell medical marijuana)."
Ankur Rungta, CEO of Ann Arbor-based C3 Industries, a vertically-integrated company with a grow operation in Webberville and 13 High Profile Cannabis Shop locations across the state says medical marijuana doesn't make sense anymore. “It’s a tighter market right now and managing costs is critical. As the market shrinks, it just makes less and less sense (to sell medical marijuana).”
Michigan voters approved medical marijuana sales in 2008, a full decade before voting to allow recreational sales. But the legal framework to allow medical sales wasn't established until 2016, after the Michigan Supreme Court ruled in 2013 that the 2008 law didn't allow for dispensaries. The long delays led to the state not issuing the first batch of retail licenses until August of 2018.
The medical industry was largely supported by caregivers, those growing marijuana at home and distributing that product to dispensaries — the state began phasing out caregiver sales to dispensaries in 2020 as recreational marijuana came online and commercial grow operations were churning out product. Caregivers can still supply registered medical marijuana patients, but cannot sell excess product to dispensaries.
The state requires a medical marijuana card for "patients," who used the product to treat mostly chronic conditions, requiring patients to get a medical marijuana card issued by medical doctors and doctors of osteopathy. One difference there is patients can be as young as 18, where recreational cannabis is only available to those 21 and older.
David Schulman, a former vascular and thoracic surgeon at Henry Ford Health and other metro Detroit health systems, started Huntington Woods-based Greenpath Holistic Medicine in 2017 to review and approve patients seeking medical cards.
"I was done with surgery and done with teaching, and I was done with organized medicine," Schulman said. "But I wanted a source of income, though that wasn't the major factor. It was more curiosity about marijuana and it was something I could do with my license without having to be involved in traditional medicine."
Schulman said he doesn't issue cards for common complaints like insomnia and anxiety but saw great improvements in patients with migraines and other chronic conditions.
"I would say I started as a skeptic, thinking my patients would be young college students looking to sell weed to their friends," Schulman said. "But I discovered a large cohort of patients who found marijuana is superior to the crap drugs other doctors were putting them on."
The state had more than 251,000 registered marijuana card holders in July 2021, making Michigan the largest medical marijuana market of the time, according to data from the CRA. Of those card holders, nearly 61% of the cards were issued for chronic pain and more than 22% for arthritis.
But plummeting recreational prices started cutting into those sales. Recreational wholesale prices had almost reached parity with medical marijuana by July 2021 and continued to crash, reaching as low as $80.16 an ounce by January of this year.
The result was fewer and fewer people maintaining their medical marijuana cards. As of July 31 this year, state data shows Michigan has shed more than 100,000 medical card holders, dropping to 141,005.
"There used to be some meaningful advantages for a medical card for consumers – lower taxes and higher purchasing limits," Rungta said. "But those advantages are less important as overall prices come down."
Medical marijuana carries a 3% excise tax, compared to a 10% excise tax for recreational marijuana, and users are able to purchase larger doses of medical marijuana than recreational.
That translated to an ounce of recreational marijuana — an amount that would produce roughly 60 marijuana cigarettes or joints —costing $3 more than an ounce of medical marijuana in July 2023 prices. The CRA limits recreational THC concentrates in edibles at 10 milligrams per dose, compared to 50 milligrams per dose in medical as well as differing doses for tinctures and oils.
For many, renewing a two-year medical marijuana card, which costs between $100 and $200 for the medical appointment, isn't worth the trouble, Rungta said.
C3 Industries has shed all but one of its medical marijuana growing licenses and almost all of its medical marijuana sales licenses.
"We have the largest addressable recreational market in the country as far as sales per capita," Rungta said. "It's not from medical marijuana consumers going to rec. It's just exploding. That has to do with the low cost of product."
While the medical market in the state continues to decline, the adult-use recreational market is reaching new heights, selling more than $270 million in July alone. The state's total marijuana market is expected to eclipse $3 billion this year, behind only California, which has 30 million more people.
Kevin Mechigian, owner of Tree House CBD in Walled Lake and Express Med Card, said despite declines in medical marijuana card holders business in Michigan is holding steady.
There are still good reasons to maintain a medical marijuana market, and Schulman said it has nothing to do with money.
"What if they encounter the law or have a job with drug testing?," Schulman asked. "Cannabis still isn't like other medicine because of the stigma. If they keep a medical card, they are less likely to face drug testing from their employer, and for those that picked up for DUIs and are found to have marijuana in their system, they get hit with that whether they were high or not. People are still threatened because of marijuana use."
Kevin Mechigian, owner of Tree House CBD in Walled Lake and Express Med Card, said despite declines in card holders business is holding steady.
"For the average consumer, a medical card doesn't make sense anymore," Mechigian said. "But if you use cannabis daily or even monthly, it gets competitive."
A card at Express Med Card costs $110, he said.
But he isn't high on the market. Mechigian expects medical marijuana to all but phase out of the state in the next five years.
"Maybe it doesn't go away, but it will continue to change," Mechigian said.
Rungta said the medical market in Michigan or elsewhere won't survive until medical marijuana becomes more legitimate as medicine, not just as a recreational drug with a medical backdoor.
"For medical to really drive a comeback, there would need to be differentiation. It's the same product, essentially, on both sides (medical and recreational) of the business. We're just not there yet," Rungta said. "It has to come through R&D. A product that's something closer to medicine and more data-driven evidence to support it."