The cost of cannabis – Arkansas Times

As of Jan. 17, nearly 35,000 Arkansans held medical marijuana ID cards. Arkansas’s 16 operating medical marijuana dispensaries have sold over 5,000 pounds of marijuana, totaling $33 million in sales since Suite 443, the first dispensary approved to operate, opened in Hot Springs in May 2019. 

However, though Arkansas’s medical marijuana industry continues to expand, cannabis prices remain a barrier for many cardholders seeking relief from their qualifying medical conditions. Dispensary owners and employees say they expect cannabis products to become more affordable as more dispensaries and cultivation facilities open, but in the meantime, some dispensaries are finding ways to make medical marijuana more accessible to low income customers. 

Robbin Rahman, owner of Harvest Cannabis in Conway, said product and price diversity are key to Harvest’s business. He said the dispensary strives to “create price points that are as low as we can possibly do it” in addition to offering products at more mid- to high-range costs. Harvest’s website lists “popcorn” buds, or small buds, of the Mimosa sativa strain for $8.84 a gram; its highest online menu price for marijuana flower is $15.03 a gram for the Apple Sherbet sativa strain. 

“Fundamentally, I don’t think we approach this any differently than your average retailer does,” Rahman said. “Once we get it from the cultivators, a lot of the pricing is already baked in. We pay what we pay, and then we resell it to the consumer.” The sale price reflects the cost of doing business, including employee wages, facility maintenance and utilities, security and computer systems. 

“Street” prices for marijuana obtained illegally are often significantly lower than dispensary prices. An eighth of marijuana, which contains about 3.5 grams, can cost between $40-$50 on the “street.” The cost of marijuana purchased from a dispensary will depend on the specific strain, but after the state’s regular 6.5 percent sales tax plus a special 4 percent “privilege” tax applied only to the sale of cannabis — which goes to the National Cancer Research Institute — an eighth of a strain that costs $15 a gram would run a cardholder around $60. 

Holley Stuart, manager of Greenlight in Helena-West Helena, said the dispensary has accommodated this difference by offering some strains at lower prices. 

“Patients were complaining that dispensary prices were really high and that there were alternatives,” Stuart said. “They knew of alternatives, illegally, where they could acquire medicine for cheaper. So, of course we can’t have that here at our facility. We don’t want to be competing with people buying it illegally.” 

Though none of the four dispensary owners and employees interviewed for this story provided specific wholesale prices for medical marijuana products purchased from the state’s cultivators, all were sympathetic to the costs of doing business experienced by cultivators. Ross Mash, a consultant for Red River Remedy in Texarkana, said he believes the cultivators are “trying their hardest to provide pricing that’s realistic.” 

Dispensaries must also take into consideration the fact that they’re taxed differently from other retail businesses. Because the cultivation and sale of marijuana is still federally illegal under the Controlled Substances Act, dispensaries are subject to Section 280E of the U.S. Internal Revenue Code, which forbids businesses from deducting business expenses from any gross income earned through the sale of controlled substances. This means dispensaries are taxed on their gross revenue and thus have a smaller profit margin than other retailers who can deduct the cost of business from their tax debt.

“If we spend $10 paying our employees’ wages, the IRS says no, you don’t get to deduct that, that’s just part of your profits, and you’re going to be taxed on that,” Rahman said. “That affects how we price things because it’s just one more thing that becomes part of our pricing: We have to account for the tax consequences.” 

Dispensaries can offer discounts through a Compassionate Care Plan, in which dispensaries must state exactly who is able to receive a discount — such as seniors, veterans or customers who live below a certain income level — how much the discount is, and the requirements cardholders must meet to qualify for such discounts. Dispensaries can only offer these specific discounts if they included a Compassionate Care Plan in their original licensing application. Scott Hardin, spokesman for the Department of Finance and Administration, said each of the state’s 32 licensed dispensaries included compassionate care plans in their applications. 

Lisa Murphy, CEO of Fiddler’s Green in Mountain Home, said “about 75 percent” of the decision about a product’s price is made based on “how much we pay for it from the cultivators,” and the other 25 percent of the decision is based on when the largest customer population is in the dispensary. Like many other dispensaries, Fiddler’s Green regularly hosts a “weekend celebration” where prices for specific products — a certain strain of flower or a particular type of edible gummies — are lowered for a specified day or weekend. 

“Typically an ounce [of marijuana flower] is $400, but on Friday and Saturday, we always pick a strain and offer it to the public for $199,” Murphy said. “That way, the people who really can’t afford to buy all the expensive products can always know they can come on the weekends, and they can get a product that they [can afford].” 

Greenlight’s Stuart said that in addition to its Compassionate Care Plan, which includes a 10 percent discount for seniors and 15 percent discount for veterans, the dispensary organizes its medical marijuana products into four pricing tiers: ultra premium, premium, affordable and economy. As part of the “affordable” tier, Stuart said Greenlight will offer a certain strain for $10 a gram; as part of the “economy” tier, cardholders can purchase an ounce of a specific strain for $199. 

Stuart said Greenlight makes these accommodations to ensure all cardholders, regardless of income level, are able to afford relief, and that doing so is an industry standard. 

“I actually have experience in the cannabis industry outside of Arkansas [from] before I moved here, and so I know that that’s standard nationwide,” Stuart said. “We support the veteran community, we support seniors, we support cancer patients, we support a lot of people that have the issues that cannabis is helping them with.” 

Dispensary owners and employees say that prices for medical marijuana products will naturally decrease as Arkansas’s program matures, specifically as cultivators get their bearings. Three of the state’s five cultivation facilities are growing marijuana and selling to dispensaries. The DFA’s Hardin said Harvest of Newport — formerly called Natural State Wellness Enterprises — received approval from Alcoholic Beverage Control to begin growing in a portion of its facility in November 2019, while the rest of the facility remained under construction. Now that construction is complete, Hardin said, ABC will inspect the facility within the next month. 

Delta Medical Cannabis Co., also in Newport, is scheduling its inspection with ABC. Hardin said the DFA anticipates Harvest and Delta Medical Cannabis to be “fully approved to grow” by the end of February. 

Mash from Red River said that once all five of the state’s cultivation facilities are growing and harvesting, more medical marijuana flower and other products will be available to purchase, and the longer the cultivation facilities are open, the better. 

“[The cultivators] built state-of-the-art facilities that produce a certain amount of product, they’ve got a lot of overhead, they’ve got a lot of security and compliance restraints, which are valid and definitely needed,” Mash said. “As they are able to start having a return on that investment, I expect the prices to come down.” 

Fiddler’s Green’s Murphy echoed Mash’s sentiment, saying she thinks prices will start going down within the next six months. She said the cultivators harvest a new batch of marijuana every four months, and with “every single harvest, the quality of the product gets better,” and the price of the product continues to decrease. 

“I think as the cultivators learn to grow more during their harvest and grow it less expensively, then the prices will go down,” Murphy added. “Also, the dispensaries [will be] able to be a little bit more resourceful in all the things they’re doing.”