Publicly Traded Companies Dominate the New York Medical Cannabis Market

New
York’s
medical
cannabis
program
has
developed
substantially
over
the
past
several
years
and
is
now
dominated
by
publicly
traded
companies.
While
it
appeared
that
2019
would
be
the
year
that
the
Big
Apple
would
become
the
12th
state
to
legalize
the
recreational
use
of
cannabis,
the

Marijuana
Regulation
and
Taxation
Act
failed
in
the
waning
days
of
the
legislative
session.
Despite
this
setback,
many
remain
confident
legalization
of
cannabis
for
recreational
use
is
in
the
cards
for
New
York.
In
this
review,
we
take
a
look
at
the
history
of
the
medical
cannabis
program,
the
existing
marketplace
and
the
potential
for
future
growth.

History
and
Program
Rules

On
September
11,
2014,
New
York
Gov.
Andrew
Cuomo
signed
into
law
the

Compassionate
Care
Act.
It
allowed
doctors
to
prescribe
marijuana
in
a
non-smokable
form
to
patients
with
serious
ailments
that
are
included
on
a
predefined
list
of
14
conditions
ranging
from
HIV/AIDS
to
Parkinson’s
disease
and
which
must
be
accompanied
by
a
complicating
condition
such
as
chronic
pain,
seizures
or
wasting
syndrome.
A
complete
list
is
available

here.

Pursuant
to
the
Compassionate
Care
Act,
there
is
a
$50
application
fee.
However,
the
Department
of
Health
is
currently
waiving
the
$50
fee
for
all
patients
and
their
designated
caregivers.

The
Medical
Marijuana
Program,
which
operates
under
the
state’s
Department
of
Health,
oversees
the
certification,
purchase
and
dispensing
of
medical
marijuana.
The
program
also
handles
the
certification
of
practitioners
and
dispensaries.

A
patient
would
have
to
be
certified
by
a
practitioner
to
obtain
medical
marijuana
and
that
practitioner
would
be
a
physician,
trained
by
and
registered
with
the
Department
of
Health,
licensed
by
the
state,
and
qualified
to
treat
the
serious
condition
for
which
the
patient
is
seeking
treatment.

The
excise
tax
on
medical
marijuana
in
New
York
is
a
seven
percent
tax
on
the
gross
receipts
from
medical
marijuana
sold
or
furnished
by
a
registered
organization.
The
sale
of
medical
marijuana,
as
well
as
the
sale
of
related
products
to
administer
medical
marijuana,
are
exempt
from
sales
tax.

Since
its
initial
enactment,
however,
a
number
of
improvements
have
been
made
to
that
law
including:

• The
  authorization
  of
  nurse
  practitioners
  and
  physician
  assistants
  to
  certify
  patients
  for
  medical
  marijuana,
  thus
  expanding
  the
  scope
  of
  who
  can
  prescribe.
• Increasing
  the
  number
  of
  organizations
  registered
  to
  manufacture
  and
  dispense
  medical
  marijuana.
• Expanding
  the
  list
  of
  qualifying
  conditions
  to
  include
  chronic
  pain,
  post-traumatic
  stress
  disorder
  and
  any
  condition
  for
  which
  an
  opioid
  may
  be
  prescribed.
• Allowing
  registered
  organizations
  to
  wholesale
  to
  other
  registered
  organizations.
• Allowing
  registered
  organizations
  to
  deliver
  medical
  marijuana
  products
  to
  the
  homes
  of
  patients
  or
  their
  caregivers.

As
a
result
of
this
expansion,
the
number
of
certified
patients
skyrocketed
by
a
whopping
1,124
percent
to
more
than
112K,
while
the
number
of

registered
medical
practitioners
increased
from
611
in
2016
to
2,638
as
of
January
2020.

Existing
Market

The
U.S.
Census
Bureau
estimates
that
New
York
state’s
population
in
2017
was
19.85
million,
of
which
14.9
million
(74.9
percent)
are
21
or
older.
Using
NYS-specific
data
on
marijuana
use
as
reported
in
the
2016
National
Survey
on
Drug
Use
and
Health,
the
New
York
State
Department
of
Health
estimated
8.5
percent,
or
approximately
1.27
million
residents,
currently
use
marijuana
in
one
form
or
another.

The
most
common
conditions
among
medical
marijuana
patients
are:
chronic
pain
(53.16%),
neuropathies
(14.59%),
and
cancer
(12.8),
according
to
New
York
Department
of
Health
data.
Patients
between
the
age
of
51
and
60
make
up
the
greatest
percentage
of
certifications
(23.06%),
followed
by
those
between
the
ages
of
61
and
70
(19.21%).

There
are
currently
ten
vertically
integrated
registered
organizations
in
New
York
state,
each
with
the
ability
to
operate
up
to
four
dispensaries.
At
this
time,
37
of
the
possible
40
dispensaries
are
open.

The
first
five
companies
obtained
their
licenses
in
In
July
2015.
 These
original
five
were
all
private
at
the
time,
but
three
have
commenced
trading
publicly
subsequently:

In
July
2017,
five
more
providers
were
licensed.
All
of
the
second
group
of
license
holders
trade
publicly
at
this
time,
though
they
were
private
at
the
time
they
received
the
licenses:

• New
  York
  Canna,
  DBA
  The
  Botanist,
  which
  was
  acquired
  by
  
  Acreage
  Holdings
  (CSE:
  ACRG)
  (OTC:
  ACRGF)
• Fiorello
  Pharmaceuticals,
  which
  
  was
  acquired
  in
  August
  2019
  by
  
  Green
  Thumb
  Industries
  (CSE:
  GTII)
  (OTC:
  GTBIF)
• Valley
  Agriceuticals,
  whose
  parent
  company
  Gloucester
  Street
  Capital
  LLC,
  
  merged
  with
  
  Cresco
  Labs
  (CSE:
  CL)
  (OTC:
  CRLBF)
  in
  October
  2019;
• Citiva
  Medical,
  which
  was
  purchased
  in
  February
  2018
  by
  publicly
  traded
  
  iAnthus
  Capital
  Holdings
  (CSE:
  IAN)
  (OTC:
  ITHUF)
• PalliaTech
  NY,
  which
  in
  August
  2018
  changed
  its
  name
  to
  
  Curaleaf
  (CSE:
  CURA)
  (OTC:
  CURLF)
  before
  going
  public

These
organizations
can
grow,
manufacture,
distribute
and
dispense
medical
marijuana
to
patients
who
have
an
approved
medical
condition.

Increasing
demand
is
expected
to
favor
the
entry
of
new
players
into
the
market.

Form
factors
include:
vape
cartridge/pen,
capsule,
tablets,
oil,
oral
spray,
oral
powder.
Smoking
medical
marijuana
is
not
allowed,
though
pods
for
vaporization
are
permitted.
Edibles
also
are
prohibited.
Patients
need
to
contact
each
registered
organization
to
learn
which
products
are
available.
Pricing
varies
among
registered
organizations.

Legalization
for
Adult-Use

On
July
13,
2018,
the
New
York
State
Department
of
Health

released
its
report
on
the
assessment
of
the
potential
impact
of
regulated
marijuana.
It
concluded
that
the
positive
effects
of
a
regulated
marijuana
market
in
New
York
outweighed
the
potential
negative
impacts,
thus
giving
rise
to
expectations
that
the
market
would
greatly
expand.

Based
on
population
usage,
and
the
assumption
that
marijuana
sells
on
the
illegal
market
at
$270
to
$340
an
ounce,
the
New
York
Department
of
Health
estimated
potential
total
tax
revenue
in
the
first
year
with
a
price
of
$297
and
illegal
market
consumption
of 
6.5
million
ounces
ranges
from
$248.1
million
(with
a
7%
tax
rate)
to
$340.6
million
(with
a
15%
tax
rate).
The
estimated
potential
total
tax
revenue,
with
a
price
of
$374
and
illegal
market
consumption
of
10.2
million
ounces,
ranges
from
$493.7
million
(with
a
7%
tax
rate)
to
$677.7
million
(with
a
15%
tax
rate).

In
2019,
New
York
decriminalized
the
possession
of
amounts
up
to
2
ounces,
making
it
a
violation
instead
of
a
crime.
Fines
range
from
$50
for
amounts
of
less
than
one
ounce,
to
$100
for
quantities
between
one
and
two
ounces.

In
his
2020
State
of
the
State
address,
Gov.
Cuomo
reiterated
his
commitment
to
legalization
for
adult-use.
He
has
promised
to
introduce
legislation
once
again
this
year
and
has
proposed
the
creation
of
a
new
state
agency
to
oversee
recreational
and
medical
marijuana,
as
well
as
hemp.
His
proposal
also
would
limit
recreational
sales
to
those
over
21
to
possess
up
to
one
ounce
of
marijuana
and
up
to
five
grams
of
concentrated
cannabis.

New
York’s
medical
marijuana
regime
does
not
allow
certified
patients
to
cultivate
or
grow
cannabis.
Under
the
proposed
adult-use
regulations,
consumers
also
would
not
be
permitted
to
cultivate
cannabis
for
personal
use.

The
legislation
would
also
promote
social
equity
in
the
cannabis
industry
through
various
programs.
Cuomo
said
he
hopes
to
work
with
Connecticut,
New
Jersey
and
Pennsylvania
to
coordinate
policy
reform
efforts.
He
also
has
called
for
the
State
University
of
New
York
to
create
a
cannabis
and
hemp
research
center.

Conclusion

While
the
medical
cannabis
program
was
slow
to
start
in
New
York,
several
changes
have
helped
it
grow
substantially.
The
market
is
served
by
a
limited
number
of
vertically
integrated
providers,
with
8
of
the
10
licenses
held
by
publicly
traded
companies.
Looking
ahead,
New
York
state
could
become
one
of
the
largest
state
markets
for
adult-use
should
the
state
move
forward
with
legalization.

Susan
R.
Miller,
an
award-winning
South
Florida-based
writer
and
editor,
has
spent
her
career
writing
about
a
wide
range
of
subjects
in
print
and
online,
with
a
focus
on
the
business
of
healthcare,
law,
and
nonprofits.
She
launched
her
own
PR
and
content
marketing
firm
in
2013
and
continues
to
write
for
a
variety
of
clients
and
publications.