Aspiring entrepreneurs crowded into an auditorium in St. Paul on Friday, eager to be pioneers of the new medical marijuana industry in Minnesota.
What they got was a sobering assessment from state officials about just how difficult it will be to get a toehold in the state’s fledgling medical cannabis industry, where only two manufacturers will be permitted.
“One out of 10 start-up enterprises succeed,” Assistant Health Commissioner Manny Munson-Regala told the crowd. “Let’s make sure the two manufacturers are in that category.”
More than 250 people — some in power suits, some in dreadlocks — sat through a six-hour seminar delving into an issue that upended the last legislative session and pressed the state deeper into a larger national discussion about the future of marijuana laws. Minnesota now has less than a year to figure out how to grow, process and distribute the drug before the first patients begin lining up to buy it legally in July 2015.
Every ounce of legal marijuana grown in the state will come from two manufacturers that will be licensed by the Health Department this winter. Becoming one of the two won’t be easy. For starters, prospective manufacturers have to come up with a secure production facility already prepared and a $20,000 nonrefundable application fee in hand.
The application fee alone was daunting, even before business owners figured out things like where to put the state’s eight new retail cannabis facilities or tackled issues like disposal of plant material left over from the manufacturing process.
“This is pretty onerous,” Ben Streit said during a question and answer period. Heads nodded around the room. “I want to help sick people,” he added, “but I also want to make a profit.”
Minnesota is the 23rd state to legalize medical cannabis and its law is among the most restrictive in the nation. The Health Department has a detailed checklist designed to reward proposed manufacturers who have deep pockets, business savvy and agricultural cultivation experience over upstarts with a passion for the plant.
They want to see the applicants’ financials and scrutinize their plans for product lines, quality control and how they’ll make payroll.
“Our selection will result in best-in-breed manufacturers. Folks we know and can trust will have the patients’ safety and their welfare in mind,” Munson-Regala said. “Yes, it’s about taking care of patients, but in order to take care of patients, there has to be a secure and predictable supply.”
State officials are worried that looser restrictions and regulations could allow the medical-grade cannabis to get into the general population, worsening what authorities say is already a halting drug problem in the state.
But some prospective businesses were concerned that the state has so tightly controlled the new industry that only the wealthiest, most well-connected investors have a shot at being selected. They also are concerned about staying afloat in the early lean years, when patients may be slow to sign up and dispensaries may only be able to operate a few hours a week.
“I’m a little dismayed,” said Don Wirtshafter, an attorney and hemp activist from Athens, Ohio, who is consulting with one of the prospective manufacturers.
“They’re not willing to let the free market work here. They’re controlling it from the very start,” he said. “Only the huge companies can survive. If you don’t have $20 million, don’t even start.”
That’s the idea, Munson-Regala said. Passion for the industry and a desire to help people is great, but “beyond the romance, we want to be sure you can pay people.”
Not everyone in the room was looking to get into the business directly. Catherine Arthur was passing out pamphlets touting the greenhouse lighting system made by her company, LED Grow Green. At this stage, she said, “it’s hard to tell who’s serious about it and who’s just checking it out and saying, ‘Yeah, it would be great, but there’s no way.’ ”
Ken Anderson, CEO of the of Wisconsin-based hemp company Original Green Distribution, is still studying Minnesota’s system, trying to figure out whether a business can turn a profit at medical marijuana or if the system has been “set up to fail.”
Munson-Regala acknowledged that the start-ups will face a great deal of uncertainty.
“We cannot come up with all the rules (for challenges) you’re going to face,” he said. “This is a huge abyss.”
Business owners will have plenty of things to figure out as they go along — everything from what sort of products they’ll offer to how they’ll keep that product secure.
“You’re dealing with a cash crop, folks. People are going to want to get at it,” Munson-Regala said.
But Friday’s meeting was a sign of progress for patients and their families who beat long odds to push the medical marijuana measure through a leery state Legislature.
“It’s such a great feeling,” said Kim Kelsey of Excelsior, Minn., who hopes a liquid form of cannabis might be able to help her 23-year-old son, Alec, who suffers from debilitating seizures.
Kelsey still hopes to see the law relaxed to allow people with other conditions, like chronic pain, access to the drug. Some adults and children with seizure disorders have shown remarkable improvement after taking medical marijuana, she said, and while there’s no knowing if Alec will be one of the lucky ones, she’s glad she’ll finally be able to find out.
“Cannabis has never killed anyone,” she said. “Seizures have.”