Have you been thinking about putting your entrepreneurial skills to work in the medical cannabis field? If so, be prepared for an expensive proposition. Getting into the business is not as easy as you might believe. From a financial standpoint, one of the first things you have to consider is licensing. It is not cheap in most states.
The states utilize a number of different licenses depending on what their individual programs call for. As you might have guessed, different licenses have different fees attached to them. Your job is to figure out what you want to do and apply for the right license. Just be prepared to bring your checkbook. You are going to need it.
- 4 Types of Licenses
Cannabis is still illegal at the federal level. That means medical cannabis is left to the states to administer. As with anything else involving the states, statues vary from one to the next. Licensing does as well. As a general rule though, there are four types of licenses:
- Grower – The grower license allows you to cultivate plants, harvest them, and sell them to licensed processors. Some growers stick exclusively with marijuana or hemp while others grow both.
- Processor – The processor license allows you to use cannabis biomass to make retail products. This generally involves extracting the desired components from plant material and then using them to make things like vaping liquids and edibles.
- Dispenser – The dispenser license allows you to operate a medical cannabis pharmacy. You buy your products from processors. Note that some states require pharmacies to have at least one state-approved pharmacist on staff.
- Tester – The tester license allows you to set up a business that tests both raw cannabis flower and the extracts and products made by processors. Testing tends to be independent in most states.
Some states have additional licenses above and beyond the four mentioned here. Other states allow processors to test themselves, thereby mitigating the need for the fourth license.
Why Fees Are So Expensive
For many would-be medical cannabis business owners, licensing fees are prohibitive. That is partly by design. For example, Provo Utah’s a Deseret Wellness pharmacy says the state charges $2500 for an annual pharmacy license. That may not seem like a lot, but it is when you factor in all of the other expenses related to opening a brand-new pharmacy.
So why are license fees so high? There are a couple of reasons. First and foremost, states want to tightly regulate the number of medical cannabis businesses operating within their borders. At least that is the case in states that have not legalized recreational use. Tightly controlling licenses allows the states to avoid the free-for-all market they fear so much.
Second, high license fees automatically weed out would-be business owners that are not really serious about running legitimate, long-term operations. They weed out the fly-by-nights, which leads into the third and final reason.
In most states, entrepreneurs have to prove their financial resources before they can get a license. Being able to pay a $2500 fee is a step in that direction. Entrepreneurs without sound financial resources do not make it past the application process, leaving only those willing to make a significant financial investment in their businesses.
As a side note, licensing fees are generally put to use administering state medical cannabis programs. Business owners essentially support the state in this regard. Yet the license fees are ultimately passed on to customers by way of retail pricing. So in the end, patients themselves are paying to support their state programs.