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Electric payment options considered for new medical marijuana access in Iowa

Manufacturer working with bank on options

Cannabis plants grow inside the mother room at MedPharm Iowa in Des Moines on Tuesday, Jul. 24, 2018. (Stephen Mally/The Gazette)
Cannabis plants grow inside the mother room at MedPharm Iowa in Des Moines on Tuesday, Jul. 24, 2018. (Stephen Mally/The Gazette)

The state’s new medical marijuana program is ready to kick off its expanded operations come Dec. 1. But growers and sellers of the product are finding they have to address a point of sale much differently than any other industry.

In response to federal law, one of Iowa’s cannabidiol manufacturers is in the process of setting up an alternative electronic payment system for its customers, said Lucas Nelson, general manager of outsourcing services for Kemin Industries, MedPharm Iowa’s lead consultant.

“There are a range of alternative electric payment options that companies have been working on and developing,” Nelson said. “Those are the types of things we’re looking at for our dispensaries.”

And they plan to do so through a relationship they’ve established with Banker’s Trust, going on about 10 months or so.

The move indicates banks are becoming interested in being involved in this developing industry — given that businesses follow higher reporting standards.

“If businesses comply, most (banks) feel comfortable working in this space,” Nelson said.

The majority of the country has legalized the sale of marijuana for certain uses, but for most of the growers and sellers in these states, cash is king.


The federal government classifies marijuana as a Schedule 1 drug, a definition of substances with “a high potential for abuse,” according to the U.S. Drug Enforcement Administration that includes drugs such as heroin and LSD.

Because of this, banks that handle any marijuana-related transaction can be charged with money laundering. So businesses are without any means for electronic payment processing.

“What that means in those states is that, yes, it is cash,” Nelson said.

And to some extent, that applies to Iowa’s new medical marijuana program, which was expanded in the 2017 legislative session to include a wider range of qualifying medical conditions. The state approved two manufacturer’s to produce the product — MedPharm Iowa, located in Des Moines, and Iowa Relief LLC, a subsidiary of New Jersey-based Acreage Holdings in Cedar Rapids.

The products will be sold, beginning Dec. 1, at five, state-licensed dispensaries — Council Bluffs, Davenport, Sioux City, Waterloo and Windsor Heights.

“We know for a fact (the dispensaries) cannot use credit cards. None of the major processors will touch this,” said Nelson, listing card companies including MasterCard and Visa.

Insurers also are not required to cover medical marijuana products.

However, Nelson said Banker’s Trust, headquartered in Des Moines, has agreed to take MedPharm as a client, if the manufacturer files Suspicious Activity Reports, a document financial institutions must submit to federal officials following a suspected incident of money laundering or fraud.

This matches with the latest guidelines from the Financial Crimes Enforcement Network, part of the U.S. Treasury Department, for banks to comply with federal law.

Cannabis capsule by dDara from the Noun Project. Map by John McGlothlen / The Gazette

“Providing banking services to marijuana-related businesses is complex and constantly evolving,” reads a statement from Banker’s Trust to The Gazette. “Whether in this industry or any other, Bankers Trust is only willing to offer financial services to organizations that comply with applicable state law.


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“And, while Bankers Trust doesn’t comment on specific customer relationships, we intend to comply with all relevant prior federal guidance from the Financial Crimes Enforcement Network and the Department of Justice if and when serving customers in this industry.”

MedPharm is maintaining an open dialogue with Banker’s Trust, Nelson said, as the less cash moving through these dispensaries, the better.

Security is a concern for marijuana businesses nationwide, as retail operations with large amounts of cash on site can be targets for crime. As a result, many businesses have implemented steps that include more cash drops or taken security measures such as additional cameras or security personal.

Customers need to be taken into account, traveling from another location to one of the five Iowa towns with a dispensary and carrying potentially hundreds of dollars’ worth of cash.

“Not every patient wants to be hauling around large amounts of cash to be buying product,” Nelson said.

But through the partnership with Banker’s Trust, MedPharm officials are considering electronic payment options that would offer as much convenience as swiping a card, Nelson said. The bank and the manufacturer are considering their options, and hope to do a full rollout sometime in November.

Nelson estimates that a 30-day supply of a medical marijuana product could cost between $30 and $40. For some products, it could cost up to $150 for the same supply amount.

It is a concern for some officials in the state’s program that financial aspects of the program “can be limiting and impossible for some,” Nelson said.


With the cost of each month’s supply solely sitting on the patient’s lap, officials worry patients who need the product may not have access.

This conversation has grown across the nation after the Food and Drug Administration approved its first-ever cannabis-derived drug, called Epidiolex, that treats two rare types of epilepsy — Lennox-Gastaut syndrome and Dravet syndrome — that affect children.

According to Business Insider, the manufacturer stated the drug is estimated to have a purchase price of roughly $32,500 a year.

At this time, it’s unclear how insurance companies will chose to cover this drug.

Iowa’s cannabidiol program is available to individuals with medical conditions that include cancer, multiple sclerosis, seizures, AIDS/HIV, Crohn’s disease, ALS (Lou Gehrig’s disease), Parkinson’s disease, other terminal diseases and untreatable pain.

State law also caps at 3 percent the tetrahydrocannabinol, or THC, allowed in medical marijuana products sold at dispensaries, which will include oils, creams, suppositories and others.

However, to obtain cannabidiol products, a physician must certify an individual’s condition and approve him or her for a medical cannabidiol registration card. That allows a patient and a caregiver to legally possess the product.

The amount of the product given to the patient for his or her condition is not determined by the physician, but between the patient and the dispensary where they purchase the medical marijuana.

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