Staff Columnist

Republicans set up cannabis industry to fail - could the coming recession finish the job?

Marijuana businesses were already suffering from unfair tax policy, now they will miss out on coronavirus stimulus

Marijuana grows at an indoor cannabis farm. (AP Photo/Richard Vogel, File)
Marijuana grows at an indoor cannabis farm. (AP Photo/Richard Vogel, File)

Iowa’s tiny market for legal cannabis just shrank even smaller.

Medical dispensaries in Davenport and Council Bluffs operated by Have a Heart Compassionate Care suddenly and permanently closed this week, leaving the state with just three dispensaries to serve 99 counties and 4,300 medical cannabis patients until new licensees are selected.

The closure was not related to the coronavirus pandemic, but the situation demonstrates how delicate Iowa’s seedling medical marijuana project is. The historic economic shutdown we now face will present huge challenges to green business.

“Iowa has the worst program in the country. It’s on life support now,” state Sen. Joe Bolkcom, a top marijuana advocate in Iowa, wrote in a Facebook post about the scuttled dispensaries.

Neighboring states’ marijuana laws show just how bad Iowa is

Iowa’s medical cannabis experiment started in 2014 with a bill allowing some epilepsy patients to possess cannabidiol, but providing no legal way to obtain it. It was expanded in 2017 to allow two manufacturers and five dispensaries.

The industry was never designed for success — there are too few places to purchase medicine and too few medical conditions covered, while the products available are far too restricted to effectively treat many patients.

Market factors largely beyond state policymakers’ control also diminish demand for Iowa’s heavily regulated products — the drug trafficking pipeline from Colorado, easy availability of non-medical CBD products online and in stores, and the advent of recreational weed in neighboring Illinois.

Iowa industry leaders say the program needs to expand in order to remain viable.

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The “long-term sustainability of this program is at risk without improvement … we’ve got to make some improvements if this thing is going to last long-term,” Lucas Nelson — general manager of MedPharm Iowa, which operates one manufacturing facility and two dispensaries — told Quad-City Times reporter Robert Connelly this week.

Even in states with mature cannabis markets, the coronavirus pandemic poses a threat.

Some data from legal marijuana states show sales spiked just before public health shutdown orders were ramped up last month. Since then, pot sales — deemed an essential service — have lagged behind previous years’ figures. The slump could be attributable to a host of factors, including people avoiding dispensaries as a health precaution, canceled tourist trips and lost purchasing power due to layoffs.

Those same factors will hit marijuana and non-marijuana businesses alike, but cannabis sellers face some unique obstacles. Marijuana still is strictly prohibited under federal law, which means marijuana businesses aren’t recognized by the federal government.

As part of the industry’s shaky legal footing, companies selling consumable cannabis products are not eligible for business relief through the massive coronavirus package passed by Congress last month. Even without a national emergency, pot businesses are heavily penalized by the tax code, resulting in as much as a 70 percent tax hike compared to similar legal businesses.

In the pandemic, politicians are rushing to deliver bailouts and sweetheart deregulation orders. Will marijuana businesses get theirs? Don’t hold your vapor.

adam.sullivan@thegazette.com; (319) 339-3156

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