Changes are coming to Maine’s $300 million medical cannabis industry

Arleigh Kraus in one of the grow rooms for her medical marijuana business at her farm in Warren last summer. A raft of changes has been proposed for Maine’s medical cannabis operations, which could affect regulatory compliance and patient privacy. Gregory Rec/Staff Photographer, file

The agency regulating the sale of medical cannabis in Maine is proposing a new set of rules as providers leave the market in record numbers, despite totaling over $300 million in sales last year.

The proposed rules are primarily driven by legislative changes, including the adoption of a two-tiered fine system for violations that, depending on the severity of an infraction, could cost up to $7,500.

But according to Mark Barnett, chair of the Maine Craft Cannabis Association, the biggest issue isn’t what the rules contain. It’s what they don’t.

Barnett, who runs a medical storefront in Portland, said he was disappointed to see there were no changes to the “red tape” that cannabis businesses are up against.

“It’s another move toward a heavier enforcement hand,” he said.

The medical market, which has been around since 1999, has been criticized by some for being too loosely regulated compared to the adult-use market. For example, adult-use retailers have a mandatory tracking system and are required to test their products, while medical providers are not.

“As much as some have tried to depict the medical market as the Wild West, it’s not,” he said.

Like changes proposed for the adult-use program, the proposed rules constitute a nearly complete overhaul and rewrite or a “repeal and replace” of the original guidelines, which officials said previously are intended to make the rule that regulates medical cannabis in Maine more user-friendly, with updated formatting, organization and language. Some of the changes reflect updates that have actually been in effect since 2018 but had not officially been written into the rules. A public hearing on the changes is scheduled Sept. 26.

Barnett agreed that the cleanup and clearer language in the updated format were needed and said that compared to a set of rules proposed in 2021, the current changes seem more grounded.

Catherine Lewis, board chair of the Medical Marijuana Caregivers of Maine trade association, agreed – the “overhaul” appears to be mostly a necessary cleanup, she said.

However, she is concerned that the state may be going backwards concerning patient privacy.

The new rule includes voluntary registration of a patient’s grow location and allows patients to add a photo to their registration card – these aren’t requirements, but Lewis fears they could still compromise all the work done to ensure privacy, like eliminating the state’s patient registry.

Like Barnett, she also has some concerns about the fine system and the risk of being held responsible for employees’ actions.

But for the most part, the changes were expected, although with the new formatting, the almost 100-page document is riddled with red strikeouts and underlining.

“I think we all had a knee-jerk reaction when we first looked at it,” she said.

But even if there were heavy-handed changes, Lewis noted that lawmakers would still need to approve the draft rules.

“(The Legislature) has shown over the years that it won’t approve things that will harm caregivers or patients,” she said.

GAP CLOSES BETWEEN ADULT-USE AND MEDICAL SALES

Maine’s medical cannabis market brought in more than $305 million last year, according to state data, and is leagues ahead of the adult-use market, which last year netted just over half that, with $158 million in sales.

However, the adult-use market is growing quickly, and in July, sales between the two markets were nearly identical, at just over $20 million.

It’s the first time the two sides of the cannabis industry were evenly matched. More recent medical cannabis figures were not available.

Last year’s $305 million also represents a drop from 2021 when caregivers brought in more than $365 million in sales – a record-breaking total for the industry.

But despite what would appear to be an economic windfall, providers are leaving.

There were 1,886 registered caregivers last month, according to state data – a decline of almost 200 since April, when the office released a report concerning a “mass exodus” of about one-quarter of the industry’s medical caregivers.

In 2021, there were 3,032. At its peak in 2016, the number was 3,257. There are about 106,000 patients with cards that allow them to receive cannabis for medical treatment.

Despite the small sample size – just 117 responses – the office pointed to oversupply as the primary driver of participation decline.

Market saturation led to drops in wholesale prices, making it difficult for registrants to counter mounting energy costs, the report concluded.

The report also identified high utility and business costs, competition with the adult-use market, and banking regulations and fees as drivers of the drop-off. Banking is difficult for cannabis businesses in both markets because the drug is still illegal at the federal level. The medical market has been fighting off new regulations for years. Most recently, a 2022 law requires Maine Legislature review of attempts to make rule changes for the market.

The current set of proposed rules does not include a track-and-trace requirement. The adult-use program is also up against some rule changes this year: one intended to reduce the stigma around cannabis and another to correct an oversight in a bill passed last year allowing cannabis to be sold at events such as concerts and festivals.

The proposed medical cannabis rules will be discussed at a public hearing at 10 a.m. Sept. 26 at the state’s offices in Augusta. The Maine Office of Cannabis Policy is accepting public comment through Oct. 10.