Medical Marijuana in Michigan:

Transcription

1 Medical Marijuana in Michigan: The Next Step is Access and Control MAY 3, 2011 Presented by: MEDICAL MARIJUANA DISPENSARY ASSOCIATION (MMDA) 1

2 TABLE OF CONTENTS EXECUTIVE SUMMARY...3 DEMOGRAPHICS...5 DISPENSARIES...7 ZONING...9 JOB CREATION...11 REVENUE AND COSTS...13 TAXES POLICING, COURTS, INCARCERATION...15 CONCLUSIONS

3 Executive Summary It appears that medical marijuana is in one of those not so unique arenas where elements of the existing status quo are at odds with public opinion and the direction the voters have outlined. While legislative action has not addressed any weaknesses in the voter approved ballot initiative called the Michigan Medical Marihuana Act, non-policy-making governmental entities are quickly attempting to legislate from the courts. Surprisingly, public opinion only translates into public policy 50% of the time. When public policy falls short of public opinion one or more of three factors circumvent the public s wishes. Research by Brian Harney of Illinois State University reports that public opinion can be circumvented by the power of special interests, political parties, and economic elites. It is well understood by the medical marijuana industry that some elements within the realm of government are attempting to greatly restrict the public s intent. Where medical marijuana is not divisive is within the general public where 70% of the US s population (and, 63% of Michigan voters) favor the legalization of marijuana s medical benefits. Gallup, Pew, and Harris Polls, among many, clearly show public opinion in favor of legalizing the medical benefits. As this paper unfolds, three primary issues are addressed. The first issue is of the greatest importance in that it deals with the needs and rights of those that can benefit from medical marijuana. This paper makes several assumptions in this regard: 1. the intent of the law is to assist those that might benefit 2. the intent of the law is not to require specialized skills, such as farming, and, 3. the intent of the law is not to force an unreasonable search in time or location for medication. The second issue is as equally important as personal rights but has to do with government rights. The second issue is local control. While the legislature is slowing moving forward rewriting the medical marijuana voter ballet initiative, some elements of police, prosecutors, and judges are seeking to circumvent local control along with patient access by legislating through the courts. Voter mandate, personal rights, and local control are three core democratic principles of a democracy. Anything less becomes susceptible to subjugation. As our Senator Carl Levin once said, and this paper will paraphrase, I ll let you make the law and I ll make the procedures. And I ll win every time. 3

4 The third issue concerns the social cost/benefit analysis. At the heart of this issue is the need for legislators to ponder whether medical marijuana will be a generator of social funds or a user of social funds. Overall, though, the purpose of this white paper is first to educate and, second, to act as an additional guide and strength for policy makers in their decision making. Some of the research in this paper has never been presented before and is the result of primary research conducted by the owners of several storefront dispensaries. 4

5 DEMOGRAPHICS any change that moves more of the market into legal/medical channels, shrinking the black market, is a step in the right direction. Jeffrey Miron, Harvard University, The Budgetary Implications of Drug Prohibition, February, Very little is publicly known about the demographics of the patients of medical marijuana. The Michigan Department of Community Health is required by the Act to report to the legislature on a yearly basis and provide a minimum profile of the demographics surrounding medical marijuana. Recently released data show that: 71,356 people have been certified to use medical marijuana 2,197 doctors in the State have signed certifications for patients 36,560 patients site chronic pain, muscle spasms, and nausea as the top 3 reasons for seeking medical marijuana ((in comparison, hydrocodone (combined with acetaminophen) had 3,936,000 prescriptions written in Michigan last year)) What we also know is when comparing Michigan s user rate to the rates of the longer established MEDICAL MARIJUANA states of California and Colorado, MEDICAL MARIJUANA has not penetrated Michigan s populace to the same degree. Rate of Medical Marijuana Users Marijuana Patients Total Population Rate CALIFORNIA 360,000 37,200,000 1:103 COLORADO 115,000 5,000,000 1:143 MICHIGAN 71,356 10,000,000 1:434 5

6 One reason might be cultural, that is, the people in Michigan may be different than those in California or Colorado. Or, another reason for the higher rates of patients in California and Colorado may be that the longevity of the law translates into broader social acceptance of medical marijuana as a tool that provides medical benefits. Dr. Breen, a noted California doctor, said, This demographic of patient is not what most people think of when they think about medical marijuana. I have seen an explosion in the number of elderly patients using it to improve the quality of their life. Dr. Breen listed the benefits for the elderly as: 1. Decreased pain 2. Increased appetite 3. Improved sleep. 4. Improved mood. New outlook on life. 5. Reduced dependence on other medications 6. Gained the feeling of taking control over their health 7. Increased their activity level. More golf, tennis, recreational activities THE PROPRIETY RESEARCH DONE FOR THIS PAPER ESTIMATES THAT THE TYPICAL DEMOGRAPHIC PROFILE IS OF A 48 YEAR OLD - WHITE MALE - PURCHASING $90 - VISITING THE DISPENSARY 5 TIMES DURING THE YEAR. NOT HARD HITTING INFORMATION, BUT IT IS FORTHCOMING. 6

7 Storefront Dispensaries as an Effective Distribution Model States that have dispensaries use them as an enforcement mechanism to directly monitor sales. Michigan Department of Treasury, April 4, Currently there are many ways for patients to acquire medical marijuana: patient grown, caregivers, clubs, cooperatives, collectives, dispensaries, etc. All models fulfill a need. All are located in local communities. Beyond all the arrests and lawsuits, the first considerations by lawmakers should be access and control. The distribution model that this paper focuses on is the dispensary method of distribution. The social cost/benefits of the dispensary model are simply a replication of the existing free-market pharmacy model that exists today. Acknowledging that only a small portion of patients have the necessary physical space, financial backing, and knowledge to grow their own MEDICAL MARIJUANA and then knowing that that situation will require a distribution system for the vast majority of the patients, dispensaries are the best option for safe, convenient, and legal access. In addition; a safe, convenient, and legal access is even more important for patients that suffer from an unexpected illness or injury, such as nausea from chemo therapy, simply because the process of selection, planting, growing, and harvesting require expertise and time. Dispensaries offer many medical marijuana related advantages. First and foremost, the storefront marketplace is best suited to meet the patients needs in terms of product choices and competitive prices. A product choice is important in that one strain may be more useful for certain afflictions than others. In other words, one variety of medical marijuana may be effective for pain control for a patient while another may be better for combating nausea. In addition, medicinal choices can be much more easily expanded to include smoke-free medication in the form of liquids or solids, which is in all practicality a limitation in the individual caregiver model. In addition, caregivers and other forms of distribution can quickly change through unforeseen personal events leaving patients in limbo. 7

8 Importantly, the State requires the medical marijuana industry be regulated. Both the State and pharmacies, which the dispensary business model does/can replicate, understand the concepts of compliance and reporting. Since the vast majority of patients prefer some sort of distribution system other than patient grown medication, dispensaries appear to be more efficient for the State in controlling the industry than other forms of distribution. Dispensaries also allow for meeting local needs and local control. The store-front dispensary model is well accepted by those states and local communities that have medical marijuana. Safe, convenient, and legal access under local control makes one think at the very least about dry and wet municipalities: state mandated by the voters with local control. 8

9 Zoning About a quarter (27%) of Americans say they would be very concerned if a store that sold medical marijuana opened up near other stores in their area, and 17% would be somewhat concerned. But a majority (54%) say they would be not too (20%) or not at all concerned (34%). Opponents of legalizing medical marijuana are far more likely to be at least somewhat concerned about this (81%) than supporters (32%). Pew Research Center, April 1, But so far, there is no statistical evidence that medical-marijuana businesses have made neighborhoods less safe overall. A Denver police analysis completed late last year of areas around dispensaries showed that the number of crimes in those pockets dropped in the first nine months of 2010 compared with the same period in Denver Post January, 24, There s nothing in this statute that would restrict, nothing that would prohibit and nothing that would prevent these pot shops and pot clubs and smoking co-ops that have erupted in California from coming to Michigan. Attorney General, Bill Schuette, Detroit News November, Zoning of dispensaries revolves around the stigma of marijuana equates to crime. That is, the stigma of crime and not the facts of crime. As experts have found, dispensary locations do not correlate with crime; instead, crime around a dispensary is based on the neighborhood the dispensary is located in. Non-policy-making governmental entities play a huge role in incorrectly informing segments of the public about marijuana in general and dispensaries in particular. This activity of misinformation has a name: moral panic. Moral-panic is about spreading misleading information to instill fear into a large enough segment of the population so that the existing social order can protect itself from change. Moral panic is the issue at the local level that local governments have to overcome. 9

10 Interestingly, the Department of Licensing and Regulatory Affairs (MDCH) has on its website for Medical Marihuana and under the Frequently Asked Questions section a noteworthy response to a question. Question: Can patients form growing cooperatives? Answer: The law does not address this. Consult with your local law enforcement officer or personal attorney. Police cannot give legal conclusions. Unless there is an ordinance they are charged with enforcing, they cannot even opine as to a legal matter. Even then, ordinance enforcement is left to building authorities. What is important in the zoning process is the intent of the law. As stated by an unknown source, government has a responsibility to the medical needs of its people, even when it's not a politically easy choice to make. Think about moral panic. Now think about not-a-politically-easy-choice-to-make. Fortunately, many communities already have or are moving forward with zoning. For the ones that have not moved forward, they will find that when they address the issues that local neighborhoods and local businesses have, along with the general public and law enforcement, while not compromising on the needs of the patients, the issues and concerns dissipate. Is this an easy task? No. Is it a difficult task? No. It is a local zoning task that is done hundreds of times a day across the State. When done correctly, dispensaries can add value to any shopping area, including, helping to rejuvenate depressed neighborhoods by renting vacant buildings, by helping to reducing crime, and by bringing new customers to the surrounding business area.. 10

11 Job Creation The underlying key to success...is to change our culture. We need to move from negative to positive. We need to stop looking in the rearview mirror and look toward the future. We need to stop being divisive and become inclusive. We have spent too much time fighting among ourselves and become our own worst enemy. This will not be simple or easy. There are no magic solutions to our problems. But with most problems, there also comes opportunity. I've been hired to represent all of the people of the state of Michigan and to move us all forward together. It will require shared sacrifice from all of us. Many have already made sacrifices. Many of us need to join those who have already contributed. When we make changes like this, we are faced with the realization many of us will have to take a step back in the short term to move us all forward together in the long term. Governor Rick Snyder, inaugural address. So, how many jobs are created in the medical marijuana industry and what type of jobs are they? Most experts say that medical marijuana will create few jobs. To determine if the experts are correct, two quick models were employed, one by the U.S. Government and another from the back-of-the-envelope: According to research conducted by Pollin and Heidi Garrett-Peltier for the U.S. Government (unrelated to medical marijuana), $1 billion dollars in new expenditures in healthcare would create 12,883 jobs related to the healthcare industry. By estimating the size of the MEDICAL MARIJUANA industry at $70,000,000, this would equate to 900 jobs. The back-of-the-envelope estimate that takes the total sales figure for the industry ($70,000,000) and subtracts profits, cost of goods sold, and expenses (not including wages) produces the total monies paid in wages. From this formula, this paper estimates that 1,100 jobs should have been created. 11

12 The back-of-the-envelope estimates for the number of growing jobs vs. distribution jobs is just about 50% each. Virtually all of the growing jobs will be new, small-business entrepreneurs. Obviously, the distribution jobs are created also by new, small-business entrepreneurs. It is estimated that 700 new, small-business entrepreneurs have been created, consistent with Governor Snyder s vision of small businesses driving the State s future. This paper did not attempt to determine the multiplier effect that the medical marijuana industry will have on additional new jobs in the State s existing industries. 12

13 Revenue and Costs Taxes, Policing, Courts, Incarceration According to the 2010 Census, Michigan s population had just short of 10 million citizens (9,969,727). The State has lost population for 5 years running ( ) while the rest of the nation grew by just under 5%. In addition, Michigan has one of the oldest populations by average age: 38.5 vs years (Michigan vs. U.S.). This combination of a decreasing population base coupled with increased average age will be a significant drag on Michigan s future. The U.S. government is in even worse shape as international organizations, such as the International Monetary Fund (IMF), are calling for major economic reform by the U.S. As the legislators ponder whether medical marijuana will be a generator of social funds or a user of social funds, the State s operating budget has been cut for how many straight years? Tough financial times indeed. Taxes The economic argument for legalization is that it is cheaper for the government to deter consumption with a higher tax than with law enforcement... Taxation, however, is a bit of a science and can succeed or fail, based on consumer behavior CNBC, Taxes: Government Gets a Piece of the Action, April 20, I ve tried very hard not to assume a tax rate that looks as though its just going to drive the market back underground, because then of course then you re just going to get zero..... To estimate the revenue from sin taxation, this report assumes that state and local plus federal governments impose excise taxes on legalized drugs at a rate equal to 50% of the retail price. This implies that excise taxation accounts for 33% of the final price to consumers. An excise tax of 50% that is imposed on top of the legalized, retail price would increase expenditure by 25% given an assumed elasticity of Jeffrey Miron, Harvard University, The Budgetary Implications of Drug Prohibition, February,

14 Marijuana was made legal by a vote. By taxing we legitimize, this may be the problem. With legalization certainly comes taxation. This paper recognizes that a myriad of options are available as taxation is only limited by the taxer s imagination and the other person s pocketbook. The position that this paper takes on taxation is that local governments should receive the major portion of the tax monies since local governments are where the actual physical convergence is/will be. Production Tax Sales Tax Personal Property Tax License Fee Local Tax Income Tax Sin Tax Whatever Tax For an estimate of the potential tax base, a back-of-the-envelope analysis made the following estimates: THE CURRENT INDUSTRY IS APPROXIMATELY 15,000 POUNDS THE CURRENT INDUSTRY IS APPROXIMATELY $70,000,000 Using Professor Miron s formula, total tax revenues will be south of the $30,000,000 mark. Again, dispensaries are the easiest and most reliable means of regulating and taxing the market. Who else benefits and indirectly pays taxes associated with medical marijuana? How about gardening supply companies, mainstream businesses that contract for an alternative means of delivery of the medication besides smoking, Consumers Energy and Detroit Edison, local municipal water and sewers, landlords, a greater shopping area as medical marijuana patient s frequent additional local businesses, the pass along rate applied to wages earned in medical marijuana and then spent in the community. While these amounts are certainly substantial, this paper did not attempt to determine the multiplier effect. 14

15 Policing, Courts, Incarceration We re locking up people that take a couple of puffs of marijuana and the next thing you know they ve got ten years they ve got mandatory sentences and these judges, they throw up their hand and say What can we do, it s mandatory sentences. We ve got to take a look at what we re considering crimes, and that s one of them. I mean, I m not exactly for the use of drugs, don t get me wrong, but I just believe criminalizing marijuana, criminalizing the possession of just a few ounces of pot, and that kind of thing, I mean it s costing us a fortune, and it s ruining young people. The young people go into prisons, they go in as youths, and they come out as hardened criminals. Pat Robinson, Christian Broadcasting Network, December, 23, 2010 First, legalization eliminates arrests for trafficking in addition to eliminating arrests for possession. Second, legalization saves prosecutorial, judicial, and incarceration expenses; these savings are minimal in the case of decriminalization. Third, legalization allows taxation of drug production and sale. Jeffrey Miron, Harvard University, The Budgetary Implications of Drug Prohibition, February Moral panic is a continuing theme used by those that oppose social change associated with medical marijuana. It s simply human nature to protect a status quo that protects oneself. Law enforcement lobbies to protect their world just like farmers lobby to protect theirs. Unfortunately, the continuing record setting arrests for marijuana possession are yielding a negative rate of return as these arrests are mostly on otherwise law-abiding Americans. In California which has a much longer history of medical marijuana than Michigan, Los Angeles Police Chief Charlie Beck commissioned an interesting study in 2009 comparing the robberies of the city's banks to the robberies of the city s medical marijuana dispensaries. What the study found was actually counter to the general negative tone being presented to the people, as a nation. It found that Los Angeles had 350 banks in the city compared to 500 medical marijuana dispensaries and there were 71 bank robberies vs. 47 dispensary robberies. Chief Beck said, "banks are more likely to get robbed than medical marijuana dispensaries." Yes, and at a rate greater than 2 times the robbery of dispensaries. 15

16 Again in California, a local newspaper examined San Diego s police reports and found that the locations that had dispensaries in the area actually had a decrease in crime. This was while some officials presented the public with information that dispensaries were unsafe for society. In Colorado, again with a much longer history of medical marijuana, Sebastopol Police Chief Jeffrey Weaver said that for the past two years, "We've had no increased crime associated (with any dispensary), no fights, no loitering, no increase in graffiti, no increase in littering, zip." Again, counter to the information presented. I don t think there is any data to suggest any payoff for greater enforcement, Miron tells CNBC.com. If you are making lots of arrests then you are spending more money making arrests, lots of prosecutions, etc. In terms of showing that differences in enforcement lead to differences in use rates, no, there isn t any evidence to support that." So how much does Michigan spend enforcing marijuana laws? Estimates are $1 billion a year. While medical marijuana does not legalize the use of marijuana by the public at large, it does reduce the $1 billion cost. Maybe by as much as $95 million. For those that have an interest in understanding the numbers being presented by some elements of the status quo community, it is suggested that you read the book Lies, Damned Lies, and Drug War Statistics by two Appalachian State University professors: Matthew B. Robinson and Renee G. Scherien. 16

17 Conclusions The conclusions reached by this white paper are very simple: Keep focused on the voter mandate of medical marijuana as the issue Keep it locally regulated as opposed to legislating from the courts Keep it organized Keep it safe, convenient, and with legal access Keep it so tax revenues flow Keep it so expenditures for policing, courts, incarceration are reduced As stated in the executive summary, the purpose of this white paper is first to educate and, second, to act as an additional guide and strength for policy makers in their decision making. The Medical Marijuana Dispensary Association (dispensaryassociation.org) stands ready to act as a resource in the policy making process. 17