In 2016, Arkansas became the first “red” state to legalize medical marijuana, yet an extremely slow rollout dimmed many advocacy groups’ joy. Despite the glacial pace, Doctors Orders RX eventually opened the first medical dispensary in May of 2019. Medical marijuana patients are now flocking to get their prescriptions, but strict limits on dispensaries and cultivation have driven prices up beyond the means of many patients.
Amendment 98 was made to the Arkansas State Constitution outlining the market structure as it pertains to legalized medical marijuana. The amendment permits up to 40 dispensaries in the state spread across eight zones (38 have been licensed, of which 33 have officially opened). Amendment 98 also allotted for eight cultivation facilities (all eight licenses have been issued). However, no cap was provided for the number of cannabis cultivators that can grow. This keeps the prices in dispensaries extremely high compared to surrounding states.
For example, neighboring Oklahoma has strict medical laws, yet the state has opened nearly 1,700 dispensaries. Oklahoma’s pricing averages $5-10 per gram, while Arkansas’s average hovers around $14 per gram. While specific strains and dispensaries’ overhead costs are just a few examples of how the price gets driven up, the vast majority of this price difference can be attributed to a lack of market competition. Cultivators can charge higher fees because they only have limited competition, and in turn, dispensaries can do the same. Unfortunately, medical marijuana patients are the sufferers in this scenario.
The law of demand postulates that the higher the prices go, the fewer consumers will demand it. This economic law has been tried and true regarding many markets; it does not stand up when the market is controlled and contained to a specific number of suppliers. For example, since the first dispensary opened in 2019, almost 67,000 pounds of medical cannabis have to be sold to patients in Arkansas. Nearly 80,000 patients have active cards (only 30,000 active cardholders were estimated by 2021.) The Arkansas Department of Finance and Administration has said that since 2019, sales have surpassed the $400 million mark.
Clearly, the demand is high but matched by high prices, which has led to a number of these cardholders feeling extremely exasperated. Some patients even blame the cost on why they consider or have gone back to opioid prescriptions for pain management. Many consumers are also buying cannabis illegally because of the reduced costs. More still cross into bordering states to purchase cheaper medical marijuana and illegally drive it back into Arkansas. The high demand for medical marijuana has begun to spill out over the borders Amendment 98 created.
So with significant market potential in a heavily restricted market, are there any solutions for bringing down costs? Cannabis advocates have begun collecting enough signatures to put the legalization of recreational marijuana on the 2022 Arkansas ballot. The legalization of recreational cannabis would undoubtedly lead to more dispensaries and cultivators, dropping the cost per gram. With more competition and lessened restraints for cannabis consumers, the recreational and medical markets would see more customers. Another potential solution is lawmakers returning to Amendment 98 to see what changes could improve the market structure. As of now, Arkansas has no pricing control over cannabis, which leads to inflated prices; established control could help regulate how much cultivators could allow to sell and price out to the dispensaries. State legislators or ballot initiatives could create such changes; whichever option Arkansas goes, there is little debate that change is a necessity.
Arkansas is new to the medical marijuana world, and it is natural for any state government to hit some roadblocks when exploring a new market. Since one of the biggest hurdles is the extreme price hikes, eyes will be on Arkansas come 2022 to see what initiatives or amendments the state tries to make. Non-cannabis consumers and medical marijuana patients alike agree that the steep prices hurt people who genuinely need cannabis for medical problems. As demand increases, one can only hope the opposite begins to happen with prices. There is no reason for a mylar bag of medically-prescribed cannabis to break the bank of a suffering patient.