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Marijuana Dispensary Plan Defies Business Logic; Politics Replaces Economics 101

As New Times and other news media reported on Monday, the latest proposed medical pot guidelines restrict the number of dispensaries to arbitrary boundaries known by their cute acronym: CHAAs. Each of the 124 state-licensed dispensaries could inhabit no more than one CHAA, and would be selected at random from the pool of applicants.

The state Department of Health Services drew up the Community Health Analysis Areas in 2005 to help with statistical reviews, and now it's using them to express the opinion that home-grown operations are bad. Not everyone shares that opinion. But putting aside the legalization issue, this plan is -- we've gotta say it -- half-baked.

To keep Arizonans who qualify for medical marijuana from growing their own pot, the DHS plan makes a mockery of normal business sense.

Instead of putting the medical pot stores near their potential customers, it swipes potential operation licenses from population centers and grants them to rural areas that probably can't use them. The idea is to blanket the state with 25-mile-radius circles, because the new law -- crafted in part by people who want to own dispensaries -- prohibits home-growing when a dispensary is open within 25 miles.

The economical illogic of it all is especially striking if you compare the situation to how pharmacies are spread throughout the state, as one of our intrepid readers has done.

The reader's a guy who wants to open a dispensary, and he asked us not to divulge his name or which part of the state he's eyeing for the business. He sent us a spreadsheet and some PDF documents he put together in the last couple of days; we've published them in links below for your enjoyment and/or scathing criticism.

Here are some of the highlights of his number-crunching:

* There are really only 107 CHAAs for entrepreneurs to consider moving into. Nineteen are on Indian lands. (As DHS Director Will Humble mentioned at the news conference on Monday, those 19 possible licenses -- or maybe it's only 17, since there are 126 CHAAs and only 124 licenses to grant -- could be added to other CHAAs next year if the tribes decide not to participate in the program.)

 

* Forty-three of the dispensaries would serve just 11 percent of the state's population, while another 43 stores would serve 72 percent of the population.

* Proposition 203 limited the number of dispensaries to ten percent of the pharmacies. There are 801 pharmacies in Maricopa County, according to the state Board of Pharmacy, so you'd think there would be about 80 dispensaries in the county. Pharmacy owners have probably figured out the best possible locations to do business, right? Maricopa, however, has only 41 CHAAs, and therefore would have just 41 dispensaries.

* The population in many CHAAs seems too low to support a dispensary business.

The last point shows that a home-grown scene is probably inevitable in parts of rural Arizona, because dispensaries that operate there might not find enough customers to succeed.

Greenlee County, for example, now only supports one pharmacy. Could the county really support a dispensary, which would offer a much smaller variety of products for sale? Doesn't seem likely. Then again, maybe the dispensary could be inside the pharmacy.

In any case, here are our reader's docs:

 

List of 20 smallest CHAA zones

Dispensaries and pharmacies by population and CHAAs

CHAA zone summary

Board of Pharmacy's list of pharmacies in Arizona


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