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Medical Marijuana: Prop 203's Passage Means a New Billion-Dollar Industry for Arizona

In Arizona, you can ride a motorcycle without a helmet, conceal a handgun, and buy an AK-47. And soon, if you qualify, you'll be able to smoke a big, fat doobie. Legally.

Proposition 203, the state's new medical-marijuana law, passed by the slimmest of margins once all the votes from the November 2 election were finally counted. But it passed by 4,341 votes, and now Arizona is on the verge of establishing a billion-dollar pot industry.

The official canvass of votes from the election will take place on November 29, and the state Department of Health Services has 120 days from that point to create reasonable regulations for marijuana stores, known as dispensaries. (In other states, clerks behind the counters of such places are called "bud-tenders.") No more than 20 days after that, the DHS must begin accepting applications from "patients."

What all this means is that in a few months, card-holding pot users will be able to possess up to 2.5 ounces of marijuana at any given time.

Cops will be prohibited from arresting these patients for their weed. And companies that require urine tests will be prohibited from discriminating against card-holding workers or applicants simply because they tested positive for marijuana.

Cardholders may begin growing up to 12 pot plants immediately, indoors, as long as no dispensaries are open within 25 miles of their residences. If a store is within that range, the patient can no longer grow his or her own but can buy up to 2.5 ounces every two weeks.

This won't be Southern California, with more dispensaries than Starbucks. Only one dispensary for every 10 pharmacies is allowed. For now, that means a statewide total of 124. But that's plenty.

The stores will carry different strains of high-potency sativa and indica buds, plus products made from marijuana, such as hash and a smorgasbord of edibles — including brownies, cookies, "space cakes," and weed-based drinks. These are the same sort of products on the shelves of dispensaries in California and Colorado.

You won't be allowed to smoke, eat, or drink the marijuana on the premises of a dispensary, though. The law prohibits smoking in "any public place."

The law won't just benefit people who qualify as patients. It will benefit every taxpayer in this cash-strapped state.


Before the election, Republican Governor Jan Brewer criticized the measure, predicting "compassion quickly will turn to capitalism."

As if that would be a bad thing.

Under Prop 203, current marijuana dealers, including those with links to drug cartels, will lose customers to licensed dispensaries — which can sell weed grown only by state-monitored cultivators.

The loss for the black market will be a boon for the state's economy.

Prop 203 will create jobs: "Pot grower," "pot dealer," and "space-cake baker," for example, are destined to be legitimate professions in Arizona. All dispensary pot must be grown indoors, meaning more sales for local sellers of grow lights and hydroponics equipment.

Spin-off work from the industry already is putting money in the pockets of lawyers, marketers, Web site technicians, real estate agents, and other business-service professionals.

The gross revenue of pot sales alone could easily top $1 billion a year in Arizona.

If this is the United States of Amerijuana, as a recent Time magazine cover declares, then welcome to Mari-zona.

Before the DHS issues its regulations and begins accepting applications, there'll be public hearings and backroom discussions by bureaucrats, politicians, and representatives of the new industry.

Much has been published about how strict Prop 203 is compared to similar laws in California, Colorado, and the 12 other states that have passed medical-marijuana laws. But there are good reasons to believe that Prop 203 will become the free-for-all that opponents warned against and proponents hoped for.

DHS Director Will Humble projects that about 100,000 people a year will apply for medical marijuana cards. He and other opponents of 203 claim that all sorts of people — young and old, seriously ill or not — will qualify for the cards.

If regulation goes too far, the Arizona Medical Marijuana Policy Association, a group of Prop 203 backers and would-be owners of dispensaries, stand ready to sue. And they'll be armed with a powerful state law: the Voter Protection Act.

In 1996, voters passed Arizona's first medical-marijuana measure, called Proposition 200, by a 2-1 margin. Conservative lawmakers promptly gutted the bill.

In response, angry voters came back two years later and approved the Voter Protection Act ballot measure, which prohibits state legislators from changing a voter-approved initiative without a three-quarter supermajority.

 

The act also ties the hands of DHS regulators, because rules for the industry can be no stricter than those laid out in the 34-page proposition itself.

Prop 203 also prevents the DHS from gumming up the works:

• If the agency doesn't start accepting applications from qualified patients by April, they can simply have their doctors' recommendations notarized and obtain pot.

• If the DHS takes longer than 45 days to issue a registration card, a copy of the application will work just as well. As mentioned, qualified patients could immediately possess or start growing marijuana.

• After the DHS begins accepting dispensary applications on April 1, it must approve qualified applicants within 90 days.

Here's another way to put this timeline:

Between April and June, qualified patients can begin possessing and growing marijuana, and approved dispensaries can start indoor cultivation.

By October or November, dispensaries can sell homegrown weed.


You'll need a "debilitating medical condition" to qualify for marijuana under Proposition 203.

That's quote, unquote. Prop 203 defines exactly what kind of disease or malady qualifies.

That is, cancer, glaucoma, HIV, hepatitis C, Lou Gehrig's, Crohn's, or Alzheimer's will do. So will any medical condition that causes wasting syndrome, severe nausea, seizures, or severe and persistent muscle spasms.

But all you really must have is a doctor's opinion saying you've got "severe and chronic pain."

Many — if not most — of the medical-marijuana consumers in California, Montana, and Colorado cite chronic and/or severe pain as their ailment.

For sure, it will be tougher to get a card here than in California, where patients qualify with ailments as minor as insomnia.

And before you can apply for a card, obtaining a recommendation for marijuana might take longer than the super-quick diagnoses seen in some states. DHS director Humble, an appointee of former Governor Janet Napolitano, presumably wants his Republican masters to keep him employed, so he has taken a somewhat antagonistic stance toward the law. He says he takes issue with recommendations in Colorado, which often require "only a 15-minute appointment and $150 bucks on the barrelhead."

What he could do about this is unclear. After all, many legitimate doctor's appointments take 15 minutes or less.

Perhaps when it all shakes out, some kind of hard evidence will be needed to prove pain. Then, the Arizona program might well be called "Pot for Old People."

Because, truth is, if you're older than 40 and don't qualify today, you probably soon will. Chronic pain is a reality for many middle-aged and older people, especially those injured years or decades ago. As for "severe" — that's up to you. Demanding a standard for "severe" clearly would be difficult, since people have different pain thresholds.

The most important step in getting a card will be finding a doctor to make the recommendation. But it shouldn't be hard. Prop 203 allows recommendations from a wide swath of the medical field: medical doctors, doctors of osteopathy, naturopaths, and homeopaths.

Dr. Christy Cline, a naturopathic doctor with a practice in North Phoenix, says she would definitely consider recommending marijuana for people with severe nausea, loss of muscle mass, or pain.

"There are lots of scenarios [where] I think it's very beneficial," she says. "My philosophy is keeping people away from the synthetic. They're addicted to pharmaceuticals simply to get by in life. That's the tragedy in society right now — the pill-pushing and the addiction that happens to the brain chemistry. That's where the marijuana comes in and helps."

Yet Cline knows she's going to have to watch out for people who come to her simply because they want pot.

"We'll be extra-cautious, the same way [we are] when somebody asks for hydrocodone or Ambien," she says.

New Times talked to two would-be dispensary operators who say they will have a licensed physician on their business' board of directors. Another hopeful dispensary owner said her husband is a physician.

Prop 203 doesn't prevent a physician from working directly for a dispensary.

Once you get the physician's recommendation, you turn in your application to the health department with a fee — probably in the ballpark of $50 (this hasn't been determined yet) — plus a statement pledging not to "divert" the pot to anyone who doesn't have a card.

The card expires a year after it's issued but can be renewed.

Another businessman, Steve Schafer of Michigan, plans to open a Phoenix clinic that will do nothing but connect people with doctors who will recommend marijuana. In his home state, doctors affiliated with his company have recommended pot for 8,000 of Michigan's about 25,000 cardholders, he says.

 

"There's a real need," Schafer says. "We see the people who are reaching out to us."

DHS Director Humble, charged with overseeing the planned regulations, says he'll investigate capping the number of recommendations a single doctor can make — though there appears to be nothing in the law that allows such a move.


Medical Marijuana Dispensaries of Arizona's Allan Sobol wants the planned rules to be stringent enough to avoid a public backlash against Prop 203 but loose enough to allow a robust industry.

"You don't want to kill the goose that's going to lay the golden eggs," he says.

Sure, the businesses will be designated as not-for-profit, but they could end up paying their top employees and contract workers hefty salaries, he says.

Shortly before the election, Sobol's company set up a mock dispensary in a nearly vacant strip mall near Interstate 17 and Bell Road. It was a smart move. Just about every media outlet in town dropped by to look at the display cases full of moss in mason jars and pictures of would-be patients on the walls.

It wasn't just a publicity stunt, though — his business already is making money.

The shop can't sell real pot yet, of course, but the company has been using the site to teach classes on how to open a dispensary. Sobol's recruiting would-be pot-store owners who'll use his firm to help them launch their businesses.

He expects the Bell Road location to turn into an actual dispensary eventually but says he won't own it. He says he represents the owner, who doesn't want to talk to the media yet.

In a backroom filled with folding tables and instructional posters, he speaks to New Times and about 10 other people who wandered in to chat about the new industry, some of whom claim they intend to open dispensaries.

One of the posters shows "The Math." Which goes something like this:

If there are 100,000 cardholders in the first year for the maximum 124 dispensaries, each dispensary will have an average of about 800 customers. If each customer buys the maximum 2.5 ounces of pot every two weeks, at $400 an ounce, that comes to about $1.6 million in gross sales per month.

That's about $2.4 billion a year in combined gross sales for all of the state's dispensaries.

This optimistic figure requires that each patient buy $2,000 a month worth of weed. Obviously, most people will buy less — unless they're violating the rules and sharing their maximum amount.

Either way, the Arizona dispensary business seems destined to be very lucrative — if you can get in on it.

A dispensary license will cost a maximum $5,000 for the first year, and $1,000 for each year afterward. For such a small investment, it sounds tempting, right? How tough could selling weed be? And growing marijuana is pretty easy — it's a weed.

Another poster shows all the steps necessary for the business. For starters, you'll spend a lot more than $5,000 if you want to own a dispensary. There'll be expenses for a retail storefront, security, lawyers, computers, Web support. You won't find capital for the venture at the bank, either, Sobol says, because the federally regulated institutions won't lend money to dispensary operations.

Wells Fargo, for instance, tells New Times it won't "bank" dispensaries because they're still illegal under federal law.

Sobol, who says he's been in on discussions with the state about the coming regulations, claims dispensaries will be required to buy expensive testing equipment to monitor the quality of the product.

Maybe this is just part of Sobol's sales pitch (since he'll charge clients a fee for dealing with myriad dispensary issues for them), but he contends it will cost a minimum of $150,000 to open a pot store.

Sobol knows that public opinion and policy about marijuana could change in coming years, putting all that capital in jeopardy. In this business, one serious slipup could mean worse than a lost investment. It could mean a trip to jail, because legal risks are inherent in the industry.

Dispensary employees are expected to obtain seeds within Arizona and grow them from scratch, says Joe Yuhas, a spokesman for Prop 203. He's the executive director of public affairs for the Riester public-relations company that led the measure to success for the Arizona Medical Marijuana Policy Project.

 

Prop 203 allows qualified patients to "donate" marijuana they grow to dispensaries, so it's possible that some dispensaries may open with stock on their shelves.

However, authorities will look closely at such dispensaries, and anyone caught stocking a store with illegal, non-Prop-203-approved weed (such as even legal marijuana from California and Colorado) could be arrested, Yuhas says.

The coming regulations will require state officials — and dispensary owners — to track marijuana from seed to sale, he says. If owners want to preserve their profitable businesses, he adds, they will stick to the rules.

Dispensary owners will have to negotiate with pot growers over such delicate issues as price and transportation. People with expertise in horticulture could pull in big bucks not only in the pot-cultivation side of the industry, but by contracting with dispensaries as pot-growing experts.

One catch: Prop 203 will protect the medical-marijuana industry from legal action by local — but not federal — law enforcement. The Obama administration has had a hands-off policy toward medical-marijuana clinics, but things could change in two years.

As the law stands now, dispensary owners could own and operate their own grow rooms, perhaps with one dispensary's large-scale greenhouse supplying multiple clinics. Sobol says this part of the business will be extra-tricky, because problems with grow rooms — such as employees taking product out the back door — would jeopardize a dispensary's license.

Two men in Sobol's conference room, who declined to give their names, tell New Times that they've already spent more than $150,000 preparing for their dispensary and that they've prepared a 200-page business plan they intend to submit to state authorities along with their application.

The DHS is sure to receive hundreds of dispensary applications on the first day it begins accepting them. Director Humble says he's not sure yet how he'll choose among qualified applicants.

Perhaps they'll be selected in a random lottery. Or maybe licenses will be sold to the highest bidder.

One thing's for sure: The DHS can't dawdle. Prop 203 will take effect no matter what opponents say (as Republicans have emphasized since the election: The people have spoken). Then, medical marijuana will stampede toward eager consumers.


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