Wasted Opportunity: Arizona Dispensaries Want More Patients, Lower Card Costs

The Arizona Dispensaries Association says Arizona could bring in $100 million in tax revenue from medical cannabis.
The Arizona Dispensaries Association says Arizona could bring in $100 million in tax revenue from medical cannabis. Mark via Flickr
The state’s booming medical-marijuana program is due for an expansion.

That’s the recommendation from the Arizona Dispensaries Association, which released a report last week highlighting growing aspects of the state’s medical-marijuana program.

The ADA says the price of cannabis is dropping and that Arizona could harvest $100 million in new tax revenue by lowering the $150 registration fee for patients, a move that would attract new patients and encourage former patients to reregister.

“Knowing that greater access to medical marijuana in Arizona could lead to new tax revenue — money that could go to teacher pay, public safety, freeways, and other infrastructure — we clearly need to focus on expanding patient access,” said Joe DeMenna, ADA executive director and partner at DeMenna Public Affairs with his brother and father.

The figure results from a report commissioned by the ADA from Rounds Consulting Group in Tempe, but the argument goes back further than that.

During the state’s legislative session earlier this year, DeMenna’s father, Kevin DeMenna, used a similar argument while representing the ADA in advocating for a bill that would have required dispensaries to test their cannabis for THC and CBD levels as well as pesticides and bacteria.

Kevin DeMenna said a fee reduction could bring as many as 350,000 patients into the program and generate $8.7 million in addition to registration fees. The ADA estimates that as many as 300,000 patients who had cards at one point did not renew them because of high costs.

click to enlarge Joe DeMenna - DEMENNA PUBLIC AFFAIRS
Joe DeMenna
DeMenna Public Affairs
The report also claims more than 180,000 medical cards have been registered in the program; that number could expand to 200,000 by the end of the year. The figure includes more than 5,200 dispensary agents and nearly 900 caregivers.

Arizona has about 178,000 patients with an average of 3,000 patients registering every month, according to Arizona Department of Health Services reports. Next year, there’ll be about 190,000.

By the end of 2017, the medical cannabis program had 153,000 patients and sold 1.39 million ounces of cannabis flower, edibles, and concentrates, which about doubled the amount sold in 2016. Phoenix New Times estimated $310 to $370 million in city and state tax revenue just from the sale of cannabis in 2017.

Estimating about $2,400 in revenue per patient annually, the program would need to enroll only about 40,000 new patients to reach the ADA’s $100 million in increased tax revenue. Without lowering the card fee, it would take about a year for the program to increase by 40,000 at the current rate.

Just about every state with an established cannabis market has seen prices drop as more suppliers enter the field. Highly saturated markets, such as Oregon, Colorado, California, and Washington, have seen prices drop far enough to make profit difficult for some growers.

The report also covers how the patient population is aging, stating that patients 40 and older now make up most cardholders. But the population is getting younger, actually. In January 2015, 56.3 percent of patients were 40 and older. The number has dropped slightly to 54.6 percent.

Female patients, as the ADA notes, have increased from 38 percent to 40 percent of patients in the past year.

Though the program seems to have no trouble growing on its own, the ADA is determined to give it a boost.

“Prices are dropping and the number of patients continues to increase,” DeMenna said. “This report clearly shows that the marketplace for medical marijuana in Arizona is changing at an extraordinary pace.”
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