2012: The First Stage of the Medical Marijuana Bubble

August 2, 2011 No Comments by Arizona Dispense

Within the last two decades, there has been an emerging growth trend in the American medical marijuana industry. Ten years ago, few people could have predicted that the Washington D.C. Dept. of Health and the Arizona Dept. of Health Services would simultaneously be implementing dispensary-based medical marijuana programs.

An upward trajectory is occurring because the majority of patients utilizing medical marijuana as a complementary medicine are baby boomers who are experiencing chronic pain symptoms and cannot obtain relief through traditional therapeutic models. Seasoned investors know that these individuals have higher levels of discretionary income and prefer product consistency through legal and streamlined channels.

The common misperception about dispensaries is that product segmentation caters to individuals in their 20s and 30s who smoke medical marijuana. However, the latest patient report published by the Arizona Department of Health Services shows that 59.9% of medical marijuana patients are over the age of 40. Also, sales figures from dispensaries show that edible products and tinctures made from plant extract are more popular among the patient population. Medical marijuana administered orally is more potent, causes no lung damage, and generates substantially higher margins than its smokable counterpart.

The political risk associated with medical marijuana is on the decline as former U.S. Attorney and current New Jersey governor Chris Christie(R) started implementing his state’s medical marijuana program on July 19th, while Barney Frank(D) and Dana Rohrabacher(R) have sponsored a bill that would leave marijuana regulation to the states. With over $14 billion worth of medical marijuana sold in the state of California every year and $9.9 billion spent annually during the debt ceiling crisis, federal agencies have a hard time justifying enforcement against state-regulated programs. Also, which lawmaker wants to prosecute military veterans who effectively use cannabis for chronic pain and PTSD?

The footprint of state-regulated medical marijuana programs will continue to expand as Illinois, Maryland, and New York are the next growth regions for this sector in the next 12 to 18 months based on the strategic plan set forth by the Marijuana Policy Project. We project that the current growth pattern is the beginning of a bubble where legislative reform on federal and state levels will lead to widespread interstate competition and price normalization by 2016.

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