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/ Wednesday, March 16, 2022
Medicinal cannabis: a viable business in a saturated market
particular operational costs, but our calculations point to 1,500 to 2,000 patients in order for the business operation to be viable. You can imagine the situation our members are facing with just a fraction of the patients needed to keep their businesses open,” said Aleczer. The industry’s Juan A. Hernández, The Weekly Journal situation is further compounded by the fact that the Regulating Board has been issuing licenses for he industry of medicinal cannabis has reach its saturation new cannabis dispensaries without an apparent policy for the development of the industry. point in Puerto Rico and “This is a new industry that has been developing dispensary and pharmacy in a somewhat organic fashion, despite the fact owners are suffering from that it is a much regulated industry,” Vélez said. dwindling patients and loss of “But the Board itself is the first sales putting not to comply with the regulations at risk an estimated $500 million imposed by Act 42 from 2017, which total investment. requires it to publish an annual According to a study report detailing the conditions of the commissioned by the Members of medicinal cannabis market. Not a the Medicinal Cannabis Industry single report has been published by As the industry (MICaM, for its Spanish acronym), the Board in the five years since its stands now there is the number of certified medicinal inception in 2017.” an average of 432 cannabis patients has dropped With fewer patients, revenues patients for every from 130,000 in mid-2020, to 119, from sales have also dropped licensed dispensary 664 as of January 2022, while the significantly. on the island. That number of cannabis dispensaries According to Vélez, medicinal is a drop of about has continued to increase. cannabis sales topped last summer 50 percent from “Since the beginning of the with about $22 million monthly. By the all-time high industry in 2017 with the passing January 2022 sales had dropped to of 908 patients in of Act 42, the Cannabis Regulating $10 million. December 2019. Board has issued 277 licenses “Average monthly sales per for cannabis dispensaries. When dispensary dropped from $133,660 in taking into consideration the 2020, to $39,423 last January,” said Vélez. number of certified patients, it is inevitable to conclude that there is a saturation of the market,” argued Gustavo Vélez, founder of Recommendations Intelligent Economics advisory firm, and author of To avoid the collapse of the industry, Vélez the study commissioned by MICaM. As the industry stands now there is an average of 432 patients for every licensed dispensary on the island. That is a drop of about 50 percent from the all-time high of 908 patients in December 2019.
More licenses are issued as the number of patients drops
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Less Patients, Less Revenues
In fact,
When compared to the U.S. national average of patients per cannabis dispensary “the difference is overwhelming.” The US national average per cannabis dispensary is 1,898, or almost five times more patients than in Puerto Rico. In the specific case of Florida –a state with some 30 million inhabitants– the number of dispensaries is 407 and the average number of patients per dispensary is 1,692, for a total of 688,000 patients throughout the state. MICaM president, attorney José Aleczer, estimated the optimum number of patients per dispensary in Puerto Rico to be between 1,500 and 2,000. “Of course every dispensary has its own
suggests the Cannabis Regulating Board go into a moratorium and stop issuing new licenses. From then on, the Board should develop a set of regional and municipal criteria under which to issue new licenses. According to Vélez, the need of such criteria is more evidently seen in the number of dispensaries operating in the San Juan Metropolitan area, where the saturation is the strongest. Furthermore, the Board should take all the necessary measures to guarantee that a report on the conditions of the industry is published annually. The study also recommends that the government should adopt a policy recognizing the economic importance of this industry for the development of Puerto Rico as a regional and hemispheric hub in the medicinal cannabis business. Finally, Vélez recommended the government to consider the possibility of granting economic incentives to the industry, very much like the incentives given to other sectors such as manufacturing, tourism and the agriculture.
This is a new industry that has been developing in a somewhat organic fashion, despite the fact that it is a much regulated industry. Gustavo Vélez, Economist
