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Michigan marijuana customers could see higher vaping, concentrate prices with closing of caregiver loophole
LANSING, MI -- A big change to Michigan’s licensed marijuana industry takes effect Sunday, March 1.
The latest effort by Michigan to build a self-sustaining, enclosed marijuana industry supported entirely by licensed growers and processors involves further restricting medical marijuana caregiver sales to the market.
Until Sunday, a registered caregiver may sell any marijuana product, including vaping cartridges, THC oil, concentrates, edibles and marijuana flower to medically licensed growers and processors. Beginning Sunday, caregivers will be limited to marijuana flower sales.
Caregivers and industry players knew the change was coming for months.
“Our intent has been -- and continues to be -- working toward a sustainable regulated market utilizing the supply chain as dictated by the state’s statutory authorities," Michigan Marijuana Regulatory Agency spokesman David Harns said.
While the amount of marijuana grown within the licensed market is increasing, caregivers still provide the bulk of the marijuana flower that ends up on Michigan shelves.
As of November 2018, only 2.4% of the marijuana flower sold in medical dispensaries was grown by licensed businesses. The remainder came from caregivers. Over time, that has shifted some. As of January, the Michigan Marijuana Regulatory Agency said 38.2% of the 2,968 pounds of marijuana flower sold that month came from licensed growers.
The Michigan Marijuana Regulatory Agency didn’t have data regarding caregiver supply in other product segments, Harns said.
“The law requires that all cannabis sold in the regulated market be grown and tracked from seed to sale,” said Robin Schneider, the director of the Michigan Cannabis Industry Association.
Schneider said her organization, a chamber of commerce for weed with nearly 200 state-licensed marijuana businesses as members, has various opinions on the change.
“The state has been
making an exception for the last year to help alleviate our lack of supply in the regulated market by allowing caregivers to fill that void with their excess product,” Schneider said. " ... We are grateful that the state made an exception allowing for supplemental caregiver concentrates to be transferred into the regulated system but they have always been clear that this was not a permanent solution."
While some licensed businesses see this as an opportunity for greater market share, some dispensaries and recreational stores are concerned it will deplete their access to concentrates, vaping products, edibles and more. That would likely mean higher prices for customers.
“Industry-wide, it’s going to take a very big toll,” said Matt Ruhle, the purchasing manager for Detroit’s Utopia Gardens medical marijuana dispensary. "This industry is ran by majority ... caregiver extracts, especially caregiver distillate.
" ... Caregivers have been dumping large amounts of distillate into the system at cheap prices."
The impact:
Stuart Carter, Ruhle’s boss and owner of Utopia Gardens, said he believes the new limitations are the result of unscrupulous caregivers and licensed business skirting and abusing the system.
“That’s what caused them to clamp down,” Carter said. " ... That means there is going to be a shortage ... Some of the processors are complaining because they are going to have a hard time getting oil.
“It means the (expletive) prices are going to go though the roof again.”
There is a major loophole in the tracking of caregiver products. While the Marijuana Regulatory Agency has increased testing requirements -- everything purchased from a caregiver has been required to undergo the same testing as licensed product since early 2019 -- it does not track the identity of the caregiver who sold it.
This isn’t due to a lack of ability. Each caregiver is assigned a state registration number that links to the person’s identity, and that number is entered into the state tracking system along with the product they sell into the licensed marijuana market, but the Marijuana Regulatory Agency said it’s legally barred from tracking caregiver activity based on rules created in the 2008 medical marijuana law.
A registered caregiver could feasibly never plant a seed and yet make countless sales and huge profits by acting as a marijuana broker to complicit growers and processors. This is how some out-of-state marijuana brands are able land on Michigan shelves, Ruhle said
What is a caregiver?
Debra Young of Ferndale is a caregiver purist.
She began learning to grow marijuana with a group of “experts” in about 2013 and now independently grows marijuana on behalf of her own designated patients.
“I’ve had my patients for years and years and years,” Young said.
The caregiver role was created under the 2008 voter-passed medical marijuana law with the intent of making medical marijuana more accessible to registered patients in a world where retail dispensaries didn’t exist.
The caregiver, in theory, would grow up to 12 plants each for up to five designated patients, and themselves -- if they were also registered patient. This meant a fully loaded caregiver could grow up to 72 marijuana plants.
Young has been in situations where she’s had more marijuana inventory than her patients could use or the 15 ounces of harvested marijuana she could legally possess.
“For a while, you could sell it to the dispensary direct,” she said. " ... The only way I can sell into the system now is, I would have to take my crops to a testing facility, I would have to have test it ... and then I could sell it into the system.
“But to me ... there’s no reason for me to do that. My crop goes to my patients ... There’s no reason for my to add an extra layer into it.”
Ruhle of Utopia Gardens said caregivers attempting to sell marijuana flower to a licensed business usually have their product tested independently before selling it. The purchasing business must also test it upon receipt under state rules. If the marijuana fails licensed testing for various contaminants it must be completely destroyed, a risk most caregivers can’t afford to take.
On average, Ruhle said it costs about $400 to test flower and up to $700 per test for marijuana concentrates or oil.
With the advent of the commercial market, Young believes the role and definition of the caregiver is blurring.
“That’s why I question the whole thing with with this concentrate, especially with the vape pens,” Young said. " ... I don’t know actual caregivers who have that kind of extra, you know, oil or flower, the kind of quantity where there talking about thousands and thousands of (vaping) cartridges.
" ... I know it came from the black market. It’s not a caregiver that it (comes) from, it can’t be on a 72-plant grow."
The danger
The Michigan Marijuana Regulatory Agency has recalled more than 70,000 THC vaping cartridges since December. Most, if not all, were caregiver product.
The cartridges were found to contain vitamin E acetate, an ingredient the Centers for Disease Control “strongly linked” to an epidemic of vaping-related lung illnesses that as Feb. 18 accounted for 68 deaths, including four in Michigan, and more than 2,700 hospitalization.
Vitamin E acetate, previously thought to be harmless, was being used by vaping manufacturers as a filler to increase oil supply and thereby profit.
The Marijuana Regulatory agency listed a cartridges manufactured by Savage Cannabis brand Savage Sticks, as well as other brands, in recalls Dec. 17 and Jan. 22 recalls.
MLive attempted to
track down the manufacturer. The effort initially led to an accounting office in Metro Detroit where representatives claimed to have no knowledge of the brand. It was later discovered that Choice Labs, a company that operates two medical provisioning centers in the Jackson area, had purchased the brand last summer.
Choice Labs said the vitamin E contaminated vaping products were manufactured prior to the acquisition.
The Marijuana Regulatory Agency wouldn’t confirm when the tainted product was transferred to the licensed market, so the company’s statement couldn’t be verified.
In response to the vitamin E acetate issue, Michigan temporarily banned the sale of all vaping products on Nov. 22 and ordered them tested for the potentially harmful ingredient.
There were also several strains
marijuana flower recalled in late 2018 and early 2019, at a time when dispensaries were able to buy and sell untested marijuana from caregivers.
A new supply
Randi Bagley of Lansing for years made a living cooking marijuana edibles, mostly gummy and hard candies dosed with THC oil. They were sold under her brand, High Tech Edibles, at medical marijuana dispensaries across Michigan.
It was a small business, but lucrative, she said. That slowly changed as the licensed medical and recreational marijuana markets evolved and matured.
After rules were put in place that barred Bagley from selling directly to dispensaries, she was offered a $30-an-hour job with a licensed processor. Bagley said she moved in her recipes and equipment to the licensed facility and kept producing edibles, but amid pressure to produce, she said she quit because it became more of a job than a passion.
She now work in digital marketer for a Lansing-based cannabis law firm.
Bagley said she wasn’t alone at the processing facility where she temporarily worked. Other brands were in there too, working under the licensee’s umbrella as they manufactured their own edibles and marijuana products.
Exclusive Brands, a licensed grower, processor and retailer in Ann Arbor, carries a wide assortment of brands, some that originally became popular in other states. Representatives from Exclusive Brands previously told MLive some of those products, such as vaping cartridges, were produced in house using branded packaging and recipes under licensing agreements.
Another option
In its emergency rules, the Marijuana Regulatory Agency created licenses that allow small growers to participate in the commercial market alongside vertically integrated bohemoths sometimes growing more than 10,000 plants.
There is a class A grower licenses that allows for a 500-plant operation and the micro-business license, which allows the recipient to grow 150 plants that can be processed and sold in a storefront, similar to a boutique-style business.
In order to obtain those licenses, the applicant must end any medical marijuana caregiver activity.
With so many caregivers and an existing need for product in the commercial market, Young believes businesses and caregivers will continue to find a way around government restrictions.
“There has been so much crazy stuff that has gone on with the licensing and the dispensaries for years,” Young said. “You know human nature. If there’s a way to get around stuff, I think people probably get around stuff.”
Young said she takes offense to players in the industry who broker, grow or produce marijuana solely for their own personal financial gain under the caregiver moniker.
“That’s not a caregiver," she said. "that’s somebody that’s scamming the system.”
