Ohio medical marijuana: With product oversupply, industry balks at proposal to increase grow space

Sep 08, 2023

Ohio's medical cannabis growers say there's an oversupply of product, which will hurt patients in the long term. They're fighting a bill that would increase cultivation licenses. (AP Photo/Gerald Herbert, File)AP

COLUMBUS, Ohio – Ohio's licensed medical marijuana growers say there's too much green.

They say patient numbers in the state's program appear to almost have peaked. But with new grow space that has come on line in the last two years, there's now an oversupply of marijuana, industry groups say. One grower has said his unsold inventory is approaching expiration, but he's unable to sell at a level that would recover his costs to produce it. Growers are only using 40% of total cultivation space permitted by the state, the industry says.

It's hard to verify all these claims, as the marijuana firms, while highly regulated, do not have to disclose all aspects of their businesses. But a March update from the Ohio Medical Marijuana Control Program backs many of them. It's also shows that with the oversupply, wholesale prices have dropped.

That may be good news for Ohio patients, who for years told researchers and program officials that retail prices are too high. Many have said they can get better deals in Michigan's recreational program, which also has an oversupply of product at this time.

Yet Ohio's industry warns that short-term gains from oversupply may hurt patients in the long run.

They predict some businesses may not survive if lawmakers expand grow space and the licenses of processors – the companies that extract the chemical properties from the plant and turn it into edibles, patches, oils and other products. A physician who recommends cannabis said the race to the bottom may result in lower quality products.

The industry is hoping to defeat parts of Senate Bill 9, which aims to overhaul several aspects of the Ohio Medical Marijuana Control Program, including increasing grow space and processors. The legislature hasn't updated the medical marijuana law since it created the program in 2016.

Ohio's medical marijuana industry employs 6,000 people, said Matt Close, executive director of the Ohio Medical Cannabis Industry Association, which represents the majority of large-scale growers in the state, as well as some processors and about 40 dispensaries.

"SB9 would expand the number of cultivation licenses in Ohio at a time when we already have a major oversupply of cannabis," Close said. "This threatens to destroy the industry, which would harm patients and kill 6,000 jobs."

Others, including one of the sponsors of SB 9, are more skeptical about the industry's claims that it's in trouble.

"I don't believe that. If you look at who's funding the ballot initiative, it is the growers," said Sen. Stephen Huffman, a Dayton-area Republican who is sponsoring SB 9.

Some of the businesses opposed to SB 9 are behind an effort called Just Like Alcohol that's gathering signatures to put an initiated statute on the November ballot that would legalize recreational marijuana for adult use. If it passes, the new law would eventually allow even more marijuana growers in the state.

Huffman notes that the Just Like Alcohol marijuana petition would not allow new growers into the recreational program for two years, unless they already had a medical license.

"They will continue to have that monopoly, and so they’re against Senate Bill 9," said Huffman, who personally opposes recreational use.

SB 9 also would increase the number of patients who would qualify for medical marijuana, since it would expand qualifying conditions for marijuana treatment to include autism spectrum disorder, opioid use disorder and other ailments that a qualified physician believes to be debilitating.

While Close acknowledges this would provide more patients to buy product, SB 9 wouldn't likely provide enough patients to offset the increases in licensing also in the bill.

Officials in the Medical Marijuana Control Program don't appear too concerned with oversupply, or the fact that most of the available cultivation space isn't being used. Jennifer Jarrell, a program spokeswoman, noted that the program is in the process of more than doubling the number of dispensaries. Officials believe that may help with oversupply.

"The MMCP consistently reviews key program metrics, including product pricing, product inventory, and cultivation capacity. The (report) is from March, and since that time several additional dispensaries have become operational with more on track to open in the next several months," she said. "Additional dispensaries could increase demand for medical marijuana as the new dispensaries will provide patients with greater access to product."

Read: Medical marijuana: Only 22 of 73 new medical marijuana dispensaries have opened. What is the delay?

The March report, created by staff at the Ohio Department of Commerce, one of three state agencies involved in the regulatory scheme of marijuana, shows a 78% decrease in prices in recent years.

The prices examined by the Department of Commerce were transactions between cultivators and independently owned processing companies. Some growers also possess processing licenses in a "vertically integrated" business model.

In the first quarter of 2021, growers sold processers a pound of flower on average for $769. The prices began to drop, slowly at first, then rapidly. By the fourth quarter of 2022, the average pound of flower was $168.

Oversupply has reduced prices, said Close, of the Ohio Medical Cannabis Industry Association. The tumble in prices shows the real hurt that cultivators are experiencing.

One grower, Standard Wellness Company CEO Jared Maloff, told lawmakers in March that some processors can buy marijuana "for significantly below the cost of production."

"Standard Wellness alone holds several thousand pounds of inventory that is approaching expiration," he said in testifying against SB 9. "We have hundreds of pounds of top-shelf… marijuana in inventory available for sale to stand-alone processors."

But patients aren't purchasing flower for anywhere near $168 a pound, said Theresa Daniello, a patient advocate and cannabis educator from Geauga County.

The average retail price for flower around the state is $6.55 per gram, which works out to nearly $3,000 per pound.

"That price is great," she said of the wholesale price. "If that price were the real price, patients would be better off."

It's problematic that growers are sitting on product, Daniello said. Companies should sell what they have, while it's fresh. She's concerned that plant compounds such as terpenes degrade over time.

"Remember who we’re talking about, people who are disabled in Ohio, very sick people," she said.

Twenty-five medical conditions, ranging from ALS to Parkinson's disease and spinal cord injuries, are qualifying ailments for medical marijuana.

Around the time prices began to drop, state regulators allowed 13 growers to expand cultivation space, according to the March report.

The expansions occurred across the state, including in Northeast Ohio: FN Group in Ravenna and Galenas in Akron, which the state approved to expand on Nov. 15, 2021; Ascension BioMedica in Oberlin on March 3, 2022; Fire Rock and AT-CPC Klutch, both in Akron, on July 20, 2022.

There are nearly 1.9 million square feet of total cultivation space permitted by the Ohio Medical Marijuana Control Program.

-Just 40%, or 466,500 square feet, is being used to grow medical marijuana.

- 15%, or 277,500 square feet, is space that the state has authorized for marijuana cultivation but is not in operation yet.

-The majority of the space, 60%, is cultivation capacity that's not being used.

"After almost seven years of the program, only 40% of the total production capacity provided for in the statute has been realized, and the patient population has flattened out," said Close, of the Ohio Medical Cannabis Industry Association. "There is a massive oversupply problem, and adding licenses would devastate the industry, harming patients and killing jobs."

Dr. Bridget Cole Williams is a Northeast Ohio family physician and CEO of www.DrBridgetMD.com, a medical cannabis and integrative health clinic, who doesn't think the oversupply is helping patients.

"It will likely lead to potentially a lower quality of product," she said. "And what I mean by that is the processors and the cultivators are in a space where they can't get rid of what they have, and the new companies coming on the market are struggling to get out what they’re producing."

Some patients need products with high levels of CBD and CBG, also known as cannabidiol and cannabigerol. Those are cannabinoids, or chemical components from the plant believed to provide medicinal benefits. Production of those products could end if it doesn't make financial sense for a company to make them, Cole Williams said.

"My medical patients that use a lot of high cannabinoid products, it’ll be harder for them to find it," she said. "And that's already happening to be totally honest with you. A lot of the processors and cultivators aren't producing a lot of the cannabinoid varieties that are good for my patients because they don't necessarily sell as well. So it will make the situation worse, it will not be patient friendly anymore."

The number of patients in Ohio's medical marijuana program appears to have just about peaked.

When the first dispensaries opened in January 2019, percent of growth of registered "unique" patients grew by double digits, month-over-month. Unique patients are the registered patients who have purchased marijuana, since many Ohioans register as patients but never buy anything from a dispensary

In recent years, growth has slowed.

On March 31, there were 331,465 unique patients who purchased medical marijuana, a 2.8% increase from February's 322,486.

February's number was 2.3% higher than on Jan. 31, when there were 315,096 unique patients.

That's a lower rate of growth compared to January, February and March of 2022.

In January 2022, there were 226,697 unique patients. That number grew by 4.6% in February 2022, when there were 237,040.

Between February 2022 and March 2022, growth was 5%, to 248,841 unique patients.

"The market for medical marijuana in Ohio is not a free market," said Close, of the Ohio Medical Cannabis Industry Association. "Patient access to the program is limited by the requirement of regular and expensive doctors’ visits and state fees that are not covered by insurance. Product demand is further limited by restrictions on purchase amounts, potency caps, and limitations on allowable forms and methods of administration. Finally, limitations on advertising have contributed to a general lack of awareness and knowledge about the program itself. Consequently, Ohio's patient count has flatlined."

Laura Hancock covers state government and politics for The Plain Dealer and cleveland.com.

If you purchase a product or register for an account through one of the links on our site, we may receive compensation.