In this 2017 file photo, medical marijuana caregiver Dawson Julia stands in a grow room in Unity. Photo by Shawn Patrick Ouellette/Staff Photographer

More than one-fourth of the Mainers who dispense medical cannabis have closed shop in the last two years.

A new report from the Maine Office of Cannabis Policy examines the “mass exodus” of 1,350 caregivers – individuals registered with the state to supply medical-use marijuana for patients.

Accounting for those who joined the industry, there’s been a net loss of about 950 caregivers from the end of 2021 to the beginning of 2023. There were 2,070 caregivers as of March 31, according to state data. In 2021, there were 3,032. At its peak in 2016, the number was 3,257. There are about 106,000 patients with cards that allow them to receive cannabis for medical treatment.

State regulators point to market conditions as the primary reason caregivers are leaving, but industry members say that’s not the whole story. 

“This survey makes clear that the biggest issue facing the medical program is oversupply,” said John Hudak, director of the Office of Cannabis Policy, in a statement. “That oversupply has led to massive drops in wholesale price, making it difficult for registrants to endure mounting energy costs and other market conditions.” 

One indicator of saturation, according to the report, is that despite the departure of so many caregivers, supply has been uninterrupted.

The report also identifies high utility and business costs, competition with the adult-use market, and banking regulations and fees as drivers of the drop-off. Banking is difficult for many cannabis businesses because the drug is still illegal at the federal level.

REGULATORY THREAT

All this is true, according to Mark Barnett, chair of the Maine Craft Cannabis Association, but some caregivers have also been fed up with what he called a “constant regulatory threat.”

“Every single year we deal with some existential threat to our ability to operate from our own state government,” he said, adding that people are “discouraged and disenchanted.” 

The medical market has been fighting off new regulations for years. Most recently, a 2022 law requires Maine Legislature review of attempts to make rule changes for the market.

The report places the blame for overproduction squarely at the feet of the Legislature, which the Office of Cannabis Policy says has refused to update relevant statutes for five years even as the industry has transformed. 

For example, the OCP cites the lack of an inventory tracking system, which is required in the adult-use market but not for medical-use cannabis products.

Caregivers, however, have repeatedly pushed back against a mandatory track-and-trace system, which they say would be onerous and costly. 

“The legislative failures in these areas and others, often favored by industry members, have caused damage to many small business owners,” the report says.

Still, the data from the OCP survey represents only a handful of providers who have left the industry. The response rate was just 8% – 117 completed surveys out of more than 1,300 people who were contacted. 

Barnett said he was encouraged to see the office was working to collect data on the market. It’s a step in the right direction, he said, although he cautioned against reading too much into the report given the small sample size.

A PROBLEM FOR BOTH MARKETS

Oversupply is also a growing concern in the adult-use market, as prices continue to fall and the number of cultivation sites nearly matches the number of licensed stores.

Maine is currently home to 89 licensed cultivation sites and 121 licensed adult-use stores, according to state data. Plus, there are another 66 cultivation sites and 93 stores in various stages of the approval process.

The average price for a gram of adult-use flower, or bud, was $8.04 in March, according to the OCP. That’s just over half of what customers paid when the market first opened in October 2020. A gram is enough to roll two or three joints, depending on size.

State officials now say that Maine is at a threshold, where some Maine growers aren’t making enough money to cover their expenses despite continuing demand. 

Sales are still growing – they nearly doubled last year – but they’re not keeping pace with the increase in production. Maine would need to eliminate 60% of its cultivation sites – and not allow those that have been approved to go into business – to achieve market equilibrium. 

The Legislature is considering two bills that could prevent more small businesses from leaving the market. One would give the state the authority to temporarily stop issuing new adult-use cultivation licenses or allowing expansions if the average price falls 20% below the previous year’s average, or if the volume grown over three months is three times greater than the previous year’s. The second piece of legislation would effectively reduce the maximum size of a newly licensed medical- or adult-use grow operation to 7,000 square feet.