Should Oregon Combine Medical and Recreational?

Oregon

One of the announced goals of Initiative 91, through which Oregonians voted to legalize recreational marijuana, is to prevent the revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels. How this might be achieved in a state where medical marijuana is more lightly regulated than recreational marijuana remains a puzzle. Is the solution to combine the two sides of the industry, as seems to be on the horizon in the state of Washington?

In theory, medical and recreational marijuana could continue along vastly different paths, or the two systems could co-exist in parallel fashion under similar regulations but overseen by different agencies, or medical marijuana could be subsumed into the highly regulated recreational scheme. Each alternative has its proponents.

 

Medical vs. Recreational Regulation

The Oregon Health Authority regulates medical marijuana dispensaries, but not growers or manufacturers. The OHA does not set quality assurance standards or require product tracking.

The Oregon Liquor Control Commission is in the process of formulating regulations for the recreational industry created by Initiative 91. These are likely to cover advertising, seed-to-sale tracking requirements, quality assurance, packaging and labeling and security arrangements.

The heaviest consumers, the 5 percent who account for as much as 70 percent of Oregon’s total consumption, are expected to avoid the regulated recreational market, relying instead on the black market and the medical marijuana program, according to the OLCC. The situation could quickly devolve, as has happened in Washington, to one in which the legal recreational market struggles to survive as it is undercut by other sources.

This, according to many, is the reason that the medical and recreational regulatory systems should be harmonized. Of course, according to the anecdotal evidence offered by blog commenters, many patients would rather see the medical system undisturbed, at least in part, to preserve alternative strains useful in treating some medical conditions.

 

One Track or Two?

In an effort to ensure the integrity of the recreational system, the OLCC argues that medical marijuana should not be available at retail locations until it is subject to all the requirements of the recreational system, including seed-to-sale tracking.

The report acknowledges, though, that with the two track plan, recreational marijuana would begin with the potential of only about 20 percent market penetration of total Oregon marijuana consumption. That best case scenario depends upon the recreational industry’s ability to demonstrate its superiority in quality, security, convenience and price.

It seems like a very tall order for a fledgling industry in competition with a mature market. The OLCC’s argument actually makes a powerful case for combining the two sides of the industry under OLCC regulation. Some see this as a power grab; some see it as an effective way to deal with black market competition.

In a recent editorial, the Oregonian recommended a system of parallel regulation, at least for a few years, before proceeding to a discussion of full combination.

Still missing from the debate, however, is the issue of the establishment of a patient registry, a controversial element of Washington State Senate Bill 5052 that would permit registered patients to access non-recreational products and to pay reduced tax rates. A registry could also be the first step toward medical marijuana reciprocity between states, as is currently taking shape in Nevada.

Oregon, like states in the second and later waves of legalization, has the opportunity to benefit from first wave experience. It is important to create a regulatory structure that does not doom legal retail marijuana to competitive failure from the outset.

Anne Wallace is a New York lawyer who writes extensively on legal and business issues. She also teaches law and business writing at the college and professional level. Anne graduated from Fordham Law School and Wellesley College.

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