Posted: March 01, 2010
Joint Venture: Too legit to quit?
Colorado's fastest-growing cash crop causes an uproarLisa Ryckman
Ralph Morgan of Evergreen Apothecary
On a sunny Saturday in January, 72 people paid $250 each to hear Dana May - aka "Professor Marijuana" - divulge the secrets of successful cannabis cultivation.
The self-proclaimed best grower on the planet, May tells the group he can produce in 43 days what typically takes four to five months, from start to finish, seed to weed. He has three rules, and the first of which - and possibly most important - is the KISS principle: Keep It Simple, Stupid.
"Less is more," May says. "And define your goals. If you give this plant what it wants when it wants it, it will do amazing things."
A photo flashes up on the screen: It's May holding the fruit of his labor, a pampered plant bushy enough to be a small Christmas tree. An appreciative murmur ripples through the room. This is what many of the attendees - mostly middle-aged, mostly male - are here to learn: how to jump into the market for medical marijuana (also known as MMJ or medical cannabis), arguably the state's fastest-growing cash crop.
It's a startup like no other: simultaneously booming and hamstrung, besieged on one side by ever-increasing demand for a limited supply and on the other by opposition from law enforcement, legislators and residents who view medical marijuana dispensaries as more akin to liquor stores or porn shops than pharmacies. Legitimized by voters nearly a decade ago but still illegal under federal law, medical marijuana remains saddled with a "Reefer Madness" image that could only be overcome by a doozy of a marketing campaign, if then.
"This is a controversial business, and government is one of its most hostile enemies," says Denver attorney Robert Corry, one of the state's best-known go-to guys for patients, growers and dispensary owners who find themselves crosswise with the law. "Give them any rope, and they will hang this industry. And there's plenty of rope."
Compassion is at the heart of the matter: Amendment 20 to the Colorado Constitution legalized medical cannabis for use by people suffering from a variety of debilitating illnesses, many of whom say it has weaned them from narcotics and given them a new quality of life. With the recommendation of a physician, they can either grow their own or obtain it from someone they designate as a "caregiver."
At last count, more than 19,000 people had been registered as patients with the state Department of Public Health and Environment, and there are at least another 19,000 in the pipeline, according to state Sen. Chris Romer, the Denver Democrat who has been trying to craft some kind of dispensary regulation on the state level. "There are those of us who believe there will eventually be 60,000," he says.
The amendment is directed at patients; it has nothing to say about dispensaries, which were under the public radar until several things happened. In 2007, the courts threw out a state health department rule that imposed a five-patient limit per caregiver; last summer, the department declined to reinstate it. And a year ago, U.S. Attorney General Eric Holder announced that the Justice Department would no longer go after people who followed state law for using, prescribing or distributing medical marijuana.
Suddenly, a good deal of the risk went out of this risky business, and a crop of dispensaries popped up seemingly overnight. By some counts, there are more medical marijuana dispensaries - 200 or more - in the greater Denver metro area than there are Starbucks.
Buying medical marijuana, however, is generally more complicated than picking up a grande latte. Patients need a doctor's recommendation, which many physicians have been reluctant to supply because of fear of possible repercussions from medical boards or the government. Despite that, more than 800 different doctors have signed for patients, according to the state Department of Public Health and Environment.
"I'm willing to do so because the evidence I have studied is so strongly supportive of the use of cannabis in a great many situations," says Dr. Alan Shackelford, a Denver internist, whose practice includes Amarimed, which evaluates people who think cannabis might help them.
"This is not a bunch of stoner kids trying to get around the law," he says. "The vast majority are productive adults for whom this is an important part of their medical regimen."
Efforts to regulate on the state level might well focus on the doctor-patient relationship, Romer says, including putting an end to doctors in dispensaries - a kind of one-stop shopping setup that he believes can be open to abuse.
On the local level, however, the focus has been the dispensaries themselves.
"I think frankly and candidly we have a few dope dealers in this business, and I think we're going to weed them out," said Denver City Councilman Charlie Brown, whose regulations - including prohibiting medicating at dispensaries and putting them 1,000 feet from schools, day cares and each other - passed the council unanimously in January.
Brown's visit to California convinced him that the council needed to jump on regulation; Denver did in several weeks what its Los Angeles counterparts had been arguing about for four years. But most of the nearly 400 people who showed up for the vote weren't there to pat the council on the back.
"I find it incredible that the Denver City Council is sitting here trying to find a way to shut down 300 new businesses," said Laura Kriho of the Cannabis Therapy Institute, an education and advocacy group, and one of nearly 100 people who signed up to have two minutes' say at the meeting.
The majority opposed the new rules, which they consider a solution in search of a problem. But others agreed that the business of medical marijuana is an industry in search of regulation - the kind that could corral its Wild West spirit without breaking it.
Local and state government have been sent into a veritable frenzy of zoning and regulating. Even before the Legislature began its session, medical marijuana had already turned into its most contentious issue. State Rep. Tom Massey, a Poncha Springs Republican, received bomb threats after he said he would sponsor a bill that could close dispensaries.
At press time, the state Senate was considering a bill that would require doctors who make medical cannabis referrals to give patients physical exams first and would bar dispensaries from paying doctors to make referrals. In the House, a Romer-sponsored bill would require dispensaries to operate as nonprofit health centers and grow their own marijuana. It would also distinguish between constitutionally protected caregivers - those who grow and supply medical cannabis to five or fewer people - and dispensaries, which would be subject to local regulation.
State and federal law collided head-on in February, when armed DEA agents raided grower Chris Bartkowicz's Highlands Ranch home, arrested him and seized 16 boxes of marijuana. Bartkowicz had a state license and documentation for patients; Jeff Sweetin, the special agent in charge of the DEA's Denver office, said he was doing his job enforcing federal law. In a letter to the Justice Department, Corry accused "rogue DEA agents" of violating the department's own guidelines by waging a "campaign of fear and intimidation" that would deprive suffering patients of much-needed medication.
In the midst of all of it, the amendment's intent can get lost in the shuffle, says attorney Brian Vicente of the nonprofit patient advocacy group, Sensible Colorado. The whole idea was to ensure access to marijuana for people who need it.
People like Jason Lauve, confined to a wheelchair after his back was broken when a snowboarder slammed into him. He registered with the state and was growing his own medication in his home when a neighbor turned him in. Boulder District Attorney Mary Lacy charged him with possession of more cannabis than was medically necessary, but the jury disagreed. Lauve rolled out of the courthouse with his 34 ounces of medical marijuana in a box on his lap.
Lauve wants to make sure that lawmakers hear his voice - and those of others who rely on Amendment 20 and cannabis to make life bearable.
"The market is going to drive all those who don't care out of the business. Because the quality won't be there. And the quality has to be there for the patient. The cost has to be there for the patient, and the safety," Lauve says.
"Dispensaries or storefronts are often the best way to access medical marijuana in a safe and dignified manner," Vicente says. "Some of those business interests and patients are trying to legitimize and regulate and control it. On the other side are law enforcement and the attorney general who are trying to destroy those new businesses and really weaken the state's law.
"It's a bit of a pickle," he says, in what is perhaps the understatement of the year.
It's also a business model turned on its head, one where the customers come first - literally. Under the law, patients can appoint a caregiver to supply them with their medicine, and caregivers are allowed to grow six plants per patient. Dispensary owners typically start by getting their own patient cards, then seek out friends and family who might qualify. Five patients equals 30 plants, et voila! A business is born.
On the same day that grower Dana May was giving his seminar under the auspices of the American Cannabis College ("Growing since 1968") in a hotel off Interstate 70, California-based Greenway University was hosting a sold-out, two-day seminar at the Westin Tabor in downtown Denver. Attendees were mostly middle-aged, mostly professional people looking to make a career change - a far cry from the stereotypic stoner growing plants in his closet.
"Compliance is our driving force," says Greenway CEO Gus Escamilla, whose organization advocates quality control from seed to sale so that consumers know exactly what they're buying. He supports regulation as a way to both legitimize and validate the industry.
"I applaud legislators who are actually taking a stance and establishing ordinances and rules to play by. The industry is desperately in need of that," Escamilla says, noting that more than 600 new patients register with the state every day. "That's phenomenal growth. (Lawmakers) are staying one step ahead and trying to tax and regulate. That's a good thing."
It's an evolving business that has created more business for everyone from the real estate agents who track down storefronts for dispensaries and warehouses for growers to the security specialists who try to make those buildings tough to crack. And there are the spinoffs - education seminars like those of May or Greenway, labs that test for quality, people who sell hydroponics equipment or make the world's best vaporizers or bongs.
"Job-creating, tax-paying, space-renting, employee-hiring - this is a positive thing," says Corry, whose own marijuana-related legal business is booming, too. He has formed the Colorado Wellness Association, a kind of cannabis-centric Better Business Bureau "committed to creating a fair and ethical regulatory framework for the State's wellness and medical cannabis community."
Like Escamilla, Corry was pleased when Colorado Attorney General John Suthers - no friend to the medical marijuana business - said the state can collect sales tax on cannabis and that dispensaries must get retail-sales licenses from the state to do business.
"With taxation comes legitimacy," Corry says.
Corry would like it to include a password-protected cannabis "commodities market" to bring together wholesale growers and dispensaries. More supply would lower prices, which can be $400 an ounce, definitely more than it might cost on the street. But patients - most of them middle-aged, 90 percent using cannabis for severe pain - pay the premium to buy it safely.
"It's not a bunch of hippies getting stoned - these people are sick," says grower May, who suffers from a nerve ailment that causes intense pain. "Many of them are on disability, but what choice do they have? It doesn't matter how much it costs. It helps."
All the commotion over cannabis begs the question: In an economy struggling to pull itself out of the toilet, can governments afford to ignore the tax revenue bonanza sprouting up before their eyes?
"Take advantage of it," says Bob McGowan, professor of management at the University of Denver's Daniels School of Business. "I'm not a Boulderite, but from a business standpoint, why not? Why refuse a new revenue stream?"
There's big emotion on both sides of the dispensary debate, but those in the middle take a more pragmatic path. They include commercial landlords who have finally found responsible tenants for long-vacant buildings, lawyers, accountants and website designers who cater to new businesses and publications buoyed by new advertising. The alternative weekly Westword is packed with cannabis ads and has a medical marijuana writer. The state's largest newspaper, the Denver Post, began accepting such ads in August.
Then there are people like Dana May's business partner, Cameron Telfer, who uses his years of above-board contracting to design and build grow rooms, which can cost anywhere from $1,000 for a small, in-home room, to $25,000 for something much larger.
"I hope this is headed to a well-defined, reasonably regulated, mainstream business," he says. "Nobody would blink an eye if you said, ‘I'm opening a Walgreens down the street from a school.' This should be the same way."
There are 14 states with medical marijuana laws on the books, but Colorado is the only one where it is part of the state constitution. Advocates wanted to give it the force of the state's highest law to keep government from fiddling with it too much, and so far, the strategy has worked.
When Centennial tried to shut down CannaMart and ban any others, it was soundly spanked in court. In overturning the city's action, Arapahoe County District Judge Christopher Cross acknowledged that cannabis was illegal under federal law but protected under the state constitution. Cities can enforce zoning laws, he said, but they must uphold state law, not enforce federal ones.
"The voters have spoken," Cross said. "It is not a criminal act in the state of Colorado."
But it has become clear that some people weren't aware of the implications of their vote for Amendment 20 nearly a decade ago. At a community meeting in the Stapleton neighborhood in northeast Denver, the scent of not-in-my-backyard hung heavy in the air - nothing against medical marijuana, just not in the space formerly occupied by a kid-friendly coffee shop, Perk & Play, which closed in the fall. The new tenant, 5280 Wellness, would be grandfathered in under the Denver City Council's new restrictions, which meant it could operate even if it is found to be within 1,000 feet of two nearby schools.
Nearly 100 people turned out, but the new dispensary owners weren't among them. City Council members Michael Hancock and Carol Boigon came to speak and answer questions, as did Romer, arriving late from a similar community meeting across town.
"We need an adult conversation about this," Romer said. "We need to get control of a business model that has spun a little out of control."
It wasn't going to be easy, he told the group. Law enforcement and medical cannabis supporters seemed unwilling to compromise. "There aren't enough votes in the (Statehouse) to shut down all these dispensaries," he said, adding that he wouldn't want to do that, anyway.
There are definitely people on the registry who don't belong there, Romer said, and just as surely, thousands with a legitimate need and a constitutional right to their medication.
"I'm not going to force them back into back alleys," he said.
Most of the opposition seemed to spring from a fear of the unknown, something the City Council struggled with as well. "We don't know what these dispensaries will mean to our community," Hancock said.
But Greenway's Escamilla believes time and responsible business practices will allay any fears.
"Their concerns are warranted, but the only way to overcome them is through day-to-day operation, doing things right," he says.
Doing things right means different things to different people. Down on South Broadway in Denver, the number of medical marijuana dispensaries now rivals the number of antique shops.
Ralph and Heidi Morgan's Evergreen Apothecary shares a building with an insurance agent. Inside, it's bright and modern, with an expansive front window and glass shelves that eventually will display a variety of natural products.
Patients go up the stairs and through a locked door to the actual dispensary, where jars hold fragrant buds of cannabis sativa and cannabis indica with names like Sour Diesel, Northern Lights Haze and Purple Kush - $50 to $60 for an eighth of an ounce.
Both Morgans have backgrounds in health care, so this business seemed like a good fit, one that could be both professional and compassionate. They took Greenway's course - "A high tide raises all boats. Greenway is a surge in the tide," Ralph says - and visited other dispensaries to determine what patients they could best serve.
"Our niche was people who were really looking at this as a wonderful alternative to a stew of narcotics," Ralph Morgan says. "They've got MS, they've got fibromyalgia, HIV - people who haven't been smoking marijuana as a lifestyle but have been considering it as an alternative to heavy-duty narcotics."
One of their first customers was a Vietnam vet who came in with a plastic grocery bag filled with 26 different narcotics; another was a retired surgical nurse with multiple sclerosis. Medical marijuana proved transformative for them both. Those are the stories that resonate for the Morgans and make the risk worthwhile.
"This industry's extremely volatile. This could all just be shut down in a week," says Ralph Morgan, who supports reasonable regulation. "It will evolve, and it needs to. But too many people are aware of the legitimacy of it. It's not going away."
Steve Horowitz of Ganja Gourmet
Three blocks south at the Ganja Gourmet, $30 will get you the Dinner Buzz Special: meat or veggie laganja (lasagna) or Panama Red pizza, a dessert - brownies, anyone? - and a specially blended joint.
This could be the meal that never ends.
"Talk about killing two birds with one stone!" Jay Leno joked on his show.
Owner Steve Horowitz hopes at some point, he'll be laughing all the way to the bank. Since opening in December, business hasn't been all that brisk, despite the growing demand for cannabis and plenty of media attention for the Ganja Gourmet.
He understands why people are apprehensive about the proliferation of dispensaries.
"Sure, it is pretty weird with all these businesses popping up with the big neon marijuana leaves," Horowitz says. "It's definitely a big jump from an illegal product to a product that's being advertised so aggressively. But the good news is, it's going to grow. And people are going to get used to it."
And while he's waiting for that to happen, Horowitz has no doubt the state is going to leave dispensaries open.
"My biggest problem today is figuring out how to pay the sales tax I have due on Thursday, and it's a big number," he says. "Dispensaries are the only thing doing business in this economy, and we're helping people on top of that. I think we'll be regulated, and that's fine. I'm all for having rules to follow."
The Ganja Gourmet takes a somewhat light-hearted approach to the business: All the employees wear wildly tie-dyed shirts, and a giant poster of Mona Lisa smoking a joint the size of a cigar gazes serenely down at the patients who choose to eat their cannabis-laced cherry cheesecake at the counter.
"Our food is fantastic," Horowitz says. "Even if it wasn't medicated, it would still be fantastic.
"I think that I'm absolutely set to succeed."
Lisa Ryckman is the Associate Editor/Online at ColoradoBiz. Contact her at email@example.com.