The Challenges Of Doing Business In Medical Marijuana In Pennsylvania

Photo Credit: David Radin

Ray Boyer, a partner with PurePenn, opened a facility in McKeesport to produce pharmaceutical-grade capsules, ointments, tinctures and oils that patients with prescriptions can purchase at licensed dispensaries. Formerly chief financial officer at Bechtel, he decided to open PurePenn partly because it will create jobs in the once thriving, but now economically depressed McKeesport area. Already employing 25 workers, he expects the plant to employ 75 when they’re at full capacity. Their first products will hit the market in April.

Boyer was one of the panelists of local business people convened by the Pittsburgh Entrepreneurs Forum last week. With Pennsylvania legalizing marijuana for medical uses,  the goal was to help local business people understand the law, its implications, opportunities and risks.

Their clear message? Although the substance is now legal in the Commonwealth, it remains illegal according to Federal law. That means higher risk for would-be entrepreneurs entering the trade.

Panelist John Fetterman, mayor of Braddock, said the market for medical marijuana in Pennsylvania is anticipated to be $150 million in its first year.

“Who has ever been in the Squirrel Hill marijuana dispensary?” he asked the crowd. Only a few sheepish people out of the approximately 80 attendees raised their hands. Fetterman said the dispensary is like the “Apple Store meets cannabis.”

Both Boyer and Fetterman had personal stories of people dear to them who suffered from pain that could be lessened by medicinally applied marijuana. So did Jean Novak, the sole lawyer on the panel, who firmly pointed out that her views were her own, not those of her firm.

And yet she sees the challenges to businesses: Because federally there is no such thing as legal marijuana, she explained, you can operate a marijuana business in strict accordance with Pennsylvania law, yet still be at risk. Under federal law, your business could be shut down at a complete loss, and without the benefit of bankruptcy help, because bankruptcy is a federal remedy. She went further into this set of risks, describing how a marijuana business can’t use a federally chartered bank and is a cash business without the aid of charge cards.

Two members of the panel have staked out trades that are support oriented. Clark Selby of Green Mill Supercritical is developing more efficient ways to extract the oils from the cannabis plant more efficiently. Dave Colaizzi of Remedy Metrics has created a mobile app to collect data for doctors, so they can prescribe more accurately based on the needs of the patient.

According to Colaizzi, although the marijuana market has been around for decades, its existence in the shadows has led to a lack of data. That can now be rectified in today’s more legal environment. Colaizzi added that he and his partners had been turned down as part of the processing chain by the stringent application process that the Commonwealth created to govern the marijuana supply chain.

The regulations governing the industry allow participation by several types of legal businesses including grower/processors, dispensaries, testers and research businesses, such as hospitals and universities. Boyer mentioned that compliancy with regulations is key: “If you’re not compliant, you lose your business,” he said. “We’ve established trade organizations to keep the bad guys out and the good guys in.”

Along with assessing the current state of the medical marijuana industry in Pennsylvania, the panelists also took a moment to look ahead.

“The next challenge is what happens in the workplace,” Novak added, suggesting that new business issues will crop up as patients will be medicated while on the job in other industries, creating new challenges for employers on how to deal with them appropriately.

Bill Flanagan of the Allegheny Conference led the panel, which took place at the Pittsburgh Life Sciences Greenhouse.