The list of companies wanting to break into Ohio’s budding medical marijuana business includes major players on the national and international stage with experience and access to financing that gives them an edge, according to industry experts and insiders.
The only details state officials have released about the 185 applicants for two dozen licenses to grow marijuana in Ohio are their company names and business representatives.
Names such as Aphria, Columbia Care, Cresco Labs, GTI, PharmaCann LLC and Vireo Health jumped out to cannabis industry expert Alan Brochstein as prominent businesses selling products in other states.
“They’re big and they’re multi-state and they’re very medically focused,” he said.
Vireo Health, which wants to operate in Ohio under the name Ohio Medical Solutions, has its Maryland license in jeopardy after employees drove product across state lines from Minnesota to New York. Company officials say the employees acted alone and have no involvement in Ohio Medical Solutions.
Canada-based Aphria partnered with the Schottenstein family in Columbus, known for retail outlets such as American Eagle and DSW, in the hopes of opening a facility in Lorain County.
Aphria co-founder Cole Cacciavillani, whose U.S. operations will work under the name Liberty Health Sciences, said it’s a competitive industry.
“There isn’t a Walmart in this space. There isn’t anyone who has recreated retail in this space,” Cacciavillani said.
Cresco Labs — which wants to build a cultivation facility on the edge of Yellow Springs — sells products such as Alien Dutchess, Island Sweet Skunk and Outer Space at PharmaCann dispensaries in Illinois.
These products may be similar to the ones offered in Ohio, with minor changes to comply with Ohio law. Companies will be able to sell plant material, for example, but they won’t be packaged for smoking because consumers won’t be allowed to burn it — they can eat it or vape it.
PharmaCann general counsel Jeremy Unruh — whose company wants to establish a facility in the Buckeye Lake area, east of Columbus — said all the major medical marijuana companies are likely in the queue in Ohio, just some may have used a different name than their parent corporation.
“Every big player will tender an application in Ohio under some name or another,” he said.
How many Ohioans will use?
One thing that makes Ohio attractive is that the list of qualifying conditions is broader than in some states, and includes chronic pain, which substantially increases the market size.
Cacciavillani said that about 24 percent of Ohio’s 11.6 million person population could qualify for medical cannabis.
State officials put that estimate much lower. Based on enrollment at other states they anticipate between .04 percent and .44 percent of the state’s population, or between about 5,150 and and 51,500 people.
“Because this number is difficult to predict, the board plans to pay close attention to patient enrollment and has the ability to quickly add more dispensaries in areas of the state where they are most needed,” said Cameron J. McNamee, pharmacy board spokesman.
One area patient eagerly awaiting legalization is Zon Mundhenk of Riverside, who has multiple ailments on the qualifying condition list including chronic pain largely stemming from when her car was hit by a drunk driver in 1993.
She said opioids work but have side effects and are increasingly hard to get as physicians over-correct to the current addiction crisis. She uses CBD oil — a hemp extract that is legal because it has no psychoactive properties — but it’s not as effective and is expensive compared to medical marijuana.
“This is my last option,” she said. “There are days I can’g get out of bed, and nights are the worst.”
A billion dollar business
Helping patients such as Mundhenk could be big business.
“Ohio’s medical marijuana industry is about a billion dollars in the next three to five years,” said Andy Joseph, president of Apeks Supercritical, a plant oil extraction company based in Johnstown Ohio that specializes in making equipment for medical marijuana.
Joseph started the company Ohio Grown Therapies LLC with the hopes of expanding his factory in Johnstown with a cannabis cultivation and processing facility. He said he had to partner with a company already working in other states to bolster his application, which put a lot of emphasis on a company’s experience in other states.
“(This) would imply the state is taking the position that you are going to score higher if you have an existing operation that is operating within the law,” he said. “They’re inviting these companies in from other states and even other countries to take our revenue dollars and funnel them somewhere else.”
Ohio Department of Commerce officials say they have the ability to consider whether a company is Ohio-based.
Since each business will need to be self-contained in terms of production and delivery, it will create local jobs.
Marijuana industry consultant Brett Roper said each larger growing facility would probably employ a staff of between 30 and 35 full-time-employees, plus another six to eight for facilities that also get a processing license. Smaller grow sites will likely employ five to seven people, he said.
Joseph said his state application was about 1,900 pages, much of it detailing every person involved to ensure no one had connections to the illicit drug trade. Those are the big no-no’s, he said: no cartel connections, no drugs crossing state lines and no drugs getting into the hands of children.
Federal law hinders financing
Industry watcher Brochstein said regulators typically give a lot of weight to companies who can demonstrate they followed the rules in other states. Also, established companies have better access to the tens of millions of dollars in investment capital it takes to get up and running in Ohio.
“I speak to people who’ve been able to raise money successfully in other industries, and they can’t believe how difficult it is to raise money in the cannabis industry,” he said.
And the queasiness some investors feel because marijuana possession is still illegal under federal law is exacerbated with U.S. Attorney General Jeff Sessions comparing marijuana to heroin and wanting more power to crack down on it.
Joseph, who currently only sells equipment for medical cannabis companies, said he has had his bank account shut down five times by banks concerned about federal rules.
Many of the most successful medical marijuana businesses are Canadian because that country has long allowed medical marijuana nationwide and marijuana companies can sell stock on that country’s stock exchange.
Growing facilities are expensive investments. Unruh, with PharmaCann, said companies are looking at an outlay of about $25 million for a level 1 operation and $3 to $5 million for a smaller one. The plants will be grown indoors under strict security measures.
Most of the larger companies are seeking a level 1 license, allowing them to grow initially up to 25,000-square-feet of product. There were 109 applications for this level, and only a dozen will be awarded statewide. Companies seeking this level of license typically plan on seeking a processing license and dealing in bulk extract and other processed products.
Another dozen licenses will be awarded to level 2 cultivators, capped at 3,000-square-feet. Industry insiders say this is more likely to attract plant growers akin to craft brewers who want to focus on making higher-quality strains.
Durban Poison, Green Crack
Ohio’s law will prohibit packaging that is a attractive to children, but doesn’t go as far as some states in limiting the names of the products. So it’s possible to see names used in other states, such as Durban Poison and Green Crack. Aphria names many of its products after Canadian Lakes — plus one called Alien Dawg — but may come up with different names for its U.S. products.
Company officials concede the odd names can be confusing or even concerning to people unfamiliar with cannabis, but they say they are very well-established names of various strains that are helpful to buyers.
“There’s profiles you need higher CBD strains, other ailments need higher THC, some need a balance,” CEO George Scorsis, CEO of Liberty Health Sciences.
The final rules are still being hammered out, but state officials say Ohio law will allow oils and extracts as well as the sale of plant material. But it is unusual in that it prohibits the plant material from being burned or smoked; it must be eaten or inhaled using a vaporizer.
State officials say they expect final rules for cultivators to be in place by Sept. 8, with the goal of having the entire medical marijuana system up and running by Sept. 8, 2018.
Mundhenk said the wait has been excruciating.
“I can’t live the life I need to live,” she said. “I have a son to raise. I have a book to write. I have so many things to do and I spend too many days where I just can’t do anything. I can’t even clean the house.”
Dispensaries still to come
The large-scale companies whose officials were interviewed for this story said that if they get a license to grow in Ohio, they’ll pursue processing licenses as well. Most also plan to seek dispensary licenses.
The state on Wednesday released guidelines on locating dispensaries, saying they plan to allow 15 in southwest Ohio out of 60 statewide. This includes four in Montgomery County; two in Butler, Preble and Darke Counties combined; and two in Clark, Champaign and Union counties combined.
Finding locations for the cultivation sites — secure greenhouses in rural or industrial areas — has been controversial. Many communities have passed moratoriums on any marijuana business, including Huber Heights and German Twp., where businesses have already applied for state licenses.
Placing dispensaries, which need to be in more populated areas and where people will actually buy the medicine, will be at least as controversial.
PharmaCann is the largest holder of licenses in Illinois, which has laws similar to Ohio’s. Company attorney Unruh said their dispensaries are “a healthcare experience.”
“The analogy I use is coming into an optometrist dispensary,” he said.
Company officials know that part of their business plan has to include educating a sometimes wary public that what they are making and selling is safe, medicinal and well regulated.
“This isn’t your brain on drugs,” said Joseph. “This isn’t recreational marijuana. The opportunities and benefits patients have received around the country from medical cannabis is phenomenal.”