Are Subsidies the Best Way to Address Costly Medical Marijuana?

Utah residents in support of medical marijuana were thrilled when the state launched its program in 2020. They had every right to be. Utah is a traditionally conservative state that many thought would never legalize medical marijuana. To see the day arrive was truly an accomplishment. And yet, all is not well. A lack of affordability is forcing Utahans to consider subsidies for costly medical marijuana.

Medical cannabis patients in Utah are not alone. While some states, like Colorado for example, have a robust market more able to keep prices in check, others struggle with pricing. Florida, New Mexico, and even California are trying to bring prices down for medical users.

Are subsidies really the way to go? Private subsidies are certainly better than government subsidies, but it seems there must be a better way to make medical cannabis more affordable. After all, patients in many states can buy their marijuana on the street for less.

                   Limited Supply in Utah

One of the big problems in Utah is limited supply. In many episodes of their medical marijuana podcast listed on its website, discusses this very issue. There are only eight growers licensed in the Beehive State. Among them, they are not producing enough product to supply processors and dispensaries. This, despite the fact that there are tens of thousands of patients now on Utah medical cannabis rolls.

As with any other product sold at retail, a lack of supply coupled with high demand means high prices. Utah could partially address the problem by removing its arbitrary cap on growers. Let anyone who wants to grow do so. Supply would go up and prices should go down.

                   Costs of Doing Business

Growers, processors, and dispensaries alike have another problem to deal with: the costs of doing business. All of those costs are built-in to product pricing. So the more expensive it is to do business, the higher retail prices will be. That is true of any business.

It is not cheap to run a business in the cannabis space. Licensing fees are pretty hefty. So are insurance costs. If you run a growing or processing operation, you will spend a ton on equipment. If you operate a dispensary, you will have high labor costs associated with keeping licensed pharmacists on the payroll. It all adds up to higher retail pricing.

                   Subsidies Only Shift Responsibility

It is good that private organizations like the Utah Patients Coalition are willing to offer private subsidies to patients in need. It’s not so good that some states are entertaining subsidies funded with tax dollars. The thing about subsidies is that they only shift payment responsibility. They don’t actually do anything to bring prices down. A $50 product still costs $50 even if a subsidy pays half of the bill.

At the heart of the pricing problem is government. State governments are trying to occupy that middle ground between responsible regulation and making marijuana freely accessible to patients. But anytime the middle ground is occupied, it creates more problems than it solves.

Some of the difficulty may be alleviated if Washington decriminalizes marijuana in the near future. At least then the door would be opened to insurance and Medicaid coverage. Insurance coverage would not necessarily mean drastic price cuts, but it would increase patient access.

Subsidies seem to be the preferred solution to high prices right now. If they are the solution, they represent an artificial one that doesn’t really solve the problem. Perhaps a better way to go is to get government out of the way so that the free market can do its thing.

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