Medical marijuana patients can now purchase cannabis grown by
small businesses as part of their allotment, Illinois’ top cannabis regulator
said, but smaller, newly licensed cannabis growers are still seeking greater
access to the state’s medical marijuana customers.
Illinois legalized medicinal marijuana beginning in 2014, then
legalized it for recreational use in 2020. While the 2020 law legalized
cannabis use for any adult age 21 or older, it did not expand licensing for
medical dispensaries.
Patients can purchase marijuana as part of the medical cannabis
program at dual-purpose dispensaries, which are licensed to serve both medical
and recreational customers. But dual-purpose dispensaries are greatly
outnumbered by dispensaries only licensed to sell recreationally, and there are
no medical-only dispensaries in the state.
As another part of the adult-use legalization law, lawmakers
created a “craft grow” license category that was designed to give more
opportunities to Illinoisans hoping to legally grow and sell marijuana. The
smaller-scale grow operations were part of the 2020 law’s efforts to diversify
the cannabis industry in Illinois.
Prior to that, all cultivation centers in Illinois were
large-scale operations dominated by large, multistate operators. The existing
cultivators, mostly in operation since 2014, were allowed to grow recreational
cannabis beginning in 2019.
Until recently, dual-purpose dispensaries have been unsure as to
whether craft-grown products, made by social equity licensees – those who have
lived in a disproportionately impacted area or have been historically impacted
by the war on drugs – can be sold medicinally as part of a patient’s medical
allotment.
Erin Johnson, the state’s cannabis regulation oversight officer,
told Capitol News Illinois last month that her office has “been telling
dispensaries, as they have been asking us” they can now sell craft-grown
products to medical patients.
“There was just a track and trace issue on our end, but never
anything statutorily,” she said.
No notice has been posted, but Johnson’s verbal guidance
comes almost
two years after the first craft grow business went online in
Illinois.
It allows roughly 150,000 medical patients, who dispensary owners
say are the most consistent purchasers of marijuana, to buy products made by
social equity businesses without paying recreational taxes. However – even as
more dispensaries open – the number available to medical patients has not
increased since 2018, something the Cannabis Regulation Oversight Office
“desperately” wants to see changed. Johnson said Illinois is a limited license
state, meaning “there are caps on everything” to help control the relatively
new market.
Berwyn Thompkins, who operates two cannabis businesses, said the
rules limited options for patients and small businesses.
“It's about access,” Thompkins said. “Why wouldn't we want all the
patients – which the (adult-use) program was initially built around – why
wouldn't we want them to have access? They should have access to any
dispensary.”
Customers with a medical marijuana card pay a 1% tax on all
marijuana products, whereas recreational customers pay retail taxes between
roughly 20-40% on a given cannabis product, when accounting for local taxes.
While Illinois has received praise for its equity-focused cannabis
law, including through an independent study that showed more people of color
own cannabis licenses than in any other state, some industry operators say
they’ve experienced many unnecessary hurdles getting their businesses up and
running.
The state, in fact, announced last month that it had opened its
100th social equity dispensary.
But Steve Olson, purchasing manager at a pair of dispensaries
(including one dual-purpose dispensary) near Rockford, said small specialty
license holders have been left in the lurch since the first craft grower opened
in October 2022.
“You would think that this would be something they’re (the
government) trying to help out these social equity companies with, but they're
putting handcuffs on them in so many different spots,” he said. “One of them
being this medical thing.”
Olson said he contacted state agencies, including the Department
of Financial and Professional Regulation, months ago about whether craft
products can be sold to medical patients at their retail tax rate, but only
heard one response: “They all say it was an oversight.”
This potentially hurt social equity companies because they sell
wholesale to dispensaries and may have been missing out on a consistent
customer base through those medical dispensaries.
Olson said the state’s attempts to provide licensees with a path
to a successful business over the years, such as with corrective lotteries that
granted more social equity licenses, have come up short.
“It's like they almost set up the social equity thing to fail so
the big guys could come in and swoop up all these licenses,” Olson said. “I
hate to feel like that but, if you look at it, it's pretty black and white.”
Olson said craft companies benefit from any type of retail sale.
“If we sell it to medical patients or not, it's a matter of, ‘Are
we collecting the proper taxes?’ That's all it is,” he said.
State revenue from cannabis taxes, licensing costs and other fees
goes into the Cannabis Regulation Fund, which is used to fund a host of
programs, including cannabis offense expungement, the general revenue fund,
and the R3 campaign aiming
to uplift disinvested communities.
For fiscal year 2024, nearly $256 million was paid out from
Cannabis Regulation Fund for related initiatives, which includes almost $89
million transferred to the state’s general revenue fund and more than $20
million distributed to local governments, according to the Illinois
Department of Revenue.
Medical access still limited
The state’s 55 medical dispensaries that predate the 2020
legalization law, mostly owned by publicly
traded multistate operators that had been operating in Illinois
since 2014 under the state’s medical marijuana program, were automatically
granted a right to licenses to sell recreationally in
January 2020. That gave them a dual-purpose license that no new entrants into
the market can receive under current law.
Since expanding their clientele in 2020, Illinois dispensaries
have sold more than $6
billion worth of cannabis products through recreational transactions
alone.
Nearly two-thirds of dispensaries licensed to sell to medical
patients are in the northeast counties of Cook, DuPage, Kane, Lake and Will.
Dual-purpose dispensaries only represent about 20% of the state’s dispensaries.
While the state began offering recreational dispensary licenses
since the adult-use legalization law passed, it has not granted a new medical
dispensary license since 2018. That has
allowed the established players to continue to corner the market on the state’s
nearly 150,000 medical marijuana patients.
But social equity licensees and advocates say there are more ways
to level the playing field, including expanding access to medical sales.
Johnson, who became the state’s top cannabis regulator in late
2022, expressed hope for movement during the fall veto session on House
Bill 2911, which would expand medical access to all Illinois dispensaries.
“We would like every single dispensary in Illinois to be able to
serve medical patients,” Johnson said. “It's something that medical patients
have been asking for, for years.”
Johnson said the bill would benefit patients and small businesses.
“It’s something we desperately want to happen as a state system,
because we want to make sure that medical patients are able to easily access
what they need,” she said. “We also think it's good for our social equity
dispensaries, as they're opening, to be able to serve medical patients.”
Rep. Bob Morgan, D-Deerfield, who was the first statewide project
coordinator for Illinois’ medical cannabis program prior to joining the
legislature, wrote in an email to Capitol News Illinois that the state needs to
be doing more for its patients.
“Illinois is failing the state's 150,000 medical cannabis patients
with debilitating conditions. Too many are still denied the patient protections
they deserve, including access to their medicine,” Morgan wrote, adding he
would continue to work with stakeholders on further legislation.
Capitol News Illinois is
a nonprofit, nonpartisan news service covering state government. It is
distributed to hundreds of newspapers, radio and TV stations statewide. It is
funded primarily by the Illinois Press Foundation and the Robert R. McCormick
Foundation, along with major contributions from the Illinois Broadcasters
Foundation and Southern Illinois Editorial Association.
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