Marijuana has grown like a weed (pun intended) over the past two decades.
Following its approval for compassionate use in California in 1996, half of all U.S. states have now legalized cannabis for medical use. We've also seen four states legalize recreational marijuana use, which is something that seemed unfathomable even a decade ago. Last year alone, ArcView Market Research estimates that $5.4 billion in legal marijuana was sold in the U.S.. By 2020, this figure is forecast to rise to nearly $22 billion. In nearly every facet, marijuana's expansion has been incredible.
But there's one obstacle standing in the way of marijuana's expansion that supporters may not have foreseen.
Medical marijuana patients face an unexpected challenge
According to a report from CNN, many physicians face a knowledge gap when it comes to prescribing medical marijuana.
Doctors' incomplete knowledge of cannabis makes sense in a way. The U.S. Drug Enforcement Agency has deemed cannabis a schedule 1 substance, which means it's an illicit substance with no recognized medical benefits. There's only one federally approved grow farm for marijuana in Mississippi, and it's extremely difficult for researchers to get the government's approval to run clinical studies on the effectiveness and safety of cannabis on specific ailments. Without the data such studies could provide, it's nearly impossible for physicians to get reliable information on which ailments marijuana can and cannot effectively treat.
In small, university-run studies, marijuana has shown clinical benefits for patients suffering from chronic pain, epilepsy, and cancer, to name a few conditions. But given the dearth of long-term, large-scale studies, as well as the fact that prescribing medical marijuana is still a violation of federal law, too few physicians have learned enough about cannabis to prescribe it responsibly.
Some states have begun to counteract this knowledge gap by requiring their physicians to take cannabis education courses prior to writing cannabis prescriptions.
New York, which legalized medical marijuana in 2014, began rolling out a cannabis certification program for its physicians in October 2015. The program lasts four hours and costs physicians $249. During the course, physicians are taught about the pharmacology of marijuana, its contra-indications, its benefits and side effects, and the potential for abuse and dependence. More than 600 physicians have already completed this certification in New York, with presumably many more to come.
But there's also concern that the costs of these programs, or the time required to gain certifications, could dissuade physicians from gaining the knowledge they need to dole out medical cannabis prescriptions. If physicians fail to obtain the necessary accreditations, or if they feel uncomfortable with their level of knowledge about medical cannabis and don't have ready access to the information they need, then the expansion of medical marijuana could face a major obstacle.
The industry also faces overhangs
In addition to unexpected challenges, the marijuana industry continues to face some daunting obstacles that probably won't go away anytime soon.
For example, keeping cannabis as a schedule 1 substance significantly reduces marijuana dispensaries' access to basic financial services. Just as physicians fear crossing the federal line when prescribing marijuana, banks typically want nothing to do with an industry that's deemed illegal by the federal government, even if state laws outline ways that banks can lend a financial hand. Just 3% of all banks in the U.S. are working with the cannabis industry, forcing dispensaries to deal mostly in cash, which is both a security concern and an inhibitor to expansion.
Businesses in the marijuana industry are also exposed to considerably higher tax rates. Internal Revenue Service U.S. Tax Code 280E allows the federal government to deny businesses that sell illicit substances the right to take normal business deductions. Being unable to take deductions exposes marijuana businesses to being taxed on their gross profits rather than net profits.
But the worst part might be that the marijuana industry is caught in a bit of a Catch-22. If cannabis remains a schedule 1 drug, banks could continue to avoid the industry, tax rates could remain abnormally high, and patient access to the drug could be constrained. Conversely, if cannabis were rescheduled, it could open the door for bank interaction and lower taxes, but it would also allow the Food and Drug Administration to implement what could be very costly regulations that could put smaller dispensaries out of business and allow big business to take over the marijuana industry. A big business takeover would be great news for investors, but it would likely mean higher legal marijuana prices for medical and recreational consumers.
This continues to look like a no-win situation for marijuana supporters and, to some extent, prospective marijuana investors.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.