Earlier this year, we examined why 2016 could be marijuana's most important year yet. Despite 23 states having approved the drug for medicinal use since 1996 and residents in four states (Colorado, Washington, Oregon, and Alaska) voting to allow the sale of recreational marijuana to adults ages 21 and up since 2012, it's 2016 that could be the most rapid single-year expansion of marijuana ever.
Currently, just a single state has qualified to get a marijuana initiative on its ballot: Nevada. However, grassroots movements in California, Ohio, Florida, Vermont, Massachusetts, and more than a half-dozen other states could lend to residents in multiple states voting on a medical, recreational, or medical and recreational initiative come November.
The marijuana industry's market potential simply can't be ignored any longer. ArcView Market Research released a report in February that suggested legal marijuana sales could grow by a rate of 30% per year through 2020. This would push sales from a reported $5.4 billion in 2015, per ArcView, to around $22 billion by 2020.
However, standing in the way of this momentum is inaction at the federal level. Lawmakers feel no urgency to change the scheduling of marijuana away from its current status (schedule 1), meaning it's still considered to be an illicit substance with no medical benefits. Furthermore, lawmakers are in no rush to make a decision on a potential rescheduling -- even with public opinion polls demonstrating slightly favorability toward approval of the drug -- before they have a thorough safety profile of marijuana. Following decades of research into its risks, we've only within the past decade really begun to dig into its potential benefits. This safety profile is more than likely the key to Capitol Hill changing its tune on marijuana.
Marijuana's safety comes under fire
Last week, however, marijuana's safety profile may have taken a step in the wrong direction.
Five researchers, four from Colorado and one from Illinois, conducted a study, which was published in The New England Journal of Medicine, that sought to examine if emergency room visits in Colorado for tourists were increasing at a disproportionate rate relative to Colorado residents. These researchers conducted a cross-sectional analysis of a hospital in Aurora, with approximately 100,000 emergency department (ED) visits per year, and compared to the rates of ED visits with International Classification of Diseases, Ninth Revision, or ICD-9, codes of cannabis use between in-state and out-of-state residents between 2012 and 2014.
Their findings? Between 2013 and 2014, out-of-state resident visits to the ED that were possibly related to cannabis use rose from 85 per 10,000 visits to 168 per 10,000 visits. That's nearly 100% year-over-year growth. Comparably, Colorado residents saw a very small uptick from 106 potentially marijuana-related visits per 10,000 to 112 per 10,000 from 2013 to 2014.
Researchers also culled data from the Colorado Hospital Association and compared it to the ICD-9. What they found was that out-of-state residents saw their ED visits possibly related to cannabis rise from 78 per 10,000 visits in 2012 to 163 per 10,000 visits in 2014 (which is more than double) statewide. Additionally, even Colorado residents observed an increase in ED visits possibly tied to cannabis from 61 per 10,000 visits in 2011 to 101 per 10,000 visits in 2014, an increase of 66%.
It's also noteworthy to point out that while users can overdose on marijuana, no deaths occurred from marijuana use or overdose. Also, researchers suggest that what we might be witnessing with the data above is something they described as a "learning curve," whereby out-of-state residents simply didn't have easy access to marijuana prior to the 2012 legalization. With the drug accessible now to visitors, we may see these ED visits eventually stabilize or fall after an initial introductory period.
Researchers ultimately concluded that point-of-sale education on "safe and appropriate use of marijuana products" for out-of-state residents needs to improve.
The battle continues
What this NEJM study emphasizes more than anything is that the battle over marijuana's benefits and risks seemingly has no end, and that the tug-of-war between positive and negative safety data is expected to continue.
For instance, even though the data appears to suggest that possible cannabis-related symptoms are sending more users to the emergency department, the fact that a marijuana overdose hasn't led to a death is a very strong point that can't be said for opioids, a class of painkilling medicines that was responsible for almost 18,900 deaths in 2014 according to the American Society of Addiction Medicine. If marijuana is shown to provide a similar type of pain relief for patients, this could be an optimal medicine, both for the patient and for physicians and insurance companies, which are looking to reduce costs and increase effectiveness of patient care.
Nonetheless, a laundry list of worries remains. First, there are clear concerns about the risks in-state and visiting residents might face as evidenced by a rise in emergency department visits (and remember, by law Colorado can't "educate" consumers in any state other than within Colorado). Secondly, we have a Swiss-cheese-like approval among the jurisdictions within Colorado, a recreation-legal state, which makes enforcement of marijuana laws practically impossible. And finally, there are concerns about quality and consistency as it relates to the marijuana edibles, as well as safety in terms of what effect marijuana might have on a driver behind the wheel of an automobile.
Expect inherent disadvantages to persist
This persistent tug-of-war points to only one thing: inherent disadvantages continuing for marijuana businesses.
Federal inaction, and a schedule 1 status, means that financial institutions generally want nothing to do with marijuana businesses. Although some states do allow banks to offer checking accounts and credit lines to marijuana businesses, most choose to avoid the industry altogether. The reason? Being that the plant is still illegal at the federal level, the government could charge these banks with criminal money laundering. Thus, marijuana businesses are forced to deal in cash most of the time, which creates a serious security concern. Without lines of credit, it also hurts marijuana businesses' ability to grow.
The other problem here is tax-based. Despite being federally illegal, marijuana businesses are still required to pay federal income taxes. Not only that but they're disallowed from taking normal business deductions since the primary product they're selling is considered illicit. It basically means marijuana businesses are paying far more in taxes than they would if they were selling a non-illegal substance.
Investors looking to take advantage of this potentially monstrous growth phase in marijuana have to also take into account that these disadvantages make it very difficult for these businesses to be successful -- or at least successful on a large enough scale where the average investor could benefit. It would seem that most investments in marijuana appear doomed to losses unless federal lawmakers change their tune.