Industry experts say Iowa and federal medical marijuana regulations make it difficult to operate a dispensary in the state. Their comments come as the Iowa Quad-Cities' only medical cannabidiol dispensary closed suddenly Monday.
Have a Heart Compassionate Care dispensaries in Davenport had opened in late 2018. Its Council Bluffs location also closed Monday.
Harvest Health & Recreation Inc. said Have a Heart Iowa, LLC, elected to cease operations after determining it was no longer economically feasible to operate.
“Harvest Health & Recreation Inc., through a recently acquired subsidiary, provided support services to Have a Heart Iowa. Harvest’s subsidiary plans to terminate its support services agreement with Have a Heart Iowa following its decision to close the dispensaries,” Harvest Health said.
Iowa Department of Public Health officials are looking to assist patients and caregivers who used the two locations and “will work to license two new dispensaries as soon as possible,” according to a department news release.
Patients seeking guidance can call (515) 725-2576.
Owen Parker, the program manager of Iowa’s office of medical cannibiodal, said state law asks for six months’ notice for closure, which did not happen.
“We’re going to do our best because we weren’t given that,” he said.
State officials are drafting request for proposal documents for the now-vacant dispensary licenses. Parker said license applicants get to choose the location, so the new licenses may not be in the same areas.
The timeline is currently being worked on, and the COVID-19 outbreak could alter the time it takes to get the two dispensaries operating.
MedPharm Iowa, which operates Iowa's only cultivation center and other dispensaries attempted to buy or acquire the two Have a Heart Compassion Care dispensaries last year., Lucas Nelson, general manager of MedPharm Iowa, said. That plan was denied by the Iowa Department of Health in November 2019.
Have a Heart was acquired by Harvest Health, Parker said.
Nelson said MedPharm will “likely” apply for those two licenses.
Two dispensaries closing is a “concern about the health" of the young industry in Iowa, Nelson said.
“At the same time, we have seen some really incredible results for the majority of our patients," Nelson said. "We know the good work it can do and the good work it can do for patients so I don’t know a scenario where we would not make an application on those.”
Legislative actions stalled
The closure comes as Iowa legislators continue to debate increasing the THC level of products in the state program. MedPharm has been vocal in that debate for two years.
“This is probably another piece of evidence that we need some improvements to the program for this to survive,” Nelson said. The “long-term sustainability of this program is at risk without improvement … we've got to make some improvements if this thing is going to last long-term.”
The Quad-Cities market is also complicated by the legalization of recreational marijuana in Illinois.
Andrew Livingston, director of economics and research at Vicente Sederberg LLP in Colorado, is co-host of the “Weed Wonks” podcast and cannabis industry veteran. He said the dispensary closures in Iowa, though rare, is a confluence of factors.
Part of the issue is legal marijuana businesses, whether adult-use and/or medical, need more capital in a restrictive market such as Iowa. But businesses, and capital investment, is currently under a crunch with the COVID-19 pandemic.
Cannabis businesses can only use private investment, they can’t access banks, and financial institution resources, as the national Safe Banking Act has stalled in U.S. Congress which would have opened up banks for cannabis businesses. So they have to circle back to investors in the first year or two to stay afloat as the market develops and grows, Livingston said.
“What we’re seeing right now is a combination of hesitancy of the investors within the cannabis space, generally, over the last six to eight months, and that, combined with the current investment freeze that has been occurring due to this outbreak, means there is no more water left in that well,” Livingston said.
“If you don’t have any more potential investment to keep your lights running and you’re not making enough money to continue to pay your staff, you have to close. There’s no other option," he said.
And that further compounds things for the Quad-Cities market, because Illinois operators may want to instead focus resources there, because of the robust medical program and growing adult-use market.
Livingston further said the reduction in assets within the cannabis business segment is something Iowa, and its legislators, need to be cognizant of moving forward.
“Iowans understand business and they understand tight profit margins, because it’s a farming state. And they understand business needs a certain amount of revenue to run and pay its employees, particularly when you’re setting up a new system that’s restrictive,” he said.
“… I would basically encourage them to consider ways to ease the operational burden and increase the potential for revenue for these medical cannabidiol businesses in Iowa so that they can continue to serve patients across the state.”
Iowa state Sen. Joe Bolkcom, D-Iowa City, has been vocal about increasing the THC cap in Iowa for the state’s medical program.
“Iowa has the most bureaucratic, expensive and ineffective program in the country and it just got worse. The medicine is expensive and it’s too hard to get people qualified,” he said Tuesday.
“More evidence is now in with two of our dispensaries essentially going out of business because it’s economically not feasible.”
The Iowa City Democrat points to the low THC cap making it hard to generate revenue for the program to work properly. While the Iowa House had passed a bill further restricting Iowa’s program, the state Senate had only gotten a bill out of committee before things ground to a halt due to COVID-19.
If the Iowa House bill moves forward, Bolkcom said it would be bad for Iowans.
“It’s good for Illinois because Iowa patients will go over to Illinois, albeit illegally, to get medicine that’s more effective that’s cheaper … unfortunately we’ll turn them into lawbreakers to manage their chronic conditions.”