Louisiana lawmakers are still sorting out the details of how to produce and get medical marijuana to patients, after establishing a framework for its distribution last year. As they finesse the distribution system for the emerging market, the costs have begun to mount for those interested in breaking into the business.
On Thursday, Mike Strain, the commissioner of Agriculture and Forestry, pitched a hefty fee structure that he said should be assessed to the medical marijuana producers: Producers would pay a $100,000 annual license fee, a $10,000 application fee and a $100 inspection fee, then pay a 7 percent royalty of all of their sales.
The House Agriculture, Forestry and Rural Development Committee OK’d the fee structure in House Bill 1099, sponsored by state Rep. Major Thibaut. It now goes to the full House for consideration.
Strain said his department is legally required to oversee and regulate Louisiana’s foray into growing and producing medical marijuana. But he’s not getting an additional dime from the state to take on the expensive task, so it will have to be self-sufficient.
“Medical marijuana is going to be the most highly scrutinized thing we will do as a state,” he said.
He estimated it would cost his department an additional $500,000 to $700,000 a year for oversight of the production.
But these fees are going to likely be paid by LSU and Southern University’s Ag Centers. Under last years’ legislation, which initially legalized the sale of medical marijuana, LSU and Southern Ag schools were given the first right of refusal to grow marijuana plants and produce them into the medical oils or other products.
Both schools have said they’re interested in being involved but are still evaluating potential barriers, such as costs. If they refuse, a single private company could be selected to take on the production.
Strain estimated that the growers, whether it be the Ag Centers or a private company, could generate between $7 million and $10 million annually from medical marijuana.
While the fees are high, Strain said the department is just trying to cover its costs and not make a profit.
Danny Ford, a lobbyist for the Louisiana Cannabis Association, objected to the 7 percent royalty fee.
“Seven percent is excessive for the industry, which has not even started yet,” Ford said. “We do not know how much it’s going to produce and we do not know the level of sales.”
Ford pointed out the state’s sales could be extremely limited, because the existing legislation allows medical marijuana to be prescribed only for three ailments. There’s currently more legislation making its way through the chambers to try to expand the number of applicable diagnoses.
He said LSU and Southern are already going to have to spend $10 million to $15 million for startup costs to build the facilities.
The Legislature is similarly considering a bill this session to create a $5,000 license fee for the pharmacies who want to distribute the medical marijuana. Per last year’s legislation, only 10 pharmacies will get the right to dole out the medical marijuana.