As New Mexico prepares for its new recreational-use cannabis industry, two cannabis producers are warning of an impending crisis if state regulators do not lift a moratorium on expanding existing medical cannabis production.
After the New Mexico Regulation and Licensing Department and its Cannabis Control Division announced a halt on approval of new facilities until further rules are finalized, two legacy producers, who rarely see eye to eye on regulations, said they are both worried about supply when adult-use sales begin next year.
Earlier this year, Nicole Bazzano, the acting deputy director of business operations for the Cannabis Control Division, sent a letter to medical cannabis producers informing them that any new production facilities would have to wait until after September.
“The [Cannabis Regulation Act] prohibits the [Cannabis Control Division] from accepting any new applications on or after June 29, 2021, for additional premises until related rules have been finalized,” Bazzano wrote. “As such, the [Cannabis Control Division] will not be processing applications for additional premises submitted June 29, 2021 or later, until rules for the corresponding license types are finalized.”
Duke Rodriguez, who is the president and CEO of prominent cannabis company Ultra Health, said that a pause on increasing production facilities will only worsen shortages he has been warning of for years.
“We’re going to have a crisis,” Rodriguez said. “Mathematically we cannot avoid it.”
Rodriguez has long said that New Mexico, particularly in rural areas, was already experiencing cannabis supply shortages because of rules and regulations that cap the number of plants for cultivators.
Rodriguez said the data his company has compiled shows that New Mexico could run out of cannabis completely just several days after recreational-use sales begin. He said allowing medical cannabis producers to expand operations as a way of bolstering supply is only part of the solution and that it may be too late to completely avoid a crisis. That’s partly, he said, because the New Mexico Department of Health’s Medical Cannabis Program capped production to 450 plants per producer for years. Only relatively recently, and by way of a court order, did the department increase plant limits to 1,750.
“We’ve dug such a deep hole, it’s going to take time to climb out of it,” Rodriguez said.
A spokesperson for RLD and the Cannabis Control Division said that since the application process has been opened, so have license amendments.
“The Cannabis Control Division is currently processing amendment requests for producers. Producer regulations are finalized, license applications are being accepted and amendments are being processed,” RLD spokesperson Heather Brewer said. “The Cannabis Control Division’s mission is to ensure a thriving cannabis industry in New Mexico that provides for medical cannabis patients, adult-use customers and the producer businesses that are the backbone of the industry.”
But Rodriguez said it takes at least five months to go from a cannabis seed in the ground to products on shelves and it may be too late to ensure there are no shortages of cannabis for qualified patients.
“We’re going to be short. The DOH led us to a historical shortage,” Rodriguez said. “Unfortunately, the clock has struck midnight so now we will have a painful supply outlook for greater than a year. Math is hard to deny.”
Willie Ford, who runs the medical cannabis consulting and management firm Reynold Greenleaf and Associates, is often the counter-voice to Rodriguez’s call for increased production. But after the letter from RLD, Ford said he’s also concerned about a shortage of cannabis for patients after recreational-use sales begin next year.
“You know me, I’m a regulation guy, and I’m saying that it’s ridiculous,” Ford said. “If they’re going to really hope to hit this target, they’ve got to be allowing people to move forward faster than they are doing now.”
Recently finalized rules for cultivation require producers to reserve at least 25 percent of their supply for medical cannabis patients. In nearly every legal cannabis market across the country, cannabis retailers ran out of supply on the first day of legal sales. The required reserves are a way to address that, but Ford is not confident that New Mexico retailers will abide by that rule nor that regulators will be able to adequately enforce it.
“I don’t understand how they’re going to even keep track of it,” Ford said. “You’re talking about millions and millions of grams of material sold. And they’re using an antiquated, non-functional software for their state traceability system.”
The tracking software Ford referred to is BioTrack, a seed-to-sale tracking system that DOH has used for its Medical Cannabis Program.
But as NM Political Report found in 2017, DOH was either unable or unwilling to track sales between producers, leading to further questions about how much cannabis is available at any given time.
Ford, like Rodriguez, said it takes at least five months to grow, dry and then properly package cannabis for consumers.
“We can’t move as fast as I think the administration expected us to,” Ford said. “We have to be able to build out this facility and get it approved, and get the lights turned on, get plants put in and get a growth cycle to occur. That’s a five-month affair right there. And then pull the material out, actually dry it, cure it, bag it, process it, and have it ready to go to market. It’s just not going to happen.”
NM Political Report asked both Ford and Rodriguez if producers could simply devote all their supply to medical cannabis patients.
Ford said that he plans to devote at least the same amount of cannabis his company normally sells to patients, even after adult-use sales begin.
“I’m torn. I’m absolutely torn,” Ford said. “I don’t want to destroy this system and I don’t want to be on the wrong side of history. But I have a responsibility to my company and my investors and my employees. But, when it opens up, I think we’re going to try to maintain the exact amount that we distribute, about 30,000 grams per week, to patients.”
Rodriguez provided NM Political Report data that his company compiled, which shows that when Colorado began its adult-use cannabis program, medical sales outperformed or stayed in line with recreational-use sales for the first year. Rodriguez said he expects all cannabis sales, including medical-use, will stress the system on the first day.
“[Colorado] went from about 115,000 [medical cannabis cardholders] to currently about 85,000 cardholders,” Rodriguez said. “But those 85,000 cardholders used as much as the 115,000.”
Compounding the supply issue, a state district judge recently ruled that medical cannabis patients should be allowed to purchase up to two ounces of cannabis at a time, with no transaction limits. The previous limit for patients was about eight ounces of cannabis in a rolling 90-day period. Both RLD and DOH have until Sept. 20 to argue in writing why patients should not be allowed the same purchase amounts as non-patients. Unless the ruling is overturned, the state could see an increase in cannabis purchases.
The newly finalized cultivation rules from RLD allow producers to have up to 8,000 flowering plants, with an option to increase to 10,000 in certain cases.
Brewer said RLD, through “data-based research,” determined that the current plant limit should be adequate for New Mexico’s market, but that it’s not set in stone.
“The Cannabis Control Division will continually evaluate plant count and production to ensure adequate supply and could change limits based on market conditions or patient needs,” Brewer said. “The mission of the Cannabis Control Division is to ensure that the industry flourishes. Every action the CCD takes as part of our open and transparent rule-making process is specifically designed to support businesses, patients, consumers and the industry overall.”
But Ford said he’s not optimistic that the industry will flourish out of the gate.
“I just want to make sure that people remember that the governor and the administration and the RLD have all said that they will do whatever it takes to make sure that we don’t run out of medicine on April 1. And if that means they have to push back rec[reational-use] sales because we’re not ready, that’s on them, that’s not on us,” Ford said. “We are trying to get this done.”
But the only way to push back the recreational-use launch date is through an act of the state Legislature. The Cannabis Regulation Act requires that RLD and the Cannabis Control Division start adult-use sales no later than April 1, 2021.