The medical marijuana market in California has dwindled since the Prop 64 legalized adult-use sales. Many of the compassionate care programs for medical patients were deemed illegal under the new law and many collectives were required to shut down as of January 1st, 2019. Fortunately, Governor Gavin Newsom recently signed SB 34 that will revitalize the compassionate care program and allow California cannabis dispensaries to gift product to terminally ill patients.
The new law will take effect in March of 2020 and creates a new “compassionate class” for medical marijuana products. California dispensaries will be exempt from paying the 15% excise tax on donations made to terminally ill patients. Of course, this will require the state to allocate $375,000 for software updates to the California cannabis track-and-trace system, Metrc.
These tax exemptions would also extend to cultivators relieving them of the $9.25 per ounce cultivation tax. State regulators estimate that compassionate care donations could reach close to $53 million and these combined tax exemptions would represent a loss of $7.9 million in excise taxes. In layman's terms, 125,000 medical marijuana patients could receive a free donation of 1 gram of cannabis per day for an entire year.
Americans for Safe Access were a big proponent of SB 34 and really fought for this bill to be passed alongside Sweetleaf Collective, and Weed for Warriors. Regulatory affairs coordinator for ASA Sean Khalepari, pointed out that, “Allowing licensed retailers to donate medical cannabis is a logical and compassionate reform that will make a life-changing difference for patients in need.”
Senate Bill 34 will expand compassionate care for low income medical marijuana patients and improve access. Currently, there are only about 40 California cannabis dispensaries with compassion programs attempting to source free cannabis products for nearly 10,000 medical marijuana patients. Once this new law is implemented, patients won’t be burdened with the lengthy and complicated process of acquiring a state medical marijuana card.
Instead, California cannabis dispensaries will set the qualifications for compassionate donations on a store-to-store basis. The majority will require a recommendation from a licensed physician as well as documentation proving they receive federal disability.
Oakland attorney Anne Kelson explained that, “We fought to keep barriers to access low. It’s not as if you can just walk into a store and get a compassionate care donation.”
The real question is whether or not licensed California cannabis dispensaries will be incentivized to stock the new compassionate class of medical marijuana products. Berkeley Patients Group has been one of the few dispensaries that has continued to serve compassion care patients required by a local ordinance despite Prop 64 regulations. They’ve done so even though it’s incurred costly taxes on inventory that’s not generating profit. Now that they’ll be tax exempt, they can maintain compliance with the local ordinance without losing profits.
Another aspect that could prove challenging for the new compassionate class is the lack of licensed cultivators. Much of what is harvested is already on pre-order for licensed California cannabis dispensaries. Industry experts estimate that less than 1% of the state’s $3.1 billion cannabis market will be allocated for compassionate donations next year.