How The Coronavirus Pandemic Will Affect The Cannabis Industry
As the world finds itself engrossed in the largest public health crisis of our lifetimes, the Covid-19 pandemic, the novel coronavirus disrupting life for every American and most across the globe, is naturally on the top of everyone’s minds. As difficult as it is to think about the cannabis industry and reform movement at a time like this, the reality is that the coronavirus’ impact on our economy and society is also impacting cannabis, with the effects likely to get significantly worse in the coming weeks and potentially months.
With that in mind, here are some of the ways in which the coronavirus crisis is affecting the cannabis industry, and things that consumers and businesses should keep in mind as we navigate this health crisis together.
Protect Patients First
It should go without saying that medical cannabis patients are the most vulnerable cannabis consumers, and the most at risk of serious complications from Covid-19. Dispensaries must take care to protect their patients, and states must enact emergency regulations designed to help businesses serve patients without compromising their health.
As states force the closure of more and more businesses to enforce social distancing, medical cannabis dispensaries should be treated like other essential businesses such as pharmacies and grocery stores. The lives of thousands of patients depend on it. This must also then include cultivation and production facilities that produce the medicine that these patients rely upon. Plainly said, cannabis is medicine. The medical movement was not a wink and nod towards adult use. Cannabis was and remains real medicine that patients use to treat real ailments.
While it is crucial that dispensaries remain able to serve medicine to patients, they must take measures to enforce social distancing to reduce potential patient exposure to the virus. This means states should enact emergency regulations allowing for home delivery where it is not currently allowed, as well as curbside pickup so that patients do not have to step foot inside of the retail store to pick up their products.
Fortunately, many states are already taking these measures, with more expected to follow in the coming days and weeks. Maryland, Michigan, and Illinois regulators have already enacted curbside pickup, while Massachusetts has expanded delivery areas for approved dispensaries and recommended that patients who can afford it, buy their full two week supply of two and a half ounces at a time, rather than making multiple trips.
Protect All Non-Patients and Staff
Dispensaries that are dual use, recreational and medical, should consider taking measures to reduce unnecessary medical patient exposure. If possible, when curbside pickup or delivery is unavailable, medical patients should be served in an entirely separate area of the dispensary from general customers.
These kinds of measures should be implemented even in adult use operations, all of which also serve medical patients. Businesses should limit the number of customers inside of a dispensary at any time, enforcing social distancing for the health of their staff, customers, and patients. This may mean no more than one or two customers on the dispensary floor or at the counter at a time, shifting all sales to online/phone orders for pickup only, or pre-scheduling customers through an appointment only system. When limiting customers inside of the store, customers outside should be encouraged to stay in their cars while they wait (deli style number systems could help make this more manageable) and a staff member should be posted outside enforcing a six foot distance rule between any customer waiting in line.
It should go without saying, but these businesses also need to improve their sanitary practices. This could include providing gloves for employees, disinfecting sales counters after every transaction, and disinfecting the entire store more than once a day. And of course, any employees who show any signs of illness or who have had direct exposure to someone with Covid-19 should be told to stay home. This may mean having those who check in patients do so with a thermometer in hand, screening out patients with a fever, and bringing them their medicine if possible.
Businesses Need More Flexibility To Survive
To ensure that medical cannabis businesses are able to continue operations as the virus spreads, state governments should relax rules around badging dispensary agents and employees. In many states it takes 30 days from hiring an employee until they have gone through the required background checks and fingerprinting before they can receive an employee badge and be put to work. As more employees are expected to miss time in self-quarantine, self-isolation, and even hospitalization, businesses must be able to onboard new employees quickly to ensure that they are adequately staffed to serve their patients.
Further, dispensary agent cards typically only allow an employee to work for one specific cannabis business, and often at one particular location. At a time when cannabis businesses can expect to be short staffed either due to illness and/or self isolation, cannabis workers should be allowed to shift between locations, and ideally, from business to business. If one business is forced to shut down, their employees should be able to easily move to another company using their existing agent card. This can help protect employee jobs while assisting remaining businesses who may become short staffed.
Cannabis Is Essential For Many Non-Patients
More cities, states, and countries are beginning to implement full lock downs, shuttering all retail businesses that are considered non-essential. While some may scoff at the idea of cannabis being considered an essential item, it is worth a serious look at the issue before dismissing it out of hand.
For many cannabis consumers, marijuana is an important tool for de-stressing. Many Americans would argue that access to alcohol during an incredibly stressful time for themselves and the nation is essential to their wellbeing. The same is certainly true for a substance that is non-toxic and does not produce the negative side effects like aggression, domestic violence, and hangovers.
Consumers are telling us this right now as they prepare to hunker down for extended periods of time. Cannabis retailers have reported major increases in sales since last Friday during the same period when there has been a run on essentials like groceries, toilet paper, and cleaning supplies. Many stores across the country, including some run by my own company 4Front, saw sales numbers that eclipsed April 20, typically the busiest cannabis shopping day of the year. Clearly cannabis consumers consider this healing plant to be an essential item in their lives.
This is not without precedent. In cigarette loving France, the government has already shut down all nonessential retail businesses, but one of the exemptions made was for tobacconists, in recognition that taking away an important stress reliever for many people during a time of extreme anxiety and unrest would be cruel, even during a pandemic that primarily attacks the lungs. Certainly the same can be said for something that has demonstrated to be far less damaging to our health like cannabis.
We’re already seeing this play out here in the United States. In the San Francisco Bay Area, which has instituted a complete area-wide “shelter-in-place” order, cannabis businesses have already been granted exemptions to stay open, mostly under curbside delivery rules, in San Francisco, Berkeley, Alameda, Oakland, and San Jose.
Further complicating this situation is that many who shop as adult use consumers are actually using cannabis for medical purposes. These customers choose not to become officially registered patients for a variety of reasons, primarily because they don’t want or see the need to spend the time and money going to a doctor and getting a recommendation when cannabis is legal and available for all adults and there is no penalty for personal possession.
This is especially true in low-income neighborhoods and communities of color, where patients often can’t afford the $300 or so, not covered by health insurance, that it typically costs to see a doctor and register for a state medical program. More marginalized communities that have traditionally born the brunt of cannabis and drug law enforcement are also often wary of voluntarily registering on a state list of people who use a product that remains federally illegal.
Cannabis Businesses May Need A Bail Out
Make no mistake, this health crisis and the ensuing economic downturn will have a major impact on the emerging cannabis industry. While other businesses were enjoying record stock prices and boom times, cannabis stocks have been in a bear market for the better part of a year, with many public cannabis company stocks down more than 75% off their highs in early 2019. This has made access to capital across the sector a major challenge. Now that the economy seems headed into a recession, with the stock market erasing all of the gains of the Trump administration, cash strapped cannabis companies will find it even more difficult to raise much needed capital to operate and expand their businesses.
Already this year we’ve seen cannabis companies walk away from mergers that became too expensive, sell off assets to raise capital, engage in large scale layoffs, and restructure operations to focus on core assets. The “Monopoly days” of 2018 and 2019, when many companies used cheap capital and over-inflated stock to consolidate assets across the country feels like a long time ago. Despite headlines touting how lucrative the cannabis industry is, the reality is that very few cannabis companies have achieved profitability.
This is the result of cannabis still being a new industry where revenue is typically reinvested into growing businesses. Added to that are an array of obstacles not seen in more traditional businesses including sky high tax burdens due to the 280E provision of the IRS tax code that prohibits cannabis businesses from claiming most standard business deductions and the state-by-state nature of the industry where businesses have to replicate their operations in every new state rather than taking advantage of economies of scale and shipping products across state lines. All this is exacerbated by the lack of access to commercial loans and institutional capital.
In the current environment of already sagging cannabis stocks, coupled with the new reality of a likely recession, cannabis businesses have few options to turn to for much needed capital infusions. This will likely mean that companies will be forced to shut down, and with no bankruptcy protections available to cannabis businesses in the United States, the ripple effect will be impactful, as creditors will be challenged to collect their debts.
And of course, the impact on all of the employees in the sector cannot be understated. Cannabis businesses already have a difficult time getting standard insurance plans. This means most companies will not receive reimbursement for providing their employees additional paid time off or any other costs they may incur as a result of the pandemic, leaving many businesses with painful decisions about how to deal with employees that other businesses do not face.
Exacerbating the problem, because cannabis remains illegal at the federal level, cannabis businesses will not qualify for assistance under the $850 billion bailout package that looks set for passage by Congress. What was already shaping up to be a difficult year for cannabis businesses may become even more challenging for business owners and employees alike.
After all, the cannabis industry currently employs 211,000 people, more than four times the number of coal workers in this country, yet this growing industry is set to be left out of the much needed coming federal aid. If the federal government refuses to act, state governments that regulate legal cannabis businesses will need to step up and fill the gap, or the consequences for cannabis business owners, investors, and employees alike could be enormous.
Harm Reduction Saves Lives
Finally, it is worth noting that the coronavirus pandemic will require some behavioral changes from consumers in order to protect themselves and those around them. Cannabis consumption has always been known as largely a communal activity. Unlike alcohol, social norms dictate that cannabis is to be shared with those around you. While nobody would think to order one beer at a bar and pass it around among their friends, passing a joint, bowl, or bong is commonplace. In fact, not sharing your cannabis is often considered rude.
Until we make it out of this crisis, this behavior has to change. It should go without saying that at a time when everyone is being urged not to shake hands or hug other people, taking something out of your mouth and passing it to a friend to put in their mouth must be strongly discouraged. For the time being, cannabis consumers must take their queues from alcohol drinkers and not share their marijuana. This is the one time when it is not only OK, but necessary, to bogart your joint.
Cannabis consumers and patients can take other precautions during the pandemic. Consider using edibles, tinctures, vaporizable flower and other non-combustible cannabis products over smoking if possible, since smoke can irritate the lungs and Covid-19 is primarily a respiratory illness.
Whenever possible, consumers should avoid illicit market products and use only products that come from legal market sources that they grow themselves or where they know and fully trust the cultivators. Illicit market products are not tested and are more likely to contain harmful pesticides or contaminants that can stress and damage lungs. We’ve already seen a wave of lung illnesses caused by illicit market vape cartridges. During this coronavirus pandemic, cannabis consumers should do everything they can to limit weakening their lungs and immune systems.
There are a myriad of other cannabis related consequences from the current pandemic which I hope to touch and expand upon as this crisis develops. Expected state-based cannabis reform measures may be delayed or abandoned altogether as state legislatures focus on the crisis and limit their operations to engage in social distancing.
People serving prison time for cannabis offenses will be at increased risk of dying from the virus, as prisons are the perfect confluence of conditions to spread an infectious disease, and typically have substandard health care. Whether someone agrees with legalization or not, nearly all of us would agree that a cannabis offense should never be a death sentence. States need to consider early release for all cannabis offenders, and really for any non-violent offenders in general, as a result of this health crisis.
Sourcing manufactured products like vape pen batteries and cartridges has already become more challenging, as most are created in China, which is where the virus originated and which has had strict restrictions on the movement of good and people. As the United States ramps up its own travel restrictions, access to these manufactured goods will only become more challenging, and in some cases impossible.
This global pandemic is impacting all areas of American, and global, life and business. The cannabis industry is no exception. Only time will tell how large the impact will truly be. The behavior of consumers, business owners, regulators, and legislators in the coming months will go a long way towards ensuring that cannabis companies, employees, and consumers are able to weather the coming storm.