Marijuana Dispensary Plan Defies Business Logic; Politics Replaces Economics 101

Categories: Marijuana Biz

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Image: www.smallbusinesssurvivalguide.com

As New Times and other news media reported on Monday, the latest proposed medical pot guidelines restrict the number of dispensaries to arbitrary boundaries known by their cute acronym: CHAAs. Each of the 124 state-licensed dispensaries could inhabit no more than one CHAA, and would be selected at random from the pool of applicants.


The state Department of Health Services drew up the Community Health Analysis Areas in 2005 to help with statistical reviews, and now it's using them to express the opinion that home-grown operations are bad. Not everyone shares that opinion. But putting aside the legalization issue, this plan is -- we've gotta say it -- half-baked.


To keep Arizonans who qualify for medical marijuana from growing their own pot, the DHS plan makes a mockery of normal business sense.

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The DHS map of CHAAs

Instead of putting the medical pot stores near their potential customers, it swipes potential operation licenses from population centers and grants them to rural areas that probably can't use them. The idea is to blanket the state with 25-mile-radius circles, because the new law -- crafted in part by people who want to own dispensaries -- prohibits home-growing when a dispensary is open within 25 miles.


The economical illogic of it all is especially striking if you compare the situation to how pharmacies are spread throughout the state, as one of our intrepid readers has done.


The reader's a guy who wants to open a dispensary, and he asked us not to divulge his name or which part of the state he's eyeing for the business. He sent us a spreadsheet and some PDF documents he put together in the last couple of days; we've published them in links below for your enjoyment and/or scathing criticism.







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​Here are some of the highlights of his number-crunching:


* There are really only 107 CHAAs for entrepreneurs to consider moving into. Nineteen are on Indian lands. (As DHS Director Will Humble mentioned at the news conference on Monday, those 19 possible licenses -- or maybe it's only 17, since there are 126 CHAAs and only 124 licenses to grant -- could be added to other CHAAs next year if the tribes decide not to participate in the program.)


 


* Forty-three of the dispensaries would serve just 11 percent of the state's population, while another 43 stores would serve 72 percent of the population.


* Proposition 203 limited the number of dispensaries to ten percent of the pharmacies. There are 801 pharmacies in Maricopa County, according to the state Board of Pharmacy, so you'd think there would be about 80 dispensaries in the county. Pharmacy owners have probably figured out the best possible locations to do business, right? Maricopa, however, has only 41 CHAAs, and therefore would have just 41 dispensaries.


* The population in many CHAAs seems too low to support a dispensary business.


The last point shows that a home-grown scene is probably inevitable in parts of rural Arizona, because dispensaries that operate there might not find enough customers to succeed.


Greenlee County, for example, now only supports one pharmacy. Could the county really support a dispensary, which would offer a much smaller variety of products for sale? Doesn't seem likely. Then again, maybe the dispensary could be inside the pharmacy.


In any case, here are our reader's docs:


 



List of 20 smallest CHAA zones












Dispensaries and pharmacies by population and CHAAs








CHAA zone summary

href="http://media.phoenixnewtimes.com/5934081.0.xls">Board of Pharmacy's list of pharmacies in Arizona



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4 comments
J Curwen
J Curwen

Like I wrote yesterday:

"Remember, those 25 mile "halos" have to have a dispensary at the center. There are plenty of places where no dispensary will be able to run without going broke because of the confluence of strict dispensary regulations, strict patient qualifications, and low population density. Those halos probably seemed like a great idea to some bureaucrats who had no clue about what it takes to run such a business.

Want to piss some money away? Open a legal dispensary in some small town like Page or Show Low."

Albert
Albert

The 25-mile halos shouldn’t really be an issue. The whole reasoning behind them was to force people to go and have to purchase overpriced MM. It doesn’t seem right that a patient that lives more than 25 mile from a dispensary should be allowed to grow for pennies on the dollar versus having to purchase the same MM that supports a dispensary operation, and a separate growing facility. It’s all just a forced monopoly. The language already exists for patients to grow; they should be able to choose whether or not to use a dispensary or grow their own MM. The Department of health has no authority to the placement of dispensaries.. Just like they don’t tell CVS, Walgreen’s, or Rite Aid where they can place a business, or even a doctors office. The placement and zoning issues are left to the cities, not the health department. The health department must think people are stupid and don’t take notice of all of the ridicules rules they think they can force people to follow.

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