Is Recreational Cannabis Hurting the Medical Cannabis Industry?
The cannabis industry has displayed incredible growth in the last decade alone, and the market is showing further signs of maturing as the divide broadens between medical cannabis vs recreational cannabis usage. This disparity is arguably most notable when comparing year-over-year revenue of sales. The source of this contrast can be attributed to a variety of factors, including accessibility, versatility and taxes. Is recreational cannabis hurting medical sales?
Because anyone over the legal age limit can acquire cannabis in states where it is legally available without approval from a doctor, recreational cannabis is more accessible and subsequently more profitable. Recreational sales are so lucrative that state governments and recreational business owners alike profit fiscally by restricting ‘medical’ access. This is because medical cannabis isn’t subject to the same high taxation as recreational cannabis in most states. And this begs the question — is recreational cannabis hurting medical sales and state programs?
Medical cannabis first became a reality in California in 1996. Twenty-six years later, there are now 36 states in the United States that support the legal purchase of cannabis for medicinal purposes through the prescription of a doctor. In 2012, Washington and Colorado became the first two states to legalize cannabis recreationally, igniting the spark for what would quickly become one of the most booming industries to hit the country’s marketplace.
Ten years into the future, now present day, where the further legalization of recreationally-used cannabis is becoming detrimental to its medicinal predecessor. According to figures from the Marijuana Business Factbook, U.S. recreational cannabis sales for 2021 are set to reach more than $10 billion, while medical sales are likely to be around $5.8 to billion. Does this mean that recreational cannabis is directly hurting medical sales? That said, let it be known that while the medical-only statewide markets are thriving on their own, once you introduce the ease and availability of recreational cannabis, there is little competition.
For instance, in some newer markets where cannabis has been recently legalized for recreational use, states like Illinois are seeing incredible growth. The Illinois cannabis market is currently profiting more than $1 billion in revenue, an easy $784 million increase from when the state only approved medical cannabis. Likewise, since its medicinal legalization in 2015, Florida’s cannabis industry has created tens of thousands of jobs and generated more than $1 billion in sales in 2020 alone. MJBizFactbook predicts that Florida’s medicinal cannabis sales will clear $1 billion by 2021 and is set to approach close to $2 billion by 2025.
Medical Cannabis vs Recreational Cannabis
There are a few reasons for these trends, namely that recreational cannabis appeals to a broader consumer market and has a variety of uses. There are hundreds of companies procuring every kind of unique product you could imagine, branded with astute packaging, bourgeoisie marketing and celebrity-featured advertisements.
The recreational market has made cannabis trendy and accessible to laymen. Additionally, recreational cannabis does not require supervision or guidance from a medical practitioner and usually contains a higher THC content (the psychoactive component in the cannabis plant) than its medicinal counterpart. The only factors standing between you and recreational cannabis are the state you’re in, your age (must be 21 to purchase) and your wallet. Finally, recreational cannabis is taxed much more heavily than medical cannabis in almost every state it’s sold.
Herein lies some of the monstrous numbers we see when comparing overall revenue between medical cannabis vs recreational cannabis — medical cannabis sales tax rates are usually about the same as the state’s general sales tax rate alone, barely making a difference for revenue. On the other hand, recreational cannabis is subject to excise, cultivation and sales taxes alike, bringing in millions of dollars to state governments every year.
The implications of medical cannabis vs recreational cannabis sales are uniform state by state as the accessibility of recreational products continues to overshadow the profits of medicinal-only distributors by leaps and bounds. Could this eventually lead to a future where medicinal cannabis is obsolete, and the common person is left to self-medicate? Perhaps big pharma will begin to see the value in cannabis for patients in need, and consequently add marijuana to the medicine cabinet in hospitals? Is recreational cannabis hurting medical sales? Only time will tell as the remaining 14 states play catch up.
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