Medical Marijuana Businesses Lose Millions In Tightly Regulated Minnesota Market

Craig Boudreau | Vice Reporter

Two medical marijuana growing companies in Minnesota lost millions of dollars in the first year of operation in part due to strict government regulations, according to Friday reports.

Minnesota only has two licensed medical marijuana producers, Minnesota Medical Solutions and LeafLine Labs, which collectively lost $5.2 million since medical marijuana first went on sale in the land of 10,000 lakes last July, a local Minnesota CBS affiliate reported Friday.

Part of the problem lies in the fact that Minnesota has a tightly regulated medical marijuana market. Patients are only able to obtain a prescription for one of 10 ailments, and they are not able to get it in plant form. It has to be turned into either a pill or a vapor, which increases the operating costs producers must incur.

“In year one, we needed to strike a balance between minimizing expenses and building a company that would be financially sustainable over the long haul,”CEO of Minnesota Medical Solutions Kyle Kingsley told WCCO Minnesota.

Additionally, only 900 people signed up for the program in the first six months of sales, which put producers under heavy financial pressure. Kingsley noted 2015 was an “unusual year, and future years won’t be like that.”

Patrick McClellan, a patient advocate, thinks the system is designed this way on purpose.

“It’s not sustainable,” McClellan said. “I think the program itself was designed to fail.”

However, Minnesota Medical Solutions says these growing pains are to be expected in the early stages of the process.

WCCO reports that, between the two companies, they raised approximately $30 million to “weather” these start-up costs, and Leafline plans on being able to raise an additional $20 million.

But, the companies think since intractable pain was recently added to the list of acceptable ailments, the consumer base will be expanding and will help to reverse the losing trend. Kingsley notes within weeks of intractable pain being added to the list, 500 more patients signed up. This trend created the fastest growth in their patient list to date.

Even with the new growth, McClellan’s optimism remains tempered.

“The only other options is that these companies are going to go out of business,”

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