Tradable prescriptions and flexible production in medical marijuana

June 22, 2008

There was a NYTimes article a while back on the medical marijuana trade in California.  According to Proposition 215 marijuana use is permitted for any ailment so long as it is prescribed by a medical doctor.  Patients with a prescription have the legal right to purchase the drug from 450 specialized, taxed, cannabis dispensaries in the state.  They may also cultivate an amount for themselves.  This particular article centers around a town of 70,000 called Arcata, which is now home to 1,000 grow houses (residential homes converted into makeshift greenhouses), exempt from any type of prosecution so long as they maintain less than 99 plants.


There is a part of the story missing from this piece that is tremendously interesting from the point of view of the anthropology of markets and finance.   It has to do with the way that regulations perform a market that controls users but leaves open a lot of uncertainty on the amount of supply in circulation.  A couple of summers ago when I was in Berkeley I lived in house of many roommates among whom were several people ‘working in the industry’.  They were by all means entrepreneurial types, supporting other artistic activities with the revenues created by producing supplies of medical cannabis.  Gallon sized ziplock bags of legal marijuana harvested in Arcata were a frequent sight around the house, to be divided up into quantities for personal consumption, surplus to be sold to the dispensaries, and prescribed allotments for friends. 


As it was explained to me, the way the trade works is that a patent is supposed to have two options.  They can either take their prescription to a dispensary or they can grow it themselves.  As I discovered much of the economic interest in marijuana involves a third option that has opened up based on the transfer of production rights: the right to grow has become a tradable good.  Patients who do not have the time or the talent to grow cannabis can turn over their prescriptions to ‘growers’ who do the agricultural labor (or arrange for it to be done) and earn the surplus produce in exchange.  So while a patient may have the right to x number of plants for y ailment, when grown attentively the actual harvest can substantially exceed their expected need.


If a patient accesses the drug through a dispensary there is no expansion in supply beyond that which was expected for their personal use.  But, if they do exercise their right to grow, then production becomes incalculable and flexible.  This uncertainty means that there is plenty of room to make profit (the person featured in the NYT has 30 plants which produce 30lbs a year creating a surplus worth 70,000 dollars).  A system based on distributed production with no central controls on actual yield also leaves open gaping holes for produce to fall out of the legal circuit, into illegal and even more profitable ones.  Under the existing rules, then, although the number of legal users can be known, it is impossible to trace just how much medically sanctioned marijuana is actually being produced.


My guess is that much of the side effects of these laws probably stem from this incalculable aspect of legalized production.  It is perhaps worth pointing out that since access to medical care is a commodity in the U.S. so is access to marijuana prescriptions.  This might therefore be considered an state sanctioned form of market inequality in that the system actually reserves a lucrative form of value production by ordaining the bodies of already priviledged groups.



8 Responses to “Tradable prescriptions and flexible production in medical marijuana”

  1. Arcata’s population is approx. 16,000.

  2. marthapoon Says:

    Oops. I guess I got the population figure mixed up with the dollar figure quoted in the lower half of the post…

  3. MMJ Says:

    Its just as much legalized production as Oxycoton or anything really, they make way worse drugs then just marijuana
    this is my Medical Marijuana source
    think about how they produce cocaine? My mother was getting surgery done about 6 years ago and they even charged her for the cocaine they used (no it wasnt novacaine)

  4. marthapoon Says:

    Yes, of course. According to the law this is certainly a form of legalized production. This difference from other prescription drugs, however, is this: the user does not buy it from a commercial manufacturer.

    When a drug company makes OxyContin they can presumably report how much of it they have made. The way the medical marijuana market is set up today – with prescription holders being at the same time their own producers – there is no way to calculate just how much of the drug is being legally grown.

    This is why people are able to legally make profit off of growing medical marijuana, an unintended economic consequence of the way the legalization laws have been set up.

  5. Zsuzsanna Says:

    Question of clarification: the growers can make a profit legally because they can charge the patient a high enough price (and it’s still worth it for the patient to commission someone else than to grow their own). But this profit does not depend on the plant yield, as long as the grower produces the prescribed amount. The other way to make profit is to increase the yield and sell to non-patients. If yes, then that’s not a legal way of making profit, so the unknowable part of supply goes to illegal channels. Is this correct?

    I’ve been watching the Showtime show called Weeds lately 🙂 Yes, it’s about marijuana dealer-grower in California. Two things about the medical marijuana market and regulation:

    1) What about quality? Contrary to medication, flavor and experience probably matters to patients. Of course you can argue that it’s the same with ordinary medicine. But not really. So you can expect competition among growers and dispensaries along price AND quality dimensions. How does that work out, have economists looked at this?

    2) Surveillance: another kind of “price” of getting marijuana through medical prescription is that state/federal agencies collect data about patients’ activities–or at least according to Weeds. This deterrence measure puts a limit on how much the demand for prescription marijuana can grow.

  6. marthapoon Says:

    To my knowledge money does not change hands between designated growers and prescription holders. Growers gain the rights to the prescriptions in exchange for the amount of drug that the patient needs. What they earn is the surplus production.

    Surplus production can be disposed of in two ways.

    1)It can be sold to the legal dispensaries that mark it and qualify it: each grower’s yield has a name, a different flavour, a potency and an effect. So yes there is choice for the patient-consumer and it would be interesting to look at how this plays out

    2) Surplus production can also be sold on the illegal market, that is to say, to non-prescription holders which presumably can happen if this market commands a higher price.

    The point I was trying to make in the post was that while the state can track users and even to a certain degree, their use (surveillance of the body), it can not track how much prescription holders – who are also the mandate producers of the drug – are actually producing.

    This is becuase of the flexible nature of prescriptions which can be filled either by consuming at the dispensaries OR by growing one’s own. One option expands the amount of the drug in circulation, while the other does not. The trade of prescription rights is what translates this flexibility in the system into profit making opportunity…

    This is why the growhouses in Arcata, where prosecution is not pursued up to a certain number of plants, exist. These houses are essentially production facilities designed to maximize prescription rights to produce the most legal cannibis possible.

    So instead of private production as the law intends by assigning grow-rights to individual patients, you have a profitable and attractive business in legally grown cannabis. This cannabis is very interesting because it only becomes ‘illegal’ if it is sold to non-prescription holders.

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