|This story has been corrected. See below.|
Big-name entrepreneurs, high-profile attorneys and former politicians are positioning themselves to compete for one of the eight licenses the state will issue next year to begin selling medical marijuana legally in Hawaii for the first time.
Nearly 30 new business registrations include “marijuana,” “cannabis,” “pakalolo” and “weed” in their names, many of them filed with the state since the enactment of the law authorizing the establishment of pot dispensaries. Many are associated with well-known business personalities.
The daughter of Henk Rogers, owner of the Tetris video game brand, is among those planning to apply, as is Bill Jarvis, CEO of Mobi PCS, and Michael Irish, CEO of kimchee manufacturer Halm’s Enterprises Inc. and Keoki’s Lau Lau. Anthony Takitani, a Maui attorney and former state legislator, registered Maui Medical Marijuana Dispensary LLC with Hollywood film agent and producer Shep Gordon. Former Honolulu Mayor and longtime city Prosecutor Peter Carlisle is representing a group of critical-care doctors vying for a license, and David Louie, previously state attorney general, is also representing a potential licensee.
“There are some obviously high-profile people,” said Carlisle. “Absolutely and unequivocally it’s going to be a fierce competition because there’s a very limited number of licenses, and there’s a large number of individuals of varying backgrounds who believe that there is a market for this and that it could be extremely lucrative.”
Act 241, adopted this year, authorizes the state Department of Health to issue eight dispensary licenses next year and potentially many more in 2017. Applications for the first eight are due Jan. 29, and each licensee will be allowed to operate two dispensaries and two growing centers: six on Oahu, four on Maui, four on Hawaii island and two on Kauai.
Those interested are lining up funding and potential partners, as well as property, which adds to the investment.
Applicants must prove they have $1.2 million to invest. A $5,000 nonrefundable license application fee and a $75,000 payment are due upon approval, as well as a $50,000 annual renewal fee.
Startup costs are anticipated to total $2 million to $12 million, according to Maya Rogers, Henk Rogers’ daughter and president and chief executive officer of Blue Planet Software Inc. Maya Rogers and her three siblings have reserved the name “Blue Planet Medicinals LLC” and hope to open dispensaries on Oahu.
However, the return on investment could be significant. Medical marijuana advocates estimate dispensaries here could create as many as 800 jobs and generate $65 million a year in sales. Nationally, the legal marijuana business is expected to more than double to a $3.5 billion industry this year from $1.5 billion in 2013, according to the ArcView Group, a California-based marijuana research firm.
Only 13,000 Hawaii residents are registered to use medical marijuana, but that number likely will increase when dispensaries open and patients are able to make legal purchases for the first time. The state approved a law in 2000 allowing marijuana use by prescription, but patients or their caregivers have had to either grow their own or rely on the black market.
“Once dispensaries are open people are going to think, ‘This is an option for me.’ People who were kind of on the fence, I think, will go and apply (for medical marijuana cards). That number (13,000) will double and triple very quickly,” Rogers said.
Jarvis, of Mobi PCS, is investing $4 million to $6 million of his own money to get started, but he doesn’t think the industry will be as lucrative as people believe.
“I’m hearing from people who are coming here from the mainland talking about how everyone’s going to get ridiculously wealthy. I think it’s misguided, and I don’t think it’s based in fact,” he said. “It’s not that lucrative of a business, really, when you think about the cost of electricity that’s roughly four times the national average, real estate that is more expensive and the cost of shipping goods here to Hawaii. It’s also an industry that requires high levels of security if you want to do it right. That’s an added expense most businesses don’t have.”
Irish, whose mother died when he was 13 after a painful battle with cancer, also said the numbers don’t pencil out for profitability.
“It’s not a cash cow. We have a limited amount of people we have to service,” he said. “It doesn’t make the kind of money it does in California because of the restrictions our (state is) putting on us to make sure it’s available to the people who have prescriptions today. Each location is going to get 2,000 to 3,000 prescriptions. If you do the math, it doesn’t work.”
At that margin, Irish is worried that marijuana sold by dispensaries will be so expensive that people will continue to buy it on the street. The state Department of Health is still drafting rules for the program.
“Let’s say a bag of marijuana is $100 on the street. If you actually do this in a dispensary, it could cost between $400 to $500” because of government fees and regulations, Irish said. “The consumer has to pay for it. I want to make sure we can get it to the people who need it at the right possible price. Until we know what (the rules are), none of us will actually know if we’re able to afford it or if it will be economical.”
Other potential players in this high-stakes industry have already bowed out.
Ko Olina and Princeville developer Jeff Stone registered Hanalei Cannabis and Halelea Cannabis, as well as trade names Hanalei Weed and Halelea Weed, in June. His registrations say the business is for the purpose of “farming, dispensary, sales and services.”
But Stone said he has no plans to open a pot dispensary. “I assure you I have no interest of applying for a growing license for weed,” he said in an email. “My attorneys suggested we protect our resort brands by registering names that could be associated with our properties so others couldn’t use them.”
Likewise, Yuriko McPhail, owner of the Honolulu Baking Co., which provides baked goods and fresh sandwiches, salads and fruits for Starbucks, said she has “decided not to pursue any opportunities in this industry,” although she registered the trade name Cannabis Hawaii in June.
Hank Wuh, founder and CEO of biomedical firm Skai Ventures LLC, also said he is “definitely not applying for a license,” despite registering DTB Dispensary Hawaii LLC on Sept. 15.
The contenders say they are eager to open dispensaries because of the health benefits, which may be the answer for many patients suffering from painful ailments.
“I’ve had to take all this over-the-counter medication that has literally destroyed my body,” said Rogers, who has suffered from severe back problems for 20 years. “The fact that Hawaii is allowing medical dispensaries to open up is really going to open many doors to many people who need it as an alternative to other forms of medicine. You can’t overdose and you can’t die from it, so there’s so much potential to cure ailments that people desperately need help with. I’m just really passionate that if this is a cure for people, we should explore it.”
Jarvis, who has registered the name Pono Wellness, also said medical marijuana is a personal endeavor for him.
“People very close to me had illnesses in the last several years where I felt medical marijuana would help,” he said.
Jarvis went into a dispensary for the first time six months ago when he traveled to Seattle and Denver to research the industry.
“I had a lot of misconceptions about what medical marijuana was all about. I didn’t see the proverbial 20-year-old looking to buy some marijuana. I saw people like my 89-year-old mother, and it blew my mind,” he said. “They had legitimate heath care issues, and they were very educated about what worked for them and what didn’t work for them. They could speak about the compounds in medical cannabis; they understood … ratios, various strains and genetics of medical cannabis. I was startled at how much it mattered to them. It was like a revelation to me.”
Carlisle, now an attorney at O’Connor Playdon & Guben LLP, is representing a consortium of critical-care doctors who have registered for a marijuana business called the Wellness Group.
“I’m going to take a swing at it, but it’s not like I think I’m a slam dunk,” said Dr. Marc Kruger, a founding partner in the Wellness Group. “My chances are probably small.”
Kruger, who also co-founded Aloha Critical Care Associates, the largest private critical-care group practice on Oahu, sought out Carlisle for his expertise and opinion on keeping pot strictly for medicinal use and “to help make sure it’s implemented properly in our community.”
Kruger estimates around $10 million in startup costs, which he is working to raise from undisclosed investors.
“What we do as doctors is help people with longevity and quality of life, and try to make sure people live as long as they can and feel as good as they can while they’re alive. This medicine has the potential to do that,” he said. “I would like to bring that to our community, but really I think it’s got to be done in the proper way, with a very patient-focused, science-oriented approach. Real doctors need to look at this as medicine and a potential benefit for their patients.”
Bill Jarvis’ company, Pono Wellness, was misidentified in an earlier version of this story.