State opens bids for pot dispensary licenses

The state Department of Health opened an 18-day bidding window today for companies interested in competing for medical marijuana dispensary licenses.

This year Hawaii is joining at least 18 other states in legalizing the commercial production and distribution of medical marijuana. Under Act 241, 16 medical marijuana dispensaries will be licensed to open starting July 15.

Several experienced Hawaii businessmen have said they plan to apply for licenses.

Companies will need to dish out $5,000 just to apply and pay a $75,000 license fee if their application is selected. To make a bid, a company must show that it has at least $1 million worth of financial resources for each license, as well as $100,000 for each retail outlet. There is a $50,000 annual license renewal fee and an estimated $2 million to $5 million a year in overhead costs.

Each license will allow a company to operate two marijuana production centers and up to two retail stores. Three licenses will be issued for Oahu, two licenses each for Hawaii and Maui counties, and one license for Kauai. A DOH official said the department won’t release the names of applicants until licenses are awarded April 15.

The Health Department issued detailed rules Dec. 15 for dispensary operation. They include requiring licensees to grow their plants indoors at least 750 feet away from schools and playgrounds with 24-hour security and unlimited unannounced inspections.

The costs of running a legal dispensary will push up the price of marijuana.

“(Marijuana) will undoubtedly be cheaper on the black market, and that’s a huge concern,” said Bill Jarvis, chief executive officer of mobile phone provider Mobi PCS, who formed Pono Wellness to compete for a dispensary license.

At $5 million in costs to pay for certified farms, retail outlets, labor and utilities, Jarvis estimates the retail price of medical marijuana in Hawaii could be as high as $380 an ounce, compared with $250 on the mainland.

“It probably burdens the cost by 30 to 50 percent,” he said. “It will likely result in probably somewhere between $500,000 to $1 million in incremental costs that will get passed on to patients a year.”

The costs of running a highly regulated business and competing with the black market is worrisome, said Michael Irish, CEO of kim chee manufacturer Halm’s Enterprises Inc. and Keoki’s Lau Lau, who also plans to compete for a dispensary contract.

“The question is, Can we bring medical marijuana to market at a price that works for the people who need it?” Irish said, adding that the drug isn’t covered by medical insurance and isn’t tax-deductible. “You’re probably looking at something that’s going to cost three to four times (more in a dispensary versus the price on the street). It could go as high as five times. I’m worried that they’re going to make it so expensive that you might want to be the guy standing in front of the store selling it, not in the store.”

He added, “Whether it makes business sense or not, that becomes the question. The government can put in all the rules and regulations, but the marketplace is going to determine if it works or not. Eventually the consumer pays for everything.”

Applications are available at mmjdisp.ehawaii.gov and must be submitted online from 8 a.m. today to 4:30 p.m. Jan. 29. For information on dispensary license requirements, go to 808ne.ws/1SLgtUF.