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Medical marijuana market continues to shrink while recreational sales rise

The medical marijuana market continues to plummet in Arizona as recreational sales soar. It’s a trend that began just about as soon as recreational marijuana was legalized in our state in 2020. 

Now,  the Arizona Mirror reports that the recreational market more than triples the medical sector in Arizona. In November 2023, recreational sales hit more than $83 million and medical sales, stayed flat at $25 million for the second month in a row. 

So, what does the future hold for the medical marijuana market here? And how big could our recreational market get?

For more, The Show spoke with Eddie Celaya, a reporter with KGUN in Tucson and former host of the podcast Here Weed Go! for the Arizona Daily Star, all about the marijuana industry here. 

LAUREN GILGER: Good morning to you, Eddie.

EDDIE CELAYA: Good morning. How's it going?

GILGER: Great. Thanks for coming on. OK, so these numbers seem pretty stark with a whole lot more people buying recreational marijuana than medical. Did this pretty much start from the beginning? Like as soon as we legalized recreational use, you started to see this differentiation?

CELAYA: Yeah, pretty much within that first, I mean, first year and a half, medical sales topped out in April 2021 at about $73.4 million. And so that, that was a healthy year and a half into the, the legal and legalization project. But since then, it has been a precipitous fall, kind of as you recounted in the lead up to this segment. 

GILGER: Yeah. So we've also seen this decrease in the number of people enrolled in the medical cannabis program, right. Like before recreational marijuana was passed, there were almost 300,000 cardholders at one point in the state. Now, there are less than 115,000. Tell us, you know, what's behind the drop, what's happening here?

CELAYA: Gosh, it's a little bit of a chicken and egg situation. So, since those medical sales have have dropped, you know, certain, certain items that can only be purchased by medical cardholders. Really, I'm thinking mostly of, of edible items. Some dispensaries because there are less medical patients won't carry those sort of items. And so it becomes a sort of a, a sort of loop where if dispensaries aren't carrying these medical medical only sort of items, patients won't be seeking them. And so they'll just buy the recreational available items, or more of those recreational available items because they're able to do that with a medical card instead of seeking out those higher potency items, that again would only be available to, to medical patients. There's, there's no real reason if there's not a lot of medical patients for, for dispensaries to be carrying them.

GILGER: That's interesting. OK, so one big difference there. Medical marijuana is also taxed at a lower rate than recreational though. Right, isn't this? What's the big difference there?

CELAYA: So, with medical purchases are not subject to the state's 16% excise tax. Some might call that a sin tax. But yeah, so those purchases are only subject to the, the local sales tax and some other state taxes built into the, the medical program. So it is significantly cheaper, especially if you're a medical patient who is buying in bulk. You can, and in addition to that medical cardholder, like I mentioned earlier can also just purchase more in any one visit to a dispensary. There's a different limit to what cardholders can buy as opposed to recreational customers. 

GILGER: OK. So you can buy more and at a lower cost essentially. Is it surprising then that many more people seem to be opting to just buy recreational marijuana at this point?

CELAYA: Not necessarily, I, I think it really goes back to that point I mentioned earlier where dispensaries just aren't seeing the value in carrying that those sort of items that only medical patients would be able to purchase. And, and because of that, I think medical patients, those that were on the fence about maybe re upping their card. I just figure it's, it's just too much of a hassle. You know, only certain dispensaries are gonna be carrying those sort of items. So why go out of our way to do something like that?

GILGER: There's a cost to that medical marijuana card too, right.

CELAYA: There is and it could be somewhat significant. There was some movement last legislative session to get rid of the fee associated with the purchase or, excuse me, the issuing of that card at least for when it came to medical or no, excuse me, veterans and  and just lowering the fee from $250 every two years to $125 every two years. So that, that would have been a significant, I think way that kind of save this sort of program but that didn't end up passing.

GILGER: So let me ask you lastly here, Eddie about, about what this means for the future of the medical marijuana market. Like, is this gonna continue, will it just continue to shrink?

CELAYA: I think it will probably continue to shrink it. The shrinkage has gone slower and slower. I think it'll probably top out or excuse me, bottom out around 100,000 medical card holders. I think some people will still see the value in it. There are also workplace protections that come along with having a medical card, license with you that would not be available to, to folks who are just purchasing recreationally. 

GILGER: Are we going to see very quickly, the the recreational market continue to grow. Will this top out at some point?

CELAYA: I think you'll see it continue to grow. The other reason I think there's a little bit more growth in sales is that there's more innovation and from companies who are within the space who look at the recreational market as where, where the growth is. So that's where they're focusing any research and development, especially towards people who are maybe don't count themselves as cannabis users. You see the, the appeal of, of drinks and topicals like creams that appeal to people who aren't smokers or, or aren't gonna vape cannabis.

GILGER: All right, we'll leave it there. Eddie Celaya, Reporter with KGUN in Tucson. Eddie, thank you so much.

CELAYA: Thank you so, so much. Have a good one.

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Lauren Gilger, host of KJZZ's The Show, is an award-winning journalist whose work has impacted communities large and small, exposing injustices and giving a voice to the voiceless and marginalized.