US (OK): "The medical cannabis market is oversupplied by about 32 times"

"Compared to the 2:1 ratio observed as a healthy supply-to-demand ratio across other markets, our results would imply that the medical cannabis market is oversupplied by about 32 times and could serve all cannabis consumers (patients and non-patients) 4.5 times over." The Oklahoma Medical Marijuana Authority (OMMA) commissioned Cannabis Public Policy Consulting (CPPC) to conduct a study designed to provide a comprehensive examination of the supply chain and demand outputs of the medical cannabis market in Oklahoma. The report confirms what was already long suspected: the state is facing a significant oversupply of regulated medical cannabis.

How did this happen?
According to the report, Oklahoma has the largest oversupply of cannabis any state in the U.S. has demonstrated. So how can this occur? The report suggests that the medical cannabis program is to blame. "Attempts to promote a free market in cannabis programs
often result in the misguided establishment of cannabis programs without production management tools that can prevent or mitigate oversupply or undersupply issues. In this case, the absence of caps for cannabis cultivation licenses has contributed to an early and ongoing influx of growers despite a demand ceiling. Moreover, the inability to set limits on the volume of plants each grower may produce
has contributed greatly to the issue of oversupply. A cannabis program void of any statutory or regulatory authority to place parameters on a supply chain is likely to experience oversupply to an exponential degree. Such is the case for Oklahoma."

The report also mentions other causes, such as the application cost to become a grower being well below other states ($2,500), with no further licensing fees being required. "While removing barriers to entry is typically a celebrated and encouraged policy for cannabis programs, when production management tools are absent, it can contribute to a larger and unnecessary volume of licenses."

Illicit market
According to the report, the significant oversupply observed in the regulated system through tracked supply chain data indicates that a
number of licensed operators are likely contributing to the illicit market at both cultivation and retail stages. "Regulated supply is outpacing demand so significantly that it is highly unlikely for there to be a local illicit cultivation market competing against the licensed growers. The sheer volume of regulated oversupply, paired with the low barriers to entry and absence of production management tools, suggests that the illicit market suppliers, whether supplying in or out of state, are much more likely to be licensed than unlicensed."

These illicit practices are hiding in plain sight behind a license. "A grower may feel much less exposed to the risk of enforcement if licensed for a few reasons. For one, historical enforcement of the medical cannabis program had been minimal under prior OMMA leadership. At the time of writing this paper, there are close to 7,000 cultivators spanning almost 70,000 square miles. The amount of enforcement staff and funding necessary to regularly oversee these businesses is unattainable."

OMMA response
Adria Berry, Executive Director of OMMA, has responded to the report's results. "It is essential that we address this oversupply head-on, not only to ensure the integrity and sustainability of our medical cannabis market for our patients but to promote public safety and
mitigate the dangers that coincide with illicit cannabis activity for all
Oklahomans."

Now that there is data to validate the significance of the issues, OMMA will implement a multi-pronged approach. First of all, Attorney General Gentner Drummond and Oklahoma's Bureau of Narcotics and Dangerous Drugs have been granted new authority to investigate and enforce any violations of the laws regarding medical cannabis, including medical cannabis business licenses held by commercial growers, processors, transporters, researchers, education facilities, and waste disposal facilities. Additionally, under House Bill 2095, which was recently signed by Governor Kevin Stitt, OMMA can now seize and destroy cannabis and cannabis products that are unaccounted for in the state's inventory tracking system.

In addition, OMMA is partnering with lawmakers to promote policy priorities. "Under House Bill 2095, the moratorium on grower, processor, and dispensary licenses has been extended until 2026. This measure plays a vital role in tackling the oversupply issue. By
temporarily halting the issuance of new medical cannabis commercial grower licenses, the moratorium helps to prevent an influx of additional cannabis production into the market. However, the effectiveness of the moratorium at addressing oversupply may be limited in the absence of medical cannabis production limits that reduce the expansion of current cultivation operations. OMMA is
committed to refining these initiatives to allow for proper production
management of medical cannabis."

OMMA will also make it a priority to engage with stakeholders. In order to do so, OMMA will be embarking on a statewide listening tour this fall to provide a platform for stakeholders to share their perspectives, challenges, and recommendations directly with OMMA. Informed by the insights gained from the statewide listening tour, working groups will be established. This enables OMMA to tap into the expertise of their stakeholders.

OMMA says that moving forward, they expect this strategic plan to yield tangible results in addressing the oversupply issue. "We will closely evaluate the effectiveness of our policies and initiatives through data analysis and ongoing research."

Click here to read the full report.
Click here to read OMMA's response.