Aloha and welcome to Business in Hawaii with Reg Baker. We're a weekly show that broadcasts every Thursday from 2 to 2.30 from the beautiful downtown studios of Think Tech, Hawaii and the Pioneer Plaza. We are a series about successful businesses and successful professionals in Hawaii and there's a lot of peripheral issues that surround the success and we're going to talk about one of those here today. Incidentally, I was at the PBN's Expo, the fastest 40 event in the convention center this morning and I got to tell you the business community here in Hawaii is still vibrant and strong. We had a lot of good vendors out there, a lot of participants were wandering through talking all kinds of business taking place. It's a great place to live, work and have your own business. So I'd like to welcome Chris Garth today from the Hawaii Dispensary Alliance which is the organization that helps bring some focus and collaboration within the medical marijuana industry here in Hawaii which as we all know is one of the newest industries to give birth here recently. So Chris, welcome aboard on the show today. Yeah, just thanks for having me again. I appreciate it. That's right, this is your second time on the show. It is, it is. Good little update. The first time you were on the show we were still kind of in the very early stages of launching this industry and now we're going to flash forward I'm guessing maybe six to nine months and so now we've made some progress, things have happened. So why don't you tell us what's an update, what's going on? Sure. Recently we had a bill signed, passed through our state legislature, signed by the governor in ceremony. We were invited down to Japson, the medical school, to see the governor sign our bill, say a few great words about the work that our legislature has done that the key players have had. And how appropriate that that's done in the medical school. Indeed, indeed it is. So medical school has an opportunity to in one capacity and hopefully in the very near future engage with the medical marijuana community looking at research, looking at options and then of course hopefully providing continued medical education to our existing medical staff, healthcare providers and then of course incorporating it into their own education and curriculum. Well and a neighbor of the medical schools, the Cancer Research Center, right? Yes, sir. They're kind of in the general area down there. Have they shown any interest in getting involved with what's going on in the industry yet? We've just now started to have those conversations. So coming up in the relatively near future, we anticipate that we'll in tandem host continued medical education programs throughout the state for all of Hawaii's medical providers, healthcare providers. And I think it's fairly common knowledge that one of the prescriptions for the medical marijuana drug, I guess we could call it. Of course. For normal medicine. It leaves some of the side effects of the chemo process, right? Yes, right. So not only chemotherapy but radiation as well and through not necessarily stated research but anecdotal research and stories, it's provided that it has actually cut down on the growth of tumor cells, certain types in different forms and has been a very great combatant, a natural combatant to a lot of cancer. Very good. And so that just means to me anyways on a personal level is that the Cancer Research Center would probably want to get a little bit more involved and engaged in this and help do some of the research. And I believe the DEA just made a decision today. Funny you should mention that. Exactly. The timing couldn't have been more perfect to engage in this conversation, Reg. So today is August 11, 2016. And the findings of the Drug Enforcement Agency as well as the Food and Drug Administration determined that they're not going to move marijuana at the federal level from a Schedule 1 controlled substance to anything lower, 2, 3, 4, or even... Not yet. Not yet, exactly. But they mentioned that they were going to open up the opportunity for more research to be done, more facilities to engage in tracking the progress of potentially or tracking the progress of medical cannabis and to determine whether or not it is appropriate to reschedule or de-schedule, which is grand. It's fantastic. It is. And I think people may downplay it, but that's significant because now it opens up an opportunity for people to do some of the research. So it's not going to be anecdotal anymore. They're going to be able to get into this and be able to over a period of time prove that there are some positive, I guess, impact. Exactly. So let's say that there have been a number of studies, but the studies are very small samples or taken from very small samples in small populations, usually around 100 patients or fewer. And in order for the DEA and the FDA to consider the studies to be acceptable, you need at least 200 participants or more. And for the past 30 years or so, we've only had one NIDA-certified group, which is the University of Mississippi, to grow cannabis for medical research. Now, with the DEA and the FDA's determination, we have the opportunity for all of our pharmacy school at Opelo, our Cancer Research Center, and our medical school here at Japson to participate, to apply and participate. And then, of course, across the nation, we have more opportunity. Well, it's a natural opportunity, I think, for Hawaii to at least take a look at the potential of this industry and see if they want to engage in it. And I know they're engaging in it in one way, but I'm talking about the research piece of it. Of course. Because the weather here is conducive to having a much bigger crop that can be studied and researched on a year-round basis. It is. Now, we've got University of Mississippi, of course, in the deep south, with the opportunity for really about one and a half growth cycles to harvest and have a productive yield for the 10 or so remaining patients that have been with the program for the last 30 years. Out here, of course, we have wonderful weather we can get from an outdoor crop somewhere around three, three-and-a-quarter growth cycles. But if we do it indoors, as prescribed by our state law, you can continuously cycle through getting a solid four yields, if not even more, potentially. So we have a lot of work to do legislatively to work on the previous two years' worth of legislative successes to usher in these new facilities or these new opportunities for research and different opportunities to grow. I don't want to put you on the spot, but this may be a bigger question in a number that may move around. But for us to be able to get plugged in, in us meaning here in Hawaii, to get the university involved, the Kansas Research Center, we're talking about a potentially huge market for this. We are. We are. We released the Hawaii Dispensory Alliance, released our industry findings, which were specifically targeted to the type of revenue that dispensaries themselves would be able to bring in. But our findings were that for every $1 spent in the dispensary, there's the ancillary growth or the component of three more dollars being spent. Well, that's the multiplier effect. It is. That's tight in basic economics. Thank you very much. So those numbers are real. And even the conservative numbers were somewhere around $30 million that the state could bring in. And then when you compound that, of course, the numbers could even higher. On the very liberal leaning side, we were looking at potentially $80 million of money coming in. And this is predominantly going to be product sale. Exactly. That's exactly it. But we're talking about the growth of a full, robust industry and bringing in federal dollars for research. We're looking at serious capital. We're talking about serious job creation. Great successes and advances in medical technology. And here we are again. As we spoke earlier in the year, we have an opportunity to really select from a very wide array of individuals who have a multitude of ethnic and cultural backgrounds who participate in door activities, who come from all walks of life. And the cross section that we have here in Hawaii is incredible. It allows for a very valid sample to be selected. Indeed. So we'll be contributing significantly to what exactly the FDA and the DEA are looking for from legitimate medical experiences and expert research. And I think it's a clean industry. I mean, we've already got the agricultural infrastructure in place to be able to capitalize on this. And I think we're looking for something that the universities can do that can be monetized and create additional funding so we don't have to have double digit tuition increases every few years. I think there's a lot of positive things that can come from getting more focused on the research aspect of what this industry offers. Absolutely. Absolutely. I mean, it's all interlinked. And that's one of the reasons that this industry has such benefit for Hawaii. It's not a simple siloed institution. It's transdisciplinary. There are so many other different components of the economy that are positively influenced by the development of this program, this medical cannabis institution. I mean, we're already talking about research and development in the medical capacity. We're talking about education. We're talking about legal infrastructure in one capacity or another. Eventually that trickles down to roads and public education and who knows what else. It could even end up in tourist dollars coming over here. See, well, when you start talking about medical tourism, there is a certain aspect of that, particularly, and you can correct me where I'm a little off on this, but over the next few years, there's going to be an ever-increasing opportunity. And the defined marketplace is going to get bigger and bigger because isn't there something that got to do with mobility and being able to take your prescriptions and be able to get them filled across state lines and things like this? So that term is called reciprocation. And let's go back. It's not a prescription. If it were a prescription, you wouldn't receive a certification. So the prescription implies that the doctor or the health care provider is on the line. They say, if you take this dosage, you can expect A, B, and C results and side effects. Because we're providing certifications to patients, it is recommended that these opportunities or it's recommended that this medicine may impact, but it's not guaranteed. So our health care providers are essentially off the hook for anything that happens as a patient would indulge in this kind of medication. So for one citizen to go from California to Hawaii, they're not allowed, of course, to take their medicine with them. As it stands, they're not allowed to come over here and utilize their state certification from California in Hawaii, but reciprocation in 2018, which is in the law. I'm sorry. It's not explicitly stated that reciprocation will occur. It is stated that reciprocation could happen in 2018. So we need to take the appropriate look at how we're going to roll out that program. But yes, eventually and ultimately, we could see tourist dollars from patients in medical marijuana states coming over here and utilizing our dispensaries, utilizing our brands, utilizing our medicine to impact positively their quality of life and their visit while they're here. And that's going to happen. It could happen. Correct. As early as 2018. And I guess is there going to have to be some legislation passed to allow that to happen? There will have to be legislation passed. Now, the Department of Health, our Department of Health could just say, yeah, all right, we can do that. But most likely there's going to have to be significant tracking from other states, as well as our states, so that there is a seamless transition from one state to another. And of course we have to deal with HIPAA considerations. This is all very private personal information that patients don't want out there. So it's a very exacted science as to how we'll get there. But the Hawaii Dispensary Alliance will be at the forefront of pushing that policy, making sure that everything is in order. Very good. We need to take a quick break. We're going to come right back and I want to complete that thought when we do. Sure. So this is Business in Hawaii with Reg Baker. I'm here with Chris Garth from the Hawaii Dispository Alliance, talking about medical marijuana and that very quickly evolving industry. We'll be right back. Hi, my name is Aaron Wills. You are watching thinktechhawaii.com. I am the host of the show, Rehabilitation Coming Soon. You can watch us live at thinktechhawaii.com at 11 a.m. on Tuesdays. I will see you there. Hello, I'm Marianne Sasaki. Welcome to thinktechhawaii, where some of the most interesting conversations in Honolulu go on. I have a show on Wednesdays from one to two called Life in the Law, where we discuss legal issues, politics, governmental topics, and a whole host of issues. I hope you'll join me. Aloha. My name is Josh Green. I serve as Senator from the Big Island on the Kona side, and I'm also an emergency room physician. My program here on thinktech is called Health Care in Hawaii. I'll have guests that should be interesting to you for a month. We'll talk about issues that range from mental health care to drug addiction to our health care system, and any challenges that we face here in Hawaii. We hope you'll join us. Again, thanks for supporting thinktech. Welcome back. This is Reg Baker, business in Hawaii, and I'm here talking with Chris Garth from the Hawaii Dispensary Alliance. And we were just getting into, I guess the mobility of being able to have visitors obtain medical marijuana while they're here and while they're traveling. There's still some hurdles that have to be overcome, and Chris was just explaining on how this could evolve within the next couple of years by 2018. So you suggested that maybe the Department of Health could just administratively allow this to happen, or maybe the state capital has to get involved and pass something, and what's your role in trying to guide that along? Well, as the lobbyist for the legitimate cannabis industry, we're working with all parties. Of course, we're working with our patients and our members to determine exactly what they want. And our membership is not limited to the dispensaries. It's unlimited, in fact, and there's no geographic tie specifically to Hawaii. We have members from Australia, from Canada, from Japan, and of course, all over the mainland who want to be involved in this industry and ultimately want to be able to bring purchase medicine over here and participate in our dispensary program. So depending on how they want us to proceed, we will approach the Department of Health, we'll approach our legislative body, and say these are the steps that we feel are most appropriate to ushering in this reciprocation policy or process. This is the progress that has been tracked on the mainland. This is what has worked. This is what hasn't. These are the pitfalls, and these are the benefits that we can anticipate to. But beyond that, we're the group that is also going to the Hawaii Tourism Authority, as well as D-Bed, and saying, look at these numbers. This is the number of patients from certain regions, certain markets, if you will, whether it be the East Coast or Colorado or anywhere along the West Coast that are patients that visit. So of the nine million or so visitors that we have annually to Hawaii, about five and a quarter million come from those selected markets. We have an opportunity for them to, while they can't bring their medicine, they could participate in our industry as patients here. Should reciprocation come about? So we have a significant opportunity to bring more real benefit to quality of life for the patients who travel here, as well as increasing the bottom line of revenue for our state. And you touched on something that I think is important for us to maybe just spend a few minutes talking about. But the dispensary is just one element. It's a very complicated industry. I mean, this is medical. There are requirements that certain standards be maintained, that they be tested, that they be consistent. You know, this is a, even if we reclassify it, it's still going to be a prescription drug and it's going to have some sort of level to it. And it's going to have to be protected. You know, so you've got the growing aspects of dispensary, the testing and distribution. I mean, this is a whole industry that is just getting started. It is. Now, let's also back up. We ran into each other today at the expo, the small business expo, right? Put on by PBN. Wonderful gala. But while we were there, as we engaged with some of the vendors and service providers in their booths, we recognized that they're already in conversation with either the dispensaries or some of the other groups that are coming online, providing them with help services or back office such as payroll and HR services. Again, it's not limited to just medical cannabis. It runs the full gamut. So we're well on our way to creating a robust and vibrant industry here in Hawaii. Well, it's an exciting time in the sense that it's a new industry. It's just been born. I know we've been talking about it for the last year or so, but it's exciting to get involved in something from the ground floor. It really is. Now, some would consider us to be a little bit ahead of the curve or even ahead of our time as being the Hawaii dispensary alliance. Dispensaries aren't up and running yet. We only have eight licensees. They're not going to open until generally around the end of the year, 2016, opening of 2017. Tell me, what was in the news here recently as July 15th? What was that all about? Good question. So the law from 2015 stated that dispensaries could open as early as 2015. And a lot of people, unfortunately, including our local media, assumed that that was the starting point. July 15th. Correct. They assumed that the language could open as early as July 15, meant that they needed or would open on July 15, which our position the entire time leading up to July 15th was, that it is, it's a starting point. It's a starting line. And technically, there is no finish line to Hawaii's legitimate canvas industry. Have they completed writing all the rules and regulations? We'll never really end that. I mean, we're still working with tax regulation. We're still working on, not just for our industry, but at the national and local level, we're still trying to determine where our money should go for the general excise tax, right? Has rail been determined? It's going forward. That's another contribution. It's a complete, exactly. But nothing's ever set in stone and there's always work to be done. But the Hawaii Dispensary Alliance was formed perhaps a little bit early, but we couldn't wait another legislative session to get local tax breaks for our licensees to expand the number of plants or even determine what the definition of a plant was. And all of these policy considerations will continue to evolve and the conversation will go on infinitely. See, and just to give one example of how detailed this can be, the definition of a plant... Exactly. They just kind of clarified that. And now it has, what, doubled the potential yield of the industry or what's your take on that? All of a sudden, the definition of a plant has opened up the number, essentially, of seedlings, of sproutlings and of clones that one dispensary could host. So as it stands, you have an opportunity as a dispensary owner to have 3,000 plants. But a plant is only defined by a 12 by 12 cubic area. So 12 inches by 12 inches. Up until that point, it's not on the radar. Now, of course, it will be tracked in the seed-to-sale monitoring system that each dispensary is required to own and that's going to be observed by our Department of Health, by the Narcotics Enforcement Division, and access will be granted to the local police entities for each county. But being able to expand the definition of a plant and having unlimited clones, unlimited seedlings and sproutlings, really ensures for crop security. So should one crop go down all of a sudden? Exactly. I think everybody knows that in the agricultural business, there can be sections of a crop that get some sort of a disease that have to be destroyed and doesn't spread. So being able to replace those and or have multiple other growth taking place protects the industry. It does. And it ultimately protects the patient. So when you go to get your allergy medicine, you want to make sure that they have a diverse array of allergy medicine, whether it's the claritin or the generic, whether it's the Allegra or the generic, whether it's the Benadryl or the generic. And not having the option to go in and look at the well-diversified array of products is only to the discount of, well, not only to the discount of the patient, but also of the provider. So we need security. We need crop security. We need security and the opportunity and availability of these medicines. And I was just using that as one example of how the complexity of this new industry affects the timeline. Of course. These things have to be worked out. And as we have learned, like you mentioned with the rail and I would mention with the Affordable Care Act, sometimes things get launched and they're not ready. They're a little bit ahead. They haven't figured out some of this rules and regulations and inspection processes. Of course. And particularly in this area, that's got to be a slam dunk. That's got to be set up before we really start getting into... It does. And there's no denying that we'll continue to stumble and make changes as we go along. But we've done a really good job, I think. Our legislative body and the Department of Health have done a wonderful job giving us a great launching point. Good. Really setting us up for success. Excited to hear because it's always satisfying to hear the collaboration that's taken place. Absolutely. That's great. That's good. You know, in this industry, we're highly dependent on that very sound working relationship between Department of Public Safety, Department of Health and our legislative body. It's imperative that they all work well. And here we are. We have an opportunity, as was stated in this most recent bill, 2707 Act 230, to sit on a legislative working group to help usher in these next legislative changes in our legislative session for 2017. Is this a first for the Alliance to be sitting at the table? We were one of the only non-government entities to be invited exclusively in law to sit on this. We have two seats. Wow. Yeah, we have... Congratulations on that. It sounds like you've gone a long way in establishing yourself. We, you know, we still consider ourselves the little guy. We've been around for a year, and we've made some great... We have some great triumphs. We have some success. But as the policies will continue to grow and morph, we don't see ourselves as getting comfortable anytime. There's a lot to do. There's a lot to do. That's right.  So, you know, the dispensaries couldn't actually start getting multiplying a little bit. Sure. There's always that potential. There's always that potential. Right now, we have what they consider as a vertically integrated market, or vertically integrated program, where if you're going to grow, you have to sell. If you're going to sell, it has to be your own grown product. Now, that could topple. But as it stands right now, that's not in the works. But potentially, you could see markets follow, or our market follow the trend of Colorado, Washington, Oregon, and the other states that have robust medical programs where they have a license to grow, a license to sell, a license to manufacture, a license to retail. Multiple tiered licensing process, yeah. Exactly. And if we move to that, which who knows, but if we do, we need to be able to protect the eight licensees that were at the forefront of this industry. They're the ones that's taking all the risk. They're the ones that are taking all the risk. They need a break on this. They need it. They deserve a break. Unfortunately, we're out of time, which means we're going to have to have you come back on the show again. So we'll give this another few months, and then come back and give us another update. Very good. But there's a lot of work to do. And the Alliance is certainly there to help bring some structure to the process. And I can't forget, we're not reinventing the wheel here. This has been done in other states, and part of your role, I would think, is to just create this awareness to people that what's working and what isn't. Exactly. And help figure out how that fits into Hawaii. Yes, sir. So Chris, it's great to have you on the show again. I look forward to the next one. But this is a business in Hawaii with Reg Baker. We air weekly every Thursday at 2 o'clock for 2.30. And we're always talking about good, positive stories, success stories of businesses in Hawaii. And Chris has done an amazing job out at the Alliance. So we applaud him for that. Thank you, and I hope to see you next week. Aloha.