Medical Marijuana: The Feds vs. California


Raids and arrests are up, but so are the number of dispensaries—and more states are coming aboard

When California voters approved the nation's first medical-marijuana law in 1996, the idea was to help people like Jamie Green, a 73-year-old cancer patient who says he can't stand traditional painkillers such as morphine and Vicodin. "One puff and my pain is gone," he says. Alas, medicinal marijuana is producing nothing but pain for California politicians and law enforcement officials.

The Golden State has seen an explosion of dispensaries where people with written recommendations from a doctor can buy all kinds of pot products, from multiple grades of herb sold by "cannabaristas" in black aprons to marijuana-infused candy bars and baked goods with names such as Reefer's Peanut Butter Cups and Munchy Way.

An estimated 600 dispensaries have sprouted up statewide in the past three years, a $1 billion-a-year business by one estimate. Many use coupons, newspaper advertising, and the Internet to attract customers with come-ons that include free grams for first-time visitors, discounts for people who have served in the armed forces, and $150 credits towards doctors' visits.

The relatively easy access to the drug has been lampooned on popular TV shows such as HBO's Entourage and Showtime's Weeds, the star of which—a pot-dealing suburban mom—has trouble competing with all the new medical-marijuana establishments. It has even inspired related businesses such as Potpartner.com, an online dating site for marijuana smokers that launched in April and has been advertising on Los Angeles radio stations. Richard Kapustin, one of the site's founders, says he has been giving out promotional lighters with his company's logo at the dispensaries. "The response has been very good," he says.

Good Guys vs. Bad Guys

There's one big problem with this, of course: Marijuana is still illegal under federal law. In July federal agents raided a dozen dispensaries across the state. Fourteen people were arrested, including several dispensary owners, a doctor who made referrals, and a handful of protestors. The Drug Enforcement Administration also has sent letters to the landlords of 150 dispensaries warning them that their property may be subject to forfeiture.

The feds say the dispensaries are just fronts for illegal drug-dealing. In one indictment, Larry R. Kristich was charged with running a chain of seven dispensaries from San Francisco to San Diego that operated under the name Compassionate Caregivers. Although California's law says medicinal ganja cannot be sold for a profit, the indictment says the business generated more than $95 million in sales, allowing Kristich to purchase a $70,000 Mercedes and real estate in Costa Rica. The U.S. Attorney's Office in Los Angeles says Kristich is now a fugitive. Calls to the Compassionate Caregivers branch in Reseda, Calif., were not returned.

Don Duncan, whose California Patients Group is a nonprofit, says the feds are tarring all dispensaries with the same brush. Ironically, he was arguing for more regulation of the industry at Los Angeles' City Council when his dispensary was raided on July 25. "The DEA can't tell the difference between the good guys and the bad guys," he says.

The city council ended up initiating a moratorium on new dispensaries. Councilman Dennis Zine says complaints about the dispensaries' staying open too late and distributing promotional fliers near schools has the city considering a number of regulations, including making sure they are collecting sales taxes and prohibiting consumption on the grounds, "just like liquor stores."

Never an Overdose

Meanwhile, the federal crackdown is prompting a lot of dispensaries to close up shop. Kern County Sheriff Donny Youngblood says there were six dispensaries in Bakersfield when he took office in January. But two federal raids, including one that led to arrests on July 17, as well as his own warnings have prompted them all to shut down. "It is a federal crime," he says. "And federal law trumps California law."

A dozen states now have medical marijuana laws, the latest being New Mexico, whose law went into effect on July 1. Most of the laws list specific ailments such as cancer, glaucoma, and AIDS, for which doctors may recommend the drug. California left its law open to interpretation by allowing physicians to suggest it for any illness they believe marijuana may help. Dr. Alfonso Jimenez, who owns four clinics in California that give patients recommendations but don't sell pot, says he has treated 5,000 people over the past four years, many for anxiety and depression. "I've got patients who come in and say: "I don't want antidepressants that will cause suicide or hurt my liver,"? he says. "It's a great treatment for chronic insomnia. I've been an ER doctor for 10 years. I've never seen a patient come in with an overdose of marijuana."

Los Angeles won't be the first California city to regulate the dispensaries. In San Francisco at one point, the number of people coming to downtown Oakland to buy medical marijuana grew so large that the neighborhood earned the nickname Oak-sterdam. Even the city's mayor at the time, the famously liberal Jerry Brown (he's now California's Attorney General), sought to rein in the dispensaries, closing some down and setting a limit of four in the city, according to Dale Gieringer, a state coordinator for the National Organization for the Reform of Marijuana Laws.

Many medical-marijuana proponents lament that aggressive growth and marketing of California's pot dispensaries has set back the medical-marijuana movement. Scott Imler, a Methodist minister who helped write California's medical-marijuana proposition back in 1996, says he would prefer to see the federal government control production and distribution of the drug. Imler says he read that one of the dispensaries in Los Angeles kept a sawed-off shotgun on the premises. "Have a shoot-out over a bag of weed—that's exactly what we were trying to avoid," he says. "We were trying to get patients off of the black market, not institutionalize it."

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau.

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