Why is medicine more expensive in the dispensaries than it is on the street?

It’s logical to assume that when a product goes from illegal to legal, its street price drops. But not with medical marijuana. Colorado medical marijuana patients are discovering what California patients have known for years: legal pot is more expensive. From NPR:

“We found that if you go to a dispensary, it’s more expensive,” he says. “You go through a buddy, least expensive. Speaks for itself.”

There’s no consumer price index for pot in Denver, but police commander Jerry Peters has a pretty good idea of the cost. He heads a drug task force in the metro area.

“An ounce of marijuana goes anywhere between $270, $280 to about $400 an ounce… that we’re seeing in the different dispensaries,” Peters says. “In the black market, though, when … we buy an ounce of marijuana, it’s about 150 bucks.”

The biggest thing that communities fear when a dispensary comes to their town is not the spectre of stoned citizens giggling hysterically as they wolf down a pint of Ben & Jerry’s, it’s the possibility that the medicine sold at the dispensary will end up being re-sold on the streets. Every California dispensary I have been to makes a point of telling new members that re-distribution is strictly prohibited; usually I’ve had to initial that paragraph, but it’s been in a prominent place on just about every collective Membership Agreement I’ve seen (and I’ve seen dozens).

This fear of re-distribution exerts an upward pressure on prices in a number of ways. First, the dispensary has to compete with the black market for product, so they have to offer attractive prices to growers. Next, the dispensary has to price the product near or above the local street price in order to discourage resale by unscrupulous patients. Then, the dispensary has a host of other costs to cover: rent, utilities, taxes, payroll, etc.

Put it all together and you can see why a dispensary will never be able to compete with a street dealer on price. It’s ironic that while full legalization would drive prices downward, semi-legalization has had the exact opposite effect.

UPDATE: Joe at the 420 Times makes this point, which I should have remembered to include in my post:

“The marijuana you can buy at a dispensary is generally of much better quality than marijuana on the street. You can get carefully grown strains that target specific symptoms, and since the medicine is so much better, you can consume less of it. Also as she points out, it’s safer; if you’ve ever been to a bad neighborhood trying to score some weed, you know what she’s talking about.”

Indeed. The selection and quality at the dispensaries is quite good, and the shopping experience is generally fun, comfortable and safe. Those are all worth paying a bit more for, but the prices are still artificially propped up by the coexistence of a licit and illicit market.

UPDATE II: I also forgot to include in my post that, adding insult to injury, the relaxation of drug laws has also had the effect of driving street prices down relative to the dispensaries. The risks associated with selling marijuana on the street in California and Colorado are not as high as they are in states like Indiana or Oklahoma. This means that pot dealers can bring their prices down even further relative to the dispensaries, which still have all of the above to pay for, while street dealers have almost no overhead to worry about.

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