Kentucky’s fledgling medical cannabis market faces high prices, limited product and a shortage of cultivators and processors.
Strict regulations and a cumbersome patient-registration process are slowing enrollment, with only about 23,000 patients registered.
A widely available hemp-THC market offers consumers a cheaper, more accessible alternative, threatening medical cannabis growth.
The growth of Kentucky’s emerging medical cannabis market is facing some unique challenges out of the gate.
Some are tied to product availability, an expected consequence of a developing supply chain of roughly a dozen operational cultivators and only four processors.
As of early August, the state has only issued 74 total business licenses: 48 to dispensaries, 10 to manufacturers and 16 to cultivators, including two for larger grows.
Other issues appear more intrinsic and threatening, including:
Competition from a thriving, largely unregulated hemp market where consumers can purchase products at gas stations, liquor stores and smoke shops.
Marketing and advertising restrictions prohibiting billboards and traditional media placements.
An onerous, often costly process to obtain a state issued patient card, which requires an in-person medical diagnosis and doctor verification for qualifying conditions, printed attestation and a notary signature, and uploading those documents to a government portal.
Even with Democratic Gov. Andy Beshear expanding qualifying conditions in June, Kentucky's patient registry is roughly 23,000, less than 1% of the state’s population of 4.6 million.
“There are several barriers to entry for patients,” Rachel Roberts, executive director of the Kentucky Cannabis Industry Association (KCIA), told Cultivated.
Inventory check
At NatureMed’s store in Peducah along the southern Illinois border and in the college town of Murray in the southwestern part of the state, flower inventory is stable but strain varieties are limited, according to marketing director Myles Mayfield.
Prices, expectedly, are pretty high, with an eighth in the $60 to $75 range, half gram vapes around $50 and a half gram of RSO (Rick Simpson Oil) for $30.
“With what’s out there, the price ceiling is pretty locked,” Mayfield told Cultivated.
NatureMed is trying to keep prices stable for Kentucky residents who are facing economic challenges statewide. Median household income is about $63,700, the fifth lowest in the country, according to federal data.
RSO, a high-THC extract that retains cannabinoids, flavonoids and other plant compounds, is a top seller at NatureMed, which is planning to open two more stores in the state.
“We offer RSO in all of our stores, but in Kentucky there is just a higher demand for it,” Mayfield said.
There are 20 operational dispensaries in the state, according to the Kentucky Office of Medical Cannabis.
The Post Dispensary in Beaver Dam was the first to open in mid December but temporarily closed within a week after selling out of inventory.
Growing pains
Cultivators, like Cresco Labs, are starting to boost production, which will help decrease product costs over time.
On April 20, the Chicago-based company collected its first Kentucky harvest at an indoor facility in Winchester it manages for KSKYAPP LLC.
Cresco harvested more than 1,300 plants, which was expected to yield about 440 pounds, Spectrum News 1 in Louisville reported at the time.
The multi-state operator recently had its third harvest, with another expected in mid August.
“We're trying to balance production of premium, highest quality products, along with accessible products that provide people medical relief,” Peyton Brennock, Cresco’s vice president of national sales, told Cultivated.
KSKYAPP was issued one of two Tier III licenses, which allows up to 25,000 square feet of grow space. Dark Horse Cannabis was the other.
Dark Horse CEO Casey Flippo and Sean Clarkson, who serves as CFO and general counsel, did not respond to Cultivated inquiries for this story.
Cresco and Dark Horse are one among the 11 or so operational cultivators. A handful of others, including NatureMed, are planning to enter the market this year.
High wholesale costs ripple through
A lack of suppliers has pushed wholesale costs in Kentucky among the highest in the country.
Compared to Pennsylvania, an early entrant that launched medical sales in 2018, Kentucky wholesale prices in most product categories are three to four times higher, according to data compiled for Cultivated by New York-based wholesale technology platform LeafLink:
Flower per gram
Kentucky: $7.70
Pennsylvania: $3.20
Vape cartridges
Kentucky: $64.70
Pennsylvania: $19.74
Concentrates
Kentucky: $58.47
Pennsylvania: $12.88
Elevated product pricing is common in newer markets, which tend to follow a similar sales pattern nationwide over time.
“With relatively few operators and constrained supply, wholesale prices tend to sit higher at the outset,” Sean O'Toole, a LeafLink public policy and communications associate, told Cultivated via email.
”As additional licenses come online, cultivation capacity expands and more product reaches the market, prices typically compress toward levels seen in mature states. Kentucky appears to be at the front end of that trajectory.”
Restrictions limiting growth
The nation’s newest retail medical cannabis market is one of the most restrictive in the country.
Smoking flower is prohibited under state regulations and possessing product amounts over the state’s 30-day limits are a punishable criminal offense.
So is possessing cannabis products purchased in other states after Gov. Beshear on July 1 rescinded his 2022 executive order that prevented prosecution for purchasing out-of-state products.
In Kentucky, regulations also restrict flower over 35% THC, concentrates over 70% THC, and edibles over 10-milligrams of THC per unit.
The state also bans licensed cannabis businesses from holding patient registry drives, which may be a first in a U.S. medical market.
The burdensome application process has also hindered patient participation, with roughly 23,000 Kentuckians registered through July.
It’s been particularly difficult recruiting rural patients, according to Roberts.
“When we're holding these patient drives in rural communities, we'll sometimes see 20% of the people show up who don't even have an email address,” she said.
KCIA, which represents licensed medical marijuana businesses, has organized nearly 400 patient drives in six months. The trade group expects to hit its goal of registering 40,000 Kentucky patients this year, Roberts said
It has also mobilized nearly 500 medical practitioners to participate in drives with rotaries, lowering application costs to $25 per patient.
Most providers charge $99 to $149. Medical cards are active for one calendar year.
“We have heard stories of people charging up to $299, and certain providers requiring patients to come back every couple of months to have a renewal,” said Roberts, a former Democratic state representative.
The proliferation and availability of hemp-based THC products may pose the most immediate threat to expanding Kentucky’s medical cannabis market, even with a potential November ban looming on most hemp products sold today.
Retailers are required to register businesses and products with the state’s Cabinet for Health and Family Services and are prohibited from selling products to those under 21. And hemp-based THC drinks are only sold through liquor-licensed outlets.
“Right now in Kentucky, there are no product restrictions when it comes to gas station products,” Roberts said.
Story edited by Jeremy Berke