The Pessimist

Our local paper recently ran a Canadian Press article on the huge markup that the Federal government is charging for medical marijuana. (Here is a slightly longer version of that article: Link.)

The crux of the article is that the government is charging patients 15 times what they are paying their supplier. The info was gathered using the freedom of information act. Here are a few sample statements from the article:

Health Canada pays $328.75 for each kilogram of bulk medical marijuana produced by Prairie Plant Systems Inc.
Health Canada, in turn, sells the marijuana to a small group of authorized users for $150 – plus GST – for each 30-gram bag of ground-up flowering tops. That works out to $5,000 for each kilogram, or a markup of more than 1,500 per cent.
Contract records show Health Canada also pays the supplier a packaging fee of $9.06 for each 30-gram package, to cover labour and materials, as well as courier fees that are dependent on shipping volumes.
Street prices for marijuana are about $10 a gram for small quantities, or about twice Health Canada's price, though bulk street purchases with few middlemen can match or better the government price. Compassion clubs charge as low as $5 a gram, the same price as government dope.

That's a lot of numbers, and is rather difficult to digest because all of the units are so odd: 1 kilogram, 150 grams, 30 grams, 1 gram. Let's lay out all those prices and costs using one standard size of 100 grams.

The article make a big deal out of the government's 1500% markup ($500 / 32.87), but they haven't even got their arithmetic right. They should be including the shipping and handling in the cost, because they still have to pay Canada Post to get it to the patient. So the mark up is only 800% ($500 / 63.07).

What should be seen as remarkable is the market price for marijuana vs the price of a comparable commodity,like tea. Tea is an agricultural product; it is a dried leaf or flower; and it is sold for use in small quantities. Tea is sold in convenient little bags (humourously called 'sachettes' on the french labeling). I can get a box with 20 sachettes of tea, totalling 35 grams, for about $3.

Why does tea sell for $16 and marijuana sell for $500 to $1000? Prohibition -- pure and simple.

The governments cost is actually excessive because their supplier's costs are excessive. The government MJ is grown deep in a mine in Flin Flon Manitoba, under heavy security behind bomb-proof bunker doors. All lighting is, obviously, artificial and all dirt,water and manpower has to be delivered by elevator.

If the MJ were grown using common agricultural techniques (sunshine, rain), grown in large quantities and harvested by machine, the cost of production would easily drop from the unnatural $32.87 to something resembling the cost of producing tea $3.00.

But costs in the public realm are unreasonably high. Because the cost of production includes organized crime premiums, loss of crops through interdiction, growing in smaller quantities, hiding crops on the land of others, illegal grow ops, the potential for serious jail time, etc., etc.

This product should be legalized. Not just decriminalized but turned into a full scale participant in the legal economy. Prices could stay in the range of $500 without dampening demand, and the cost, including shipping and handling would probably be around $10. That $490 profit would flow into the hands of the legal economy: producers, distributors and, lest we forget - the government through sales, income and sin taxes. It would also save extraneous society costs like wasted police and court time. This would be far preferable to the current situation where the full profit flows to criminals and organized crime.

Why haven't we taken this logical step? Because the Americans have their heads so far up their asses that they think society needs to be protected from reefer madness (though cigarettes and alcohol are just fine, thank you very much).