Pennsylvania is the second-largest medical market with over 400,000 cardholders. In a surprise move in February 2022, the Pennsylvania Department of Health, Office of Medical Marijuana banned the use of products that contain additives not approved by the FDA - affecting the sale of over 600 products. The Pennsylvania Cannabis Coalition is urging the department to reconsider the ban but nothing has changed in over a year.

In positive news, the bi-partisan bill SB1024 crafted by Sens. Dan Laughlin (R) and Sharif Street (D) to allow medical patients to cultivate cannabis plants for personal use has been introduced. Moreover, a group of bi-partisan lawmakers is also taking the first serious steps to legalize recreational cannabis in the state with Gov. Tom Wolf’s support.

Pennsylvania has awarded 50 licenses that allow for three dispensaries per license and 25 processors, five of which can be vertically integrated. Operators are allowed up to five retail licenses for a total of 15 dispensaries. The state also implemented a Clinical Research ("CR") license program. Program guidelines note that eight CR licenses will be issued to operators partnered with one of Pennsylvania's major university health institutions. Each of the eight license holders can operate up to six dispensaries and one cultivation site.

May 2022 | IPR announced its acquisition of TILT's White Haven cultivation and production facility for $15MM

April 2022 | Ascend Wellness completed its acquisition of various facilities for $55MM

February 2022 | FarmaceuticalRX received $34MM from Chicago Atlantic in a senior secured term loan

September 2021 | Cresco announced plans to acquire Cure Pennsylvania's three dispensaries for $90MM

September 2021 | AYR announced plans to acquire PA Natural Medicine's three dispensaries for $80MM

May 2021 | GTI acquired NSE, The Healing Center & TerraVida

The play in the Keystone State is to build out infrastructure in anticipation of adult use. Through the Clinical Research program, 200 dispensaries will ultimately be allowed in this market. That said, no single operator can own more than 15 dispensaries, which should allow for relatively broad market participation.

Dispensaries should look to maximize earnings in advance of selling by partnering with one of the 25 cultivators in need of retail presence. Wholesale pricing has fallen since the start of 2022 as the market has become more saturated. Additionally, Pennsylvania is surrounded by states who allow adult use sales, notably New Jersey who is just over the river from Philadelphia, one of the top 15 cities in the world for cannabis consumption.

While Pennsylvania is not quickly moving towards adult use legalization, the pressure is mounting as they are almost surrounded by states who have legalized adult use. As the medical market continues to experience turbulence, operators can expect lawmakers to give more attention to the cannabis market in the next 12 months. The state has the potential to be an incredible market for adult use and operators should continue to find ways to enter before potential adult-use legalization.