Iowa-grown relief from pain is coming
2017 law lets MedPharm Iowa plan to roll out medical cannabis products
JOE GARDYASZ Apr 3, 2018 | 8:03 pm
9 min read time2,041 wordsAll Latest News, Business Record Insider, Health & Wellness
Iowa bioscience leader Chris Nelson is bringing his significant knowledge in growing and extracting custom health ingredients from botanicals to the emerging medical cannabis industry.
Nelson, the president and CEO of global nutritional company Kemin Industries Inc. in Des Moines, last year became the sole successful bidder for Iowa’s first medical cannabis production facility.
Currently 28 states and Washington, D.C., have legalized the medical use of cannabis. With passage of the Medical Cannabidiol Act in May 2017, Iowa is among 18 states that limit legal medical use to medical cannabidiol products.
MedPharm Iowa, which is a separate entity from Kemin but will operate from a building on Kemin’s Des Moines headquarters campus, is built on a similar model as a Colorado medical cannabis company that Nelson co-founded three years ago. That company, MedPharm Colorado, began selling medical cannabis products in Colorado earlier this year.
This summer, MedPharm Iowa’s 14,000-square-foot facility that’s now under construction on the Kemin campus will begin growing cannabis, from which the company will begin extracting cannabidiols from the plants to produce a line of medical cannabis products.
Nelson said the anecdotal evidence that has emerged in the past few years about the medical benefits of cannabis, particularly for children suffering from serious disorders, prompted his decision to enter the industry.
“We had seen kids literally affected with enormous neurological challenges and seen that classical pharmaceuticals had been unable to touch that, and in this particular case, utilization of medical cannabis had,” he said.
“Knowing that that required the growing of very specific plants, then carefully extracting those plants, characterizing the active molecules through analytical chemistry and then formulating those into something that’s useful for a particular user — all of those things were right within Kemin’s wheelhouse,” Nelson said. “It seemed very logical for us to get into the business.”
MedPharm Iowa will leverage expertise from its sister company, MedPharm Colorado. Nelson is a managing partner in MedPharm Colorado with Andy Williams, who founded Medicine Man in 2009 with the goal of becoming “the Costco of marijuana,” and last year had sales of $17 million in legal marijuana products. Pharmacy chain owner TJ Johnsrud, founder and president of NuCara Management Group LLC in Conrad, Iowa, is also a managing partner of MedPharm Colorado.
Williams brings significant experience in growing cannabis, while Johnsrud has the pharmaceutical expertise that will be coupled with Kemin’s chemical extraction methods, Nelson said.
“We’ve made significant discoveries on every facet of what I would call ‘excellent quality medical cannabis products,’ ” he said. The plants will be grown entirely without pesticides, and the chemical extraction process will use supercritical carbon dioxide that will result in zero percent residue within the extracted material. Additionally, the company has developed new forms of medical cannabis that allow more complete forms of absorption and better overall utilization of the active cannabidiols from the plant products.
“All three of those discoveries will be valuable for MedPharm Iowa,” Nelson said.
Based on initial demand seen in two other Midwestern states — Minnesota and Illinois — that are a few years ahead of Iowa in legalizing medical cannabis, Nelson estimates that 17,000 Iowans could qualify for medical cannabis cards. Currently, fewer than 300 Iowans have the cards.
Nelson provided details of several other aspects of the operation in response to the following questions:
How did they project expected demand in Iowa?
That’s been a little tricky, I would say. Iowa, first of all, has a number of problems within its law — things that we’re actually attempting to see if we can get changed in this legislative session.
The first problem is in the law’s definition of pain that is allowed to be treated with medical cannabis. The definition in the Iowa law is “untreatable pain.” Well, if you talk to a physician you can sever a nerve and still have pain, unbelievably. So when we talked to legislators, that was not the intent; they wanted to have it utilized where there was chronic pain. So we’re looking for changes in the wording in that area.
Number two, when you look at the list of diseases that can be treated with the product, Iowa is very limited on the number that can be treated — only nine diseases. That compares to Illinois, which has 43. We think the Legislature needs to either expand the list to be more comparable to Minnesota or Illinois, or perhaps it’s time for the Legislature to stop playing doctor and allow the physicians to make the decisions about which diseases can be treated. Physicians have that full ability with any other pharmaceutical, and maybe we should be treating cannabis in the same way.
The third major change we think we need to see is in the level of THC [Tetrahydrocannabinol] that’s allowed. THC, of course, is the chemical that has the psychotropic attribute. Minnesota and Illinois have no limits on the level of THC that can be contained within their products. Iowa has put a limitation of 3 percent. The problem with that is simply on dosage. If you need 85 mg of THC, it could be with the Iowa product you would need to take 10 pills, whereas with a product from Minnesota you would only need to take one. Taking 10 pills obviously would be extremely difficult for someone suffering extreme pain due to cancer. Also, just from a cost standpoint, it makes it very difficult for Iowans to have this as an affordable treatment.
Is there a valid concern that a higher THC level could promote abuse?
The first thing you have to understand is that there has never been a reported case of cannabis addiction. This is not an addictive material. This is very unlike alcohol and opioids. It works through a very different biochemical mechanism, and thus addiction of any sort is not possible. Is it possible to get high if THC is available? The answer is, of course, yes. Even with the lower 3 percent concentration, it is still possible. Just like anything else in pharmaceuticals, medical cannabis can be abused. But I think the forms we have it in — for instance, an oil tincture or a soft gel, pills or in a cream — make it much more difficult to be able to do that.
What progress are you making toward production and sales?
The requests for proposals from the Iowa Department of Public Health came out last October. When it finally came due to actually put in the application, we were the only one to put an application in. And that was over 500 pages of documentation that the department required. After being granted a license, within 15 days we had a contract set with Neumann Construction here in Des Moines, and they started construction immediately. We’ve got a very aggressive timeline, but we are on that timeline right now.
We will have plants growing this summer in our facility, and we fully expect to be extracting those plants in October and November, thereby meeting the requirement that the state had set that we have material available by Dec. 1.
Other regulatory or sales channel hurdles?
Right now the state has only allowed five dispensaries, and again it requires a very extensive application process. Knowing how difficult it is just to put the application together, we decided we would apply for some of the dispensaries ourselves, just to guarantee that there was a customer to sell these materials to. With our license, we can only sell to the five dispensaries.
The other thing we were concerned about is that the dispensaries would be geographically distributed across the state. It’s conceivable that all the applications would come from Des Moines, and there would be five dispensaries in the Des Moines area and none anywhere else. We think that all Iowans should be able to drive to a dispensary in an hour or maybe a little more. [The Iowa Department of Public Health on March 27 said it would grant dispensary licenses to operations in Council Bluffs, Davenport, Sioux City, Waterloo and Windsor Heights.]
How do you see production ramping up in the first few years?
In Iowa, it’s required to hold a medical cannabis card to be able to buy it. These cards cost $100 each for a patient to be able to obtain a card. We looked at the number of cards issued in Minnesota and Illinois and then we figured that Iowa should have the same proportion of cards relative to our smaller population. Based on that, we believe there should be something like 17,000 cards issued in the state of Iowa. Currently today, there is only 283. So there has to be quite a big change in the number of cards issued — and that will then tell us what we can expect for first-year production and sales.
How could this help address Iowa’s opioid crisis?
The important thing here is that there have now been a number of scientific studies done that demonstrated that for people who are in severe chronic pain, that the combination of the cannabis product along with maybe very much smaller doses of opioids is far more effective in controlling pain. This has been demonstrated to reduce the overall opioid demand, simply because people don’t get hooked on it because they don’t utilize as much to get the pain relief they need.
Target price range for the products?
We have not set any of the pricing yet, but it is going to be very comparable to Minnesota and Illinois. We’re in the Midwest market and we’ve got to be competitive. Although technically a patient cannot cross state lines to buy material, from a good business standpoint we’re going to be right in there with the pricing for the other two states.
How expensive is it?
Because it’s not covered by insurance, I would say for some users, yes, it will be expensive. On the other hand, when you’ve been unable to achieve any solution through traditional pharmaceuticals, it is inexpensive. It is not like some of these drugs you hear about that cost $100,000 a year. For a patient who has to take some every day, it may be a couple thousand dollars per year.
How profitable could the medical cannabis business be?
We have very good philosophical reasons for going into this because of the help that we’re going to be able to provide to a large number of Iowans who we feel are not being served by traditional pharmaceuticals. On the other hand, to make this sustainable, we have to be profitable. The first years are not going to be; there’s no question. We are making enormous investments in 2018, and we will not sell anything this year. Next year in 2019, depending on the number of cards we have in the state, we’ll really determine how much we’re able to sell.
Long-term, we need to be sustainable. Kemin, being a family business that has worked in botanicals for many years, we know that patience is often needed. Given the unique chemistry of cannabis, we’re willing to have that patience.
Does this give you a leg up if recreational marijuana is legalized in Iowa? Do you have any interest in that market?
There will have to be some change at the federal level before that could even become a possibility within the state. It’s almost impossible to hypothesize. It is worthy to note that we now have virtually the western third of the United States with legalized recreational. And shortly this summer, all of Canada. That may make fishing trips to Canada very different. No beer cans in the bottom of the boat!
Eligible conditions that can be treated under the Iowa law:
• Cancer (with severe or chronic pain, nausea or severe vomiting, cachexia or severe wasting)
• Multiple sclerosis (with severe and persistent muscle spasms)
• AIDS or HIV
• Crohn’s disease
• Amyotrophic lateral sclerosis (ALS)
• Any terminal terminal illness with a probable life expectancy of under one year (if the illness or its treatment produces one or more of the following: severe or chronic pain; nausea or severe vomiting; cachexia, or severe wasting)
• Parkinson’s disease
• Untreatable pain