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Canadians complain about cannabis prices, but they’re higher in the U.S. Here’s why

Why are some Canadian cannabis companies struggling?
WATCH: Why are some Canadian cannabis companies struggling? (Nov. 21)

Canadians are used to the idea that most things are cheaper in the U.S.: clothes, cars, appliances, cigarettes, alcohol. Shifts in the exchange rate lead to waves of cross-border shopping, usually in one direction.

There are, however, a tiny number of exceptions: pharmaceutical drugs, for one.

And, unexpectedly, cannabis.

While prices vary a bit by state, it turns out that weed is consistently more expensive in the U.S. — in states where it is legal — than it is in Canada.

Why?

Unlike Canada, U.S. states and the federal government both have their own sets of criminal laws.

And when they contradict each other, things get messy. Cannabis is a great example.

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READ MORE: Would U.S. legalization solve Canadians’ border cannabis woes? Here’s why it might not

While several states have legalized cannabis, it’s still federally illegal, which complicates the U.S. cannabis economy in many ways.

Because cannabis can’t legally cross state lines, any state that’s legalized has to have its own completely self-contained cannabis economy, which leads to endless inefficiencies.

Prospective Canadian cannabis investor gets lifetime U.S. entry ban
Prospective Canadian cannabis investor gets lifetime U.S. entry ban

“If there’s a surplus, you can’t ship it to another state,” says Brock University business professor Michael Armstrong.

“Even the companies that are operating nationally are really collections of state organizations. They have to have production independently in each state, and retailers independently in each state. They can have management co-ordinated across the country, but all the operations have to be state-by-state.”

Armstrong points to an extreme example of the problem: a cannabis store that opened not long ago on Nantucket, an island that’s part of Massachusetts.

Since water and air transport are federally controlled, the store has to grow all its own cannabis — and make all the products it wants to sell, like edibles, on-site.

Massachusetts state officials require producers to submit cannabis samples for testing, but allow the Nantucket site to submit soil samples instead, since the cannabis itself can’t be legally shipped off the island any more than it can be legally shipped to it.

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Not surprisingly, the store’s dried flower is the most expensive we could find in America, at US$20 a gram, or C$26.22.

Rhode Island, the smallest U.S. state, has an ongoing debate about legalization. If it did legalize, the tiny state would have to have its own closed cannabis economy, with no supply from next-door Massachusetts, which legalized in 2016. Nor could they buy any from Oregon, though that state has overproduced cannabis to such an extreme that it’s ended up with a seven-year supply.

READ MORE: Oregon has a seven-year pot supply, but Canada can’t have any

By U.S. standards, Canada’s cannabis is a bargain

The lowest-priced dry flower from five Canadian public-sector sites Global News looked at starts just under $7 in non-bulk sizes, with a few a little below that point. Quebec has a handful under $6.

Ontario and Quebec offer a 28-gram bag of dried flower from Hexo. In Quebec, the price per gram works out to $4.49, and in Ontario it’s $5.

We looked for the least expensive dry flower at dispensaries across the U.S. Here’s what we found.

Canadians travelling for pot business reasons may be denied entry
Canadians travelling for pot business reasons may be denied entry

All measurements are in metric, and all dollar amounts are Canadian, converted from the original U.S. prices on Dec. 17. 

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Michigan

Massachusetts

  • Insa in Salem, Mass.: dried flower starts at $19.67 a gram

Colorado

  • TweedLeaf Colorado in Colorado Springs, Colo., is more reasonable, starting at $9.18 a gram
  • Euflora, a statewide chain, has nothing under $14.79 a gram

California

Oregon

  • Oregon Weedery in Portland, Ore.: three kinds of dried flower at $10.49 a gram
  • Green Health in Eugene has one strain at $6.56 a gram

Washington

Nevada

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Deepak Anand, CEO of Materia Ventures, a cannabis supply and distribution company, noticed the price difference in Las Vegas recently. 

“I visited Planet 13, which is a fairly large dispensary,” he says. “The prices that I saw for products were insanely high, on both THC and CBD products, compared to Canada.”

READ MORE: Cannabis IQ — Everything you need to know about pot and the border

“Granted, Las Vegas is probably catering to predominantly a tourist market, prices are artificially inflated and that doesn’t necessarily reflect what happens in the rest of the state, in places that are not frequented by visitors, but I thought prices were significantly higher, compared to Canadian prices.”

Federal illegality complicates how these businesses are run, Armstrong says. And unavoidably, the extra costs drive up prices.

Americans will be allowed back in U.S. after cannabis use in Canada
Americans will be allowed back in U.S. after cannabis use in Canada

“They don’t have bank accounts. They have to store cash in a safe on the premises or elsewhere,” he says. “That can add to the security costs. Producers don’t like to disclose their production locations. If something gets stolen, there’s no insurance coverage. If you go bankrupt, there’s no bankruptcy protection.”

“If you can’t get access to the stock market, you’ll have to raise money other ways, which will be more expensive. That will add financing costs.”

Reliance on cash attracts violent crime. In 2016, a security guard at a Denver dispensary was shot dead during a robbery. The victim’s mother, and a security company that specializes in protecting cannabis businesses, both blamed the cash-based nature of the industry, the Denver Post reported.

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“The fact that you have to deal in cash, and pay your taxes in cash, can’t write off expenses, are all challenges that they face in the U.S.,” Anand says.

Anand points out that cannabis testing standards differ by state, making compliance much more complicated for companies than if there was a uniform national system, as in Canada.

State and federal regulators disagree about what claims can be made about CBD, leaving companies caught in the middle.

“You’ve got a state regulator that says, ‘Yes, you can launch these products,’ and you’ve got a federal regulator saying, ‘No, we’re going to shut you down,'” Anand says. “Whereas in Canada, it’s one level of approval. You’ve got the federal approval, and that’s all you need.”