Medical pot business poised for huge growth

After a recent shootout at the home of medical-marijuana activist Steve Sarich, police found 375 pot plants, $10,700 in cash and a stack of credit-card receipts showing Sarich's business had collected "hundreds and thousands" of dollars from pot-related sales and services in just a few weeks.

Sarich now is waiting to find out if the King County Prosecuting Attorney's Office will charge him with drug dealing.

The case is being watched closely in the medical-marijuana community, in part because the number of patients qualifying to use pot for medical purposes is expected to swell in the next few years, thanks to a new state law. To cater to those patients, a number of for-profit companies are staking claims in territory once dominated by nonprofits.

By most accounts, Sarich is one of the most aggressive players. He says he grows marijuana, dispenses it in exchange for a "donation" at a dispensary called CannaCare, and hires doctors to write medical authorizations for patients at $200 a pop under a business called Sentry Medical Group. The entire operation is housed in two buildings at his Kirkland residence.

His model has thrived, in part, because of a complicated state law that makes it legal to possess and use pot for medical purposes, but illegal to buy or sell it.

Sarich's one-stop shop became so popular that he employed parking attendants and shuttle buses to handle as many as 800 patients a month who flocked to his address, according to a sheriff's search-warrant affidavit.

To supply those patients, Sarich kept hundreds of plants in his basement, a number that far exceeds the 15 plants allowed each patient under state rules. Sarich, however, argues that the law allows him to have many more as long as he's serving as the "designated provider" for other patients.

Sarich, who says his business isn't profitable, said he wants prosecutors to charge him.

He said nothing in the law prevents him from directly providing pot to many patients.

"They [prosecutors] haven't challenged that because, if they lose, dispensaries will be legal."

Surge could be ahead

The King County sheriff's investigation comes at a time when the number of medical-pot patients — and businesses that help those patients obtain it — seems guaranteed to explode.

A new law effective June 10 will expand the authority to write medical-marijuana authorizations from doctors to a variety of health-care professionals, including naturopaths and nurse practitioners.

"It will dramatically increase the number of people who receive authorizations and lower the cost, which will make it more affordable for patients to qualify," said Paul Stanford, executive director of THCF, The Hemp and Cannabis Foundation.

The new law also likely will mean a lot more competition for companies, such as THCF, that connect patients seeking pot authorizations with doctors willing to write them.

THCF runs for-profit clinics in nine states, charging patients up to $180 for a first-time pot authorization.

The company, which started as a nonprofit with Stanford working at home, grossed $4.7 million last year and now has 100 employees, Stanford said. He said THCF is seeking investment capital to expand into 20 new cities.

CBR Medical, a Spokane-based for-profit, sees about 600 patients a month at 11 clinics across the state. Kent Myles, a consultant for CBR, says the 2-year-old business "grew 300 percent last year" and could hit $1 million in revenue this year.

Smaller competitors are cropping up in the area, advertising in publications such as the Little Nickel.

Many doctors reluctant

Businesses such as CBR and THCF thrive, in part, because many doctors won't provide pot authorizations out of fear of losing their federal license to write prescriptions.

Unlike Sarich's Sentry operation, CBR and THCF do not provide pot to patients.

At their clinics, patients typically pay around $200 for a doctor's authorization that must be renewed annually.

"It's big money out there for the doctors," said Mark Healy, manager of Green Hope Patient Network.

And although doctors in Washington state can authorize marijuana for medical use, they can't tell patients where to get it.

As a result, Washington patients navigate a legal netherworld, where finding medical pot can mean joining a co-op or making a donation to a provider.

Green Hope, a family-run co-op in Shoreline, focuses solely on obtaining marijuana for patients already authorized to use it.

The co-op makes a slight profit by selling memberships for $40 a year and offering clones — plant clippings off larger plants provided by other patients who grow their pot — for $20 donations, Healy said. Being a co-op allows Healy's organization to collectively provide pot to more patients than one caregiver could supply.

"We make OK money," he added. "As a caregiver, I can only [provide] for one patient. Steve Sarich is doing that for all his patients."

According to the search-warrant affidavit on Sarich's house, Sarich's girlfriend was the designated caregiver for about 138 patients.

No clear guidelines

Advocates and law-enforcement agencies in King County met twice last year to develop guidelines for co-ops that grow and distribute pot, but no agreement was reached, said Alison Holcomb, drug-policy director for the American Civil Liberties Union (ACLU) of Washington.

The shootout at Sarich's house underscores the need for guidelines and could bolster support for legal dispensaries in Washington state, she said.

"When people stretch the envelope of what law enforcement intended, and engage in practices that put their neighborhoods at risk of violence, maybe it's time to look at amending the law," Holcomb said.

The ACLU says it will pursue legislation to legalize medical dispensaries for pot. At least one state senator has announced she will introduce such legislation in 2011, Holcomb said.

Under the state's 1998 medical-marijuana law, patients can grow their marijuana — a long, labor-intensive and expensive process that advocates say often isn't feasible for sicker people — or designate a "caregiver" to do it for them. They also can obtain pot from caregivers or other patients.

Finding the line between lawful and unlawful use can be difficult, even for law enforcement, said Sgt. Carlos Rodriguez, a State Patrol officer assigned to WestNET, a drug task force that includes agencies from Pierce, Kitsap and Mason counties.

"It would be nice if there was more clarity," he said. "There are people who use the authorization to hide behind for illegal purposes, and true believers who use it as medicine. It's not our intention to go after sick people."

California and Colorado allow the sale of medical pot through storefront dispensaries that are not licensed by the state. Four other states passed laws allowing licensed dispensaries, said Allen St. Pierre, executive director of the National Organization for the Reform of Marijuana Laws.

Locally, the Internet has made finding a supply a little easier. Web sites such as thclist.comand FindMyMeds.com list organizations and people willing to serve as caregivers for the 15 minutes or so it takes to conduct a transaction.

Tom Ewing — a medical-marijuana patient listed as "Dr. Feelgood" on thclist.com — became a provider for other patients in Walla Walla about three months ago after being ripped off repeatedly by what he called "black-market dealers."

Ewing said he screens clients carefully, checking to see they live in Washington and have medical authorization before meeting them at their homes. Clients sign a contract that designates him as their caregiver for the time it takes to conduct the interaction.

A bad example?

Meanwhile, some patients and providers claim the size of Sarich's operation and his willingness to push the boundaries of the law are setting back the medical-marijuana movement.

"I think he hurts the cause," said Stanford of THCF, noting that teenagers formerly employed by Sarich were shot after breaking into Sarich's house in March.

"These kind of shootouts and being involved with teenagers in distributing [pot] and cultivating it, it makes us all look bad."

Sarich acknowledges he's a polarizing figure.

But he said the challenge to his business ultimately could help patients obtain marijuana more easily.

"They don't want things to change," he said of his competitors. "They've told me that if medical marijuana were legal tomorrow, they'd be out of business. I want to put myself out of business."

Mark Rahner: 206-464-8259 or mrahner@seattletimes.com. Susan Kelleher: 206-464-2508 or skelleher@seattletimes.com. Times reporter Sara Jean Green contributed to this report.

Information in this article, originally published April 17, 2010, was corrected April 19, 2010. A previous version misstated the dollar amount of credit-card receipts listed in a search-warrant affidavit. It has been corrected.