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Opportunity and Roadblocks Implementing Medical Marijuana in Pennsylvania

Signed into law on April 17, 2016, and “taking effect” on May 16, 2016, legal medical marijuana has come to Pennsylvania in the form of “The Medical Marijuana Act.”

Both innovative and despairing, the success of the Act’s implementation hinges on the substance and timing of the regulations that Pennsylvania’s Department of Health is charged with promulgating.

Equal parts “good,” “bad,” and “ugly,” huge rewards and multiple landmines litter Pennsylvania’s path to getting its medical marijuana program online.

The Good

Because all ingredients necessary to be among nation’s premier medical marijuana programs are present, the “good” is fairly spectacular.

First, the Medical Marijuana Act lists 17 “serious medical conditions” encompassing autism and sickle cell anemia alongside traditional cancer, epilepsy and post traumatic stress disorder ailments. By cutting such a wide swath, the Act welcomes a high participation in its program.

Second, because of its huge potential patient base, every incentive exists to quickly and smoothly launch the program to maximize the yield. Even if less than 1 percent of the Commonwealth’s 12.8 million residents participate, the program would be populated by over 100,000 card holders generating an estimated $100-$150 million in annual sales revenue.

Third, unlike states severely limiting the number of issued licenses, the Medical Marijuana Act authorizes 25 grow/processing licenses and 50 dispensary licenses, each of which empowers the licensee to open three (3) locations for up to 150 dispensaries.

Fourth, because its residents are concentrated in its southeast (Philadelphia and suburbs), west (Pittsburgh and suburbs), center (Harrisburg and State College) and northern tier (Allentown and Scranton) sections of the state, Pennsylvania’s population density and dispersal lends itself to the peculiar algorithm of zeroing in on “agreed upon” grow/processor and dispensary locations.

Fifth, the staggering application and registration fees and capitalization requirements should fuel program’s launch and initial success.

The Medical Marijuana Act imposes:

  1. $10,000 application fee, $200,000 registration fee and $2 million “capital requirement” ($500,000 of which must be in cash) on growers-processors; and,
  2. $5,000 application fee, $30,000 registration fee and $150,000 “capital requirement” on dispensaries.

Although forming a significant barrier to entry, these exorbitant sums will weed out applicants and yield more mature registrants fueling implementation and assuring greater stability in the program’s early stages.

The Bad

Despite massive potential, the Medical Marijuana Act’s restrictions form potentially fatal chokepoints and provides little guidance or inducement for the Health Department to move swiftly.

First, the Act imposes “certification” requirements on medical marijuana prescribing physicians requiring them to successfully complete a course and registration process. Little incentive exists for Pennsylvania physicians to pursue certification, and a similar requirement in New York is frequently blamed for that program’s poor start.

Second, the Medical Marijuana Act bars both “edibles” and “smoking,” restricting consumption to vaping, pills, oils, topicals, tinctures, liquids, and dried leaf and plants. Beyond limiting the legalized cannabis’ market, the modest consumption choices may dissuade patients from selecting to treat with cannabis.

Third, because the Act provides no hard deadline for promulgating regulations, the Health Department faces little consequences for “dawdling.” In lieu of creating a dedicated agency to create regulations and administer its program, the Act assigned Medical Marijuana to an agency already tasked with other responsibilities and without providing it any significant resources other than an “advisory board.”

Further, although requiring that specific regulations be promulgated within 18 months of May 16, 2016 enactment (ex. regarding possession by day care center employees), the Medical Marijuana Act imposes no hard deadline on overall regulations issuance.

Fourth, because it fails to address historically “hot button issues,” the Act dumps a number of bombs in the Health Department’s lap requiring diffusing that may gum up the works.

Will there be a residency requirement? Will “out-of-state funding” be allowed?  Exactly how will gender, minority, or veteran status be weighed in the application process?

The Ugly

Regardless of opportunities and roadblocks, Pennsylvania is a commonwealth composed of 67 independent counties, contains the nation’s oldest population, and has been described as “Philadelphia in the east, Pittsburgh in the west and Alabama in the middle..”

Defined by entrenched cronyism, warring factions and counties, and an antiquated state controlled liquor sales system, it’s anyone’s guess whether Pennsylvania will pull together to swiftly and successfully launch its medical marijuana program.

Steven Schain

Steven Schain

2019 National Law Journal “Finance, Banking, & Capital Markets Trailblazer” award winner, Steve Schain is Senior Counsel at Smart-Counsel, LLC, a 100% female owned boutique Cannabis law firm.  Steve represents entities, governments and individuals in litigation, regulation and compliance, financial services, license applications and entity formation. Reach Steve at [email protected]

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