With Arizona recently receiving 750 applications for 31 medical marijuana dispensary licenses, Pennsylvania’s Department of Health is bracing for the tidal wave of medical ­marijuana program applications for the 25 grow/processor and 50 dispensary permits.

On Aug. 18, Pennsylvania’s Department of Health issued two sets of temporary ­regulations under its Medical Marijuana Act, 35 P.S. Sections 10231.101-10231.2110: Article IX. Medical Marijuana Program “Chapter Section 1141 General” and “Chapter Section 115 Growers/Processors and Medical Marijuana Organizations,” (temporary regulations).

Offering few surprises, the temporary ­regulations provide staggering application requirements, emphasize the ­program’s deep diversity commitment, but fail to ­provide any “residency requirements” ­barring ­out-of-state investment or ownership.

Although setting no timetable for ­processing the submitted applications, the department is adhering again to its ­self-imposed deadlines and promises to issue dispensary “operation and application” regulations shortly.

Patients, Medical Marijuana Organizations, and Growers/Processors

Mirroring much of the 24 other legalized marijuana states’ guidelines, the temporary regulations offer generally accepted ­industrywide definitions of the legalized cannabis industry players.

The temporary regulations define ­”patient” as a commonwealth resident having a “serious medical condition” meeting the act’s “certification” requirements and a “medical marijuana organization” as a “dispensary, grower/processor, or clinical ­registrant,” (MMO). The 17 “serious ­medical condition” ailments are amyotrophic lateral sclerosis. autism, ­cancer, Crohn’s Disease, damage to spinal cord nervous tissue with objective neurological indication of intractable spasticity, epilepsy, glaucoma, human immunodeficiency virus or acquired immunodeficiency syndrome, Huntington’s Disease, inflammatory bowel syndrome, intractable seizures, multiple sclerosis, neuropathies, Parkinson’s Disease, post-traumatic stress disorder, severe chronic or intractable pain of neuropathic origin or severe chronic or intractable pain in which conventional therapeutic intervention and ­opiate therapy is ineffective, and sickle cell anemia.

Unlike most legalized marijuana ­jurisdictions separately defining “growers” and “processors,” the temporary regulations consolidate the two into “grower/processor” defined as “a natural person, corporation, partnership, association, trust or other entity holding a valid permit from the department to grow and process medical marijuana.”

Expressly excluded from MMO’s and grower/processor definition is “health care medical ­marijuana Organization,” “a vertically integrated health system approved by the department to dispense or grow and ­process medical marijuana” pursuant to a ­”research study.”

A “vertically ­integrated health system” is defined as a single Health Care Facilities Act-licensed organization providing a complete spectrum of primary, specialty, ­hospitalization and pharmaceutical care.

On the investment side, a “financial backer” is defined as an investor, mortgagee, bondholder, note holder or other source of equity, capital or other assets other than a “financial institution” which, in turn, is defined as a bank, national banking ­association, bank and trust company, trust company, savings and loan association, building and loan association, mutual savings bank, credit union or savings bank.

Prohibited from holding any “financial interest” in an MMO (or its holding ­company, affiliate, intermediary or subsidiary) is an “executive-level public employee or public official” as defined in 65 Pa. C.S. Section 1102, or their immediate ­family member. Expanding the act diversity’s emphasis, the temporary regulations require that each MMO’s initial or renewal ­applicant provide a “diversity plan” defined as a strategy promoting or ensuring diverse groups ­participation in an MMO’s ­ownership, management and operation through contracting and ­employment opportunities.

A “diverse group” is defined as a ­certified disadvantaged, minority-owned, ­women-owned, service-disabled, veteran-owned or veteran-owned small business and an “operator” as an individual directly overseeing or managing applicant or permittee’s day-to-day business functions and ability to direct both “on- and off-site” employee activities.

Unlike Alaska, Colorado and Washington State’s legalized marijuana program’s launch, the temporary regulations fail to include any residency requirements ­whatsoever. Beyond not structuring the program to support Pennsylvania-based ­growers, processors and investors, the temporary regulations provide no barriers to out of state interest which, through economies of scale and superior funding, may ­overwhelm state business application efforts.

Grower/Processor Application Submission

In opting for a “competitive” application process, and not a “lottery” system, an applicant will have to submit massive detailed information and documents that the ­department will then evaluate according to its own subjective criteria.

Specifically, through three regional ­designations (northwest and southwest, northcentral and southcentral, northeastern and southeastern), the department will award Pennsylvania grower/processor ­permits based on factors including respective region’s population, number of “serious medical condition” suffering patients, types of serious medical conditions, public ­transportation access, and rural and urban area health needs.

Applicants must provide the department with: legal name and certified copies of organizational documents; proposed site’s physical address (including evidence of clear legal title, option to purchase or lease) and landlord or property owner’s ­written statement that applicant may operate an MMO; certification that applicant will comply with local zoning ordinances affecting location and site’s MMO use and ordinances; plans and specifications drawn to scale for existing or altered building and a plot plan; each MMO’s principal, operator, financial backer and employee’s name, residential address, date of birth, title, and curricula vitae, criminal history, affidavit of prior 10 years management/ownership ­position; evidence that applicant is responsible and capable of successfully establishing and operating MMO (demonstrated experience running a for-profit or nonprofit organization, prior licensing history, evidence of compliance with Department of Revenue and Department of Labor and Industry laws, and evidence of applicant’s workers’ compensation insurance and professional and commercial liability insurance coverages); description of each principal, operator, financial backer and employee’s duties, responsibilities and roles; operational plan, including timetable outlining steps to becoming operational; operation plan describing how proposed site and business will comply with act and regulations relating to security, employee qualifications and training, product transportation, storage and labeling, inventory management, quality control and testing for potential contamination, recordkeeping, preventing marijuana unlawful diversion, marijuana growing including a detailed cultivation policies and procedures summary, and diversity goals establishment, implementation and monitoring; all relevant capital requirements financial information; and “character” statements.

After reviewing the grower/processor ­application and conducting any “site inspection,” the department will score the application according to its own determined criteria. The “inspection” encompasses site’s appropriateness, applicant’s readiness to participate in medical marijuana program and law and regulation compliance, interviewing financial backers, ­principals, employees, and operators (including ­physicians, pharmacists and physician’s assistants) and examine vehicles.

Further, because a subjective scoring ­system is proposed, arguably a more thorough diversity program may be more ­material to an applications success than prior business experience.

Grower/Processor Application Evaluation

Although setting no timetable for ­processing submitted applications, the ­temporary regulations provide guidance on post-submission requirements to obtain a license.

Within six months of the initial permit’s issuance, the grower/processor permitee must notify the department, on a department-supplied form, that it is ­”operational;” i.e., ready, willing and able to carry on permit-authorized activity and has ­implemented an electronic inventory tracking system.

Within one year of the initial permit’s issuance, and every three months thereafter, the grower/processor must report to the ­department the: amount of medical marijuana sold during each three-month period; and the price of each unit of medical ­marijuana sold.

Violating the temporary regulations may result in department-imposed civil penalties including up to $10,000 per violation and $1,000 for each day of a continuing ­violation. •