With the dust settling and fuzzy math shrieks abating, Pennsylvania’s medical marijuana program’s first phase has drawn to a close.
Or has it?
Denying 408 applications and demanding its 12 grower/processor and 27 dispensary licensees construct statutorily compliant facilities within 182 days, the program’s overseeing agency, Pennsylvania’s Department of Health (DOH), faces Herculean obstacles in overcoming the missteps which crippled New York, Maryland and New Jersey’s programs and mollifying scores of disgruntled and litigious applicants.
Medical marijuana program
Defined by the Medical Marijuana Act, 35 P.S. Sections 10231.101-10231.2110, regulations promulgated there under, and Medical Marijuana Organization (MMO) permit application (hereafter, collectively referred to as the marijuana law), the program encompasses 17 serious medical conditions eligible for marijuana prescription, including post-traumatic stress disorder.
Authorizing 25 grow/processing licenses and 50 dispensary licenses, each empowering the licensee to open three locations for up to 150 dispensaries, one trade publication estimated that if even 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 $100-$150 million in annual sales revenue.
Dividing Pennsylvania into six delineated geographic regions, the DOH launched a competitive, “1,000-point scoring system” based on factors including the respective region’s population, number of serious medical condition-suffering patients, serious medical conditions types, public transportation access, and rural- and urban-area health needs.
Because applicants compete inter-regionally, a winning Region 6 score may fall short of that which prevailed in Region 1.
Requiring that each MMO’s application 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, the program’s scoring rubric apprised that 100 potential points would be awarded for diversity and community impact, respectively. Further, unlike Alaska, Colorado and Washington state’s programs’ launch, the program imposed no residency requirement, removing any barriers to entry for out-of-state interests.
Electing to award licenses in phases, on June 20, the DOH awarded 12 grower/processor, and, on June 26, 27 dispensary licenses, forming the program’s first phase.
Lessons learned from the first phase
Ignoring the program’s primary objective of swiftly providing sick people with medicine, the first phase license denials and awards triggered a tidal wave of malevolence to wash across Pennsylvania.
Seduced by their own PowerPoint deck’s glitter, both high and mighty and hardscrabble applicants received a rude awakening in the form of both denied applications and modest scoring. Stunned by their lack of sway and convinced that shenanigans prevented fair consideration, lawsuits ranging from “striking Pennsylvania marijuana law as unconstitutional” to “disqualifying successful applicants for alleged wrongdoing in other jurisdictions” are being loudly threatened across all 67 counties.
Although the program allows each applicant to receive a de-briefing on how respective applications were scored, and for unsuccessful applicants to appeal their scoring, here is what the first phase results revealed:
• Life ain’t fair. Mirroring Arizona’s 2016 dispensary permit results (in which 750 applicants sought 31 licenses), each program application had less than 1 in 11 chance of winning. Further, because the program omits any residency requirement, Pennsylvanians, whom had never grown, processed or sold marijuana, had even less of a chance.
• Big marijuana carried the day. Approximately 70 percent of the winning applicants were affiliated with growers, processors and dispensaries already operating in multiple legalized marijuana jurisdictions. Beyond being able to demonstrate a history of being a transparent, compliant and profitable marijuana-related business, winning applications were crafted by experts at submitting winning applications, which is distinct from growing, processing and selling marijuana.
• Consultant means failed grower. Like a rube swindled by a suddenly exiting town carny, seemingly sophisticated Pennsylvanians got suckered by consultants with shiny trade show booths leveraging claims of “Colorado or California growing experience” and selling fanciful and proprietary lighting, fertilizing and yield optimization techniques. Also, enjoying handsome windfalls at 400 unsuccessful applicants’ expense were lobbyist and juiced-in lawyers offering connectivity to politicos with jazzy titles and zero decision-making process impact.
• Follow the rules closely. Does your diversity definition encompass armed forces veterans or involve third-party certification? Regardless, because Pennsylvania’s marijuana law defines a diverse group as a certified disadvantaged, minority-owned, women-owned, service-disabled veteran-owned or veteran-owned small business, the program’s unique criteria disqualified many seemingly qualified applicants.
• Pennsylvania’s Program Is Built to Last. Perceived inequities aside, the DOH and the program got it right. Beyond meeting every self-set deadline and blitzing through 500 applications in 90 days, licenses were generally awarded to the best-funded applicants with proven track records of success. In an exceedingly volatile industry hinging upon timing, adequacy of funding, and fullness of regulatory compliance, in the first phase the DOH has positioned the program for its greatest likelihood of swift success.
With 39 licensees scrambling to raise capital and timely complete compliant facility construction, and 400 failed applicants licking their wounds and weighing their options, one thing is clear: The remaining 13 grow/processing and 23 dispensary licenses will soon be up for grabs and the level of competition will be even fiercer than what occurred in the first phase.