Change is in the air as the Maryland Medical Cannabis program continues to grow and evolve in a number of important ways. The program, which had only one licensed grower and zero patients at this time last year, now boasts 14 growers, 13 processors, 46 dispensaries, 800+ certified providers, and 33,000+ registered patients, with more being added every day. The continuous and steady growth has fueled optimism about the potential for the program that some skeptics were questioning whether it would ever get off the ground. That optimism has now spilled over into the 2018 legislative session of the Maryland General Assembly with state politicians jostling to position themselves as supporters of the nascent program.
The Assembly, which meets for only 90 days at the beginning of each calendar year, was tasked with filling holes in the enabling legislation of the medical cannabis program that only became apparent once the program rolled out in 2017. There were at least 38 cannabis-related bills filed in the 2018, but the headliner was HB2 (SB1) which served as a sort of omnibus fix bill that went through significant debate and amendment, and required the entire legislative session to eventually pass. It was signed into law just this week by Republican Governor Hogan, who has been a somewhat surprising supporter of the program since his taking office in January 2017.
Lauded as a top priority for the Black Caucus, HB2 was originally envisioned as a bill to solve the racial disparity in the program that resulted from the selection of the grower, processor and dispensary licensees in 2015-16 that disproportionately benefited non-minorities. Sponsored by Delegate Cheryl D. Glenn (D-Baltimore City) and Senator Joan Carter Conway (D-Baltimore City), HB2 addressed the dearth of minority- and women-led businesses by adding 7 new grower licenses, 12 new processor licenses, and directs the Maryland Medical Cannabis Commission (MMCC) to actively seek racial, gender, ethnic and geographic diversity in their award. The MMCC is instructed to implement remedial regulations based on the results of a 2017 interim disparity study to more fully inform its future licensing decisions. It also obligates licensees to regularly report racial and gender diversity statistics to the MMCC, and establishes a compassionate use fund to finance low- or no-cost access to medical cannabis for eligible patients.
A number of industry carve-outs were also included in the final bill. In a protectionist nod to the existing licensees, the bill caps the number of licenses that can be issued in the future by requiring a needs assessment report to be issued by the state, and restricts when that report can be issued. It clarified the definition of an owner, established important protections for transportation agents to carry cannabis between licensees, further protected independent testing laboratories, and limited the ways that a criminal conviction would interfere with a person’s ability to hold a license. These seemingly mundane and technical changes will be a boon to an industry still trying to find its footing in the new regulatory environment. From an operators perspective, they resolve a great deal of the open questions and allow them to move forward with more aggressive business strategies.
Perhaps the most important operational change is the allowance of a limited list of pesticides, referred to as “crop protection agents” in legislative parlance, on cannabis crops. HB2 authorized the MMCC to develop, on an emergency basis, a list of acceptable crop protection agents which may be applied directly to cannabis plants provided they meet certain criteria for safety as determined by the US Environmental Protection Agency (EPA). Although the EPA has not approved pesticides specifically for use on cannabis, there is a broad list of products that are exempt from food residue tolerance requirements and permitted under the organic label. Provided the crop protection agents meet these criteria the MMCC is authorized to allow their use as part of a grower’s integrated pest management program. A full list of allowable products is expected to be released soon.
Also notable is what HB2 does not include. A number of legislators called for time, place and manner restrictions on advertising relating to medical cannabis. A standalone bill (SB1078/HB 1348) was introduced but ultimately failed after it received unfavorable votes in committee, and was opposed by the industry as overly restrictive and unnecessary. In a narrow but important loss to the industry, SB37/HB845 would have created a state-based tax deduction to offset some of the federal deductions for ordinary and necessary business expenses disallowed under IRS 280E. That creative workaround to the burdens of 280E is almost certain to be raised again in legislative session 2019.
Now the hard and important work of rolling out regulations to breathe life into the new law begins. Being so expansive, it will take the MMCC and the executive branch many months to write, offer for comment, and implement comprehensive regulations for the program. The MMCC has already indicated they expect a first draft by June 1st, but this will only be the first step in a process that likely won’t wrap up until at least Q4 2018. For those readers who are interested in positioning yourself to apply for one of the few remaining grower or processor licenses, you can expect an open application period to begin no sooner than Thanksgiving 2018.
Overall, the state of Maryland’s medical cannabis program is as strong as its ever been, and HB2 should be lauded as a victory to the industry and its future viability. Maryland is officially open for cannabis business.