New Department of Health Regulations Begin to Provide Guidance on Obtaining and Maintaining a Medical Marijuana Grower/ Processor Permit or Dispensary Permit in Pennsylvania; 28 Pa. Code §§1141.21 et seq.

November 3, 2016

by David L. Pollack, Of Counsel[1]

 NOTHING IN THIS DOCUMENT IS INTENDED OR SHALL BE CONSTRUED AS ADVICE TO PARTICIPATE IN, OR COUNSEL WITH RESPECT TO, CRIMINAL OR FRAUDULENT ACTIVITIES.  POSSESSION, DISTRIBUTION AND SALE OF MARIJUANA IS A SERIOUS CRIME UNDER FEDERAL LAW, AND NOTHING HEREIN SHALL BE CONSTRUED AS ADVICE TO VIOLATE THAT LAW.

On October 29, 2016 the Pennsylvania Department of Health (the “Department”) published temporary regulations[2] (the “Regulations”) under the Pennsylvania Medical Marijuana Act[3] (the “Act”), which outline the application process for obtaining and maintaining a medical marijuana grower/processor[4] permit or dispensary[5] permit under the Act. Persons who are contemplating entering one of these businesses should be aware of the following:

 

When can I apply for a grower/processor permit or dispensary permit?

The specific dates on which the Department will make the permit application available and begin accepting accept permit applications has not yet been announced. We are informed that this date may be in the first quarter of 2017.  However, the Department will publish in the Pennsylvania Bulletin notice of the initial permit application availability and the time frame in which initial permit applications will be accepted. An applicant’s initial permit application must be received during that time frame to be considered by the Department.

What form do I need to complete in order to apply for a grower/processor permit or dispensary permit?

The application form will be made available on the Pennsylvania Bulletin. Applicants must use the official form. Once the application is made available, applicants will be required to submit the permit application form electronically, either through the Department’s website or by mailing electronic media to the Department.

What are my chances of getting a grower/processor or dispensary permit?

The Department will not initially issue more than twenty-five grower/processor permits and fifty dispensary permits. Permits will be divided among six regions (coextensive with existing Department of Health Regions). The Department will consider the following factors about a region in which an applicant intends to do business in its determination to grant or deny an initial permit to an applicant.

  1. Regional population;
  2. The number of patients suffering from a serious medical condition;
  3. The types of serious medical condition in the region;
  4. Access to public transportation;
  5. The health care needs of rural and urban areas; and
  6. Areas with recognized need for economic development.

Note here that the regulations governing the demand side of this market, the physicians, patients and caregivers, appear to be last on the regulatory agenda at the Department of Health. The DOH may find it difficult to evaluate applications if it does not have data on qualifying patients.

What do I need to start assembling in order to apply?

1.  The physical address of the applicant’s proposed site and facility, including evidence satisfactory to the Department that shows the applicant owns or has the authority to use the proposed site and facility as a site and facility for, at a minimum, the term of the permit.

2.  Plans for the facility (after construction or renovation, if the applicant will build or build out its facility).

3.  Evidence that the applicant is or will be in compliance with municipal zoning requirements.

4.  Certified copies of the applicant’s organizational documents, if applicable, and, if the applicant was not organized in Pennsylvania, evidence that it is authorized to conduct business in Pennsylvania.

5. Evidence that the applicant is responsible and capable of successfully establishing and operating a facility. Evidence of this capability could include, e.g., demonstrated experience, running a for-profit or nonprofit organization or other business within Pennsylvania or any other jurisdiction.

6.  Evidence that the applicant and its directors and officers are in compliance with all the laws of the Commonwealth regarding payment of State taxes. (Tax clearance letters from PA Departments of Revenue and Labor and Industry; or certification by those departments that a Tax clearance letter has been requested.)

7.  A diversity plan that establishes a goal of equal opportunity and access in employment and contracting by the medical marijuana organization. A medical marijuana organization may demonstrate achievement of its diversity goals by employing diverse participants or transacting business with diverse groups.[6]

8.  Begin running background checks on owners and prospective employees. Each applicant will be required to submit fingerprints of its directors, officers, financial backers, operators and employees to the Pennsylvania State Police. The Pennsylvania State Police will then submit the fingerprints to the Federal Bureau of Investigation for the purpose of verifying the identity of the individuals whose fingerprints have been submitted and obtaining a current record of criminal arrests and convictions. The Pennsylvania State Police will provide the results of the record checks to the Department.

9.  Begin working with other service providers. To comply with the Act and Regulations, a medical marijuana organization will need to have commercial relationships with:

a.  a commercial bank;

b.  a property and liability insurer;

c.  an analytical laboratory;

d.  one or more physicians or pharmacists;

e.  a security specialist or specialists;

f.  IT specialists;

g.  accountants; and of course

h.  legal counsel.

10.  The Regulations require that the applicant adopt internal policies and procedures to address the requirements of the Act and Regulations. As part of the application, the applicant must provide a summary of its intended plan of operation that describes, at a minimum, how the applicant’s proposed business operations will comply with the Act and the Regulations (including new Regulations for grower/processors codified at 28 PA. Code §§1151.21 et seq.) relating to:

a.  Security;

b.  Employees qualification and training;

c.  Transportation of medical marijuana;

d.  Storage of medical marijuana;

e.  Labeling of medical marijuana;

f.  “Seed to sale” inventory management;

g.  With respect to grower/processor facility, nutrient practice;

h.  With respect to a grower/ processor’s facility, quality control and testing of medical marijuana;

i.  Recordkeeping;

j.  Preventing unlawful diversion of medical marijuana;

k. With respect to grower/processor’s facility, growing of medical marijuana, including a detailed summary of policies and procedures for its growth; and

l.  Establishment, implementation and monitoring of diversity goals.

What is the cost to apply for a permit?

When applying for a grower/processor permit the Department requires a $10,000 nonrefundable application fee and a $200,000 refundable initial permit fee. An applicant for a grower/processor permit must provide an affidavit stating that the applicant has at least $2,000,000 in capital, $500,000 of which must be on deposit with one or more financial institutions.

When applying for a dispensary permit the Department requires a $5,000 nonrefundable application fee and a $30,000 refundable initial permit fee. An applicant for a dispensary permit must provide an affidavit that the applicant has at least $150,000 on deposit with one or more financial institutions.

How long after I submit my application will I know whether or not I have been chosen to receive a Permit?

The information regarding the application process timeframe is unclear. The timeframe regarding the application release date, submission and evaluation period has not yet been addressed by the Department.  We do know that once a permit is granted the permit holder will have six months to become operational and forecast its production to the Department.

If I am granted a permit from the Department, for how long is it valid?

A permit is valid for one year from the date of issuance. A medical marijuana organization wishing to renew its permit shall submit a permit renewal application not more than 6 months, nor less than 4 months, prior to the current permit’s expiration.

What if the Department denies my application for a grower/processor or dispensary permit?

Once a decision is made, the Department will provide written notice of denial to the applicant. The applicant can request a debriefing from the Department within 30 days from the date of notice of denial, limited to a discussion of deficiencies in the application. A disappointed applicant can appeal the notice of denial under the Department of Health’s rules for administrative appeals, and should have an ultimate resort to Commonwealth Court.

SMGG intends to stay at the forefront of legal developments in this area. For questions, please contact Erica L. Laughlin or David L. Pollack of Strassburger McKenna Gutnick & Gefsky at elaughlin@smgglaw.comdpollack@smgglaw.com or (412) 281-5423.

[1] The author would like to recognize the significant contributions of John Scialabba, University of Pittsburgh Law School class of 2017, to this post.

[2] Codified at 28 Pa. Code §§1141.21 et seq; 28 Pa. Code §§1151.21 et seq

[3] Codified at 35 P.S. §§ 10231.106 et seq.

[4] The new rules and regulations define a grower/processor as a person who holds a permit from the Department under the act to grow and process medical marijuana.

[5] The new rules and regulations define a dispensary as a person who holds a permit issued by the Department to dispense medical marijuana.

[6] Under the new rules and regulations, the term diverse participants includes

a.  Individuals from diverse, ethnic and cultural background and communities;

b.  Women;

c.  Veterans; and Individuals with disabilities.