United States: What Medical Marijuana Organizations Should Know About Pennsylvania's 2017 Permit Applications

On January 17, 2017, the Commonwealth of Pennsylvania Department of Health made available the first applications for up to 12 Growers/Processors and up to 27 Dispensaries permits to be issued in June 2017. This "first round" of permit applications will be accepted between February 8 and March 20, 2017.

The Commonwealth estimates that it will receive 70 applications, which will be evaluated on seven criteria, as previously set forth under Pennsylvania's Medical Marijuana Temporary Regulations. In addition to the "moral character" of financial backers and company principals, the Commonwealth  will evaluate each applicant's ability to maintain effective control and prevent diversion of medical marijuana; obtain land, buildings and equipment in an "expeditious manner" ; and implement the security, tracking, recording keeping and surveillance requirements of the Temporary Regulations.

The application instructions disclose that the Commonwealth will consider region-specific issues, including population, number of potential patients, types of medical conditions, availability of public transportation, urban/rural health care issues and economic development needs.

Applications will be graded on a one-thousand-point scoring system that is substantially the same for Growers/Processors and Dispensaries. . However, Growers/Processors are required to provide additional agriculture-specific information, including practices for growing, nutrients/additives, processing/extraction and quality control testing.

Some portions of the application are "essays" of no more than 5,000 words, either addressing a specific operational requirement or allowing the applicant to explain why it will not conform to a provision of a Temporary Regulation.

An applicant's Diversity Plan, for ensuring diverse ownership and contracting opportunities, and Community Impact Statements, summarizing "how the applicant intends to have a positive impact on the community where its operations are proposed to be located," are worth up to 100 points each.

The Plan of Operation, outlining how the entity will ensure that its facility will be ready to run within six months of the date any permit is issued and setting forth benchmark operational dates, is worth a total of 550 points and requires yes/no answers and multiple "essays" for Security and Surveillance, Transportation and Storage, and other operational details.

Applicant Organization, Ownership, Capital and Tax Status information is worth up to 150 points awarded for two "essay" responses: (1) "your business history and your ability to maintain a successful and financially sustainable operation" (75 points) and (2) "a summary of your available capital and an estimated spending plan to be used for you to become operational within six months from the date of issuance of a permit" (75 points).

While applicants are required to submit 12 attachments, only two are considered under the scoring system: Site Plan (50 points) and Personal Identification (50 points).

Applicants must be prepared to stand behind all application statements. For example, once submitted, the Diversity Plan cannot be amended without written authorization of the Department of Health.

Although the application forms are comprehensive, each applicant also must review the Temporary Regulations to ensure that all necessary information is provided. For instance, 28 Pa.Code § 1141.44(a) of the Temporary Regulations requires an "adequate amount of comprehensive liability insurance covering the medical marijuana organization's activities authorized by the permit." However, the application form only requires the disclosure of the applicant's Pennsylvania Workers' Compensation Policy number (which insurance is separately required under § 1141.44(b)). Applicants might be more competitive if they include information that is required under the regulations but not specifically requested in the application forms.

In addition, there are a number of specific formatting requirements that must be observed. Most importantly, applicants bear the burden of submitting a redacted application to preserve confidential and proprietary information. Generally, any information contained in an application will be discoverable under Pennsylvania's Right to Know (RTK) Law (subject to the specific exclusions of RTK). Certain information is expressly protected from RTK, including physical/security features of a proposed facility, the proposed electronic system of a dispensary, and any other proprietary or confidential information that may undermine the secure operation of the entity. Applicants are expected to determine what information will or will not be subject to RTK.

Temporary Regulations issued in October 2016 (Growers/Processors) and December 2016 (Dispensaries) gave potential applicants a glimpse of what the Commonwealth will require from marijuana entities. All entities will be required to show that their investors and employees have no criminal backgrounds and are of "good moral character." Growers/Processors applicants know that they must have a plan for erecting an indoor growing facility with physical security and product tracking protocols in place within six months of receiving an initial license. Every proposed Dispensary must show that it is ready to build a main facility with adequate security and surveillance, a pharmacist or physician at the main site (or nurse practitioner at a satellite site) and strict storage requirements.

The instructions for Medical Marijuana Organization Permit applications provide additional information. The Commonwealth previously stated that there would be a maximum number of permits issued for each of the six established regions. Now we know that the maximum number of Dispensaries in certain counties has been limited, with Philadelphia receiving the largest potential allotment (3) followed by Allegheny and Montgomery counties (2) and 20 other counties being restricted to a single Dispensary.

As stated under the Temporary Regulations, there are application costs ($10,000 for Grower/Processors; $5,000 for Dispensaries) and initial permit fees ($200,000 for Grower/Processors; $30,000 for Dispensaries per location up to $90,000).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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