While the world is watching Texas' special legislative session for its high drama on redistricting and hemp, on Friday, the Texas Department of Public Safety ("DPS") released information on the required Supplemental Application Narrative and Forms that must be completed to remain eligible to receive a Dispensing Organization license for all 139 applicants that applied for licenses in 2023 and prior. Supplemental Application materials are due before September 15.
It's a major movement and applicants are going to want to carefully assess their prior filings for areas to update, as well as address new information requested by DPS in light of the recent passage of House Bill 46, which expands the Texas Compassionate Use Program in the Lone Star state. Applicants looking to shore up their prior application will want to (i) pay particular attention to site control and real estate issues in light of DPS' Health Service Regions; (ii) specifically discuss plans for ensuring statewide coverage and patient access, which is a major objective of HB 46; and (iii) emphasize their financial capability.
Foley Hoag's National Applications Team has won licenses in every major competitive cannabis licensing process and state. We pride ourselves on our win rate and track record of responsiveness and timely delivery of project narratives. Please reach out if you would like to consult on these developments in the state of Texas.
Background
On Friday, DPS also adopted regulations, which will be published in the Texas Register for public comment, laying out the supplemental application process.
DPS will award at least nine (9) Dispensing Organization licenses by December 1 through a competitively scored application process. We learned Friday that a committee of DPS employees will score the application based on the criteria described in more detail below.
Only the 139 previous applicants in 2023 and prior are eligible to receive the licenses. These applicants may not edit and re-submit their application and narratives, but as described below must complete an updated supplemental narrative, which gives applicants opportunities to update real estate information for the Dispensing Organization location and satellite dispensing locations and provide further financial and other information – particularly in light of the expansion of the TCUP program under HB 46 – to improve their application. Applicants wishing to withdraw have until August 15 to seek a refund of the application fee and to withdraw their application.
Supplemental Application Requirements for Existing Applicants are due by September 15
There are three components that the 139 previous applicants will need to complete to remain in the competitive application process are:
- Supplemental Narrative and Exhibits. A
new narrative that includes the following
information:
- A plan detailing how the applicant would begin operations if licensed including timelines, deliverables, milestones, and projected date for filling prescriptions.
- The plan must also identify how the applicant would provide statewide coverage for patients.
- Current financial portfolio.
- Current Dun & Bradstreet report.
- Current balance sheet.
- Health Service Region Selection and
Responsibility. A Statement of Priority Ranking for one of 10
Health Service Regions. The Health Service Regions are new, and if
you are a winner, DPS will assign you a region in which you will be
required to build the cultivation/processing location
or one satellite dispensing location. It is
important to note that an applicant does not need
to build its cultivation/processing facility in the Health Service
Region to which it is assigned but must build either the
cultivation/processing facility or a satellite dispensing location
in their assigned Health Service Region.
- Region 7, which includes Austin, is not available for selection. The three existing licensed Dispensing Organizations are in Region 7.
- Region 3, which includes Dallas, and Region 6, which includes Houston, will each receive two licenses, and all other regions will receive one.
- As a reminder, under House Bill 46 licensees will be allowed to apply to DPS to open satellite locations for storage and delivery/dispensing of low-THC cannabis to patients. DPS is tasked by HB 46 with developing regulations for security and design requirements for satellite dispensing locations. For license winners, the rules allow Dispensing Organizations to build unlimited satellite locations, if approved by DPS, but a licensee cannot build more than one satellite dispensing location in a Health Service Region until the licensee has built a satellite dispensing location in each region.
- A signed acknowledgment form.
Application Scoring Criteria
DPS also released scoring criteria it will use to award the licenses. The Scoring Criteria is detailed, but roughly awards points as follows:
- 25% - Security and Infrastructure Plans
- 25% - Accountability, which includes diversion prevention, seed to sale tracking plans, cultivation methods and other topics
- 25% - Financial Responsibility, which assesses the applicant's financial capability to implement its plans, including longer-term plans for statewide patient coverage; and
- 25% - Technical and Technological Ability, which includes cultivation and processing methods, HIPAA compliance, and other topics
Key Strategic Considerations for Existing Applicants
We think key components that will require updating in the Supplemental narratives will include:
- Renewed discussion of plans for implementing statewide coverage, including future satellite locations;
- Real estate and site control information for selected Health Service regions;
- Revisions to plans that discuss expansion of the qualifying conditions and other amendments in HB 46;
- Most importantly, financial capability. DPS at its recent meeting emphasized that scoring criteria will emphasize an applicant's financial ability to stand up a vertically integrated operation in its health service region within the 24-month deadline set by HB 46.
New Applicants Also Can Apply for Three Available Licenses by September 15
Lastly, new applicants also have until September 15 to submit a completed new application. There are three "new" licenses that must be awarded in 2026, and applicants from the prior pool, that are not selected on December 1, 2025, will automatically be considered for one of these three licenses – meaning new applicants will have to score higher than the 10-12 highest scoring applicants from the previous application pool.
DPS will name three waitlist or "eligibility" list that score in 13-15th place. If an application winner looks like it will be unable to meet "the 24-month deadline to become operational, DPS stated it will begin to consider the process for awarding the license to the one of the backup eligible licensees."
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