Medical Marijuana Update

When the Ohio Medical Marijuana law became effective on September 9, 2016, it provided that much of the operational details and rules would be established in the future by various state agencies. As of the end of January 2017, “proposed rules” for both cultivators and dispensaries have been published. Assuming these rules are adopted as proposed, here is some of what we may expect under the new law.

Initially only 12 “Level I Cultivators” (a cultivator with up to 15,000 square footage of space designated as the marijuana cultivation area) and 6 “Level II Cultivators” (a cultivator with up to 1,600 square footage of cultivation area) will be allowed.  No more than two Level I and one Level II cumedical marijuana updateltivator provisional licenses will be issued in any one “designated territory”. Likewise, until September 8, 2018 there will be only “up to” 40 dispensary provisional licenses issued. After September 9, 2018 the state board of pharmacy will consider additional cultivators and dispensaries if needed.

To obtain a license for either use, an applicant must submit evidence that it owns or controls (e.g. as a tenant) the property on which the proposed cultivator operation will be located. It must also submit a location area map of the area surrounding the proposed cultivator site that establishes the facility is at least 500 feet from the boundaries of a parcel of real estate having a school, church, public library, public playground, or public park.

Under the proposed rules, cultivators and dispensaries cannot advertise medical marijuana brand names or utilize graphics related to medical marijuana or display medical marijuana products and paraphernalia visible from the exterior of the facility. In addition, a dispensary cannot use a name, logo, sign, or advertisement unless it has been approved by the state board of pharmacy.  No advertising of any kind is permitted at a location that targets or is attractive to children, (as determined by the state board of pharmacy); on a billboard; on or in a public transit vehicle or public transit shelter; or on or in a publicly-owned or operated property. Ads cannot include any image bearing a resemblance to a cartoon character, fictional character whose target audience is children or youth, or pop culture icon.

Both facilities must have “restricted access areas” where medical marijuana inventory, is stored. In addition, the proposed rules provide that the dispensaries must have a “dispensary department” with access limited to patients, caregivers, and dispensary employees, a waiting room, and a “patient care area.” Sales of medical marijuana can only occur in the dispensary department and in the original, sealed containers or packaging. All products sold must be in an opaque package that shall not indicate the contents of the package.

All sales are required to be a face-to-face exchange without the assistance of any electronic or mechanical device (such as a vending machine). However,  a dispensary cannot operate a drive through window. Sales can only occur between the hours of 7:00 am and 7:00 pm. All sales must be logged at the dispensary with information electronically sent to the state board of pharmacy the within five minutes of the sale. A dispensary cannot make “deliveries” (“No dispensary shall transport medical marijuana or medical marijuana products to residences of patients or caregivers”). However under the law a caregiver may deliver medical marijuana to the caregiver’s qualified patient.
There are some interesting provisions regarding self regulation of dispensaries. Each dispensary employee is statutorily required to monitor for suspicious recommendations, unusual usage, or questionable disposition of medical marijuana and report such activity to the state. Under the rules, a dispensary employee may refuse to sell if he/she suspects that dispensing medical marijuana to the patient or caregiver “may have negative health or safety consequences for the qualifying patient or for the public, or when the patient is exhibiting signs of potential abuse or diversion.”

There are extensive monitoring, surveillance, and security requirements including prevention of loitering both inside and outside of the facility, ensuring that trees, bushes and other foliage outside of the dispensary do not allow for a person to conceal themselves from sight and have specific security cameras and alarm requirements. If the required surveillance equipment stops operating for any reason, no sales may take place.

The process to obtain either a cultivator license or dispensary license is very detailed with specified financial requirements. Provisional or initial permits will be granted before a full license will be issued. Even though we have a better idea of what to expect in terms of how things will run in the State, we still do not know how the federal government will act with marijuana issues. Note that Marijuana is Schedule I drug under federal law. Medical marijuana usage was not being actively enforced at the federal level due to executive orders and funding cuts from the Obama administration. Whether or not this will continue remains an issue. There is the potential for federal penalties which can include, fines, prison, seizures which can affect those involved in industry.  Due to these federal issues, most banks will not permit deposits or accounts from businesses engaged in State legalized marijuana sales. As a result the industry remains primarily a cash business. Ohio is planning a closed loop financial system for the purchase and sale of medical marijuana in the State but the details of that are not finalized.

For questions about this article please contact Gerald McDonald at gmcdonald@pselaw.com or call 937-223-1130.

AUTHOR: Gerald McDonald
gmcdonald@pselaw.cpom