2011 MMJ Update

As most of you know, DOR has drafted various rules regarding regulation of MMJ businesses. Public comment is invited and there is hearing scheduled on 1/27 and 1/28. For those of you who do not have a copy, you can view the document at:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251678551504&ssbinary=true.

Next, further legislation is being proposed for MMJ businesses, caregivers, doctors and patients. The bill, HB 11-1043 is attached in PDF format. A summary of the proposed changes include:

1. Only owners of MMCs and/or MIPs will be subject to the 2 year residency requirement;
2. MIPs that cultivate their own medicine will be limited to 500 plants;
3. Primary Caregivers can work with more than 5 patients upon the granting of a waiver from the Department of Revenue. This class of Primary Caregiver will be licensed (there may be fees…) and would be able to transact with the patients of another Primary Caregiver of the same class (more than 5 patients). This section does not appear to be well thought out and is likely to be substantially revised;
4. Primary Caregivers licensed to serve more than 5 patients will be required to register the cultivation site with the Department of Revenue, disclose the patients they are working for and comply with zoning and building regulations. This appears to be limited to PCs who received a waiver to care for more than 5 patients, but could likely include all Primary Caregivers. This could result in elimination of home-based cultivation;
5. MMCs will be permitted to sell MMJ below cost or give MMJ to indigent patients. It is unclear whether this will impact the 2 oz. per patient inventory limits;
6. MMCs will be permitted to sell clones. According to the recent Dept. of Revenue rules (see above) clones are treated as plants and subject to inventory limits (6 plants per primary center assignment) and cannot be sold to patients;
7. MMCs will be able to “trade” medicine in equal amounts with another MMC, but not “re-traded.” It is unclear whether this will be included in the 30% allowable sales;
8. The prohibition for owners with a felony drug conviction in their lifetime will be reduced to a conviction within 5 years of the completion of the sentence;
9. The location of the Optional Cultivation Premises will no longer be confidential;
10. Multiple MIPs will be permitted to operate from a single facility by obtaining a “manufacturing facility license.” It is unclear how this will be enforced, fees, etc.;
11. Patients will be permitted to purchase medicine while their application is being processed (no more 35 day waiting period);
12. Labeling of medicine is going to be addressed; and
13. Doctor’s with “conditional” licenses will be permitted to request that they be able to recommend MMJ.

Finally, I trust that all of you are prospering in the New Year and that you are currently in compliance with the rules governing your business. Be reminded that compliance will be measured from 7/1/10 and you should not expect any leniency if you are not compliant at all times.

MMJ Division/Matt Cook update

I have been corresponding with Mr. Cook on various legal issues that continue to arise. I wanted to share with you his responses.

1. Is the sale of the 30% inventory from MMC to MMC retail or wholesale? A: Wholesale and that normal business records must be kept. I suggest that you verify both local approval and timely filing of the state application with any MMC you deal with. Make a copy of any licensing if possible.

2. Can MMCs sell to caregivers on behalf of the caregiver’s patients? A: No, unless the patient is homebound AND has a waiver from CDPHE.

3. If you failed to meet the 9/1 certification deadline, can you continue to operate? A: No. However, if you met the 7/1 local approval/pending local approval deadline and filed the state application by 8/1, you are still considered “established” and do not forfeit your application fees. Nonetheless, you must cease operation until the state rules on your application.

4. Will there be a license fee(s) in addition to the application fee(s)? A: Yes. The license fees will be set in the spring. Start saving your money (what little you have) now!

5. Does the 2 year residency requirement also apply to employees and managers? A: Yes. As you know, I do not necessarily agree with this, but that is the state’s interpretation until a district court judge rules otherwise. You should also assume the felon criminal conviction rules for owners applies equally to employees and managers.

6. Can municipalities impose a different standard for who is permitted to own a MMJ business? A: No, it is the state who decides this issue. For instance, Fort Collins enacted an ordinance prohibiting someone from owning a MMC/MIP if the have a felony within 10 years of the completion of the sentence (the state limits this to 5 years).

7. Can municipalites use a different standard of measurement for the distance between MMCs, schools, day cares, etc.? A: No, the “pedestrian access” standard set from in CRS 12-43.3-308(d)(II) will be applied.

35 day rule, selling to new patients

As some of you may know, Mr. Matt Cook, on the advice of the attorney general, pronounced that MMCs cannot sell MMJ to new patients until the expiration of 35 days after the application is sent to the Department of Health. Please review http://www.colorado.gov/cs/Satellite/Rev-Enforcement/RE/1251575119584.

The apparent basis is Amendment 20 which states, in part, that the state must issue the MMJ registry cards within 35 days after the application is received. Accordingly, Mr. Cook believes that 35 days must pass before the patient is “legal.” I disagree. Participation in the MMJ registry program is not required. A patient is entitled to the affirmative defense to criminal prosecution upon the recommendation for use of MMJ by a licensed physician. The Amendment requires that the card must then be issued no later than 35 days after submission of the application. As we all know, this hasn’t occurred for over a year.

However, Mr. Cook requires that the MMC not sell MMJ to any new patients until 35 days after submission of the application have passed. I anticipate that the state will be verifying this information at some point in the future and will look back to 7/1/10 for compliance. Accordingly, please comply with this rule immediately.

Finally, the state is still woefully behind in issuing MMJ patient registry cards. The Amendment states that when the card is not issued within 35 days, the patient “shall provide a copy of the application” and “written documentation and proof of the date of mailing.” I understand that this is not included in the application or the state’s application instructions. Nonetheless, it is the law and must be followed by the MMJ businesses…

amending applications

In view of the rapid, changing circumstances for MMJ businesses, the Department of Revenue is permitting applicants to amend their applications in the following situations:

Replacing a cultivation location with a new cultivation location (filing an amended appendix A) to the original application. I suspect that another OPC fee must be tendered along with the new Appendix A;
Adding/deleting managers, members, shareholders. New keyperson applications must also be tendered;
Transferring or selling the business assets (internal changes to an LLC or corporation, including transferring all stock/ownership of that entity); or
Increasing or decreasing the size of the proposed premises.

This list is not exhaustive and amendment may (or may not) be permitted in other situations.

Next, you must first seek local approval for any of the above-changes to your business. Also, you may only amend the application if:

1) You were operating an established, locally approved business on July 1, 2010, (or you had an application on file by July 1, 2010, which was subsequently approved), and;

2) You filed the required applications and fees with the Department of Revenue on or before August 1, 2010; and

3) On or before September 1, 2010, you certified that you were growing at least 70% of the medical marijuana necessary for your operation.

Mr. Cook advises that continued operation of a medical marijuana business or without meeting all three of these conditions is in violation of 12-43.3-901(1)(c) and 12-43.3-901(1)(d) C.R.S. This means that if you were late with your 9/1/10 certification, you are no longer permitted to continue to operate while your application is pending and must submit an entirely new application.

MMC and the “grow your own” requirement

Although I have previously discussed this issue, I need to address the concept of a MMC growing its own medicine. Here are the basic rules:

1. The MMC must grow up to 70% of its own MMJ.
2. The MMC can only purchase up to 30% of the MMJ from another, licensed MMC.
3. The MMC cannot buy MMJ from a caregiver or patient. Simply put, there is nothing legal a caregiver or patient can do with “excess” MMJ.
4. The effective date for the MMC to grow its own MMJ is 7/1/10. The 9/1/10 certification date is merely the date you tell the state that you are and have been growing your own MMJ.
5. You cannot contract with a grower to produce MMJ – you must grow your own.

Next, what is 70%? This is one of the more cryptic answers in this area of law. First, you must look to CRS 12-43.3-901, the unlawful acts section. At Sec. (e), it states that it is unlawful (i.e., illegal) for the MMC to possess more than 2 ounces and grow more than 6 plants for each patient that assigns the MMC as their “primary center.” Accordingly, the total amount of MMJ a MMC can possess is 2 ounces multiplied by the number of patients who have designated the MMC as their primary center. Using simple math, a MMC with 50 patients who have assigned the MMC as the primary center can possess no more than 100 ounces of MMJ. A MMC with 100 patients can possess 200 ounces and so on. Accordingly, a MMC with 50 patients must produce 70% of 100 ounces, which is 70 ounces. Again, the MMC can possess up to 100 ounces and no more. The practical result is that, in most cases, the production of the grow far outstrips the legal possession of MMJ by the MMC. Also, since you can only sell 30% of the total inventory to another MMC, in the 50 patient example, you can only sell 30 ounces to another MMC. Understand that the MMC is likely to produce “excess” MMJ, but cannot legally sell it. The key is to acquire more patients who assign the MMC as their primary center until your retail and cultivation capacity are equal. Otherwise, unlawful and illegal activities will have dire consequences.