Ohio’s Medical Marijuana Program “Goes Live” Part I

By Jordan C. Butler

In September of 2016, the Ohio General Assembly legalized medical marijuana in the State of Ohio. The new law requires Ohio’s medical marijuana program to be fully operational by September 8, 2018. This narrow window to develop a functional infrastructure has put tremendous pressure on several state regulatory agencies to meet the looming deadline.

To complicate matters, recent delays in the licensing of 25 cannabis cultivators in Ohio have potentially pushed back the program’s launch.

The key state agencies involved in regulating this new complicated “ecosystem” are:

  • The Ohio Department of Commerce -oversees medical marijuana cultivators, processors and testing laboratories.
  • The State of Ohio Board of Pharmacy-oversees medical marijuana retail dispensaries, registration of medical marijuana patients and caregivers, approval of new forms of medical marijuana, and the Medical Marijuana Advisory Committee.
  • The State Medical Board of Ohio- certifies physicians who are permitted to recommend medical marijuana and qualifying conditions for which medical marijuana can be recommended for patients.

This first article (in a two part series) focuses on the basic definitions and guidelines applicable to cultivators, processors, and dispensaries. It provides an overview of the licensing and inspection provisions as they relate to scale and investor cost. The second article in the series will look at entrepreneurs who are developing businesses to implement and distribute medical marijuana in Ohio.

What is a cannabis cultivator?

A “cultivator” is an entity that grows, harvests, packages, and transports medical marijuana. A “Level I cultivator” is a cultivator that is permitted to operate up to 25,000 sq. ft.of space for marijuana cultivation. A “Level II cultivator” is a cultivator that is permitted to operate up to 3,000 thousand sq. ft. of space for marijuana cultivation. After September 8, 2018, the Department of Commerce may issue additional cultivator provisional licenses if the population of the state and the number of patients seeking to use medical marijuana support additional licenses. The Department of Commerce has already issued thirteen Level I licenses to twelve cultivators (one cultivator will be operating in two different municipalities). It has issued fifteen Level II licenses to twelve cultivators (one cultivator has 3 locations and another cultivator has 2 locations).

The cost to apply for a Level I cultivator license is $20,000.  If awarded, the initial license fee is $180,000 and annual renewal fees are $200,000. The cost to apply for a Level II license is $2,000.  If awarded, the initial license fee is $18,000 and annual renewal fees are $20,000.

What is a processor?

A “processor” is an entity that manufactures medical marijuana products. These products include oils, edibles, and other items that are made from the raw materials provided by cultivators to be sold at dispensaries. The Department of Commerce may issue up to forty provisional processor licenses.  The Department accepted applications only during an eleven day period in December 2017.  Similar to the potential increase in cultivators’ licenses, the Department of Commerce may issue additional processor provisional licenses if Ohio’s population and the number of patients seeking to use medical marijuana support additional licenses.

The cost to apply for a processor’s license is $10,000. If a license is granted, the initial operation fee is $90,000 and the annual renewal fee is $100,000.

What is a dispensary?

A “dispensary” is an entity that sells medical marijuana to qualifying patients and caregivers. The State Board of Pharmacy may award up to 60 dispensary licenses. A dispensary cannot be located within 500 feet of a school, church, public library, public playground, public park, or community addiction services provider. Furthermore local municipalities may adopt additional rules prohibiting or limiting the number of dispensaries. The State Board of Pharmacy accepted applications during a 14-day period in November 2017, so no new applications are being accepted.It costs $5,000 to apply for a dispensary license. Biennial renewals will cost $70,000.

Applications, Operations, & Inspections

The application forms, disclosures, review processes, and rules of operation are quite complex and vary by agency. Cultivators, processors, and dispensaries should, at least initially, expect frequent visits from the Department of Commerce or the State Board of Pharmacy. The law allows the Department of Commerce to inspect a cultivator’s and processor’s premises without prior notice. The law does not limit when or how many times within a certain period the Department of Commerce may conduct inspections. The dispensary rules state that dispensaries are “subject to random and unannounced dispensary inspections and medical marijuana testing” by the State Board of Pharmacy.

While the applicable State agencies are not currently accepting applications for cultivator, processor, and dispensary licenses, such applications may be accepted again in the future. Given the short application periods allowed for the initial licenses, it is likely any future acceptance period will also be relatively short. Therefore, if you are interested in applying to be a cultivator, processor, or dispensary in the future, you should learn the applicable rules now and familiarize yourself with the applications and required supporting documentation.

If you would like to learn more about these guidelines, applications, and other general processes, please contact your Carlile Patchen & Murphy LLP business attorney.