Pennsylvania’s medical marijuana law states that its Department of Health cannot issue more than five dispensary permits to one person, with each permit allowing three locations. Yet 16 dispensaries are controlled by Trulieve and another 16 by Green Thumb Industries.
This control of a market that has earned $2.4 billion in retail sales since it’s 2016 launch is a result of the Department of Health’s unique interpretation of the law, giving organizations the freedom to apply as many times as they can afford, as long as each application is under a different limited liability company.
The law also states that no one individual can own more than one grower-processor license, yet AYR Wellness, Trulieve, and Curaleaf each effectively control two or three permits.
In 2019, one company, Harvest Health & Recreation, which has since been acquired by Trulieve, was awarded seven dispensary permits by the state, each held by a different LLC, all controlled by the same parent company. That is, until they bragged about it, according to the Philadelphia Inquirer. The ensuing news coverage got the Department of Health’s notice. Later the Department brought an enforcement action and reduced Harvest’s permits from seven to five.
Pennsylvania has three medical marijuana permit types: retail, a combined grower-processor, and Clinical Registrants, the latter allows a licensee to grow, process, and dispense medical marijuana in conjunction with a Pennsylvania medical school.
Once medical marijuana sales was legalized in 2016, Pennsylvania regulators issued 25 grower-processor permits over two rounds of permitting. The grower-processors first became operational in 2017 with the first sale in early 2018.
The two permitting rounds also included 50 dispensary permits. Each dispensary permit entitles the permit holder to open up to three locations in a region. Clinical Registrants, a vertically-integrated license, are allowed a grower-processor facility with six dispensaries. They must also submit studies regarding cannabis sales to the state.
There are 23 qualifying conditions.
Meredith Buettner, executive director of the trade association Pennsylvania Cannabis Coalition, said Pennsylvania businesses and other small companies should be given more attention in an adult-use bill.
“Now we have the majority of our licenses here in Pennsylvania are vertical and owned by MSOs. Whether that was the legislative intent or not – I don't believe it was. Why our regulators have allowed that to happen – I can't offer an explanation for that, that’s something that they would have to answer on their end,” she said. “But I will tell you that a lot of the original permit holders have really successfully completed mergers and acquisitions.”
The Pennsylvania Department of Health responded to some requests but did not respond to media inquiries concerning ownership and current patient numbers.
There is a bipartisan bill that has already been introduced and is written by Republican State Sen. Daniel Laughlin and Democratic State Sen. Sharif Street. There is also one bipartisan memo circulating.
But Philadelphia-based William Roark, a cannabis attorney at Hamburg, Rubin, Mullin, Maxwell & Lupin, P.C., is not hopeful either will get passed in the current climate.
“We have a Democratic governor who has made cannabis one of his legacy items. And we have a Republican General Assembly that very much doesn't want to give our governor another win. So I don't think this is going to get over the finish line. And I say that knowing full well that a lot of the bills are bipartisan and supported by Republicans. But the Republican leadership is in charge of the General Assembly's calendar. And this just isn't going to be a priority,” he said.
Some states have a “carve out” for social equity applicants, said Cassel, but Pennsylvania’s medical marijuana law does not.
“What they did was they gave extra points to applicants who were planning to build in a disadvantaged area. They also gave points for people who had very comprehensive and robust plans to hire minorities and contract with vendors who were certified minority businesses,” she said. “I will say most of the adult use bills that are circulating in Pennsylvania right now have a specific carve out for minorities, as well as a criminal justice or social justice component.”
Roark said applications had to have a diversity plan that made up 10% of the final score.
“They didn't say, ‘Okay, we only want permittees that are owned and operated by diverse individuals.’ That's not how they looked at it at all. They looked at it by saying, ‘Okay, how are you going to weave diversity and these goals into your business model? How are you going to make sure that you have a diverse workforce? How are you going to make sure that you contract with minority owned businesses with certified women owned businesses?’ It wasn't simply myopically focused on what is the skin color or the gender of the applicant,” he said.
Current medical market challenges
The Department of Health has recently come under fire for its statewide review of concentrates containing added ingredients like externally sourced terpenes.
The Department will cross check information from grower-processors with a list of FDA-approved additives. The only issue is that cannabis is not extensively researched by the government, meaning there will be a limited number of approved additives – and companies will have to pull products medical patients have come to rely on.
“Lots of agencies are coming out with these mandates that no additives can be placed inside any of these inhaled products because of this scare in 2019 of vaping. But those are really separate issues,” said Judith Cassel, an attorney at Hawke McKeon & Sniscak LLP. “A lot of these additives are wholly natural, but coming from botanicals, from citrus, and they'd help give the medical marijuana products some flavor and some aroma that's pleasant.”
The Department of Health did not respond to inquiries about its investigation into additives.