Massachusetts regulators are planning to overhaul medical cannabis rules to better match recreational licensing rules, but they seem to be reluctant to include the same social equity stipulations.
“It is crucial that any proposal to remove vertical integration include a three-to-five year period where those new licenses can only go to economic empowerment and social equity program applicants,” wrote Grant Smith Ellis, a medical cannabis activist who submitted a public comment during the advisory committee’s meeting on January 13.
Massachusetts has a similar window for economic empowerment and social equity applicants for cannabis delivery licenses. Those licenses will remain exclusive for three years, starting when the first applicant receives a final license, which has yet to happen.
When Massachusetts created the regulations for its medical cannabis market almost 10 years ago, without any provisions given to social equity. As a result, adding any rules could be seen as being more restrictive. Frank Shaw, an advisory committee member who has advocated for ending mandatory vertical integration since last year, said he did not think an exclusionary period would be legally allowed.
“By statute, the commission cannot implement anything in the medical program that’s more restrictive,” he said. “We can look at priority, we can look at certain classes of groups getting through the queue faster.”
Shaw suggested that there were two models that could be presented to the Cannabis Control Commission. One would shift from mandatory vertical integration to “partial vertical integration.”
As it stands, medical cannabis operators must own and operate every step in the supply chain, from cultivation, to processing, to retail. Partial integration would require companies to control only two of the three steps in the chain.
Shaw’s other suggestion would be to create an endorsement for existing licenses, that would allow adult-use operators to enter the medical market.
Shaw said that he believes that ending mandatory vertical integration will not require the legislature, because that requirement was originally created by the Department of Public Health to prevent cannabis from leaking into the illicit market.
“It was basically because of their fears of diversion in the industry, being an early industry,” he said. “As you know the adult-use program has matured and those fears didn’t bear out.”
Shaw said he believed that simply eliminating all vertical integration requirements would be “a heavy lift,” though most committee members seemed to be in favor of that.
“I think the goal here is to make this as practicable and as practical as possible.
This is a no-brainer, just trivercate the licenses,” said Kimberly Napoli, suggesting they be split into three. “Currently there are no equity provisions that apply to the medical side of this. If we continue to require folks to purchase multiple licenses at once, that is going to continue to be a barrier to entry that is insurmountable to most.”
Shaw cautioned the committee against approving a broad recommendation to end mandatory vertical integration, because the committee did so in 2018 without success.
“The industry subcommittee previously set up a broad recommendation to eliminate vertical integration in 2018, but the commission wanted more detail about how this could be accomplished,” said Shaw.
