Hope for cannabis entrepreneurs, deep in the heart of Texas

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By John Schroyer

When Texas Gov. Greg Abbott signed a limited CBD bill into law last June, many cannabis professionals downplayed the move.

The measure seemed to be another bit of unworkable political posturing, primarily because it requires doctors to issue a “prescription” rather than provide patients with a simple recommendation to use CBD-heavy medicines.

That distinction is important: Doctors can theoretically lose their licenses for prescribing a Schedule I controlled substance, which is why every state with an active medical cannabis industry opts for recommendations.

But there’s a growing sense of optimism that Texas will indeed be able to launch a CBD industry under the current law because the word prescription in this case has a very specific – and different – meaning. And interest levels from entrepreneurs in the state’s potential CBD market have reached a fever pitch.

“We’ve gotten dozens of calls about Texas, so much that we decided to actually host an event down there (in May)… just a sort of cannabusiness investment event to shape the discussion,” said Brian Vicente, one of the founders of the Denver-based cannabis powerhouse law firm Vicente Sederberg.

Flawed reasoning?

The state’s law is very limited. It includes just a single qualifying condition – intractable epilepsy – and only allows for the production, use and sale of CBD oils.

While doubts remain about whether the program will in fact launch, some observers close to the situation say the existing law is indeed workable.

Patrick Moran, president of the Texas Cannabis Industry Association, said the critique that the program is flawed due to a prescription requirement.

The requirement will be fulfilled by the stipulations of the law, which protect epilepsy specialists from any crackdown by the Drug Enforcement Administration, Moran said.

Only doctors who are certified by the American Board of Psychiatry and Neurology or the American Board of Clinical Neurophsyiology will be allowed to write prescriptions for CBD, Moran said, which is outlined in the law itself.

The main reason he’s so confident in the law is because it was “reverse-engineered” by the authors – who received input from physicians at the outset.

“The doctors who treat these patients are the ones who wrote this bill,” Moran said. “They’re the ones who put in the prescription language and insisted on it.”

That should put to rest any concerns that doctors will lose their federal licenses, Moran added, because in this case a “prescription” essentially means only that a patient is signed up for the CBD program and is then supported by two qualified physicians.

“The only doctors who can prescribe this are the doctors who are already treating epileptics,” Moran said, adding that those physicians are “protected by the law because the definition of ‘prescription’ does not match the four-step definition of ‘prescription’ that the DEA has threatened to sue people under.”

Possible changes

Despite Moran’s take on the prescription requirement in the bill, there will likely be a push to change that and make other tweaks, said cannabis industry lobbyist Joe Megyesy, who has worked with Vicente Sederberg and other advocacy groups.

“We’ve never seen that work in any other state, because with the word ‘prescription,’ it triggers the purview of federal regulators at the FDA, and it’s a word that’s specific only to prescription drugs,” Megyesy said.

He admitted, however, that it’s conceivable the law could work as currently written.

“The reality is this is uncharted territory,” Megyesy said. “Maybe that language will work, and maybe they’ll get doctors to give those prescriptions, and it’ll be fine.”

Megyesy thinks that it likely will be another couple of years before the qualifying condition list is expanded to include more ailments, since the Texas Legislature meets only in odd-numbered years. But increasing the number of qualifying conditions is a top priority, he said.

The biggest thing Megyesy wants to see changed is the prescription requirement, and he thinks there’s a good chance that will happen next year.

“It’s realistic that we get the language fixed,” Megyesy said, adding that there’s a “sincere desire” among lawmakers in the Capitol to see the MMJ program work.

Optimism over market size

If it does indeed work, license winners in Texas could be getting in on the ground floor of a potentially huge new market.

The Texas Department of Public Safety, which will oversee the program, will likely issue around 12 dispensary licenses for vertically integrated producers and retailers beginning in June 2017, Moran said.

The state could start accepting applications as soon as this summer.

The agency is still working on putting together an infrastructure for the program, but the law mandates that the department license at least three dispensaries by September 2017.

“It’s a large state, lot of money there, and we’ve seen a real dive in the oil and gas industry in Texas. So you have a lot of wealthy people looking for business opportunities… so it’s kind of a perfect storm,” Vicente said. “Texas is sort of a sleeping giant in a lot of ways.”

The program has no residency requirement for ownership of a CBD business, which means anyone from across the country could submit a bid for a Texas dispensary permit. The state also doesn’t have a cap on the number of dispensary licenses it will issue.

There are also roughly 150,000 patients in the state that suffer from intractable epilepsy, Moran noted. However, all of those potential patients won’t sign up to participate in the program, so the actual patient pool will likely be much lower.

If the condition list is expanded to include other ailments, or if full-strength medical cannabis is eventually allowed, Texas could become a powerhouse, given the state’s population of nearly 27 million.

“I feel fairly confident that that will happen in the next couple of years,” Vicente said.

John Schroyer can be reached at johns@mjbizdaily.com