By Tony C. Dreibus
Massachusetts appears to be making some progress in setting up its medical cannabis industry after two years of delays, with the first dispensary preparing for liftoff and the state issuing revised licensing rules this week to make the process smoother going forward.
Don’t expect the floodgates to open anytime soon, though.
As it stands now, only two companies are poised to open dispensaries in the coming months.
Alternative Therapies Group has started producing medical marijuana. Once the company is ready to open its dispensary in Salem, it will still need final approval from the state, said Scott Zoback, a spokesman for the Massachusetts Department of Public Health (DPH), which is overseeing the MMJ program.
E-mails to Alternative Therapies were not returned, but observers said the company could open in June or July. Another company – New England Treatment Access – received approval to cultivate last week and could open at least one of its two planned dispensaries in the fall.
The other companies that received initial approval have not yet been given the go-ahead to start growing, so it’s unclear when they will actually be able to open dispensaries. Given the long cycle required to cultivate the first crop of cannabis, it might not be until late this year or even into 2016.
Delays have become a hallmark of the state’s medical marijuana program, and that’s had a big impact on the business community.
“For the industry, (the delays) have been horrific,” said Bill Downing, a director at the Massachusetts Cannabis Reform Coalition, the state affiliate of the National Organization for the Reform of Marijuana Laws (NORML). “It’s put a huge damper on progress.”
The rollout has been so slow that some entrepreneurs are considering nixing their MMJ business plans in Massachusetts because of the delays and uncertainty.
A handful of investors are looking for greener pastures elsewhere too, taking their money to other states that have since legalized medical marijuana, said Michael Schwartz, an analyst at Viridian Capital & Research, a company that brings together investors and business owners seeking financing.
“With the process continuing to be delayed, coupled with the fact five other states have approved medical marijuana regulations for dispensaries, many of the investors have started to second-guess their investment thesis and turn to other attractive medical marijuana states,” Schwartz said.
Nevada is especially attractive, he said, because of a reciprocity rule that allows MMJ cardholders from other states or countries to legally purchase medical cannabis, meaning a steady stream of customers to cities including Las Vegas.
Still, the growing number of MMJ cardholders (currently around 5,000) in Massachusetts and the likelihood the state will legalize recreational cannabis in 2016 are keeping a lot of investment money grounded in the state, Romano said.
“Some investors might be getting a little frustrated, but I don’t think they’re running for hills,” he said.
Troubles With Application Process
Problems with the dispensary program started early in the application process.
Voters approved a ballot measure in November 2012, and regulations were finished about a year later. The initial 20 licenses were tentatively awarded to applicants in January 2014.
Companies that lost out, however, filed lawsuits saying other applicants weren’t qualified to receive permits. Indeed, media reports showed that in some cases there were errors on applications. In the case of former congressman William Delahunt, charges arose that his political connections helped him win three dispensary licenses.
After much legal wrangling and rewriting of provisions concerning the dispensary program, the state wound up tentatively approving only 15 licenses, even though it’s allowed to issue as many as 35. Officials reversed their initial decisions in several cases, yanking the tentative approval they had given to a handful of applicants (including the company Delahunt was affiliated with).
The other applicants cleared to proceed must continue to jump through hoops prior to opening.
Because Massachusetts is vertically integrated – each licensed company must grow and process the marijuana it sells – just having product to sell takes anywhere between five and seven months. Even prior to planting, dispensaries must have everything from their security systems to architectural design approved by DPH inspectors.
Some observers say it’s now up to the companies that have tentative approval to move the process along.
“Given the enormity of the regulations and security they need to put in and all of the rules they have to comply with to get everything ready,” it was bound to take a while, said Boston attorney Valerio Romano, who worked with five of the applicants that received licenses. The ball is “firmly in the court of the registration holders to get their proposals done and get them to the DPH.”
There still seems to be plenty of holdups in that process, however, as companies with tentative approval have been working for a long time on getting final approvals to begin planting.
It’s unclear where the delays are stemming from, but the state seems interested in working out some kinks down the road. The Massachusetts health department said its revised licensing approach will streamline the process when it seeks to award the remaining 20 licenses allowed under the law.
Ostensibly, those changes will help avoid the types of vetting problems experienced with the first round of licenses.
Some observers are doubtful that the state will pick up the pace. Thanks to the earlier delays and problems, state officials are going to be extra cautious moving forward, said Richard Evans, a Northampton attorney who works in marijuana law.
“The DPH is mired in the mud of hyper-caution,” Evans said. “The DPH is very squeamish about doing anything at all. To avoid any criticism, they avoid doing anything.”
Tony C. Dreibus can be reached at [email protected]