Week in Review: New York medical cannabis lawsuit, Vermont MMJ expansion & Texas’ preliminary CBD licensees

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By Omar Sacirbey, Bart Schaneman and John Schroyer

New York medical marijuana dispensaries file suit to prevent new competitors, Vermont lawmakers approve expanding the state’s MMJ program, and Texas awards three preliminary licenses for its CBD program.

Here’s a closer look at some notable developments in the marijuana industry over the past week.

For patients or ‘protectionism’?

New York’s Medical Cannabis Industry Association filed a lawsuit to prevent the state’s health department from awarding new business licenses to five companies that weren’t successful during the 2015 application process.

The lawsuit’s claim? Doubling the number of suppliers will “launch the collapse” of the state’s cannabis industry. The suit – filed on behalf of four of the state’s five MMJ companies – contends the state’s current operators are producing below capacity because of a dearth of patients and that adding dispensaries will make it harder for the existing companies to serve their clients.

Some observers find disingenuous the lawsuit’s claim that increasing licensees will make it harder to serve patients.

“These are the types of protectionist policies that aren’t good for the industry. These people have achieved a market share that they’re dependent on and want to suppress the competition,” said Kayvan Khalatbari, co-founder of Denver Relief Consulting. “Patients will have the best experience when there is more competition.”

Competition also drives innovation, lowers prices and forces companies to fight for business, Khalatbari said.

New York’s existing MMJ program is one of the most restrictive in the nation, including a prohibition on flower, and many doctors are geographically unreachable for some patients. But the state has also made moves to improve patient access and expand the market by adding chronic pain to the list of conditions, allowing home delivery and expanding the types of health professionals who can make recommendations.

The changes seem to have helped.

Through May 2, the state had 18,128 certified MMJ patients, up from 11,291 through Dec. 12, 2016. With 989 practitioners, the latest patient count amounts to about 3,625 patients per the five current licensees, if patients are equally divided.

Vermont seeks common ground

Vermont could see an expansion to its medical marijuana program if the two chambers of its Legislature can agree to a compromise.

After the House passed a expansion bill on Tuesday, the next step is to meet and discuss the differences between that measure and the one the Senate approved in February.

“The medical bill is very likely to pass in some form,” said Matt Simon with the Marijuana Policy Project. “The question is just what the final version is going to end up saying.”

Vermont has four licensed nonprofit dispensaries. The Senate wants to add four more dispensary licenses. The House wants to keep the current license number the same and instead add more satellite locations.

Both chambers want to add Crohn’s disease, Parkinson’s disease and post-traumatic stress disorder to the list of medical conditions that can be treated with medical cannabis – a move that could broaden Vermont’s patient count and boost MMJ sales.

If the two chambers can agree before the end of the session, the final bill will go to the governor’s desk. There’s no firm day for adjournment, but it could be as soon as Monday.

The mess in Texas

Three companies are poised to shell out nearly half a million dollars apiece for two-year CBD licenses in Texas. But those permits may be virtually worthless until at least 2019 – unless the state legislature approves a bill now in the House in the next three weeks.

At issue is a stipulation in the state’s low-THC law that requires Texas doctors to write cannabis prescriptions, not recommendations, for patients. The problem is that physicians are federally prohibited from writing prescriptions for Schedule 1 narcotics, which includes marijuana – whether full strength or low THC.

“Our concern is … the lack of protection for doctors, in that the program requires them to prescribe cannabis, and that it renders this program unworkable,” said Heather Fazio, who’s been spearheading a Marijuana Policy Project lobbying effort in Austin to change the law.

Fazio said, it’s unlikely any patients will even be able to register for the Texas’ CBD program because of the prescription requirement.

That means the three preliminary license winners – Cansortium Texas, Compassionate Cultivation and Surterra Texas – may end up paying $488,250 for a two-year business permit that will provide no return on their investment until state lawmakers alter the prescription requirement.

A measure before the Texas Legislature, House Bill 2107, would change both the prescription requirement and dramatically expand the program, which currently allows only CBD oils to treat one qualifying condition – intractable epilepsy.

But advocates are racing against the clock because the legislature is set to adjourn May 29 and won’t reconvene until 2019. It’s also unclear if HB 2107 will even get past the House Committee on Public Health, let alone receive a full vote by the House and then the state Senate.

That’s why one of the 43 failed CBD applicants, Scott Bier of Green Well Ventures in Texas, said he’s “bullish on Texas in the long term, but not necessarily in the short term” when it comes to MMJ and potential business opportunities.

Omar Sacirbey can be reached at omars@mjbizdaily.com

Bart Schaneman can be reached at barts@mjbizdaily.com

John Schroyer can be reached at johns@mjbizdaily.com