Permits For Pa. Medical Marijuana Growers, Dispensaries On Track To Be Issued By End Of June

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PHILADELPHIA (CBS) ? The state Department of Health says it still expects to issue permits for marijuana grower,/processors and dispensaries by the end of this month.

The deadline to submit applications for medical marijuana grower/processors and dispensaries was in March.

Spokeswoman April Hutcheson says the state Department of Health expects to award permits to the successful applicants by the end of the month, but it will still be a while before medical marijuana is available.

‚ÄúOnce the permits are issued, the applicants will have six months to become operational. So they‚Äôll have six months to begin to set up their systems and processes. They‚Äôll have to have an inspection before they deemed operational,‚ÄĚ said¬†Hutcheson.

There are a lot of other things that have to happen, including the certification of physicians and patients who will participate in Pennsylvania’s medical marijuana program, which should be ready to serve those patients in the…

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BREAKING: PA Dept of Health Expects Phase 2 Medical MJ Permits To Be Issued in Early 2018

Public records indicate that the next round of medical marijuana organization permits could be coming much sooner than we had thought!

In our previous post,¬†PA Software Contract Goes To The Infinitely Cheaper MJ Freeway, we covered some of the less-than-comforting circumstances surrounding the Department of Health’s choice for the state-mandated Seed-To-Sale/Patient Registry software. It turns out that, in focusing on the contract’s potential impact on patients, we overlooked some POSITIVE news that could impact the businesses that are seeking permits to act as grower/processors, dispensaries, and laboratories in the upcoming PA Medical Marijuana Program.

In order to solicit bids for the software contract, the Department of Health was required to define the expected user base so that vendors could more accurately propose their plans and costs.¬† According to a document that was posted to the contract’s award details section of the PA eMarketplace, it sounds like we finally got some insight into the timing of the Phase 2 round of permits:

natureandscope

Holy smokes! How do we interpret this?

  1. The Department of Health has finally indicated their expectations for when Phase 2 permits will be issued – first quarter of 2018. This much sooner than we had expected.
  2. The language implies that the balance of remaining permits will be awarded during that time.
  3. The aggressive timeline also seems to suggest that it is possible that Phase 2 permits will be awarded to those who applied in Phase 1. Though the Department has indicated that this won’t be the case (see Q&A below) we would be hard-pressed to believe that they would want to go through the whole application review process all over again in just a few months. That being said, they have delivered thus far, and should be commended for that.

To provide some background, The Medical Marijuana Act authorizes the Department to issue permits to a total of 25 grower/processors and 50 dispensaries, with each dispensary allowed up to 3 locations. The reason that the permit totals above are higher is because they are including the special “Clinical Registrant” permits in the totals. We don’t pay much attention to those, as they require a $15,000,000 proof of capital, and are obviously intended to be used as handouts to our Tyrannical Healthcare Overlords. This is in Chapter 1141: General Provisions of the Temporary Regulations as well:

Section 616.  Limitations on permits.

The following limitations apply to approval of permits for grower/processors and dispensaries:

(1)  The department may not initially issue permits to more than 25 growers/processors.

(2)  The department may not initially issue permits to more than 50 dispensaries. Each dispensary may provide medical marijuana at no more than three separate locations.

Here’s a statement from Secretary of Health Karen Murphy describing how these permits would be doled out:

‚ÄúIn the first phase of the program, there will be up to 12 permits issued for grower/processors across Pennsylvania‚Äôs six medical marijuana regions, and up to 27 permits issued for dispensaries.”

This and future communications left many applicants wondering, “Does that mean there will be a second phase, and if so, when?” Understandably, the Department wasn’t very forthcoming with their answers in the Q&A

phases

It looks like now we have a much better idea of when that will be. Or maybe we should wait until Phase 1 has actually happened. Either way…

From now until Q1 2018,

WE ARE WATCHING

-PAMMJW

 

1000 Medical Marijuana Applications in 90 Days

That’s nightmare material.

To really put things into perspective, here’s a snapshot of what an actual grower/processor application looks like in paper form. Try to imagine thoughtfully reviewing this entire thing (seems pretty daunting, right?)

application

The Department of Health may have to do that 1000 TIMES!

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By The Numbers

On April 26th, the Department provided an update on the application review progress.

“More than 500 packages were received, containing one or more grower/dispenser applications in each package…

‚ĶOf the packages received, the department has logged 258 applications to date‚ÄĚ

So…

  1. The Department received ~500 packages. We’ll call that 500.
  2. Each package contained at least one application.
  3. As a ballpark, let’s assume each package contained an average of 2 applications.
  4. 500 packages x 2 applications per package = 1000 applications total.
  5. The Department had logged 258 applications as of 4/26.

With a little bit of math we can estimate that, as of their last update, the Department was scoring applications at a rate of around 7 per day, or 49 per week.

numbers2

Now, clearly a portion of the total page count can be attributed to the application itself – ie. in the form of instructions, forms to be filled out, etc. Still, given the sheer volume of information that needs to be processed by regular old human brains, this looks to be a mammoth undertaking for the Department of Health.

Over time, this could play out a little something like this, according to our rate of 49 applications scored per week:

timeline

Not quite the end of June, but to be honest, this seems like a more reasonable timeline if we are current in estimating that they received at least 1000 applications.

A quick point to address has to do with the meaning of the word ‚Äúlogged.‚ÄĚ Do they mean that 258 applications were accounted for, or that 258 applications were scored? Let‚Äôs give them the benefit of the doubt and assume they meant that 258 applications scored. If not, they’d better call Alex Jones:

Moral of the story? Unless your team of reviewers includes among them an exemplary yet humble speed reader, be careful what you wish for when making a request like this:

5000words

We’re expecting an update on the DOH’s progress (or perhaps lack thereof) fairly soon.

Just like you, We Are Watching.

-PAMMJW

 

DOH Secretary Karen Murphy Announces Departure Just As PA MMJ Program Approaches The Finish Line

In a move that has largely flown under the radar, Department of Health Secretary Karen Murphy has announced Monday that she is leaving her position to pursue an opportunity in the private sector. Dr. Murphy’s abrupt exit comes as¬†the Department of Health is still in the process of vetting business candidates for PA’s medical marijuana program.

According to Charlotte Ames at wearecentralpa.com:

The Wolf Administration will need to find someone to take over implementation of Pennsylvania’s medical marijuana program. State Health Secretary Dr Karen Murphy is leaving to take a position in the private sector.

Additionally, WRAL.com reports that she is expected to leave the job by early July.

The inopportune timing of Murphy’s departure seems to beg the question, “What the hell is going on at the Department of Health?” Dr. Murphy was essentially the face of the medical marijuana in Pennsylvania, disseminating all major developmental announcements related to the program. What sort of private sector opportunity would require such an urgent departure?¬†

Strike while the iron is hot!

Alternatively, it is possible¬†that she was concerned about a¬†less-than-sensible decision that was made under her watch as the Department of Health’s head honcho. Maybe¬†Karen Murphy’s conscience got the best of her.

As this saga continues to unfold, rest assured – We Are Watching

-PAMMJW

The Sun Is Giving Away Unlimited Photons Every Single Day For Free Until¬†It Burns Out 5 Billion Years From Now

Anyone who paid attention to the medical marijuana permit application frenzy earlier this year surely remembers this headline:

bunkerNow, I hate to pick on these guys in particular – I’m sure they mean well. Based on previous news reports and press releases, a¬†substantial number of additional applicants have proposed indoor, artificially-lit cultivation facilities. Many of them have made it to the Department of Health’s short list.

Before we look at¬†why a prospective grower/processor would present a business model that attempts to replace a fully-functioning sun, let’s take a look at what cultivation configurations¬†are actually permissible under¬†PA’s medical marijuana law.¬†According to Section 712 of PA’s Medical Marijuana Act:

indoors

In short, this means that traditional outdoor farmers are out of luck, including these hemp farmers from Hanover, PA who have been patiently waiting since 1908.

1pi2vj

Thus, anyone seeking permission to grow marijuana in Pennsylvania must keep their cultivation activities in a secure facility behind closed doors, but that doesn’t mean that greenhouses are off-limits. From what we’ve seen in the news, many applicants have proposed facilities that will use¬†grow lights to mimic the photosynthetic power of the sun, a decision with implications that should¬†be weighed heavily by the Department of Health.¬†When it comes to producing marijuana, those grow lights really jack up the price:

I think you can see where this starts to impact patients in Pennsylvania. Someone has to pay that energy bill.

Prices aside, those looking to curb humanity’s influence on climate change should be very¬†concerned with the environmental impact of artificially-lit marijuana production. According to a 2011 study published in the Journal Of Energy Policy by Evan Mills Ph.D.,¬†indoor marijuana production accounted for a whopping 1% of total electricity use in the United States. Whoa! What could it be¬†today!?

millspaper

 

This general countrywide consumption conundrum should also present itself as particularly relevant to ongoing policy initiatives in PA. According to the Pennsylvania Department of Environment Protection’s 2015 Climate Change Action Plan:

climatechange

The Resource Innovation Institute, a non-profit organization whose stated goal is to promote and quantify energy and water conservation in the cannabis industry, has suggested 4 strategies to help the industry move in the right direction environmentally. One is particularly relevant here:

RII

If the State has a goal to reduce greenhouse gases by reducing energy demand, one would think that this would be a no-brainer – choose applicants that propose greenhouses.

Why Is Marijuana Grown Indoors In The First Place?

Remember when marijuana was super illegal? As the DEA and local law enforcement agencies ramped up their efforts to eradicate domestic marijuana production, the black market figured out how to produce it more discreetly by growing it indoors Рwithout the sun. This technique basically became the status-quo.

We see this method of production still being used today primarily for two reasons:

  1. Old Habits – Many of the “experts” in the industry today cut their teeth in the underground market. It’s what they know. Many of these experts are now hired as consultants when someone with deep pockets comes along and wants to make some money in the MJ biz.
  2. High Prices –¬†Even today, prices are still artificially high. This means that cultivators can currently get away with being inefficient, especially with limited competition.¬†Looking at historical pricing data from states with mature programs shows that prices are tumbling.

The Ball Is In The Department Of Health’s Court

It is up to the PA DOH to decide who will receive the 12 grower/processor permits that they are authorized to issue. When it comes to permitting, there doesn’t appear to be any direct references in the grower/processor application scoring rubric¬†that would indicate a preference for a particular method of photon delivery. That doesn’t mean that it can’t be considered, as¬†PA’s Medical Marijuana Act presents the following factors for¬†the Department to consider in order to determine which businesses to award a permit to:

publicinterest

One could argue that it would be in the public interest to select applicants that can deliver medical marijuana at the lowest price possible, especially since this kind of medical treatment is typically paid for out-of-pocket. The businesses that grow marijuana in PA should also be environmentally sustainable to remain consistent with Harrisburg’s desire to reduce statewide energy consumption. This simply can’t happen with artificial lighting.

We Are Watching

-PAMMJW

 

 

 

 

[UPDATED] PA Software Contract Goes To The Infinitely Cheaper MJ Freeway

Patients of Pennsylvania Рthis is a Code Red Watch. 

The PA Department of Health, in full-blown transparency mode, has provided the results of their extensive review of seed-to-sale cannabis software. As it turns out, BioTrackTHC submitted a cost proposal that was apparently infinitely more expensive than their¬†competitor of ill repute, MJ Freeway. That’s right, BioTrackTHC’s proposal, despite receiving a perfect 500/500 technical score, was apparently so expensive that they received a cost score of zero, which ultimately cost them the contract. If you buy this narrative,¬†God help you.

overallscore

To put this in perspective, here is the cost score formula that was used:

cost formula

Since MJ Freeway submitted a cost proposal with the lowest total cost ($10,400,000), they received the full 300 points that were available in the cost score category. That’s reasonable.

However, in order for BioTrack to receive a cost score of zero, their cost proposal would have to be twice that of MJ Freeway, a whopping $20,800,000.

The state has yet to release BioTrack’s cost proposal, though it seems unlikely that they would propose such a high dollar amount, especially considering the value of previous contracts that they have won. Here’s a sample from what we could find with a quick google search.:

Washington (2013) – $750,000

Hawaii (2016) – $159,000

The full report with this¬†absurd scorecard was linked to as part of a 4/20 press release on¬†the Department of Health’s website. Remember that date, stoners.

Hang on. This is just the tip of the iceberg.

We should start off by pointing out the obvious for the folks at home – ain’t no one messing around with MJ Freeway these days. They are basically industry pariah.¬†MJ Freeway was mega hacked back in January, halting the operations of¬†1000’s of marijuana businesses across the country. To better illustrate the severity of this recent outage, here’s a¬†message from earlier this year brought to you by MF Freeway CEO and Cofounder, Amy Poinsett:

 

Hilariously, after MJ Freeway was announced as the winner, Department of Health Spokesperson April Hutcheson was quick to point out that they were well aware of the recent data breach, and that it was really nothing to worry about.

“We are aware of the system failure MJ Freeway experienced in January during the procurement process, and that it has resolved any issues surrounding the breach,” she said, in a written statement. “MJ Freeway submitted the strongest proposal and was selected on those merits.

Resolved huh? I gues we’ll just have to take it from¬†MJ Freeway cofounder, Amy Poinsett:

“I think I can confidently say we are the most secure cannabis company in this particular industry,”

picard-facepalm

WTF IS GOING ON HERE?

MJ Freeway should have been eliminated from the running once it became known that their¬†systems were hacked. I don’t think this point really needs to be made to reasonable people. HIPPA concerns aside,¬†This is a $10.4 million dollar contract we are talking about.

womanowned

Similarly, you can see on this modified scorecard that BioTrackTHC probably would¬†have won if the cost score was calculated reasonably. Unfortunately, when it comes to showing us how they arrived at the cost score, the DOH isn’t that transparent. In reality, BioTrackTHC was most likely priced comparably to MJFreeway. That’s why BioTrackTHC is used by¬†states such as Washington, New Mexico, Illinois, New York, Hawaii, and Delaware – and with much lower price tags…

Prior to the big win in PA, MJ Freeway had just one government contract. The state of Nevada got a much better deal ($603,393 for 5 years) for what the software company has described as “essentially an off-the-shelf system

Pennsylvania‚Äôs tracking system is an adaptation of software ‚ÄĒ ‚Äúessentially an off-the-shelf system,‚ÄĚ Poinsett said ‚ÄĒ that was prepared for Nevada‚Äôs marijuana industry.

Nonetheless, the Department of Health has assured us that they have done their due diligence, even releasing a technical diagram showing what seed-to-sale software does. I’ve added a unique feature of the MJ Freeway system that they missed for reference.

s2s

Follow The Money

We know that MJ Freeway’s reputation has obviously suffered as a result of the hack earlier this year. Bad reputation=lost customers=lost revenue. Someone is losing money as a result.

Interestingly, the hack happened just as MJ Freeway was in the middle of what is known as “Series B Funding.” This is when investment firms inject money into businesses that have established themselves as more than just a concept. MJ Freeway was pumped full of cash based on the assumption that they were a major player¬†in the marijuana seed-to-sale software market. Then they got hacked…someone’s investment turned sour.

So, who has a stake in MJ Freeway? In other words, who really loses money when MJ Freeway fails? The press release linked to above lists, among others, a private equity firm called Tao Capital Partners.

Here’s Where Things Get Really Fishy

Remember that date that I told you to remember?

announce

It just so happens that the very next day, MJ Freeway announced that they had received an additional $3 million in investments to reach a total of 11 million in Series B funding. This money came from existing investors, including Tao Capital Partners. However, surely this is just a coincidence, right? According to Managing Director of Tao Capital Partners, Joby Pritzker:

With the expectation that the cannabis market is set to more than double by 2018, we chose to invest additional capital with MJ Freeway,” said Joby Pritzker, Managing Director of Tao Capital Partners and Chairman of the Marijuana Policy Project, the largest organization in the United States focused on marijuana policy reform.

 

A little more digging has yielded even more questionable relationships. Looks like The Arcview Group (investment) and the National Cannabis Industry Association (Lobbying), are also in the mix of strange bedfellows. Dear Lord, even MJ Freeway’s executives are intertwined into the web of political influence. Shoutouts to the hustlas!

influence

That’s not how its supposed to work…

WE ARE WATCHING

-PAMMJW

And Your Diversity Score Is…

In the course of designing and implementing a “medically-focused program benefitting patients,”¬†the Pennsylvania Department of Health has been tasked¬†with selecting a limited number¬†of businesses and contractors that will grow, process, test, and dispense medical marijuana products for patients in the Commonwealth. As such, the ensuing “gold rush” has been covered heavily in the news, with waves of prospective businesses pouring in to flex their marijuana biz cred, patient-centric mission statements, financial fitness – legitimate factors that can potentially impact the overall quality of the program. While a merit-based scoring system for prospective businesses¬†will certainly be considered first and foremost,¬†the process of separating the wheat from the chaff could come down to a single factor¬†that has absolutely nothing to do with medical marijuana.

How The Medical Marijuana Program Got So Diverse

Before we look at the way that the “diversity goals” will potentially confuse and pervert the selection process, it is important to understand how the concept of diversity even came up as a determining factor in the first place. Interestingly, the concept of achieving diversity in the Program goes all the way back to PA’s Medical Marijuana Act. Basically, this is the law that makes medical marijuana legal.¬†It also identifies the Department of Health as the administrative authority when it comes to designing and implementing the Medical Marijuana Program in PA.

The¬†promotion¬†of¬†“Diversity Goals” was first codified by the Legislature in Section 615 of PA Act 16 – Medical Marijuana Act.

Section 615.  Diversity goals.

(a) ¬†Goals.–It is the intent and goal of the General Assembly that the department promote diversity and the participation by diverse groups in the activities authorized under this act. In order to further this goal, the department shall adopt and implement policies ensuring the following:

(1)  That diverse groups are accorded equal opportunity in the permitting process.

(2)  That permittees promote the participation of diverse groups in their operations by affording equal access to employment opportunities.

But what does the Legislature actually consider¬†a “Diverse group?”

“Diverse group.” ¬†A disadvantaged business, minority-owned business, women-owned business, service-disabled veteran-owned small business or veteran-owned small business that has been certified by a third-party certifying organization.

As you can see, this is a fairly¬†large pool of diverse participants to draw upon. The key thing to notice here is that the “third-party certifying organization” requirement indicates that this is a special kind of diversity – certified diversity.

diverse

The general gist of it is that participants in the Medical Marijuana Program must promote diversity and provide equal access to the program to those individuals and businesses that are certified as diverse groups. Whew. That’s pretty harmless at face value, but let’s read between the lines to get a better idea of what is actually going on.

As you may have noticed, the Act goes as far as to set annual diversity reporting requirements for the Department of Health. These reports must include:

(1)  The participation level, by percentage, of diverse groups in the activities authorized under this act.

(2)  A summary of how diverse groups are utilized by permittees, including in the provision of goods or services.

Why would the legislature push diversity into the requirements for the state Medical Marijuana Program? Who knows? I’m guessing there was some sort of diversity initiative going on at the time. Regardless of their motive, the Legislature cannot enact laws that¬†are overtly discriminatory (eg. 2 out of 37 permits must be granted to Diversity Group A by law)

They can, however,¬†require the Department of Health to report on the diversity progress within the program. The idea of reporting in and of itself implies a progress update that is motivated by a desire to achieve some sort of measurable results – a roll call. For some confounding reason, Act 16 says Pennsylvania’s patients need a Medical Marijuana Program + Diversity, and it is up to the Department of Health to somehow make this happen. One can assume that this has something to do with the recent uproar in Maryland’s selection process.

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Diversity Goals – Makin’ It Happen In Section 3

Back in January, prospective applicants seeking a permit to become a grower/processor and/or dispensary were presented with an official application¬†through the Department of Health’s website. In the application, the first two sections encountered required the applicant to fill out some basic contact and facility information. It was the next section, Section 3, that¬†was the first scored portion¬†of the application.

This section¬†did not seek to determine the¬†operational readiness of the applicant, such as the applicant’s past experience with construction projects, or the applicant’s mastery of repeatable cultivation methods and extraction technologies. It didn’t even require the applicant to demonstrate that they will possess the necessary capital to carry out¬†the business¬†that they were proposing.

First and foremost, show me your diversity.

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But wait, there’s more!

On the Department of Health’s application¬†scoring rubric, there are just two sections in the entire application that are scored with¬†highest possible¬†value of 100 points. One of these sections is titled, “Community Impact.” Can you guess the other?

rubric

And just in case you missed it, here’s the highlight reel:

highlights

What This Means To Patients

In implementing PA’s Medical Marijuana Program, the Department of Health lists the following as “Guiding Principals”¬†on their website:

  • medically-focused program benefitting patients
  • effective communication
  • consistent, competent and efficient
  • leading, innovative, research-driven program
  • transparent

Political agendas that are being pushed into the medical marijuana program are most certainly at odds with the medical needs of patients in the Commonwealth. Simply put, diversity is not a reliable predictor of the potential success of a marijuana business, nor does it have anything to do with patients who need medical marijuana. 

Patients need access to a variety of medical marijuana products at a price that they can afford out of pocket. For this to happen, patients require a stringent, merit-based selection process that awards points based on the ability to produce and distribute medical marijuana products at the highest levels of efficiency and quality. This becomes even more important in a regulatory environment that eliminates competition through the issuance of a limited number of permits. Why? Think of it this way: if one of these ill-chosen businesses goes belly-up, it will reduce the available supply of medical marijuana substantially, leading to shortages and increased prices. When there are only 12 producers in the whole state, this could be a major disruption.

We Are Watching

For starters, check out our post on the Department’s highly suspicious¬†selection of disgraced software vendor, MJ Freeway, as the state seed-to-sale tracking system.

We¬†will be closely monitoring the implementation of the Medical Marijuana Program in the coming months. When it comes to the impact of diversity goals on the selection process, we run into a bit of a dilemma. The Department of Health,¬†which can’t seem to stop talking about how committed they are to transparency, has drafted regulations that seem to suggest that not even the applicant, let alone the public, will have access to the application scores for review:

denial

Notice also that any information relating to who will be scoring the applications or¬†how they will ensure consistency across applications is shrouded in secrecy. According to Department Spokesperson April Hutcheson, this deliberate preference for opacity over transparency is¬†“to ensure that this remains a level playing field.” Huh?

All is not lost, though:

“Hutcheson said the agency plans to eventually release the applications publicly, although it remains unclear whether that will happen before or after the applications are scored and permits are issued.”

Finally, the Department has been less than forthcoming in the Q&A section of the program’s website as to whether or not they will be providing any way for the public to double-check their work:

denialqa

Call your congress(wo)men, post your thoughts, and stay tuned for more updates. Until then…

Let the watch begin.

– PAMMJW