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Medical marijuana rulemaking

Medical marijuana rulemaking: A chance to get it right this time

| July 25, 2018

By Elizabeth Dalton, McAfee & Taft
and Ron Kammerzell, Regulatory and Government Affairs Consultant

As a result of the recent opinion from the Oklahoma Attorney General (AG) that the rulemaking for medical marijuana was beyond the scope of statutory authority, the Oklahoma State Department of Health (OSDH) will once again consider regulations to implement State Question 788 (authorizing medical marijuana). Here are some highlights of the original regulations, with our thoughts about ways to improve them:

  • Restrictions on smokable marijuana – the AG indicated this was clearly beyond the scope of SQ788, but beyond that, it would severely limit the ability of licensed dispensaries to make a reasonable profit. Further, prohibiting the sale of smokable forms of marijuana at dispensaries, while permitting personal growth of marijuana by licensed patients, will result in an expansion of the illicit marijuana black market in Oklahoma.
  • Requirements for a licensed pharmacist at dispensaries – the AG also indicated this was beyond the scope of SQ788. Not only would it be very difficult for dispensaries to be able to hire pharmacists for this role (pharmacists may risk their DEA registration), but the cost would further throttle the dispensaries’ ability to turn a profit, driving patients to the black market.
  • Serving and potency restrictions – Restricting the level of THC in medical marijuana grown by commercial licensees will also drive patients to seek stronger homegrown marijuana. Establishing serving sizes is good for patients, especially for those patients who are not familiar with dosage sizes. However, adding restrictions on percentages of THC does nothing to protect the public; it will just serve to increase the size of products containing THC unnecessarily. It’s better to establish a standard serving of THC in milligrams and require clear instructions as to the number of servings in a product.
  • Inventory tracking – Most states require that all licensees use a select inventory tracking system. This makes it easy for the state to track inventory for public safety and tax purposes. OSDH’s initial rules did not require a uniform inventory tracking software. Such a requirement does require a substantial outlay of funds initially; however, chain of custody and full accountability of medical marijuana produced and sold is critical to the success of legalization in Oklahoma,
  • Employee licensing – Consideration should be given to requiring licenses for employees, similar to the alcoholic beverage industry. This would help keep errant employees out of the industry rather than have them simply engage in job hopping.
  • Transportation licenses – the initial rules only authorized licensed growers, processors, and dispensaries to obtain transportation licenses. Having dedicated transportation companies with warehouses, especially with a unified inventory tracking system, enhances manifest tracking and facilitates an efficient distribution system throughout the state.
  • Surety bonds – As a practical matter, these bonds will be nearly impossible to secure and, if available, very expensive. Any restrictions that make commercial licenses unprofitable will enhance unlawful distribution.
  • Outdoor growing and greenhouses – As has been shown in other states, it is possible to permit growth of cannabis outdoors or in greenhouse facilities without sacrificing adequate security. The AG indicated that requiring growth, processing, and dispensing indoors was beyond the scope of SQ788.
  • Odors and smells – It would be virtually impossible for growers to comply with the rules as drafted. Cannabis is a natural agricultural product that produces smells, like other farm products. Zoning may offer a solution.
  • Surveillance requirements – The initial regulations imposed central monitoring obligations that would be difficult to overcome in rural areas that lack cable or broadband access. Additionally, they required vast amounts of storage of electronic data, an expensive proposition.
  • Labeling – The initial regulations could be improved by requiring an FDA-type model, with templates and a required statement of intended use.
  • Child resistant packaging – The initial regulations did not reference the child resistant packaging standards required by the Poison Prevention Packaging Act, which would be advisable.
  • Testing – While it’s a good idea to require ISO accreditation (as was provided in the initial regulations), as a practical matter it may take several years for enough labs in the state to meet these requirements to provide adequate testing capability for the state’s commercially grown products. It may be necessary to waive testing during the initial period because otherwise, product will not make it to the dispensaries. Further, there is no reason to require testing in such high quantities; it will not improve quality and will only serve to increase costs to the lab and the growers and processors. Also, the formulas for testing THC need to be specific to the type of equipment being used: liquid chromatography doesn’t decarboxylate THC, but gas chromatography does. Finally, there was no requirement to test edibles for homogeneity – critical in the protection of purchasers of multi-serving consumables.

The initial rules imposed such stringent financial constraints on prospective commercial licensees in the medical marijuana industry that, as a practical matter, many commercial operations, had they even been initially established, would have failed. While this may well have been the intention of the regulators, state law will permit licensed patients to grow their own medical marijuana. As has been seen in other states, the black market flourishes when the regulatory burden strangles lawful operations. The result, completely unregulated, untested products in the hands of patients, is antithetical to the health, welfare, and safety of patients and the public.

While the OSDH must currently act quickly to comply with the time requirements imposed under SQ788, over time it will have the opportunity to supplement the regulatory framework the Board adopts now. We recommend that it compose a task force, not just of interested Oklahoma regulatory agencies as it did previously, but of industry stakeholders at all levels, including those from other states that have valuable experience to share.
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Elizabeth Dalton’s corporate, securities and franchise lawyer with emphasis on issues relating to the healthcare industry for both taxable and tax-exempt clients. She serves as leader of McAfee & Taft’s Medical Marijuana Industry Group and previously served as leader of the firm’s Healthcare Group and on the firm’s board of directors. She can be reached at elizabeth.dalton@mcafeetaft.com.

Ron Kammerzell

Ron Kammerzell is an independent consultant who recently retired from the Colorado Department of Revenue after 25 years of service. Most recently, Ron served as Senior Director of Enforcement for nearly 5 years where he had management oversight responsibilities over five divisions, including Marijuana Enforcement. Ron can be reached at ron.kammerzell@gmail.com.