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Buffalo News: Potential pot growers struggle with New York’s new rules

By Tom Precious, April 4

Gary Smith grows millions of pounds of tomatoes in a greenhouse in Niagara County, but he is fighting the clock to rotate in a different crop soon so that he can harvest in time for sale next January. His new crop: marijuana.

Or, at least, he hopes it will be.

Smith is among hundreds of people poring over regulations the state Department of Health released last week that paves the way for medical marijuana to be sold in New York State by early next year.

The complex set of rules sets in motion an application period that is expected to see a rush of businesses trying to get a foothold in the state’s medical marijuana industry.

“We’ve already had a lot of time and resources into this in preparation of the application. Nothing in this latest release has diminished our desire to apply for a license,” Smith, of H2Gro Greenhouses in Lewiston, said of the marijuana regulations released Tuesday night.

A long line of competitors is expected in the effort to provide pain relief for seriously ill people. But only five will be selected.

Advocates of medical marijuana say the governor and the state Health Department have set up too many obstacles, dragged their feet on guidelines for compensation and placed too many restrictions on the use of medical marijuana.

“One might wonder if the regulations were designed to prevent the system from operating at all,” said Assemblyman Richard Gottfried, a Manhattan Democrat and one of the sponsors of the Compassionate Care Act.

The Health Department and its supporters, though, say the new medical industry faces potential legal challenges if not done by the book.

“These regulations are necessary because we’re creating a new industry in a state where there is no template for it,” said Sen. Diane Savino, a Staten Island Democrat who also sponsored the new law. “You’ve got to build the regulatory structure before you get off the ground.”

In the meantime, potential marijuana growers are going over thousands of pages of the recently released regulations to decide if they should enter the business, and as many as 400,000 potential patients, according to advocates, wait for the medical marijuana product to hit the outlets.

An industry is born

The goal is for medical marijuana products to be in the hands of patients who have one of several serious health conditions by Jan. 16. But before that can happen, much must be accomplished.

Prospective marijuana growers must apply. The state will conduct background checks. Then those awarded the permits must secure financing, build or adapt buildings with strict security systems and hire staff. After that comes the sowing of seed. It will take 12 to 15 weeks to grow and process the marijuana plants for the oil-based form of the drug that physicians will be allowed to prescribe.

Five businesses around the state each will be permitted to open four dispensaries for medical marijuana, for a total of 20 outlets.

New York’s program will feature strict integration: companies selected must run the entire process, from growing the plants to processing into one of the permitted forms to running outlets that sell the product.

The law forbids the drug to be smoked. Eligible patients will be able to consume the drug through an oil, pill or vapor.

Patients will be given a registration card after getting approval from a qualified physician. The patient must be diagnosed with a “severe debilitating or life-threatening condition,” such as cancer, AIDS, amyotrophic lateral sclerosis, Parkinson’s, multiple sclerosis, spinal cord injuries and epilepsy.

Too restrictive?

Advocates of medical marijuana have many concerns about how New York is opening up the new industry, and those concerns were evident in questions, comments and suggestions posed to the state Health Department, which paraphrased and released them last week when it made public the final regulations.

For starters, advocates say state regulators have refused to set a price for individual doses of marijuana, making it difficult for potential dispensing companies to complete an accurate business plan.

Just filing the application to grow, process and sell marijuana will cost $10,000. And the winners will be charged a $200,000 refundable registration fee. One would-be bidder estimated that the true cost of complying with all of New York’s rules will be more than $8 million every two years.

Cost to consumers is also a question.

Advocates say the state needs to quickly devise a program that sets medical marijuana prices not so high that people buy from the illegal market and not so low as to discourage companies from joining the program.

In addition, they say the state needs to offer lower prices to poor people, although the regulations do not embrace that idea. And then there are concerns that even if all 20 dispensaries are opened, that will not be enough to serve all the New Yorkers who are prescribed the drug.

Of particular concern is that the distribution of the outlets will favor downstate, leaving upstaters, especially in rural areas, with no access to medical marijuana. One commenter to the agency suggested that every county get a dispensary. Another said they should be located within 50 miles of eligible patients.

But despite hundreds of comments stakeholders offered, advocates said they are disappointed the state Health Department made no substantive changes to the draft regulations issued last year.

“The DOH response to many comments is ‘will consider,’ or ‘will take under advisement.’ That is what DOH was supposed to have done during this comment period,” said Gottfried, the law’s sponsor.

Gabriel Sayegh, managing director of policy and campaigns at the Drug Policy Alliance, one of the lead groups that pushed to get New York to join 22 other states permitting medical use of marijuana, said her organization will begin a push to amend the law and lift restrictions.

“It’s baffling and downright unacceptable for Gov. Cuomo to ignore both the science on medical marijuana and the evidence on medical marijuana programs,” Sayegh said.


The regulations have their defenders, including Gottfried’s partner in getting the law approved last year.

Savino, the Staten Island Democrat, believes the Cuomo administration wants the program to succeed, noting that regulators have hit every deadline of the roll-out. She expects licenses to grower/seller firms will be awarded in July.

The 18-month period between the law’s passage and the scheduled distribution of the drug to patients next January is seven months shorter than the average in other states with medical marijuana programs, said Savino.

If the regulations are not tightly drawn, losing bidders for the permits could sue the state or the federal government could intervene, as happened in Montana a few years ago, the lawmaker said.

Moreover, while advocates want an initial program that is more widespread with more dispensaries, Savino says such calls are premature.

“We don’t want to grow a program so big that it can’t sustain itself … And we have no idea what the patient volume is going to be. No patients have been certified yet, no doctors trained,” she said.

And she said she trusts the Health Department’s promise to expand the program in the future if necessary.

For its part, the Health Department notes that marijuana possession is illegal in the United States, and said the state’s law “ensures appropriate access through comprehensive regulations and safeguards.” The regulations were developed “through this very critical lens to ensure that the entire program would not be subject to enforcement action or legal challenges” that would have delayed or halted the medical marijuana growing and distribution system, it said.

The department also said regulators will consider geographic balance when selecting firms and their dispensing facility proposals. The health agency has been given wide powers to interpret the law, such as adding health conditions of patients who will be permitted the medical marijuana and permitting more than 20 dispensaries of the drug.

Local marijuana industry?

Jody Miller is a pharmaceutical industry consultant who heads Buffalo’s 4Front Consulting Group, and he represents a client now considering an application to grow and distribute medical marijuana. Miller would not name the client but said the operation would be located in Western New York.

Miller said the state is rightly taking “a very responsible approach” in developing the program.

“We need to balance access with patient safety,” Miller said of the need for high-quality marijuana. “They’re looking at it from the lens of producing a medical-grade product, and we concur with that.”

The biggest mystery?

Pricing. New York will be the only state in the nation that sets medical marijuana prices, but it is not going to do that before the applications go out.

“Without a doubt, the biggest challenge for any professional looking at this is the question on price,” Miller said.

For instance, will the state take into account higher costs to grow the plants in Buffalo than, say, Long Island?

The way New York is setting up the program will mean some thin margins for companies compared to other states, Miller said.

Still, he predicted hundreds of companies will apply.

Back in Lewiston, Smith, the greenhouse company executive, has learned more than he ever thought possible about the medical marijuana growing-and-dispensing industry.

To Smith, the new regulations cleared up a number of questions he had, such as a glimpse into the state’s goal for applicants with wide geographic dispersion.

One of his questions to the state: Could a grower act as a wholesaler to dispensaries?

Answer: no.

Unlike some advocacy groups, Smith was fine that the state Health Department didn’t make many changes between its initial and final regulations.

“They definitely don’t want to make major changes until the program is up and running, and I agree with that,” he said.

For the program to be on time, the agency will have to release application materials soon, which he believes could come in a couple weeks.

“Quite frankly, if they keep to the time frame of having products out on the street by Jan. 16, they’re going to have to start choosing (growers) by June,” he said.