New York Releases Proposed Regulations on Medical Marijuana

The New York State Department of Health (“DOH”) has released proposed regulations on the growth, manufacture, sale, and use of medical marijuana in the state. The regulations are the first step in implementing the “Compassionate Care Act,” (the “Act”) signed into law in September, that contemplates the distribution of medical marijuana in the state in 2016.

The regulations will provide clarity on all areas of the Act, which left many of the mechanics of how marijuana would be grown and distributed up to the DOH. While the Act had been fairly specific in some areas (such as which physicians could prescribe marijuana and which patients could take it) it had left, until now, relatively large gaps in how entities wishing to grow and distribute marijuana could go about being licensed to do so, and the requirements they would have to meet in order to do so.

The regulations do not make significant changes to the governing provisions on how physicians can prescribe marijuana or how patients can receive it (a summary of the Act can be found here). Physicians that wish to prescribe medical marijuana must take a DOH-approved course on medical marijuana before being allowed to do so. For patients, the list of illnesses and symptoms for which marijuana can be prescribed has not significantly changed, despite DOH’s authority to add to both lists.

One of the most significant areas of development in the regulations is the enumeration of the requirements for “Registered Organizations” (entities allowed to grow, manufacture, and distribute marijuana). The application for Registered Organizations will include everything from a description of all property and equipment to be used in the manufacture and sale to a description of devices to be sold along with medical marijuana to security systems, financial statements, and architectural sketches. The application appears as though it will extensively cover all phases of development and require aspiring Registered Organizations to not just have a business and logistical plan to operate, but also have the tools to quickly, efficiently, and securely establish a production line from “seed to sale” not long after approval. Applicants can also expect to pay a significant fee: a $10,000 nonrefundable application fee plus another $200,000 registration fee (which will be refunded if the applicant is not approved). Applications will be approved based on ability to produce sufficient quantities of material with a consistent, testable quality while being able to effectively comply with all relevant laws and regulations. If a Registered Organization is approved but fails to operate, its approval will be revoked by DOH.

On the growth and manufacture side, a successful Registered Organization applicant will have to have capability to grow the plants indoors with a sufficient security system (including a perimeter alarm, motion detectors, video cameras, duress, panic, and holdup alarms, and backup power sources). Extraction of THC, an active compound in marijuana purported to have therapeutic effects, will need to be done either via a carbon dioxide or alcohol-based extraction system, and the manufacturer will have to have quality control measures in place to ensure consistent levels of THC and CBD (another active compound). The Registered Organization will initially be allowed to develop five product brands with varying levels of THC and CBD. In addition to the DOH regulations, growers will also have to comply with existing good agricultural practices and New York State laws and regulations regarding agriculture.

Following manufacture and packaging, a certain amount of the product per lot will be sent to an independent laboratory to confirm THC and CBD levels as well as undergo contaminant testing. Assuming the lot passes, it will move on to a dispensing facility. Dispensaries require the same security as growth and manufacture facilities. They will also require that a state-licensed pharmacist be on site and supervise the facility at all times. In addition to the limitations already in the Act, restrictions are placed on who can be on a dispensary’s premises (only registered employees, patients, caregivers, and approved visitors), and disclaimers and warnings to be provided to the patient are specifically enumerated.

The regulations also address the transport of marijuana, which is restricted to only between manufacturing facilities and dispensaries, and only in an approved safe within a vehicle that is not visible from outside. Transport routes and times must be randomized and precisely recorded in shipping manifests.

As contemplated in the Act, the DOH will set the price for all marijuana sold by a Registered Organization. The price will be set for the duration of a Registered Organization’s two-year registration period (though it can be increased after the first year). Registered Organizations will submit a proposed price, along with data supporting that price, to the DOH, which will review the proposed price and consider it in light of the Registered Organization’s practices, historical price, and past sales (if applicable) in either approving, modifying, or rejecting the proposed price.

Advertisement is significantly limited, including only a single black and white sign on any building used by the Registered Organization, including a dispensary. All other forms of advertisement must be approved by DOH. Consumption is limited as contemplated in the Act, but the regulations now also include a prohibition on consumption via vaporization in any location where smoking is prohibited under state law (such as bars, restaurants, offices, public transportation, etc.), including hospitals (except in designated rooms if the hospital has them). Limitations are placed on pharmacists and physicians in a manner similar to all other controlled substances currently distributed in the state.

The approximately 100 pages of proposed regulations also address certified caregivers, laboratories, testing requirements, disposal, and all other facets of the production chain to ensure that only those approved to consume marijuana will have access to it and the marijuana produced will be of sufficient quality.

The regulations’ release comes at an interesting time; just two days after the regulations were made public, Oklahoma and Nebraska filed a lawsuit against Colorado in the Supreme Court to attempt to invalidate Colorado’s legalization of recreational marijuana. Oklahoma and Nebraska claim they have been harmed by an increase in marijuana possession occurring in their states, specifically in areas that border Colorado. The suit is predicated on the fact that marijuana remains listed as a “Schedule 1 Narcotic” in the Controlled Substances Act (“CSA”), meaning, by the CSA’s definition, marijuana has no currently accepted medical use. As such, marijuana is illegal to manufacture, distribute, or possess under the CSA. The suit lays an interesting battle line, however, attacking Colorado’s regulatory scheme for the production, sale, and taxation of marijuana instead of the underlying legality of possessing and using marijuana.[1] While Colorado’s Attorney General has stated that the legal challenge is “without merit,” the Supreme Court’s ruling may set precedent that facilitates the further development of legalized marijuana in other states such as New York, or curtail the distribution of possibly both recreational and medical marijuana in the many states that currently allow for such.

In the meantime, however, New York will continue to establish a legal framework for the use of medical marijuana. The regulations, to be published in the December 31^st State Register, will have a 45 day comment period before being revised or finalized. The next step will then be the application of growers and distributors to be one of the five Registered Organizations producing medical marijuana come January 2016.