Pubdate: Sun, 12 Oct 2014
Source: Baltimore Sun (MD)
Copyright: 2014 The Baltimore Sun Company
Contact:  http://www.baltimoresun.com/
Details: http://www.mapinc.org/media/37
Author: Timothy B. Wheeler
Page: 1

MEDICAL MARIJUANA FEES STIR MD. DEBATE

Advocates Say State Licensing Costs, Among Highest in U.S., Could 
Hurt Program, Patients

With Maryland's proposed licensing fees for growing and selling 
medical marijuana among the highest in the nation, some advocates 
warn that the steep costs could drive off applicants, crippling the 
nascent program and limiting access to treatment for tens of 
thousands of state residents.

Prospective medical marijuana growers would have to pay $125,000 a 
year for a two-year license, while dispensaries would have to pay 
$40,000 a year, according to the recommendations of a state 
commission. Only one state - Illinois - is charging a higher upfront 
cost for growers.

Del. Cheryl D. Glenn, a lead sponsor of Maryland's medical marijuana 
law, called the proposed fees "outrageous." The 15member medical 
marijuana commission is named for Natalie M. LaPrade, Glenn's mother, 
who died in 2011 of kidney cancer.

The Baltimore Democrat fears the steep costs could shut out small 
businesses and increase retail prices so much that marijuana would be 
unaffordable for some patients. "We have the haves and have-nots all 
over again," she said. "That's ridiculous."

Others say the steep fees might scare off small operators but are 
unlikely to chase away many entrepreneurs looking to get in on the 
ground floor of what appears to be a rapidly growing industry.

Maryland officials defend the proposed fees while noting that the 
medical marijuana regulations are still being drafted and could 
change before being published. They say the rates are needed to 
finance the new program, which was designed by lawmakers to be 
self-supporting. And they note that there is great variability in how 
such programs have been set up and financed in 23 states and the 
District of Columbia.

The General Assembly first approved legalizing medical uses of 
marijuana in 2013, but limited it to academic medical centers, which 
showed no interest. Lawmakers revamped the program this year, 
authorizing licensed physicians to recommend medical marijuana, with 
15 growers and as many as 94 dispensaries to supply it.

State health officials estimate that 45,000 patients would be 
eligible to obtain medical marijuana to help alleviate debilitating 
illnesses and conditions that cause severe pain, nausea or seizures.

Health insurance will not pay for medical marijuana.

Rachelle Yeung, legislative analyst for the Marijuana Policy Project, 
a Washington-based advocacy group, said Maryland's fees are 
"prohibitively high." She noted that in addition to annual licensing 
fees, prospective growers must pay $6,000 to apply, while those 
seeking to open a dispensary must put up $5,000.

Maryland's fees, she said, "are almost certainly going to be passed 
on to the patients, and these are already people who have expensive 
medical bills and are dealing with debilitating medical conditions. 
It's unfair they would have to pay the costs of the program."

But the steep fees on tap did not dissuade more than 100 people from 
attending a daylong "Canna-Business" seminar in Bethesda last week. 
Cultivators and dispensary operators from Connecticut, Colorado and 
the District of Columbia advised applicants that they would need deep 
pockets. But they suggested that that's the price of starting out in 
a new but expanding business, as more states approve medical marijuana.

"There's a green rush," said Chris Reilly, spokesman for one of three 
state-licensed "compassion centers" in Rhode Island, which he said 
cost nearly $3 million to set up. "People are clamoring to get into 
this industry."

Many states charge fees lower than those in Maryland's draft rules. 
But in some cases, those states serve a smaller patient population 
than Maryland expects. Some draw additional revenue from sales taxes 
or have costs partly covered in other agencies' budgets.

New Jersey, for instance, charges a $20,000 annual fee for its 
"alternative treatment centers," which are licensed to cultivate and 
dispense marijuana. The state has three, with another three being 
reviewed, to serve 3,478 patients who have qualified to buy it for 
their medical conditions.

That state's program has a budget of about $1.7 million, according to 
Donna Leusner, spokeswoman for the New Jersey Health Department. (The 
state also charges 7 percent sales tax on medical marijuana, a 
revenue source unavailable to Maryland, which exempts all medications.)

Connecticut charges a $25,000 nonrefundable application fee and a 
$75,000 yearly licensing fee to producers. Dispensaries pay $5,000 
for their licenses. A spokesman said six dispensaries and four 
producers serve 2,326 patients. The program's annual budget is 
$650,000, with four administrative staff members and two inspectors.

In Illinois, applicants for cultivator licenses pay $25,000 to apply, 
plus a $200,000 fee for the initial one-year license, according to 
Melaney Arnold, spokeswoman for that state's health department. 
Cultivators' license fees drop to $100,000 upon renewal.

Each suitor for one of 60 dispensary licenses to be awarded has to 
pay a $5,000 application fee, with the successful applicants required 
to pay a $30,000 licensing fee the first year, discounted to $25,000 
upon renewal.

Arnold said the fees in Illinois were set to cover the program's 
costs, estimated at $6 million to $8 million. She said unofficial 
estimates put the potential number of eligible patients in the tens 
of thousands.

Despite its high fees, the Illinois Department of Agriculture 
reported recently that it had received 159 applications for licenses 
to run 21 cultivation centers statewide and 214 applications for up 
to 60 dispensary licenses.

In Maryland, state officials say the fees under consideration are 
needed to cover the projected $3.5 million annual budget for the program.

"This is what we feel it's going to take to run a rigorous program," 
said Sharon H. Bloom, the commission's acting executive director who, 
commission members said, recently announced her intention to resign 
from the post.

The commission was allotted $125,000 to get started, she said, but 
more money is needed to get the program up and running before any 
medical marijuana is produced. She said the commission must pay rent 
and hire staff, including three inspectors, set up its 
information-technology system and hire a lawyer.

Bloom refused to provide a breakdown of projected costs, saying in an 
email that such information can only be released to the public once 
the governor presents a budget to the General Assembly in January.

Glenn and Del. Dan K. Morhaim, another prominent legislative 
advocate, questioned the cost projections on which the fees are 
based, as well as the commission's decision to withhold them.

"They should be forthcoming, not just with me, but with everybody," 
said Morhaim, a Baltimore County Democrat who is a physician. "Asking 
for $250,000 up front [licenses are for two years] is very 
potentially a nonstarter," warning that the fee setup, "structured as 
it is, it could kill the program before it starts."

"Let's allow everybody the opportunity to develop a business so it's 
affordable," Glenn said. "I worry about what it's going to cost the patients."

Paula C. Hollinger, a former state senator who oversees the state's 
health professions boards and commissions, defended Bloom's decision 
not to release the panel's projected budget. "It's not out of line 
with what other states have had to spend," she said.

Hollinger said the commission hopes to vote on draft regulations at 
its next meeting, Oct. 28. The regulations would then be sent to 
Maryland Health Secretary Dr. Joshua M. Sharfstein and the attorney 
general's office for review before being formally proposed.

It is unclear exactly when Marylanders will be able to buy medical 
marijuana, but it is months away. Prices will be set by the licensed 
dispensaries.

State Sen. Jamie Raskin, a Montgomery County Democrat who is the 
chief advocate for medical marijuana in the Senate, said he is 
reserving judgment on the proposed fees. He said the commission faces 
a "Goldilocks problem," needing to set fees high enough to fund the 
program but not so high that they're a barrier to small businesses.

"Obviously, that's a judgment call the commission has to make," he 
said, adding that "the legislature will get a chance to revisit it."

Maryland's proposed fees have drawn a handful of emailed complaints 
to the commission, including a couple predicting that the proposed 
fees would discourage smaller businesses. One writer noted that it 
could take months after receiving a license before the first crop of 
marijuana could be grown and processed for sale.

One of those who wrote the state, Britton Loftin, said in an 
interview that he and fellow investors formed a company, Maryland 
Hands of Care, and have been looking to apply for licenses to grow 
and sell medical marijuana.

The Laurel-based lobbyist said he is taken aback by the proposed 
fees, enough that he is reconsidering his interest.

"It'll make me think three or four times about it," Loftin said. He 
suggested that the fees be set low to start, then gradually raised, 
in recognition that it will take time for businesses to get up and running.

John A. Pica Jr., a lawyer for another group of investors, the CBD 
Wellness Group, said his clients have not been dissuaded, though he 
agreed that the $125,000 annual licensing cost "seems pretty high."

"Without knowing the pricing side, and how much you can produce, 
there's a lot of uncertainty," he said.

Still, he said, he has not heard of anyone abandoning the pursuit of 
a license, which gains entry into a business with only a limited 
number of competitors.

"It hasn't scared anyone away," he said.
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MAP posted-by: Jay Bergstrom