New York’s Marijuana Regulation and Taxation Act: What About Medical Marijuana?!

28 May New York’s Marijuana Regulation and Taxation Act: What About Medical Marijuana?!

In all of the hubbub over New York’s legalization of adult-use (i.e. recreational cannabis), not a lot of ink has been spilled over the expansion of New York’s medical cannabis program. As a brief refresher, New York first legalized medical cannabis in 2016. Since then, only 10 organizations (ROs), have been issued registrations. We are proud to say that a few of them are clients of our law firm.

New York has had some of the more restrictive patient certification requirements nationwide, which resulted in lower revenue for the ROs. It was widely assumed that New York’s medical cannabis industry, in particular the existing ROs, would have a leg up on recreational applicants once the MRTA was finalized and passed. As we get into below, it turns out there may not have been as many advantages as the ROs expected.

Let’s go through some of the questions we most frequently get about the MRTA’s changes to New York’s medical cannabis program.

Who qualifies as an eligible patient?

Anyone who, “in the [patient’s physician’s] professional opinion and review of past treatments, the patient is likely to receive therapeutic or palliative benefits from the primary or adjunctive treatment with medical use of cannabis for the condition.” This is a pretty broad provision that is clearly intended to give physicians discretion to prescribe cannabis where they deem appropriate.

Is there a limit on how much medical cannabis a patient can buy?

Yes, a sixty (60) day supply. But patients can “refill” their prescription with another sixty (60) day supply in the last 7 days of the previous 60 day period.

Are there any rules about the form of cannabis prescribed?

Just like any other prescription, the MRTA requires a prescription to identify the form of cannabis prescribed and the appropriate dosage. A patient’s registration identification card is required to include any recommendations or limitations by the patient’s physician as to the form or forms of medical cannabis and/or dosage for the patient.

How do I apply to be an RO?

The application is generally similar to the application process for a recreational license. Some key differences in terms of the application and criteria for registration:

• The registration application must include information about management or ownership interest in any other cannabis business outside of New York above 10%.
• The applicant will be evaluated in part based on the affordability of its medical cannabis.
• As an alternative to demonstrating that the applicant has sufficient real estate and equipment to operate, the applicant can post a bond of at least $2,000,000.

As with recreational licenses, the Cannabis Control Board (CCB) will be issuing rules and regulations that detail the exact application process, including any application fees.

Can I apply for both a registration and a recreational license?

Maybe. The CCB is empowered to grant some or all ROs the ability to obtain recreational cannabis licenses, subject to any fees, rules, or conditions prescribed by the CCB. We will have to see what the CCB’s rules and regulations say.

Do the existing ROs have an advantage over recreational licensees?

There are few obvious advantages. ROs can be vertically integrated, which means control from seed to sale. The right to vertically integrate allows for cost control throughout the production process.

ROs are also allowed to dispense medical cannabis from 4 wholly-owned dispensaries, with the apparent right to have an interest in an additional 4 dispensaries (presumably in which the RO is not the sole owner). Of the additional 4 dispensaries, 2 must be located in underserved or unserved geographic locations as determined by the CCB.

Another big advantage is going to be in the initial supply of recreational cannabis. Unless the CCB staggers its issuance of recreational licenses in such a way that allows cultivators and processors to grow and manufacture cannabis products in advance of recreational sales, there will likely be a significant supply deficit, with only the existing ROs ready to step into the void.

Where things may not be as advantageous is with existing ROs’ right to operate recreational dispensaries. As per the MRTA’s recreational licensing article, an RO can sell recreational cannabis at 3 of its medical dispensaries. However, the sale of recreational cannabis is limited to the RO’s own products. We note that there is some debate as to whether the MRTA expressly limits ROs to selling its own products recreationally, as opposed to dispensing its own products (i.e. one level up the production chain). Here at the Canna Law Blog, we think the spirit of the MRTA indicates that the limitation applies to the sale of recreational cannabis.

Anything else I need to know?

The renewal provisions for ROs are pretty interesting. The CCB can choose not to renew a registration if it determines and finds that:

• The number of ROs in an area is excessive to reasonably serve that area; and
• The RO has substantially violated the laws of another jurisdiction in which they operate a cannabis license or registration related to the operation of a cannabis business.

These two bases for non-renewal appear to target the existing ROs and multi-state operators and indicate that the CCB is really going to push for geographic diversity in the issuance of registrations.

On the whole, we mainly want to point out that a recreational license is not the only option available for prospective entrants into New York’s cannabis industry. There may be more barriers to entry in terms of capital requirements (i.e. that $2,000,000 bond option), but with the significantly expanded patient availability, it may make sense to explore medical cannabis registration for some prospective applicants.