Monthly Archives: September 2015

No Big Marijuana, Please: Medium is as Big as we Get

The spectre of Big Marijuana is often raised as a problem to be avoided in legalized markets (including, it must be said, by the Blue Ribbon Commission, of which I was Public Safety Chair). Though Big Marijuana is most often discussed in the context of adult-use markets, it is also of concern in the medical market—particularly one as large as California’s. The new regulations (AB 266, SB 643, and AB 243) no longer require market participants to be patients, and they no longer exclude for-profit companies. This doesn’t mean, however, that Big Marijuana is inevitable. California’s new medical marijuana regulations address concerns about market concentration in a number of ways, particularly when it comes to licenses.

At the outset, AB 266 allows for three sizes of cultivation license, each one bigger than the other. But taking a page from Starbucks (or Orwell), these are not small, medium, and large licenses: instead, they are specialty, small, and medium licenses. That’s right: the largest size of 3 cultivation licenses is a medium. To be fair, these cultivation sites aren’t all that large, as is spelled out in AB 243. The smallest licenses (type 1, or specialty) are 5000 square feet of canopy or less, the medium—er, small/type 2—size is between 5001 and 10000 square feet of canopy, and the “bigger than small but not large” medium/type 3 licenses are 10,001 square feet to an acre for outdoor grows and 10,001 to 22,000 square feet for indoor and mixed-light grows.. The Department of Food and Agriculture “shall limit the number of licenses”, but, as with many areas covered by the new regulation, substantive details about the limited numbers are going to be worked out administratively.

In addition to cultivation licenses, there are licenses for distribution, testing, dispensaries, and manufacturing. Distribution licenses can only be combined with testing licenses; they may not be combined with other kinds of licenses. This seems familiar enough, taking a page from the alcohol producer/wholesaler/retailer model–except that there is also a carveout for combining licenses. It is possible to hold cultivation, manufacturing, and dispensary licenses provided the dispensary license is 10A (permitting a maximum of three locations) and the total area of cultivation is not more than 4 acres of canopy.  This suggests that vertical integration on a smaller scale (Medium Marijuana) is permissible. Not being a horticulturalist, I’m not sure whether 4 acres of canopy is a sufficient limitation to prevent market concentration—it would depend on the yield of those four acres and on the number of “medium”/type 3 cultivation licenses that are ultimately authorized. We might also need to consider geographic/local market concentration as well. Given the relationship between state and local regulations, it might still be possible to have geographic concentrations of stores or cultivation sites that could result in local Big Marijuana, but this would, of course, depend on whether the local permitting system enabled that.

Finally, note that the licensed market does not include everyone authorized to grow medical marijuana. Individual patients can still grow their own marijuana, though they are limited to 100 feet of canopy and are not permitted to sell or even give away any of what they grow. Caregivers are allowed to care only for 5 patients at the most and their compensation is limited by 11362.765(c) (limiting compensation to, generally, expenses and that which is “reasonable”).  Already, one pro-patient group has indicated its displeasure with these new limitations and has threatened to sue on the grounds that the legislature has taken away rights granted by Proposition 215, a claim which, if true, would indeed invalidate the provisions. However, it is unclear whether Prop 215 granted an explicit right to be a caregiver for, say, more than 5 people or to grow for personal use with a total canopy size that was either unlimited or at least bigger than 100 square feet. At least for these patient groups, the medium sized marijuana market, personal edition, is not nearly large enough.

Is the Era of De Facto Legalization Over in California?

After a summer hiatus, we are back at the Drug Law and Policy Blog. I have a team of students who is going to help me cover the latest from the world of California marijuana regulation, but we’re going to start by walking through some of the huge changes wrought by a trio of bills: AB 266, SB 643, and AB 243, which, almost 20 years after the Compassionate Use Act (CUA) ballot initiative (also known as Prop 215), provide for statewide regulation of medical cannabis.

California has been described as having de facto adult-use legalization because it is so easy for people to get medical recommendations for marijuana use. Indeed, I have often heard in conversation with folks around the state that the reason the prior legalization initiative, Prop 19, failed—and why any future proposition might fail—is that the existing system worked well for everyone involved: people who wanted marijuana could easily get it. (This ignores other things that consumers might want, such as reliable testing and safety of products, many of which are covered in this new set of regulations.) Did the recent legislation change anything?

Nothing has changed about the qualifying conditions eligible for marijuana, which are set by the CUA and are quite broad. Instead, in this post I’ll focus on the other ways in which the medical market might constrict: regulating doctors who issue the regulations, regulations which are laid out in SB 643.

There are a number of “plain vanilla” regulations of the doctors who write recommendations, including requirements for disclaimers in advertising and prohibitions on doctors having any financial arrangements with licensees (punishable by up to a year in jail). There is a requirement that the recommender be the patient’s “attending physician”, but the definition of attending physician is given a particular meaning in Health and Safety Code 11362.7, and merely refers to a medical doctor or osteopath who has “taken responsibility for an aspect of the medical care, treatment, diagnosis, counseling, or referral of a patient and who has conducted a medical examination of that patient” (emphasis added) before issuing the recommendation.  As long as there is an examination, then, and there is some responsibility for some part of the person’s medical care, a doctor can issue a recommendation.  (Of course, a more restrictive definition of “attending physician” or what it means to “take responsibility” for an aspect of a patient’s care could limit the pool of those who could write recommendations, but the rest of this post will focus on different language, since the new legislation adopts these definitions without necessarily changing them.)

The two new limitations on recommendations, as I see them, come from changes to the Business and Professions Code § 2220.05, which establishes the “investigative and prosecutorial resources” of the Medical Board of California. Here, SB 643 made investigations and prosecutions of doctors who engage in “[r]epeated acts of clearly excessive recommending of cannabis to patients for medical purposes, or repeated acts of recommending cannabis to patients for medical purposes without a good faith prior examination of the patient and a medical reason for the recommendation” the fourth-highest priority for the Medical Board, just above sexual misconduct with a patient and just below a more generic prohibition against excessive prescribing of controlled substances. Of course, we don’t necessarily know just from the statutory language what a “clearly excessive” number of recommendations might be, nor is it clear either what a “good faith examination” of the patient is nor how many bad faith examinations constituted “repeated acts.” Nevertheless, there are some limits here.

Elsewhere in the bill there is a requirement for the Medical Board of California, in concert with the (newly established) Center for Medical Cannabis Research, to work on “developing and adopting medical guidelines for the appropriate administration and use of medical cannabis.” If one reads “administration and use of cannabis” to include the decision whether or not to recommend usage at all, this might provide some clearer guidance to doctors—and the Medical Board—about who is engaged in unprofessional (and license threatening) conduct.

So why would this matter? California’s medical marijuana industry is so large, in part, because the number of “patients” who can buy medical marijuana is so large. If the state begins to crack down on a few doctors who provide a large number of recommendations (and I don’t have any reliable information about how many doctors, if any, there are, nor about how many recommendations they provide), then we might see the size of the medical marijuana market start to shrink. One of the reasons I’ve been less than sanguine about the prospects for the electoral prospects of ballot initiatives to allow adult use in California is that, for many market participants, medical marijuana ain’t broke, so it doesn’t need fixing. Starting to distinguish between overly permissive doctors and those with some kind of established relationship with their patients might change the economics of the established medical marijuana market, and, with it, the electoral calculus as well. But it will all depend on how the statutory language is interpreted and on how effective enforcement activity is.