Chasing medical marijuana license in Pa. an expensive process

David Weissman
  • PA Medical Society: Hopeful applicants should expect to pay to $1 million before submitting app.
  • Lawyer: Pennsylvania attractive to investors because of high number of qualifying conditions.

Following Sunday's passage of the medical marijuana bill, future prospective dispensary owners are preparing for an application process, which one cannabis educational organization says will be an expensive proposition.

FILE - In this Sept. 15, 2015 file photo, marijuana plants with their buds covered in white crystals called trichomes, are nearly ready for harvest in the "Flower Room" at the Ataraxia medical marijuana cultivation center in Albion, Ill. Marijuana-friendly doctors in states with similar medical cannabis laws face starkly different treatment by government regulators. When it comes to oversight of doctors, enforcement practices vary in the 23 states allowing medical cannabis. How governments oversee pot doctors has become an issue even in more tolerant states such as California and Colorado.

Russ Cersosimo, director of strategic alliances for the Pennsylvania Medical Cannabis Society, said groups should expect to pay up to $1 million just to be in position to submit a competitive application. These ancillary fees include lawyers, accountants and lobbyists, he said.

"People don't realize the financial and time commitment necessary to be successful in this business," Cersosimo said. "It's a big undertaking. You're going to have to quit your job."

The newly passed legislation will allow for 25 grower/processor licenses, five of which will allow holders to open up to three dispensaries each, and 50 dispensing licenses, which also permit up to three dispensaries each.

Cersosimo said interested parties should expect an application to be released this December with a deadline in January 2017. Dispensaries might begin business operations as soon as September 2017, he said, and consumers should be able to access these facilities around January 2018.

The state's application fee of $200,000 would be refundable if not selected, but the additional costs to chase a permit are "100 percent at risk," he said.

Plenty of interest: Justin Moriconi, a Philadelphia-based attorney who specializes in regulated cannabis, said he's already fielded multiple calls from potential investors in the budding industry, and he expects the state will see hundreds of applicants.

Pennsylvania is the 12th state on the East Coast to legalize medical marijuana, including surrounding states Delaware, Maryland, New York and New Jersey.

Moriconi said Pennsylvania should prove attractive to potential investors because it has the highest number of qualifying conditions and proposed dispensaries of the East Coast states.

"You're talking about getting in on the ground level of a very robust market," he said.

Moriconi added that lab testing spaces, which are built into the statute, should prove to be an expanding business opportunity with low overhead costs and the ability to charge processors to test products.

Cersosimo said the applicants will range from people with lots of money or land who don't know a lot about the market to businesses that were denied licenses for various reasons in other states.

"There's a huge gap in knowledge of what people expect and reality," he said.

Licenses: Licenses will be awarded based on merit from a range of factors including security plan, location and staffing, Cersosimo said, adding that dispensaries will be required to have a pharmacist on staff.

Cersosimo said problems with medical marijuana companies in other states have occurred because not enough doctors or patients sign up for the program. He pointed to New York, where medical marijuana was legalized in July 2014, as an example.

As of April 11, only 526 physicians had registered for the program, and only 2,675 patients had been certified, according to the New York Department of Health.

Moriconi said he doesn't believe that will be the case with Pennsylvania because the high number of qualifying conditions ensured a robust patient base market.

Moriconi and Cersosimo said potential applicants should be wary of companies, perhaps held up as "consultants," who claim to be experts in attaining medical marijuana processor and dispensing licenses.

These companies are often "selling snake oil," Moriconi said, and charging up to $250,000 for their help even if they know the applicants don't have a chance at a license.

Banks: Another issue prospective applicants will run into is dealing with banks, Cersosimo and Moriconi said.

Cannabis is still classified as a Schedule I drug by the U.S. Drug Enforcement Agency, which means it is federally outlawed. Since banks are federally insured, businesses associated with the drug will have difficulties opening and maintaining accounts, Moriconi said.

Cersosimo said he's seen dispensaries in other states encounter problems with banks freezing their accounts due to the nature of their business.

Pennsylvania's law requires grower/processor applicants to have $500,000 in the bank, Moriconi said, adding that it's a way to weed out applications.

Moriconi said he expects cannabis entities will be forced to open accounts with credit unions and trust companies.

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