Senate Judiciary sends medical cannabis vertical integration bill to Senate floor

CHARLESTON — The Senate Judiciary Committee approved on Thursday morning a revised version of HB 2079, the bill enabling vertical integration of medical cannabis operations.

Most of the changes are technical. One significant change was made in coordination with the House, and the committee adopted a couple amendments offered by senators.

First, the vertical integration. Current law says growers and processors may not be dispensaries. The bill allows growers, processors and dispensaries to be a single operation.

Committee counsel told the members that research conducted since the medical cannabis program bill passed in 2017 showed that the expenses required in these operations make vertical integration necessary for them to operate profitably and succeed.

The bill keeps the limit on permits to 10 for growers and processors.

The House version raised the cap on dispensary permits from 30 to 165, and the limit on dispensary permits for one owner from two to 10. The Senate bill reduces the dispensary cap to 100 but keeps the limit for one owner at 10. Counsel said the House is OK with that reduction.

Committee counsel said there was a sense that 165 may be too many, and it’s uncertain if there will even be 100, but they picked that number because it’s divisible by 10.

The Bureau of Public Health will review applications and select permit recipients. The bill contains a set of criteria for the bureau to consider when permitting dispensaries. The committee approved an amendment by Sen. Stephen Baldwin, D- Greenbrier, to include geographic location as a criterion.

This came in response to a comment from Michael Haid, representing an investor group interested in starting an operation, who said that the bill eliminated a requirement that growers, processors and dispensers be distributed evenly among the six regions established in the original program.

Hague said that not requiring some kind of regional disbursement of dispensaries might limit access for rural residents. “they shouldn’t have to drive an hour or two to get access to medicine.”

Jason Frame, director of the bureau’s Office of Medical Cannabis, said the office isn’t concerned about regional distribution of growers and processors. And each of the six regions contains a city that the dispensaries will gravitate toward because some remote locations simply couldn’t produce enough business.

The bureau would likely consider location when evaluating applications, he said, but it would be good to include that in code.

Haid was pleased that vertical integration is moving forward. “This is just as big a deal as the state banking fix,” he said. Without it, the program would sit idle another year.

“The businesses would ignore West Virginia; and the money and the revenue to make a small profit on medical marijuana doesn’t exist without vertical integration.”

Sen. Randy Smith, R-Tucker, zeroed in on Haid’s statement about businesses ignoring this state and asked if the program would be drawing in a flock of out-of-state interests to suck away West Virginia money.

Haid said his group consists of 90 percent West Virginia investors and he’s not worried about an out-of-state invasion because the profit margin on medical cannabis, versus recreational marijuana, is too slim.

That discussion prompted Sen. Richard Lindsay, D-Kanawha, to offer an amendment requiring any medical cannabis business to have 51 percent West Virginia resident ownership.

Sen. Greg Boso, R-Nicholas, questioned whether that’s a typical requirement for other businesses. He noted that most prescription medicines are distributed by big pharmacy chains,

Sen. Mike Woelfel, D-Cabell, replied that in-state ownership of other medical services – nursing, physician groups, hospital – is typical. And federal commerce regulations prohibit cannabis operations, apart from seed acquisition, from crossing state lines. It has to be grown, processed and dispensed within the borders.

Lindsay’s amendment also was adopted.

Sen. Ryan Weld, R-Brooke, is committee vice chair, and it’s typical for the vice chair to handle the various procedural motions to move a bill along. However, he opposes this bill so Chair Charles Trump, R-Morgan, called on Boso to handle the motions.

Weld did not vote on the motions and when the vote came to approve the bill, he joined with Mike Azinger, R-Wood, to vote no. All others voted yes and HB 2079 goes to the Senate floor.

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