7/1/10 “Black Thursday”

Try as I might, I cannot possibly get to all of you before Thursday (I have tried!). Accordingly, I am writing this blog in an effort to address various issues that appear common to most MMJ business people.

1. 7/1/10 is the effective date for all MMJ businesses going forward. I understand that Mr. Matt Cook has told some of you that you have until 7/1/11 to comply. This is not the case. I have spoken with Mr. Cook and corresponded with him on several occassions. In his correspondence he makes clear that your MMC and/or MIP application will be evaluated using the 7/1/10 date. For those of you seeking to add a retail or add a grow after 7/1/10, Mr. Cook advises that both aspects of the MMC must be locally approved on or before 7/1/10.
2. There is no one year state moratorium. However, there is a defacto moratorium in that you cannot operate after 7/1/10 unless you were “established”/locally approved for both the grow and retail location(s) before 7/1/10. Otherwise, you cannot operate until both local and state approval are obtained.
3. Hash is going to be considered an “infused product.” The distinction provided by Mr. Cook is that green stuff in a bag is for MMCs, everything else is for MIPs.
4. There can be no deliveries except in the narrow circumstances provided in HB1284.
5. One grow can supply a MMC with multiple locations and common ownership.
6. One grow cannot supply MMJ to mulitiple MMCs not wholly and commonly owned by the same people. NO INDEPENDENT CONTRACTOR GROWS NO MATTER WHAT ANYONE IS TELLING YOU!!!
7. The residency, “no felony w/i five years of completion of sentence” and “no felony drug convictions ever” standards apply for owners, employees and managers of the MMC. The criminal background issues apply equally to investors.
8. The 70/30 rule applies on 7/1/10 and the certification is due 9/1/10. Again, in evaluating your application and 70/30 certification, the state will look back to 7/1/10.
9. MIPs must be locally approved by 7/1/10 to be considered established under HB1284 even if there is no such licensing procedure locally available.
10. The MIP may, but is not required to, grow its own MMJ using a locally approved OPC or may contract, in writing, with up to 5 MMCs to purchase the MMJ for use in making the products. The MIP MMJ cannot be resold to any other business or person, but the MIP can sell its products to any MMC.

I know how hard it is out there. Better to be on the sideline and do it right, then be further down the road doing it wrong. Remember, doing it wrong can result in delay, denial, permanent bar from future MMJ business or removal of any protection from criminal prosecution.

Stay legal, stay safe.

MMC and patient assignment – a follow up to the 70/30 rule

Further to my previous post, a MMC’s inventory is measured by the number of patients that assign the MMC as their “primary center” times two ounces per patient (I am not dealing with the “edibles”/medical necessity issues here) and can only grow 6 plants for each assigned patient. The question is how do we do this? The answer is not simple and has not yet been considered by the Dept. of Revenue or Dept. of Health. As with most MMJ issues, we must solve the problem ourselves and wait for the state to catch up. As with all MMC issues, prior to 7/1/10 is the date to accomplish this.

Accordingly, I suggest that the primary caregivers associated with the MMC have their patients assign the MMC as their “primary center.” Since their is no form or procedure for this, I suggest using the Change of Primary Caregiver form issued by the Dept. of Health. Instead of inserting a person’s name as the PC, I suggest inserting the MMC’s name, address, etc. Otherwise, fill out the form as required by the Dept. of Health and have the document notarized and mailed to the Dept. of Health, certified mail, return receipt requested. The state may reject the form, but at least you have timely proof of conversion from primary caregiver to primary center. Keep the proof handy, including the original patient cards, change of caregiver forms and return receipts as evidence of an unbroken chain of legal caregiving/care centering.

Finally, there are many patients you cannot locate. I suggest sending the Dept. of Health a letter detailing the patients that have changed from you as a PC to the MMC. Next, list each of the patients you were unable to locate and advise the state that “I am listed as the primary caregiver for the following patients listed below. I have tried to contact these patients, but am unable to do so. Accordingly, let this letter serve as notice that I am unwilling to act as the primary caregiver for the patients listed below effective immediately. If you have any means of contacting these patients, please advise them that I am no longer their primary caregiver.” Again, notarize and send this letter to the Dept. of Health AND Dept. of Revenue, attn. Mr. Matt Cook, certified mail/return receipt requested.

Someday the state will create its own procedure and form for designating a primary center and you get to do this all over again!

Keep all the records handy, organized and a copy at the MMC and any optional grow premises.

Primary Caregiving post HB1284

HB1284 goes into effect on 7/1/10. This restrict all primary caregiving to five patients or less, requires the provision of “other services” as set forth in the Clendenin case, and providing the MMJ for cost only. No two (or more) primary caregivers can work together, share a grow, etc. and no primary caregiving duties can be delegated (grow assistance, delivery, etc.). Finally, you cannot ever sell your “excess” medicine to medical marijuana centers.

Meeting with Matt Cook

I just completed my meeting with Mr. Matt Cook, the current head of the Department of Revenue Medical Marijuana Business Division. I clarified several points that concern MMJ businesses:

1. All MMJ Centers must be locally approved for both the cultivation and retail sale of medical marijuana by 7/1. I understand this presents many logistical problems, but it is true nonetheless;
2. There is no state moratorium on new MMJ businesses (that was just in the bill summary) but local approval and state approval is required BEFORE any operation of that business.
3. Hash is likely to be considered an infused product and its creation is likely to be limited to Infused Product Manufactures. He stated that MMC’s are going to be able to create “raw product” only and that is likely to include clones.
4. The no felony within five years of the completion of sentence and no felony drug convictions ever is going to apply to employees, managers, investors, etc., as well as owners.
5. The two year residency requirement is likely to apply to employees and managers, not just owner/licensees.
6. The corporate structure for a MMC is simplistic: one business handling both the grow and cultivation, which is locally approved for both activities. This means no corporations owning corporations. While this is permitted as a matter of corporate law and may evolve in the future, I suggest you give the state what it expects to see.
6. Growers may not be “employed” by more that one MMC and, under no circumstances, can exist as a seperate business.
7. Owners of MMCs can still be a primary caregiver for 5 patients, but all activities must be separate from the MMC (no selling excess from your patient grow!).
8. In examining your MMC/MIP application, the state will refer back to 7/1/10 to establish your compliance with HB1284.
10. Service business will be allowed, like a grow consultant, but be careful not to blur the lines between consultant and grower.
11. The rules will be created over a six month process and will be binding. That means what Mr. Cook says today may or may not be established by rule in the future. Anticipate the most conservative view of HB1284 and expand beyond that when the rule permits such expansion.

I hope this helps guide you efforts to comply with the new regulations.

Medical Marijuana Center and 70/30 rule

HB1284 requires that a Medical Marijuana Center cultivate its own medicine. The concept is that one business, the MMC, will operate both a retail and cultivation operation. Many people believe that a grower can merely contract with a MMC and continue wholesale sales of MMJ to MMCs. This is not the case.

Only the MMC can apply for the optional grow premises license and only MMCs can sell MMJ, including to each other.

The state requires that MMCs established (a lease, payment of local and state sales tax and/or applied for local approval at both locations must certify that the MMC is growing at least 70% of its own medicine by 9/1/10.

The MMC can sell or purchase 30% of the medicine from another MMC (not a grower). The concept is that lag time between harvest and acquisition of unique strains can be facilitated between MMCs.

The question arises as to how the MMC will account for 70% cultivation of its own medicine. Here it is: the MMC can only possess 2 ounces and cultivate 6 plants for each patient that assigns the center as their “primary center.” Be reminded that the MMC can work with any patient (no more “temporary” caregiving) and a patient can go to any MMC. As such, “primary center” means favorite or main center and is not exclusive. This means that the 100% inventory is based on the number of patients who assigned the MMC as their primary center, multiplied by 2 ounces.

Be wary. The state may not be very good at this at first, but it will not be long before it is very experienced with MMJ cultivation. Do not take chances and keep good records in the event of a dispute. You do not want to lose your investment over a few ounces!

There is no 1 year state moratorium

There is a myth going around that there is a one-year, state moratorium on new MMJ businesses. This is incorrect.

It is true that the HB1284 summary contained such a statement, but the summary is from a prior version of the draft regulation and is a summary intended to give voting legislatures a summary of the bill. However, the bill itself, which is the actual regulation, does not contain any state moratorium language.

Accordingly, any state resident can apply to the state once local approval of their proposed MMJ business is obtained. Remember, the MMJ business must be locally approved for both cultivation and retail sale of MMJ. This usually requires approval of two separate locations. Once local approval is obtained, you may apply to the state for the Medical Marijuana Center/Optional Cultivation license(s) or Infused product manufacturers license. Be reminded that you may not engage in cultivation or sale of MMJ until both state and local approval are received.

New Regulations

As many of you know, the state legislature has given us two new MMJ regulations, HB 1284 and SB 109. HB 1284 regulates MMJ businesses and SB 109 regulates MMJ doctors and eliminates and financial relationships between MMJ businesses and doctors. Both bills are aimed at making MMJ businesses more legitimate. As with any regulation, there are pros and cons to each bill.

Pros for HB1284:

HB 1284 creates legal protection for all participants in the MMJ business. Growers, trimmers, retail employees, owners, managers, etc., all are specifically protected from criminal prosecution by virtue of being employed or ownership of a MMJ business. The MMJ business must cultivate and sell its own medicine and cannot contract out such services. The upside is that MMJ businesses will have greater control over product quality, availability and cost of the medicine. The MMJ business can work with any licensed patient and a licensed patient can patronize any MMJ business without requiring primary caregiver assignment. This provides tremendous choice and flexibility for the patients and the MMJ businesses.

Cons for HB1284:

It will be difficult to comply with all of the logistical and financial requirements of running a MMJ business. The cost of the licenses, application fees and other costs are substantial and are likely to be passed on to the patients. No person with a felony drug conviction can own a MMJ business and out-of-state residents similarly are prohibited from ownership. Finally, the cost of running such a business typically requires both an industrial location to cultivate and a retail location to provide medicine to the patients. The costs of running such a business is likely to prevent smaller businesses from thriving.

Pros for SB 109:

The MMJ program has widely been criticized for catering to recreational drug users and the financial relationships between doctors and dispensaries has created widespread public opinion that the program has tremendous fraud. By cracking down on the financial relationships between doctors and MMJ businesses, the public perception of fraud may be replaced by community trust.

Cons for SB 109:

The requirement of a complete physical examination and an ongoing relationship between the MMJ patient and recommending doctor is likely to be costly. Many MMJ patients have few financial resources and may be unable to participate in the program. This is especially true since no health insurance is available to cover the cost of the medicine. The costs may force patients to acquire medicine from the “black market” and be exposed to possible criminal prosecution.

Conclusion:
HB 1284 and SB 109 usher in a new period of legitimization for the MMJ industry. The legislature formally recognized that patients must be able to acquire medicine from professional businesses. The end result should be greater acceptance of MMJ and the businesses that provide medicine to legitimate patients. However, regulation has a cost that is likely to be passed on to the patients. In response, patients should organize and patronize the businesses aimed at providing high quality medicine at affordable prices.

Boulder Regulations inevitable

Last night the Boulder City Council moved forward with plans to roll out extensive medical marijuana business regulations by the end of March. A second reading of the proposed regulations is scheduled for 3/16. At this point, it appears the the regulations, in their current form, are inevitable.

Accordingly, it is time for all City of Boulder medical marijuana businesses to get moving toward compliance with the regulations.

Among other things, dispensaries and growing operations can’t operate within 500 feet of schools or day-care providers, or in areas that already have three or more dispensaries.

The regulations would create a licensing system for medical marijuana businesses. The city is proposing licensing fees of $6,000 for the first year, with a $2,000 annual renewal fee. The rules also would set security requirements, require owners to submit business plans and plans for being a good neighbor, prohibit on-site consumption of medical marijuana and require businesses to keep detailed patient records. Also being considered is restricting the amount of marijuana a business can have based on the number of patients it serves.

Once the regulations are enacted, Gard & Bond is glad to assist you with ensuring that you are in compliance before any deadline is reached and will be associating with other professionals (architects, security professionals, etc.) to help you. This process is likely to be complicated and we don’t want any businesses to suffer for lack of detailed preparation (like those poor folks in Denver!). Please call us to schedule a meeting to review and prepare the necessary paperwork. Also, stay on top of all medical marijuana laws and changes using our website: www.medicalmarijuanalawcolorado.com, which contains an up-to-the-minute Google newsfeed. Stay legal.

Jeff Gard

Read more: Boulder advances medical marijuana rules – Boulder Daily Camera http://www.dailycamera.com/ci_14501071#ixzz0h8DkeL3h

DEA on the warpath

Last week, the DEA raided a medical marijuana caregiver’s home in Highlands Ranch. This is one of several recent raids on medical marijuana businesses, including Full Spectrum Labs in Denver and another lab in Colorado Springs. It is clear that the DEA is not going to go away quietly. As we tell our clients, you should continue to remember that the federal government does not recognize medical marijuana and considers all medical marijuana activities illegal. It is possible that the DEA will continue to investigate medical marijuana sales and cultivation. Accordingly, it is necessary to stay under 100 plants when cultivating medical marijuana. Any plant over 100 requires a mandatory five-year federal prison sentence if convicted. Forfieture of any property used in the cultivation or sale of medical marijuana is also a real possibility. Until the federal government ceases any further prosecution of medical marijuana you should be as careful and quiet as possible in your medical marijuana endeavors. Stay legal and stay safe!

Doctors and dispensaries – a “no-no”

In anticipation of SB109 or whatever it becomes, it is important for doctors to continue working with patients independent of any relationships the doctor or patients may have with a primary caregiver/primary caregiver business. It is unclear whether a doctor’s association with a referral business will be affected. The transaction between primary caregivers should be seperate from any renumeration to the doctor. Better yet that the patient pays the doctor directly for the examination. If the doctor is shareholder of such a business and primary caregivers/primary caregiver business is a source of revenue, it will be quite problematic.

Also, the doctor is not permitted to see patients at any dispensary. It is unclear whether an office rented or occupied by the referral business would permitted. As we seek to restore our image with the public, it is necessary that legitimate doctors are making independent medical marijuana recommendations for legitimate patients. Even the appearance of impropriety should be avoided. In doing so, we are helping patients and their caregivers stay legal and avoid further media criticism.

Stay legal!

Jeff