Home grown? Medical cannabis companies mostly out-of-state
CHARLESTON — Once again, out-of-state business entities and owners took the majority of dispensary and processor permits for West Virginia’s long-awaited medical cannabis program.
Last week, the Department of Health and Human Resources’ Office of Medical Cannabis announced that 100 dispensaries between 32 companies with locations in 23 counties had been selected. The Office of Medical Cannabis announced the selection of 10 growers in October 2020 and 10 processors in November 2020.
According to a review of the selected dispensaries and processors selected by the Office of Medical Cannabis and a search of business records through the West Virginia Secretary of State’s Office, 22 of the 32 companies selected as dispensaries involved out-of-state entities, controlling 79 of the 100 dispensary locations.
Looking at last year’s selection of medical cannabis processors, seven of the 10 processors came from out-of-state. As previously reported, eight of the selected 10 growers had out-of-state connections.
All of the selected dispensaries, processors, and growers were required to base their operations in West Virginia due to the legal issues surrounding marijuana – a schedule I drug under the federal Controlled Substances Act. According to the 2017 Medical Cannabis Act, applicants were either required to be West Virginia residents or majority ownership of the business entity must be held by state residents.
However, the 24 companies participating in the state medical cannabis program either had out-of-state mailing addresses or listed corporate officers — such as presidents — located outside of the state.
Holistic WV Farms I LLC received a grower and processor license, as well as 10 dispensary licenses. The principal office address for Holistic WV Farms is Washington, D.C. A manager listed for Holistic WV Farms is Josh Genderson, the CEO of Holistic Industries, with medical cannabis operations in California, Maryland, D.C., Pennsylvania, Massachusetts, and Michigan.
Harvest Care Medical LLC was also able to receive grower/processor permits and 10 dispensary permits – the maximum allowed under state law. According to their business filings, Dustin Freas of Cumberland, Md., is listed as a manager for the company. Freas was also a donor to Gov. Jim Justice’s primary and general election campaign, donating $5,800. Harvest Care Medical was also represented by lobbyist Larry Puccio, a long-time Democratic Party political operative and friend to Justice. Puccio has also lobbied for Justice’s businesses.
Other companies include officers or mailing addresses in Texas, Ohio, Massachusetts, Pennsylvania, Illinois, Virginia, Florida, and Colorado. In the case of dispensaries, of the 100 permits available, only 21 permits went to companies based solely in West Virginia.
The medical cannabis program was capped by the West Virginia Legislature at 10 growers permits, 10 processor permits and up to 100 dispensaries. While a person or a business can hold permits for all three permitting processes, no person or business can have more than 10 dispensary permits.
According to the Office of Medical Cannabis’ Review Process for Medical Cannabis Organization Applicants, dispensary applicants were required to have at least $150,000 of capital on deposit to be considered.
Growers and processors were required to have at least $2 million in capital with at least $500,000 of the required capital on deposit. Applicants were required to submit to background checks and bank verification.
State code requires the Office of Medical Cannabis to establish procedures for “fair and objective evaluation” of grower, processor, and dispensary permits. Applications were scored by a review team and recommendations were submitted to an awards team. The membership of teams came from DHHR and members selected outside the agency. Team members are required to maintain impartiality and sign a conflict-of-interest certification for each application they review.
Categories the team considered for scoring included organizational experience, security, employee qualifications, transportation plans and storage, for medical cannabis, inventory management, plans to discourage diversion of the product, and timetables. A DHHR spokesperson said whether an applicant was solely a West Virginia entity was not part of the scoring process.
“The Office of Medical Cannabis can only base decisions on the selection criteria specified in law,” said Andrea Lannom, public information officer for DHHR. “The companies selected more fully and specifically addressed those criteria and therefore received higher scores and the resulting permits.”
Speaking Wednesday during the West Virginia Press Association’s annual Legislative Lookahead, House Minority Leader Pro Tempore Sean Hornbuckle, D-Cabell, said lawmakers need to take an aggressive look at the state’s medical cannabis program to ensure that locally owned and controlled applicants are not pushed out by larger players in the industry.
“With the current medical cannabis program, some of the things I’m hearing in my district is we didn’t give the little guy a true chance to thrive and succeed,” Hornbuckle said.
According to the National Conference of State Legislatures, 36 states and Washington, D.C., legalize the medical use of cannabis products despite the federal criminalization of marijuana. Hornbuckle said West Virginia should join the 15 states and three territories that legalize and tax recreational cannabis, especially if Republican lawmakers are considering phasing out the personal income tax.
“If we were to look at the legalization and regulation of cannabis for adult use, it would do our state a lot of good and might even potentially be a tool in our toolkit for replacing some of that income,” Hornbuckle said. “We could potentially bring in about $660 million and that would do a lot for our coffers.”
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