New York’s Medical Marijuana Program: High Hurdles for Sellers and Doctors
by Marc Gromis
As the number of patients qualifying to purchase medical cannabis under New York’s program slowly rises, many are complaining about the high price of the medicine in New York. Medical marijuana, which is not covered by health insurance, is much more affordable in other states.
Some patients have said that the five companies (“registered organizations”) that have received licenses to manufacture and sell medical cannabis in New York are charging high prices due to greed. However, what many patients do not know is that the high prices New Yorkers must pay is not due to decisions made by the licensees. Rather, it is because the licensees’ costs, which serve as the basis for the prices they are allowed to charge, are extremely high. And, many of these costs are due to unnecessarily strict and misguided provisions of the New York program.
ABOUT THE MEDICAL MARIJUANA PROGRAM
Governor Cuomo signed the Compassionate Care Act into law on July 5, 2014.
It has been reported that before he agreed to sign any medical cannabis legislation, the Governor insisted on many changes to the law. These revisions have made New York’s program one of the strictest and most complicated in the nation. The program is extremely financially challenging to the licensees, and the least helpful to patients who desperately need access to medical cannabis.
THE APPLICATION PROCESS
Under the law, the Commissioner of the Department of Health was permitted to register only five applicants to manufacture and dispense approved medical marijuana for the entire state. The application process was extremely complicated and expensive. Several applicants have indicated that it cost them $1,000,000 just to prepare an application.
In addition to a $10,000 application fee, applicants were required to submit detailed manufacturing plans from the planting of seeds to the harvesting of plants, extraction of oils procedures, and details for testing, storage, and transport of the medicine. Security plans also had to be submitted showing that there would be cameras providing constant surveillance of every section of the greenhouses, laboratories, safes, and entrances to the manufacturing location, and at each of the four dispensaries that licensees would be allowed to operate.
Also required were blueprints for the large greenhouses required by the nature of the New York law, and copies of deeds or leases for the properties where the medicine would be prepared and where the dispensaries would operate. Quality assurance, packaging and labeling procedures, and staffing plans also had to be submitted.
The cost and complexities of the application process resulted in only 43 deep-pocketed entities submitting applications. Applicants needed to retain attorneys and costly experts from other states on issues of cultivation, harvesting, extraction processes, and security. Most applicants hired companies with experience in preparing applications for medical marijuana licenses. The applications consisted of thousands of pages.
OBSTACLES FOR THE FIVE APPROVED LICENSEES
New York’s program required licensees to manufacture medical marijuana products in forms approved by the Commissioner. Allowable forms include liquid or oil preparations for oral or under the tongue administration, metered liquid or oil preparations for vaporization, and capsules for oral administration.
The Compassionate Care Act expressly provided that a certified medical use of marijuana did not include smoking.
By forbidding the sale of and smoking of dried flowers or “buds” of cannabis, and edible forms of the medicine (as is permitted in almost every other state program), New York created immense costs for the licensees. Some of these costs have to be passed on to patients if the program is to going to remain financially viable for the five licensees.
Requiring the licensees to use extracted oils from cannabis plants means that licensees have to grow 15 to 20 times more plants to produce the medicine than if they were permitted to sell buds that patients could smoke. New York forces licensees to construct and operate huge greenhouses. In addition, every inch of each greenhouse and its labs, entrances and safes/vaults have to be monitored 24/7 by cameras. The requirements are more appropriate for monitoring the production of plutonium than for a plant that has been around for thousands of years. While most states require that each plant be tagged, numbered and tracked, New York’s unnecessary and expensive camera surveillance system creates costs that are passed on to patients.
The limitation of producing only extracted oils for tinctures and capsules requires licensees to construct and staff expensive laboratories to produce, label and package these forms of the medicine.
Regulations covering the transport of the medicine to the dispensaries in unmarked vans containing safes, using differing travel routes and days of deliveries creates additional and, for the most part, unnecessary expenses.
The regulations also required the licensees to hire pharmacists at each dispensary, and for each dispensary to have extensive alarms, safes, and surveillance cameras.
As a result of the cumbersome regulations and the limitations on the forms of the medicine, members of the medical cannabis industry have stated that it would cost licensees at least $10,000,000 to acquire sites and build and equip the greenhouses, laboratories, dispensaries, and transport vehicles, and to purchase and install the extensive network of cameras, safes/vaults and alarms.
THE PRICE OF MEDICAL CANNABIS IN NEW YORK
The price charged for medical cannabis must be approved by the state after reviewing a licensee’s costs, the proposed price, and allowing for a reasonable profit.
In view of the enormous costs of production under the program, it is not surprising, nor the fault of the licensees, that medical cannabis costs significantly more in New York than in other states.
Some patients have indicated that the monthly cost for their medicine may reach $1,000 or more. This is not within the budget of most patients, many of whom face significant other expenses stemming from their serious ailments.
RISKS FACING THE LICENSEES
The licensees are in a difficult position. They need to provide medicine at a cost that does not exceed the budget of patients or drive them to the black market. Yet the expenses of New York’s program and the risks associated with being in the medical cannabis industry make it impossible for them to charge the lower prices that exist in states with more reasonable programs.
Many patients upset with the price for medical cannabis in New York may not be aware that licensees face additional costs and risks because banks will not provide services to their industry, and because the IRS does not allow medical cannabis producers to take deductions for expenses that are allowed to other businesses.
In addition, recreational cannabis and medical cannabis remain unlawful under federal law. Should the U.S. Supreme Court or the next president or attorney general share the views of Chris Christie or Marco Rubio regarding strict enforcement of federal cannabis laws, the entire industry could be closed down.
OBSTACLES TO PHYSICIAN INVOLVEMENT IN NEW YORK’S PROGRAM
Physicians have offered a variety of reasons for not becoming involved in New York’s program. Some, such as not being able to afford the $249 cost for the online training course, are hard to accept as legitimate.
However, many doctors are hesitant to become involved due to provisions in the program that have doctors making recommendations on patient certification forms as to brands of the medicine, modes of taking it, and allowable dosages.
Although existing federal law allows doctors to generally recommend medicinal cannabis to a patient, prescribing cannabis remains prohibited by federal law. The nature of the recommendations that must be made by doctors under New York’s program make some doctors fear that their participation may cause them to lose their DEA licenses. The provisions of New York’s program, and its requirement that medicine be received from pharmacists, make the actions of doctors very similar to writing a prescription.
SEEDS OF CHANGE?
In April, eight pieces of legislation were introduced in both the New York Assembly and Senate to address some of the problems under New York’s program.
BILL A9562/ S6999 would add eight qualifying medical conditions: Alzheimer’s disease, traumatic brain injury, dystonia, muscular dystrophy, wasting syndrome, post-traumatic stress disorder, rheumatoid arthritis and lupus.
BILL A9514 would allow the use of cannabis for severe or chronic pain. This is the most common use of medical cannabis by patients around the country, and could add enough patients to make New York’s program financially viable.
BILL A9517 would allow the sale of cannabis that can be smoked by patients. It is widely accepted that smoking medical marijuana is the cheapest and most effective way of consumption for many conditions. If enacted, this bill could result in a less expensive form of medicine being available to many patients.
Bill A9507 would eliminate the requirement that licensed producers be vertically integrated, by allowing producers to contract out parts of the manufacturing and distribution process. This could lower expenses for the licensees and might result in lower prices for patients.
BILL A9510/S6998 authorizes nurse practitioners and physician assistants to recommend medical marijuana. However, this law might have limited effect if these health care providers, like doctors, are called upon to recommend dosage, brand, and method of administration to a dispensary pharmacist. The DEA can argue that these practitioners, like doctors, are prescribing medical marijuana in violation of federal law.
BILL A9553/ S7000 would establish an advisory committee to assist the Commissioner of Health in the implementation of the program.
BILL A9747 would authorize 5 additional medical marijuana producers and would allow each of the resulting 10 licensees to operate 8 dispensaries. This could add 60 dispensaries throughout the state. However, this legislation will be of little value if additional medical conditions are not approved. The existing licensees do not have enough patients and reportedly are facing financial challenges. It is doubtful that these licensees will be in a rush to build additional, expensive dispensaries for the limited number of patients who presently are covered. Furthermore, unless the other changes sought by these new laws are enacted, it is doubtful that there will be many new applicants willing to invest millions of dollars to participate in the present program.