Nevada going to pot

As the first medical marijuana establishments come on line in Nevada, there is a great deal about their operation that is still a mystery to the general public. The legislature passed SB374 in 2013, specifying all the rules and conditions for medical marijuana establishments and the Department of Health and Human Services Division of Public and Behavioral Health was charged with implementing them. Medical marijuana has been legal in Nevada since 2001, but until now holders of the patient authorization cards had to grow their own medication.

Four different types of medical marijuana establishments are identified in SB374: cultivation facilities, production facilities, independent testing laboratories and dispensaries. Applications for certification were brisk when they began being accepted in 2014, despite the relatively high cost of applying for a $5,000 per establishment application. One-time certification fees are $3,000 for cultivation and production facilities, $5,000 for laboratories, and $30,000 for dispensaries.

In addition, there are smaller annual renewal fees. Of the 519 applications received, 372 provisional certificates were granted. Of these, 182 were for cultivation facilities, 118 for production facilities, 18 for laboratories and 55 for dispensaries. As of mid-June 2015, only 11 final certificates have been issued. Five of them are cultivation facilities with two each in Clark, Washoe and Nye counties. There are two laboratories and one dispensary each in Clark and Washoe counties.

Steve Gilbert, health program manager with the department’s division of public and behavioral health, has been in charge of the Medical Marijuana Program for about a year. Prior to that he spent three years with the program that issues the medical marijuana patient cards.

Gilbert said that the program’s slow growth has been due to the many moving parts of the system. The establishments not only have to abide by the many regulations imposed by the state, but must also comply with local zoning regulations, building codes and other local ordinances.

Yet there is a time limit. Provisional certificate holders have only 18 months from the date of issue to become operational.

Advertising, marketing, logos and signage must also be approved. The general rule is that the overall design of signage and logos must be “tasteful, respectful, and medically focused.” There can be no references to recreational use, no slang terms for marijuana used and no appeal to minors. All sales and marketing material must use clean, professional fonts and avoid the use of humor. The buildings that house the establishments must have the look of a pharmacy or medical office. Finally, advertising must avoid unfounded claims or promises, and must avoid using the word “cure.”

Given the costs and regulations, it takes a brave entrepreneur to embark on such a project. But the market is there and will only get larger.

There are currently 9,345 active patient cards in Nevada and an additional 633 active caregiver cards. This number is expected to rise significantly by 2020 but the exact number is difficult to predict, according to Pam Graber, education and information officer for the Medical Marijuana Program. All medical marijuana patients must be referred by a licensed physician or osteopath and pay $100 plus printing costs for their cards.

According to Graber, the division of Public and Behavioral Health has taken great pains to ensure the purity and safety of the product that is delivered to the end user. Certified laboratories must rigorously test batches for the percentage of cannabinoids (THC, CBD, CBN) as well as the presence of pesticides, fungicides and other foreign substances. These independent testing laboratories have the authority to refuse to certify any batch that fails the established parameters. Each batch is clearly labeled, so the customers know exactly what they are getting.

Graber also noted that even when a medical marijuana establishment has jumped through all the hoops and complied with all the regulations and conditions, there are still issues, many of which are the result of the Federal Drug Enforcement Administration’s designation of marijuana as a Schedule I controlled substance.

The end result is that entities that rely on the federal government for a variety of things are reluctant to do business with a medical marijuana establishment. Perhaps the most visible of these is the banking industry. Federally-chartered banks stand to lose that status by opening an account for a medical marijuana business. Even state-chartered banks have to deal with federal entities such as the Federal Reserve System and the Federal Deposit Insurance Corporation.

Another at-risk category is the legal profession. Attorneys who practice in federal courts could lose that ability by representing a medical marijuana establishment. They could also risk federal prosecution, even though they are doing nothing illegal under Nevada state law. And in another legal twist, because bankruptcy courts operate under the federal umbrella, recent bankruptcy filings by medical marijuana establishments have been dismissed because they are considered to be in violation of the federal Controlled Substances Act.

Although applications to become a medical marijuana establishment are closed, the legislature passed SB276 this session, clarifying and spelling out how certifications may be transferred and how facilities may be relocated. So while new applications have been closed, there is still an avenue to become certified.