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Arizona Medical Marijuana

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A photo of some California issued medical marijuana bottles and a marijuana pipe. Image by Adam Guzzon. Refer image by Laurie Avocado and used under terms of a Creative Commons license.
After More Than A Year Since It Was Slated To Begin, The Arizona Department Of Health Services Will Likely Award Certificates In August

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By John Guzzon and Jeff Moses
Modern Times Magazine

April 13, 2012 — The Arizona Department of Health Services will begin accepting applications for medical marijuana dispensaries May 14, restarting the industry that had been delayed for more than a year.

“The tumblers have clicked, and the race to apply for a dispensary is on.  Our revised rules for regulating Medical Marijuana were filed and became official today (April 11) — and we’ll be accepting applications for Medical Marijuana Dispensary Registration Certificates from May 14 through May 25,” said Arizona Department of Health Services Director Will Humble on his blog.

Voters passed Prop. 203 in November 2010 which set out the guidelines and compelled the state to enact the program. Patients and caregivers began applying for cards that allowed them to provide and use marijuana and cannabis products in April 2011, but the dispensary application process was halted by Gov. Jan Brewer in May. At the same time, Brewer directed Attorney General Tom Horne to file suit against the federal government in order to compel them to answer whether they would bring charges against state employees for overseeing a marijuana program that is in defiance of federal law.

In early January, U.S. District Judge Susan R. Bolton threw out the federal lawsuit Gov. Jan Brewer and Attorney General Tom Horne had filed that blocked the program. In her decision, Bolton rejected outright the state’s argument that the program should not be enacted because it would open state employees up to possible federal charges. Bolton cited the fact that 16 other states had implemented similar programs and not one state employee has yet been targeted.

In response to Bolton’s ruling, Gov. Jan Brewer instructed Humble to restart the dispensary application process. Yesterday’s announcement that applications will be accepted from May 14 to 25 is the culmination of that order.

Humble said in his blog yesterday that he believes the state will award its first dispensary applications in early August.

“We’ll have 30 working days to review the applications, and applicants will have 20 working days to submit any documents or information that were missing during our review of the application.  We expect to award Medical Marijuana Dispensary Registration Certificates on Aug. 7.  If there’s only one qualified applicant in a CHAA, that applicant will be awarded a Registration Certificate.  We’ll be holding a random drawing in early August to award Registration Certificates in CHAAs with more than one qualified applicant,” Humble wrote.

The rules the Arizona Department of Health Services, or ADHS, issued yesterday are different than those that would have dictated the dispensary application process last year, however, thanks to a judge’s ruling in Compassion First v. State of Arizona. In that case, Maricopa County Judge J. Richard Gama ruled the ADHS overstepped the authority the Act granted it to create rules by requiring applicants to have been an Arizona residents for three years, that applicants have never filed personal or corporate bankruptcy, that applicant have submitted Arizona personal income tax returns for previous three years, and that applicants are current on court-ordered child support; is not delinquent in paying taxes, interest or penalties to the government; does not have an unpaid judgment to the government; and is not in default on a government-issued student loan.

Gama did rule that some of the rules challenged by Compassion were eligible under the Act’s diversion and theft provision. Gama specifically cited three rules: that individuals with 20 percent or more interest in a dispensary be the applicant or principal officer or board member of  dispensary; mandating documentation of ownership of address of dispensary or permission from owner for applicant to operate dispensary at the address; and requiring the application to comply with state law.

Those requirements are part of the rules released yesterday. Other significant items in the rules are that a random drawing will be held when multiple applications are received for a CHAA, combined with meeting criteria. What that means is if more than one application is received for a CHAA, the ADHS will first check if the applicants have listed all members of the board of ownership and will then move on to whether they have proof of access to $150,000. If more than one application meets those two requirements, then those who do not will not be eligible for the random drawing.

The $150,000 requirement was considered onerous by some hopeful ‘mom and pop’ applicants when the state when through the public comment process for the rules in 2011. Other, more established organizations, however, sought to make the application requirements a filter that would screen for those who could bring the best and most responsible dispensaries.

“I am glad that the Arizona Department of Health Services is finally executing the program as it was designed, as a trifecta of qualified patients, caregivers, and dispensaries. However, the Medical Marijuana Fund has a large surplus of capital at this time and we feel that these resources could be used to evaluate the quality of applicants rather than using a random license assignment process in CHAAs that have more than one applicant.  Although dispensaries are subject to market conditions just like any other business or organization, the Department has the authority to regulate this industry using best practices from other states and should choose to do so as it will be subject to scrutiny until it is rescheduled by the Federal government,” said Moe Asnani, partner, Arizona Dispensary Solutions.

Humble told the Arizona Republic that it was his impression that the “land-rush” mentality that was widely reported last year had appeared to wane with the delay.

I just don't sense the same land-rush type of attitude that we had a year ago," Humble said to the Arizona Republic. "I don't think we'll be overwhelmed with applications."

Doug Banfelder of Premier Southwest Insurance Group, one of the few providers of insurance for dispensary applicants, said that while they may not be such a “land-rush” mentality, what remains is a core group that are hoping to open multiple dispensaries.

“The people that are involved now are people that have been with us from the beginning. They have deeper pockets and have higher functioning teams that didn't fall apart due to the stress of waiting.”

Banfelder said that unless the groups intending to open a dispensary have had a location approved by a municipality and have acquired a conditional-use permit, their prospects of opening a dispensary are probably slim. A potential applicant in that situation would only have 20 working days past May 14 — or slightly less than 60 days to find a location and have it approved by a landlord and a municipality.

“What we are looking at is a situation where those teams that have deep pockets and real estate connections will have additional opportunities. So, some of them are looking at other opportunities,” he said.

Banfelder said now that dispensaries will be awarded, however, the next evolution in the state’s medical marijuana industry will be between law enforcement and dispensary owners. He said with dispensaries slated to open before Christmas, questions over whether prosecutors will allow cannabis lozenges and tinctures and other potential legal loopholes need to be resolved before law-abiding dispensary owners find themselves in court.

“It would be nice if the county attorney and the attorney general would offer some guidance to the industry because nearly everybody on the industry wants to be compliant and so those with prosecutorial powers also have the power to educate those in the industry who seek compliance,” Banfelder said. “They can either offer guidance so those who want to operate legally, can.  Or they can lie in wait and play a game of gotcha.”

John Guzzon is editor of Modern Times Magazine and Jeff Moses is a freelance writer and photographer from Teaneck, N.J.
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