The Buckeye State will have a fully operational medical marijuana program by September 8, 2018. The fiscal and social impact of this Program are projected to be significant to the rust belt state with an opioid epidemic. The licensing process will be under the purview of two state agencies – the Department of Commerce and the Board of Pharmacy. The Department of Commerce will license cultivators, processors and testing labs while the Board of Pharmacy will license patients, caregivers and retail dispensaries. Cultivators will be the first entities to apply for a license, with a June 30, 2017 deadline for submitting applications. With respect to cultivator licenses, Ohio has created two distinct species – large grow and small grow. A “Level I” or “large grow” license permits a cultivator to have up to 20,000 square feet of grow space. There will be twelve Level I licenses issued with a low, low annual permit price tag of $200,000. A “Level II” or “small grow” license permits a cultivator to utilize a grow space of up to 3,000 square feet. Twelve small grow licenses will be available, and require a $2,000 annual permit fee. As cultivator applications are being filed and reviewed this summer, state agencies will be crafting applications for the remaining licensees. The applications for processors, testing labs and dispensaries are projected to be released in Fall 2017.
Ohio’s medical marijuana program will be interesting to observe for several reasons beyond the significance of a red-ish state with a Republican Governor wholeheartedly embracing medical marijuana. Ohio will be the first state to offer safe harbors for financial institutions that work with medical marijuana entities, the first state to implement a state run “closed-loop” payment processing system for patients and the first state that tracks medical marijuana like any other pharmaceutical prescription.
The federal status of marijuana and the financial industry’s misconception that working with legal marijuana entities will jeopardize federal banking protections such as FDIC have created discordant banking policies with respect to medical marijuana entities. Finding a bank to accept their “drug” money is arguably one of the most significant obstacles for medical marijuana entities. Ohio’s medical marijuana bill attempts to mitigate this hurdle by expressly exempting financial institutions that work with these entities from criminal prosecution, at the state level. Why is this novel provision significant? A banking safe harbor will encourage banks and other financial institutions to work with the Ohio medical marijuana industry.
Ohio has even gone a step further to wean medical marijuana entities off of cash, by creating a “closed-loop” payment processing system for patients, caregivers and licensed entities. The system will create individual accounts and operate much like a pre-loaded credit card. Cardholders can add funds to their account by check or credit card at a state-licensed liquor store or other government agency. This state-run payment system will support medical marijuana entities, and is a legislative acknowledgement of the risk inherent in operating a 100% cash based business. The information recorded by the “closed-loop” system will be accessible to state agencies as well as the Treasury Department’s Financial Crimes Enforcement Network, which is responsible for combating money laundering and other financial crimes.
Ohio is one of the states that has been hit hardest by the opioid epidemic. To discourage the over prescription of pharmaceuticals, in 2006 Ohio created OARRS: the Ohio Automated Rx Reporting System. OARRS requires pharmacies to enter every prescription dispensed in an effort to monitor patient abuse and diversion of prescription drugs to the black market. Dispensaries, like pharmacies, will be required to enter every amount of medical marijuana dispensed into OARRS. This is significant because by treating marijuana like every other prescription drug, Ohio is legitimizing the medical efficacy of marijuana.
So far, Ohio’s medical marijuana program is having a smooth and transparent roll-out. And there is no indication that it will stray from the legislative timeline which sets the September 2018 hard-open date for the program. If the program continues to progress at a precipitous pace, Ohio patients will have access to a harvest by next Fall.
