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Medical marijuana law: What businesses need to know

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Earlier this month, the state House of Representatives passed a bill that will set the groundwork for using medical marijuana in Pennsylvania.

The law could impact a variety of industries ­— some you might not even think of.

Nursery or greenhouse supply stores would have the opportunity to serve a whole new market of growers.

Construction companies could specialize in retrofitting old warehouses and other facilities into cannabis grow houses.

Dispensaries will open throughout the 67-county state.

And that’s just the beginning, said Justin S. Moriconi, a Philadelphia-based attorney specializing in regulated cannabis.

The bill, Senate Bill 3, will make Pennsylvania the 24th state to allow the medical use marijuana.

“It’s the most robust law right now on the east coast,” Moriconi said. “It’s better than any other state as far as the qualifying conditions, number of licensing and number of dispensaries.”

If the legislation makes it to Gov. Tom Wolf’s desk and becomes law, Moriconi predicts the industry won’t be fully operational until the end of 2018.

Whether you’re an employer who needs to know how medical marijuana could impact your company’s drug policy, an entrepreneur interested in getting involved in the cannabis industry, or just someone who is curious about the legalities of a once illegal trade, state experts dive in.

PENNSYLVANIA TO JOIN SURROUNDING STATES

For the first time in Pennsylvania, a bill legalizing the medical use of marijuana has passed through both the Senate and the House of Representatives. If a bill is signed into law, it will be the 24th state allowing the use of medical marijuana.

On the east coast, 12 states have legalized medical marijuana, and four of the six states that surround Pennsylvania have policies, according to the Marijuana Policy Project website, which is based in Washington D.C.

Those states are Delaware, Maryland, New Jersey and New York.

In New York, eight dispensaries had opened as of January 2016. Conditions that can be treated with medical marijuana there are cancer, HIV/AIDS, amyotrophic lateral sclerosis, Parkinson’s disease, multiple sclerosis, spinal cord damage causing spasticity, epilepsy, inflammatory bowel disease, neuropathies and Huntington’s disease.

Maryland passed a medical marijuana law in 2014. It allows up to 15 licensed cultivators to grow medical marijuana.

The first state to pass a law requiring schools and some other facilities to create policies that allow medical marijuana to be administered is New Jersey. It has had a medical marijuana law since 2010, and today five treatment centers are open.

In Delaware, after almost four years of legal medical marijuana, the first center opened in June 2015. The Department of Health is expected to register two more centers this summer.

Legal challenges

Perhaps the most complicated aspect of medical marijuana law is that marijuana is still classified as a Schedule 1 drug under the federal Controlled Substances Act.

The federal government class-ifies drugs according to schedules, and Schedule 1 controlled substances are defined as “drugs with no currently accepted medical use and a high potential for abuse. Schedule 1 drugs are the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.”

As a result, cannabis-related activities that may be legal under state law may still violate federal law.

“While the state may legalize the cultivation, sale and distribution of cannabis for either medical or recreational use, businesses have to be mindful that cannabis is still unlawful under the Controlled Substances Act, and it’s a possibility for a claim that federal law has been violated,” said Seth Goldberg, a litigator at Philadelphia-based Duane Morris LLP.

That said, the federal government appears to be adhering to recent statements suggesting that it may defer to state enforcement of cannabis-related activities conducted pursuant to state legislation, Goldberg said.

On the other hand, Goldberg said, businesses in the medical cannabis space may not be protected under federal law when it comes to issues like bankruptcy and U.S. tax laws.

“The conflict between state and federal law in this area raises thorny legal issues that, prudence dictates, require the assistance of counsel,” he said.

The fact that marijuana is still a Schedule 1 drug will make it complicated for lawyers like Goldberg to counsel clients in Pennsylvania about the cannabis industry.

Tricky for banks

Only about 30 percent of cannabis-related businesses have access to bank accounts, according to Moriconi.

Because banks are federally insured and marijuana is federally outlawed, banks run the risk of losing insurance.

Banks that take on cannabis-related clients are required by the Financial Crimes Enforcement Network to provide reporting such as suspicious activity reports. The detail required in the reporting would mean an estimated one bank representative would be needed to handle one or two cannabis-related accounts instead of the usual 100 business accounts.

The burden makes it financially unfeasible for a bank to serve the cannabis businesses, Moriconi said.

Then there is the smell. Money collected by pot-related businesses literally smells like marijuana, because the scent sticks to everything, according to Moriconi.

Interested in the industry?

Aside from the legalities, when it comes to getting into the cannabis industry, it’s no easy task.

There is a limited number of licenses available, and the application process is costly.

As the bill is currently written, there would be 25 licenses for growers and processors, and 50 licenses for dispensaries. Each dispensary license can cover up to three dispensaries.

However, the way the licenses might be distributed is complex.

For example, some of the licenses will go to academic research centers, which will be able to grow, process and dispense medical marijuana.

Academic research centers could secure up to eight of the grower/processor licenses and eight of the dispensary licenses. Those centers could open up to six dispensaries.

“This dilutes the total number of available licenses to entities without such a (research) contract, but also guarantees that Pennsylvania will be on the forefront of medical cannabis research,” Moriconi said.

The application cost, meanwhile, is estimated to fall between $600,000 and $1 million for both growers and dispensers, according to Russ Cersosimo, director of strategic alliances for the Pennsylvania Medical Cannabis Society.

The nonprofit is currently talking to interested businesses and helping connect them with resources, whether that be access to lobbyists, educational resources, networking events, investment capital, strategic partners or vendor discounts, among other things.

The Pennsylvania Department of Health will establish the maximum allowed price per unit of medical cannabils, or the price ceiling, according to Cersosimo.

Drug policies

Although some House Representatives tried amending the bill so that it would be practically impossible for people to use cannabis inside or outside of the workplace, none were successful.

In the bill’s current form, it would protect employees from retaliation from an employer for using medical marijuana, Moriconi said. Under federal law, however, usage is illegal for federal employees.

The bill still allows for disciplinary action for on-the-job impairment or employment that falls below the employer’s standards. An employer is not required to accommodate an employee or do anything that would violate federal law.

Situations would be handled the same way they would be if an employee were prescribed any other medication, according to Karen A. Young, founder and president of HR Resolutions in Lower Paxton Township, Dauphin County.

Young recommends looking at company policies regarding prescribed medications and considering the impact those drugs can have on safety-sensitive positions, such as operating machinery or driving a vehicle.

“It’s like any other medication,” Young said. “If you have a drug policy that says you may not work while under narcotics, the same rules are going to apply.”

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