As a gubernatorial candidate, Phil Murphy ran on a platform of legalizing marijuana in New Jersey. In just seven months since taking office, now-Governor Murphy has taken a number of actions that resulted in the ballooning of the Garden State’s medicinal marijuana program, which now has more than 26,000 registered patients and more than 1,000 registered caregivers. Unfortunately, this otherwise exciting growth has put a strain on the medicinal marijuana supply yielded by the states six alternative treatment centers (ATCs), one of which opened just this year. While legislation regarding expansion of the state’s medicinal and adult use (i.e., recreational) programs continues to be debated and the comment period for proposed rules remains open, New Jersey is taking an interim step to address patient access issues in the near term. On July 16, 2018, the Murphy Administration announced that the Garden State is opening up licenses for up to six additional vertically integrated medicinal marijuana dispensaries. The New Jersey Department of Health (NJDOH) released a Notice of Request for Applications (Notice) outlining the reason for issuing the licenses, eligibility rules and information required for the applications. The timeline set by NJDOH is short, with the application period opening on August 1, 2018, and closing on August 31, 2018. Per the Notice, winning applicants would be selected on November 1, 2018.

THE NOTICE

Although New Jersey enacted The New Jersey Compassionate Use Medical Marijuana Act (CUMMA) in 2010, due to significant restrictions placed on the program by then Governor Chris Christie, the number of patients participating in the state’s medicinal marijuana program remained low. According to the 2017 Medicinal Marijuana Program Annual Report, issued by NJDOH, in a state with the population estimated to be close to 9 million, there were only approximately 17,000 qualifying patients registered. Furthermore, the state limited the number of licenses to operate an ATC to only six.

Upon taking office, Governor Murphy made clear his intent to expand the program, issuing Executive Order No. 6, in which he ordered a 60-day review of all aspects of New Jersey’s current program, “with a focus on ways to expand access to marijuana for medical purposes.” In response to Executive Order No. 6, NJDOH released its EO 6 Report on March 23, 2018, which proposed significant changes to the existing medicinal program. In an effort to create greater patient access, the state immediately put into effect some of the recommended changes, including cutting registration and renewal fees, and expanding qualifying conditions.

Since adding five additional medical conditions, New Jersey’s program has added 7,000 new patients, bringing the total patient count to more than 26,000. Due to the significant expansion of the program just this year, and in light of projected future expansion, NJDOH “determined … that additional [ATCs] are necessary to meet the needs of the population of qualified patients” in the program. It is on this basis that NJDOH issued the Notice for up to six additional vertically integrated ATCs, seeking to add two in each region – northern, central and southern.

NJDOH goes on to state in the Notice that it anticipates the release of two additional Request for Applications (RFA) in fall 2018 and winter 2019, after the proposed rule amendments are adopted. Importantly, the Notice states that the first RFA “will be for additional cultivators and manufacturers, and the second for additional dispensary locations.” Thus, the six additional licenses in the Notice may be the only vertically integrated licenses available in perpetuity.

TIMING

The application submission and review schedule in the Notice is short and includes attendance at a mandatory pre-application conference on August 9, 2018. The RFAs will be released on August 1, 2018 and the application period will close on August 31, 2018. During the application period, NJDOH is holding a mandatory pre-application conference, which any entity interested in submitting an application is required to attend. The anticipated date for announcing successful applicants is November 1, 2018. Failure to adhere to the time periods results in automatic disqualification. The cost to submit an application is $20,000. If an application is unsuccessful, $18,000 of the original $20,000 would be refundable.

ELIGIBILITY

Unlike the process for the first six licenses issued by the state which only permitted not-for-profit entities, in this application round, NJDOH will seek applications from both for-profit and not-for-profit entities. Entities may submit an application for one or more region(s), however entities must submit a separate application for each and must rank the applications in order of priority. Entities not eligible to submit applications are: any entity currently holding a permit issued by NJDOH, including affiliates and individuals; entities with a 25 percent stake (in the form of debt, equity or other financial relationship) in any currently licensed ATC; or entities responsible for management of currently permitted ATCs.

REVIEW CRITERIA AND SCORING

The Notice outlines two parts to the RFA, submission of mandatory information and scoring criteria. In addition to requiring submission of certain corporate information, including, among other things, the articles of incorporation and relevant New Jersey corporate records, each applicant must submit specific information for each subcontractor or affiliate of the entity named in the application. The Notice identifies 12 separate categories. A few to note are:

• evidence of site control for all proposed locations in the form of proof of ownership or a lease;
• written verification of the approval of the community or governing body of the municipality in which the ATC is or will be located; and
• evidence of compliance with local codes and ordinances including, but not limited to, the distance to the closest school, church, temple or other places used exclusively for religious worship, or a playground, park, or child day care facility from the ATC.

The Notice states that if the applicant does not have site control or local approval at the time of the application, the applicant has 30 days from the date of acceptance to submit both site control and local approval, which would be November 30, 2018, if the acceptances are announced on November 1, 2018, as listed.

With respect to scored criteria, the total scale is 1,000 points. The broad categories, labeled Criterion in the Notice, for scoring are: (1) ability to meet overall health and safety needs of qualified patients, and safety of the public; (2) community support and participation; and (3) ability to provide appropriate research data. Under each Criterion are Measures which describe in more detail the information that must be provided by the applicant.

Criterion 1 - health and safety - has the largest number of available points at 800. Measure 4 under Criterion 1, offers 300 available points and requires the applicant to include a detailed description related specifically to “cultivation, manufacturing, and dispensing operations, and ensuring an adequate supply of medicinal marijuana to qualified patients.” The other Measures under Criterion 1 require the applicant to describe past business experience, business operations and compliance, security, financial suitability and sustainability, value and affordability to patients and market diversification. The other two Criterion make up the remainder of the available 1000 points. Criterion 2 includes three Measures – a description of community support and local participation, corporate social responsibility, and diversity. Criterion 3 requires the applicant to include a description of its commitment to research.

DISCLAIMER: Per federal law, marijuana is a Schedule I controlled substance. This means that it is a federal crime to sell, distribute, possess, and/or use marijuana or marijuana-derived products, regardless of any state law that may authorize certain marijuana activity. Although federal policy may, at times, recommend enforcement discretion when a business or individual is in compliance with state marijuana law that is deemed to comply with federal enforcement priorities, it is important to understand that compliance with state law does not equal compliance with federal law, and that federal marijuana policy may change at any time. No legal advice we give regarding marijuana law or policy is ever intended to guide or assist clients in violating federal law.