The Pennsylvania Department of Health will accept permit applications for medical marijuana grower/processors and dispensaries from February 20, 2017 until March 20, 2017, pursuant to its authority under the Medical Marijuana Act. The Department of Health will initially approve 12 grower/processor permits and up to 27 dispensary permits. This Alert provides an overview of the Medical Marijuana Program (the Program). Full details are available on the Program’s website.

Overview

The Program divides Pennsylvania into six medical marijuana regions: Region 1 – Southeast, Region 2 – Northeast, Region 3 – Southcentral, Region 4 – Northcentral, Region 5 – Southwest and Region 6 – Northwest. The Department of Health will approve two grower/processor permits per region, and between two and 10 dispensary permits per region. For example, there are 10 dispensary permits and two grower/processor permits being offered for the Southeast Region, which contains Philadelphia and surrounding counties. Similarly, five dispensary permits and two grower/processor permits will be issued for the Southwest Region, which includes Allegheny County. Only certain counties in each region are deemed eligible locations for a dispensary. For example, in Region 6, only Erie and McKean counties are permissible locations. No more than five grower/processor permit holders may also be issued a dispensary permit; dispensaries may have up to three locations.

Applicants for a dispensary permit must pay an upfront, nonrefundable application fee of $5,000, and a refundable $30,000 permit fee per dispensary location. Applicants also must have at least $150,000 in capital already in a financial institution.

Applicants for a grower/processor permit must pay a $10,000 nonrefundable application fee and a refundable $200,000 permit fee. Applicants must have at least $2 million in pledged capital, $500,000 of which must already be in a financial institution.

After applications are accepted starting on February 20, 2017, all applications postmarked by March 20, and accompanied by a stamped U.S. Postal Form 3817 Certificate of Mailing, will be deemed as submitted in a timely manner.

Applications

The applications are quite extensive and require a tremendous amount of information, including, but not limited to, details of the planned operation, identity and background of the applicants and the company’s capital structure. Given the breadth of information required, applicants should already be assembling this information. The following chart identifies each of the sections of the applications:

It is also worth noting that questions relating to principals and financial backers need only be answered for those with a “controlling interest,” which is defined as follows:

• For a publicly traded company, voting rights that entitle a person to elect or appoint one or more of the members of the board of directors or other governing board or the ownership or beneficial holding of 5 percent or more of the securities of the publicly traded company.

• For a privately held entity, the ownership of any security in the entity.

All principals, financial backers, operators and employees must also submit their fingerprints to the Pennsylvania State Police for processing.

As part of the application process, the applicant further consents to any other investigation deemed necessary by the Department of Health.

Scoring

The Department of Health will review and score each application using a scoring rubric, which can be found in the instructions on the Program website. Certain metrics are pass/fail by their absence or presence, such as Parts A and C. Other sections, such as Parts B and D, are subjective and will be scored on a 1,000-point scale.

In addition to the scoring rubric, the Department of Health will consider other factors in determining whether to grant a permit. These factors may include the applicant’s good moral character, the public interest in granting the permit, and the applicant’s ability to retain effective control, and prevent diversion, of medical marijuana. The characteristics of the applied-for region will also be considered in the approval process, including the regional population, types of serious medical conditions in the area and areas with recognized needs for economic development.

Additional information about the Medical Marijuana Program, including the approved forms of medical marijuana, the covered “serious medical conditions” and additional temporary guidelines can be found on the Program website.