Little oversight, funds on pot panel
Untrained volunteers set up multimillion-dollar industry
When lawmakers first envisioned a medical marijuana commission, they created a panel of volunteers to look after what was supposed to be limited program of academic centers dispensing the drug.
Three years later, those same untrained volunteers have become closely watched regulators who have presided over the rocky launch of Maryland’s multimilliondollar medical marijuana industry. Not even half of the preliminary licenses have been awarded, and the process is already mired in a lawsuit and ethics probe. The lack of diversity among licensees has drawn the ire of black lawmakers, including one who pushed to create the program.
“This should have been done completely different,” said Del. Cheryl Glenn, a Baltimore Democrat. “There was never any thought given to the idea that this commission would end up with the huge responsibility of issuing these licenses.”
Glenn and the Legislative Black Caucus she leads are threatening legislation that would strip authority from the commission and upend a licensing process that has been underway for a year.
Many problems cited by critics of the commission stem from how the General Assembly set it up — greatly enhancing the
volunteers’ responsibility while giving them few resources and no oversight.
“We were like, ‘holy [expletive], we have to write regulations,’ ” said former commissioner Deborah R. Miran, whom Gov. Larry Hogan replaced on the panel last week. “We had no help. We had one-tenth of an assistant attorney general’s time. … The six of us sat around a table with a blank piece of paper, and we started writing regulations. It was literally from scratch.”
In the past decade, Maryland has created two brand new, highly regulated and lucrative industries — casino gambling and medical marijuana. With one, they poured resources into getting it right and gave clear direction to paid regulators on how to do it. With the other, volunteers patched together a system almost entirely on their own.
When lawmakers legalized casinos in 2007, they added four paid members to the existing five-member Maryland Lottery Commission. They gave the panel $2.3 million a year to get the industry started and hire experts, and spelled out in law how much casino licenses would cost, where they would go and how to award them.
Rough framework
When lawmakers created the medical marijuana program, they gave an existing volunteer panel a rough framework of rules, $125,000 a year and one full-time staff member to figure out how to launch and regulate a brand new industry that violates federal law.
Architects of the medical marijuana law said they were pushing for a public policy change and didn’t think of it as an economic enterprise that required heavy regulation.
“The overriding motivation was to get medical marijuana to really sick people,” said Sen. Jamie Raskin, a Democrat from Montgomery County and the Senate sponsor of the bill. “The economic motive, if it existed, was secondary or tertiary in my mind. The whole point of the legislation was to get medicine to people suffering from leukemia, multiple sclerosis and other diseases.”
Industry experts say Maryland’s medical cannabis program has taken longer to get off the ground than any of the other 24 states, plus the District of Columbia, that have legalized the drug for medicinal uses.
At the same time, what was once an emerging market run by advocates has now attracted venture capitalists and big-dollar investors.
The legal cannabis research group New Frontier Data estimates Maryland’s medical marijuana industry will generate about $129.7 million in annual revenue by 2020 — three years after it is supposed to get off the ground. (By comparison, Forbes estimates the Baltimore Ravens take in roughly three times that, $378 million a year.)
By 2024, New Frontier estimates, the legal pot industry will generate $20.6 billion annually nationwide, putting it roughly on par with the National Football League.
With casinos, policymakers had a clear sense of the financial stakes, something that wasn’t extensively discussed during the medical marijuana debate.
“There was widespread understanding of how lucrative the [casino] industry would be, and how sophisticated the operators were,” said Matthew Gallagher, who was part of Gov. Martin O’Malley’s senior staff when casino gambling was approved. “That framed a lot of the thinking in how to set up the regulatory structure.”
Maryland’s legislature first approved medical marijuana in 2013 but allowed only academic centers to grow and dispense the drug. It was an arrangement that, theoretically, could have put a university’s federal funding in jeopardy.
That law called for a group of 16 stakeholders to develop regulations to oversee the process, and designated spots on the commission for patient advocates, pharmacists, nurses, doctors and law enforcement.
The commission’s vice chairman, Harry “Buddy” Robshaw, said he didn’t find out the police chiefs association designated him as its representative on the panel until two weeks before the first meeting. Robshaw, the police chief of Cheverly, population 6,173, said he had no experience writing regulations.
“I went to my first meeting, and I told everyone that I didn’t know what they were talking about,” Robshaw recalled last week. “Some classes or training on how to write regulations might have been helpful.”
Before the panel had finished writing their first set of rules, lawmakers declared the medical marijuana program a failure because no academic centers volunteered to participate. Just one other state — Louisiana — runs a medical marijuana program through a university.
In 2014, the Maryland General Assembly revamped the program to allow companies to apply for licenses to grow, process and distribute the drug, but refused to put taxpayer dollars into getting the new program started.
“Clearly there have been problems on the commission, and there have been a number of unanticipated issues that definitely need to be resolved,” said Raskin, a constitutional law professor who is now running for Congress. “We were legislating against the background of a prior bill where the medical marijuana was supposed to be exclusively at private colleges and universities.”
The panel formed to write rules to oversee academic centers was now instead charged with a much bigger job — dealing with entrepreneurs and their investors, setting fees, developing an application and picking winners in what became an intensely competitive process.
“Once the regulations were written, though, was when we began to realize that we were a regulatory agency,” Robshaw said. “We didn’t hire any consultants at all. We used the resources that were available. … We had to figure it all out ourselves as we went along.”
The commission estimated that they would get about 300 applications for the licenses. They got more than 1,100.
Simple economics
Industry experts say the intense interest was driven by simple economics, since the program limits the supply of marijuana but created a potentially broad base of demand. The law limits growing licenses to 15, but allows a wide range of ailments to be treated with marijuana and a range of medical providers to recommend it.
The crush of applications delayed the program by months and increased the cost of reviewing them nearly five-fold. Commissioners had decided to create a “doubleblind” system to grade and rank the applications, and they hired the Regional Economic Studies Institute at Towson University to recruit outside experts to review and rank all the applications.
“The legislature put a pretty low limit on a very valuable license, and then they asked a bunch of volunteers to decide who gets them,” said Kate Bell, legislative analyst of the Marijuana Policy Project, one of the country’s most prominent advocacy organizations for legalizing the drug.
“I don’t think they felt qualified to do that, so they outsourced it to a group, which then outsourced it again,” she said.
The process led two companies who didn’t receive a preliminary grower’s license to file a lawsuit. GTI Maryland and Maryland Cultivation and Processing say the commission improperly bumped them out of the winning group, as ranked by RESI.
And one of the other chief architects of the law, Del. Dan K. Morhaim, a Baltimore County Democrat, faces a possible ethics probe for not having disclosed that he agreed to be the clinical director for a company seeking a dispensary license.
Bell said that in most states, health departments oversee medical marijuana regulation. The patchwork of laws varies greatly, and in many states there are concerns about public employees facing federal drug charges because they were paid to help distribute marijuana, Bell said.
Other medical professions in Maryland are overseen by volunteer boards, said Dr. Joshua Sharfstein, associate dean of public health practice and training at the Johns Hopkins Bloomberg School of Public Health. “The legislature felt like it was the way to do it,” said Sharfstein, former health secretary.
The medical marijuana law required the commission to be self-funded. Next year, it is expected to take in more than more than $6 million and hire more than a dozen experts. But until the applications and their fees started rolling in November 2015, the commission was on a shoestring budget.
As the applications were under review this spring, one of the commission’s two paid staffers, director Hannah Byron, resigned. She did not respond to a request for comment this week. Her successor took over this spring, and this summer publicly complained about what he had inherited.
There were “layers of internal deficiencies and weaknesses” executive director Patrick Jameson told the commission at a public meeting in July. He said there was “poor business planning,” “no long-term financial planning,” and no enforcement, regulatory or compliance structure in place. Even though the state budget last year allowed for up to nine people to be employed by the commission, there was “a very limited and inadequate staffing plan.”
“Where is the commission and program going to be in five years?” he asked.