Medical marijuana fees stir debate in Maryland

Medical marijuana cigarettes are hand-rolled at the All American Cannabis Club, aka A2C2, a medical marijuana collective, in San Jose, Calif.

With Maryland's proposed licensing fees for growing and selling medical marijuana among the highest in the nation, some advocates warn that the steep costs could drive off applicants, crippling the nascent program and limiting access to treatment for tens of thousands of state residents.

Prospective medical marijuana growers would have to pay $125,000 a year for a two-year license, while dispensaries would have to pay $40,000 a year, according to the recommendations of a state commission. Only one state — Illinois — is charging a higher upfront cost for growers.


Del. Cheryl D. Glenn, a lead sponsor of Maryland's medical marijuana law, called the proposed fees "outrageous." The 15-member medical marijuana commission is named for Natalie M. LaPrade, Glenn's mother, who died in 2011 of kidney cancer.

The Baltimore Democrat fears the steep costs could shut out small businesses and increase retail prices so much that marijuana would be unaffordable for some patients. "We have the haves and have-nots all over again," she said. "That's ridiculous."


Others say the steep fees might scare off small operators but are unlikely to chase away many entrepreneurs looking to get in on the ground floor of what appears to be a rapidly growing industry.

Maryland officials defend the proposed fees while noting that the medical marijuana regulations are still being drafted and could change before being published. They say the rates are needed to finance the new program, which was designed by lawmakers to be self-supporting. And they note that there is great variability in how such programs have been set up and financed in 23 states and the District of Columbia.

The General Assembly first approved legalizing medical uses of marijuana in 2013, but limited it to academic medical centers, which showed no interest. Lawmakers revamped the program this year, authorizing licensed physicians to recommend medical marijuana, with 15 growers and as many as 94 dispensaries to supply it.

State health officials estimate that 45,000 patients would be eligible to obtain medical marijuana to help alleviate debilitating illnesses and conditions that cause severe pain, nausea or seizures. Health insurance will not pay for medical marijuana.

Rachelle Yeung, legislative analyst for the Marijuana Policy Project, a Washington-based advocacy group, said Maryland's fees are "prohibitively high." She noted that in addition to annual licensing fees, prospective growers must pay $6,000 to apply, while those seeking to open a dispensary must put up $5,000.

Maryland's fees, she said, "are almost certainly going to be passed on to the patients, and these are already people who have expensive medical bills and are dealing with debilitating medical conditions. It's unfair they would have to pay the costs of the program."

But the steep fees on tap did not dissuade more than 100 people from attending a daylong "Canna-Business" seminar in Bethesda last week. Cultivators and dispensary operators from Connecticut, Colorado and the District of Columbia advised applicants that they would need deep pockets. But they suggested that that's the price of starting out in a new but expanding business, as more states approve medical marijuana.

"There's a green rush," said Chris Reilly, spokesman for one of three state-licensed "compassion centers" in Rhode Island, which he said cost nearly $3 million to set up. "People are clamoring to get into this industry."


Many states charge fees lower than those in Maryland's draft rules. But in some cases, those states serve a smaller patient population than Maryland expects. Some draw additional revenue from sales taxes or have costs partly covered in other agencies' budgets.

New Jersey, for instance, charges a $20,000 annual fee for its "alternative treatment centers," which are licensed to cultivate and dispense marijuana. The state has three, with another three being reviewed, to serve 3,478 patients who have qualified to buy it for their medical conditions.

That state's program has a budget of about $1.7 million, according to Donna Leusner, spokeswoman for the New Jersey Health Department. (The state also charges 7 percent sales tax on medical marijuana, a revenue source unavailable to Maryland, which exempts all medications.)

Connecticut charges a $25,000 nonrefundable application fee and a $75,000 yearly licensing fee to producers. Dispensaries pay $5,000 for their licenses. A spokesman said six dispensaries and four producers serve 2,326 patients. The program's annual budget is $650,000, with four administrative staff members and two inspectors.

In Illinois, applicants for cultivator licenses pay $25,000 to apply, plus a $200,000 fee for the initial one-year license, according to Melaney Arnold, spokeswoman for that state's health department. Cultivators' license fees drop to $100,000 upon renewal.

Each suitor for one of 60 dispensary licenses to be awarded has to pay a $5,000 application fee, with the successful applicants required to pay a $30,000 licensing fee the first year, discounted to $25,000 upon renewal.


Arnold said the fees in Illinois were set to cover the program's costs, estimated at $6 million to $8 million. She said unofficial estimates put the potential number of eligible patients in the tens of thousands.

Despite its high fees, the Illinois Department of Agriculture reported recently that it had received 159 applications for licenses to run 21 cultivation centers statewide and 214 applications for up to 60 dispensary licenses.

In Maryland, state officials say the fees under consideration are needed to cover the projected $3.5 million annual budget for the program.

"This is what we feel it's going to take to run a rigorous program," said Sharon H. Bloom, the commission's acting executive director.

The commission was allotted $125,000 to get started, she said, but more money is needed to get the program up and running before any medical marijuana is produced. She said the commission must pay rent and hire staff, including three inspectors, set up its information-technology system and hire a lawyer.

Bloom refused to provide a breakdown of projected costs, saying in an email that such information can only be released to the public once the governor presents a budget to the General Assembly in January.


Glenn and Del. Dan K. Morhaim, another prominent legislative advocate, questioned the cost projections on which the fees are based, as well as the commission's decision to withhold them.

"They should be forthcoming, not just with me, but with everybody," said Morhaim, a Baltimore County Democrat who is a physician. "Asking for $250,000 up front [licenses are for two years] is very potentially a nonstarter," warning that the fee setup, "structured as it is, it could kill the program before it starts."

"Let's allow everybody the opportunity to develop a business so it's affordable," Glenn said. "I worry about what it's going to cost the patients."

Paula C. Hollinger, a former state senator who oversees the state's health professions boards and commissions, defended Bloom's decision not to release the panel's projected budget. "It's not out of line with what other states have had to spend," she said.

Hollinger said the commission hopes to vote on draft regulations at its next meeting, Oct. 28. The regulations would then be sent to Maryland Health Secretary Dr. Joshua M. Sharfstein and the attorney general's office for review before being formally proposed.

It is unclear exactly when Marylanders will be able to buy medical marijuana, but it is months away. Prices will be set by the licensed dispensaries.


State Sen. Jamie Raskin, a Montgomery County Democrat who is the chief advocate for medical marijuana in the Senate, said he is reserving judgment on the proposed fees. He said the commission faces a "Goldilocks problem," needing to set fees high enough to fund the program but not so high that they're a barrier to small businesses.

"Obviously, that's a judgment call the commission has to make," he said, adding that "the legislature will get a chance to revisit it."

Maryland's proposed fees have drawn a handful of emailed complaints to the commission, including a couple predicting that the proposed fees would discourage smaller businesses. One writer noted that it could take months after receiving a license before the first crop of marijuana could be grown and processed for sale.

One of those who wrote the state, Britton Loftin, said in an interview that he and fellow investors formed a company, Maryland Hands of Care, and have been looking to apply for licenses to grow and sell medical marijuana.

The Laurel-based lobbyist said he is taken aback by the proposed fees, enough that he is reconsidering his interest.

"It'll make me think three or four times about it," Loftin said. He suggested that the fees be set low to start, then gradually raised, in recognition that it will take time for businesses to get up and running.


John A. Pica Jr., a lawyer for another group of investors, the CBD Wellness Group, said his clients have not been dissuaded, though he agreed that the $125,000 annual licensing cost "seems pretty high."

"Without knowing the pricing side, and how much you can produce, there's a lot of uncertainty," he said.

Still, he said, he has not heard of anyone abandoning the pursuit of a license, which gains entry into a business with only a limited number of competitors.

"It hasn't scared anyone away," he said.