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Booming interest in marijuana licenses is expected to delay medical program

Erin Cox
Contact ReporterThe Baltimore Sun
Nearly 900 medical marijuana business applications pour into the state, enough to delay review.

Maryland officials said Thursday that they expect to delay the state's medical marijuana program as they sort through a deluge of nearly 900 applications from businesses seeking licenses to grow, dispense or process the drug.

The crush of 882 applicants brought in more than $1 million in license fees and prompted officials to push back plans to grant preliminary approval to licensees by mid-January.

Extending the deadline to review, score and award the licenses into next year "in turn will extend the overall program rollout," said Hannah Byron, executive director of the Medical Cannabis Commission.

"It is too early to determine what the new schedule will be," she added.

Byron called it a "tremendous response." The final tally of applications is more than twice the number the commission announced Friday as applications were pouring in. It took three more days for staffers to process the remaining applications and issue the total this week.

The surge surprised other applicants and even industry insiders, given that each rigorous application called for more than 60 pages of detailed information, including demonstrated support from local officials, plus a $1,000 to $2,000 application fee.

"I don't know anyone who thought they would get 900 applications for this program," said Darrell Carrington, executive director of the Maryland Cannabis Industry Association. "You have to earn it. Those people who get licenses will have put in an enormous amount of work."

There were 102 applications for the 15 licenses available to grow and cultivate marijuana — nearly seven applicants for every license. Another 75 applications came in for an unlimited number of processor licenses to turn the drug into oils, tinctures or other products for patients.

The vast majority of the applications — 80 percent — were for licenses to operate one of about 100 dispensaries allowed under state law to distribute the drug.

While more than 700 dispensary applications were filed, a "significant" number of people applied to open 47 separate dispensaries — one in every legislative district in the state — in an attempt to hedge their bets. By law, a business can only hold one dispensary license.

The tactic suggests some Maryland applicants have deep pockets and didn't want to miss out on a new medical pot market, industry experts said.

"If you have $100 million in your pocket, $47,000 is nothing," Carrington said.

Byron said the huge pool of applicants ensures the state's cannabis commission will find qualified candidates and that the medical marijuana program will be able to support itself without being subsidized by taxpayers. The General Assembly law passed in 2014 to create the program called for it to be self-funded.

The applications will be reviewed and ranked by an independent third party.

Under the preliminary timeline, the state had anticipated that medical marijuana dispensaries could be open by the end of 2016.

A delay in rewarding licenses could come at a cost to some applicants, experts said. For instance, if an applicant had secured a tentative land deal to develop a processing facility, the company might have to pay more as it waits for word on whether it secured a license.

Ross Morreale, director of special projects with Maryland Natural Treatment Solutions, said his Illinois-based company applied to open 25 dispensaries just to make sure they were the top-ranked applicant in at least one location.

"To me, 47 seems excessive, but maybe 25 seems excessive to people," Morreale said.

His company hopes to build a growing and processing operation near Federalsburg in Caroline County, near the Delaware border.

To make their application more attractive, company representatives met with local officials and promised the county Health Department they would be willing to donate money to a program that helps clean up properties once used as methamphetamine labs.

Attillio J. Zarrella, Caroline County's deputy health director, said three companies offered a presentation on the benefits of their operation. He said he wrote a letter supporting Maryland Natural Treatment Solutions' efforts and that he liked the philanthropic promises they made.

Maryland, Morreale said, is worth the investment in part because the state's program allows a wide range of patients to qualify for medical marijuana treatment, including those suffering from chronic pain.

"We understand there's a lot of opportunity in this business, and with that comes responsibility for the community in which you operate," he said, which was part of his pitch to Federalsburg's leaders. "If the local officials don't want you there, if the residents don't want you there, then why go there?"

The state also plans to let patients from outside Maryland become eligible to receive the drug by seeing a Maryland doctor — another reason applicants said the market is attractive.

Kevin Kennedy, whose Kojak Industries operates a growing, processing and dispensing operation in Arizona, called Maryland's initiative "the first significant medical cannabis program on the East Coast."

That — and the possibility of a large patient pool — drove the intense competition in the licensing process, he said.

"There's a lot of big money that's investing in this," Kennedy said. "I think it will be a keystone state that will pave the way for the industry."

Someinvestorsalsoare eyeing Maryland with plans for the future, hoping they'll be in on the ground floor if the state legalizes marijuana for recreational use.

Taylor West, deputy director at the National Cannabis Industry Association, said the states that have legalized marijuana built that industry on top of successful medical marijuana programs.

Mike Gimbel, the former drug czar for Baltimore County and an opponent of medical marijuana programs, said the breadth of moneyed applicants signals to him that the state will soon be under pressure to expand its program further.

"I know we're starting small in Maryland, but we all know that's just the first phase in getting them open," Gimbel said. "The next phase, there will be more."

An earlier version of this story misstated what processors would allowed to do with the drug. They can turn the drug into oils, tinctures or other products. The Sun regrets the error.

ecox@baltsun.com

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