Maryland medical marijuana regulators took steps Monday to deny a license to one of the 15 companies picked to grow the drug, saying there was a "reasonable likelihood" the firm would not properly safeguard the medicine.
In voting to tell MaryMed LLC that it would not receive a final license, the Maryland Medical Cannabis Commission cited concerns about MaryMed LLC's former parent company Vireo Health, which operates medical marijuana businesses in two other states. The commission also faulted MaryMed for not cooperating with Maryland investigators.
The concerns stem from the February indictment of two former Vireo executives, who face felony charges in Minnesota for allegedly smuggling a half-million dollars worth of cannabis oil across state lines in December 2015.
Maryland regulators said MaryMed mentioned those two executives by name in its November 2015 application to grow the drug here, and the firm "emphasized that its operations in Minnesota and New York, and the experience gained thereby, demonstrated its ability to successfully operate medical cannabis operations in Maryland."
Commissioner Eric Sterling said in a written statement that when Maryland investigators asked MaryMed to explain, company executives demurred. Sterling said that, combined with a few other factors, commissioners concluded there is "a reasonable likelihood of diversion of medical cannabis by the applicant."
MaryMed representatives said it will appeal the commission's decision.
"We're deeply disappointed by the commission's recommendation, particularly as it appears to be based on innuendo and misinformation instead of facts," spokesman Andrew Mangini said in a statement.
Last week, Pennsylvania awarded a medical cannabis growing license to another subsidiary of Vireo. State officials there defended the decision in news reports by saying those former executives indicted in Minnesota no longer work with Vireo.
Patrick Jameson, executive director of Maryland's cannabis commission, said his agency would not pick another company to grow the drug here until after the MaryMed action was fully resolved. That process could involve a lengthy administrative hearing.
The potential revocation of a lucrative license comes as the commission faces two pending lawsuits over how it picked the companies to grow cannabis. The state's long-delayed medical marijuana program — first approved in 2013 — has been off to a rocky start, and a delegation of state lawmakers have vowed to create a new commission to oversee it.
Just one company has received permission to start growing marijuana, and it has said the drug will be ready for patients in early fall.
The same day last month that commissioners approved a final growing license for ForwardGro, the regulators voted to suspend MaryMed's preliminary license because it had not produced records despite repeated requests.
On Monday, in his report to the rest of the commission, Sterling noted that MaryMed was not forthright about other developments.
MaryMed and Vireo underwent a corporate restructuring to become two separate entities in September 2016 — a month after Maryland regulators picked MaryMed as one of the top-ranked firms to grow drug.
Sterling said that even though MaryMed was required to tell the state about such a change within three business days, the company took 93 business days to do so. He added that MaryMed was later slow to aid investigators who were looking into ties between the one-time sister companies, and that MaryMed still has a $30,000-a-month consulting contract with Vireo.
"This conduct undermined any confidence that this organization would comply with our regulations," Sterling said.
The Maryland Wholesale Medical Cannabis Trade Association, which represents MaryMed and nearly two dozen companies picked to grow and process the drug, declined to comment on Monday's decision.
Kate Bell, a lawyer with the Marijuana Policy Project, noted that the indicted Vireo executives allegedly did something that would be legal for firms in other industries — shipping products across state lines.
"Luckily for patients, there are many other applicants who appear to be willing and able to grow medicine, and we look forward to this program finally becoming operational as soon as possible."