Untangling the knot of Md. medical pot

Given how much the Legislative Black Caucus has complained about the lack of minority-owned firms among Maryland’s medical marijuana growers and processors, it may seem crazy that the legislation designed to address the issue that just passed overwhelmingly in the House could lead to more white men getting licenses. But we’re in a messy situation with Maryland’s medical cannabis program, and there is no elegant solution. House Bill 2 clears up a number of problems with existing law and reflects a good deal of thought and deliberation about how to balance the legislature’s goals of diversity in the new industry with the needs of patients and the legitimate interests of existing licensees. It may not be perfect, but it’s better than the status quo and a lot better than the original version of the legislation that was introduced in January.

A couple of legal and practical realities have made the black caucus’ goal of ensuring African-Americans aren’t shut out of the industry difficult to achieve. The state cannot legally institute race- or gender-based preferences absent a study demonstrating that minorities or women have historically been shut out of a particular industry. Maryland now finally has such a study in hand, but preferences in the licensure process aren’t guarantees. Moreover, even if one or more women- or minority-owned firms gets one of the new licenses the legislature is considering authorizing, there is no certainty whatsoever that an African-American company will get one.

The House worked out an end-around that would effectively guarantee that a particular African-American owned firm, which now has a processor license, would also get a grower’s license. Simultaneously, it would allow three companies with grower’s licenses — two of them owned by white men, one by a family of South Asian descent — to get processor’s licenses. The remaining four new grower’s licenses and seven new processor’s licenses would be up for grabs in a process that gives preferences to women and minorities.

We don’t love the idea of the legislature getting that involved in deciding which particular firms get licenses. But there is a certain logic to the way the proposal is structured. It allows any firm with a processor license that ranked in the top 30 of grower applicants to get a cultivation license, and any grower that ranked in the top 30 for producer licenses to get one of those. That accomplishes a few things: It gets new licensees up and running immediately without the year-plus delay that a new application process will require. It recognizes the commission’s judgment that the top 30 applicants for both types of licenses were highly qualified and that the differences between them were often minor. And it fosters more of a particular kind of vertical integration in the industry, which should lead to lower consumer costs.

Several firms already have licenses both to grow and process marijuana in Maryland. Many states don’t separate those functions at all in an effort to reduce the regulatory burden both for the government and the industry; some even require a completely vertically integrated structure from cultivation to retail sales. There’s significant debate in the industry about whether such complete integration is good for consumers in terms of the quality, variety and cost of cannabis products, but there is more general consensus that combining growing and processing in one facility is beneficial, at least in the early stages of a state’s marijuana marketplace.

Other key features of this bill include clarification of what happens when a company receives provisional approval for a cultivation or processing license but is unable to commence operations within a reasonable period of time; a gradual shift in the compensation of the licensing commission that brings reforms without abruptly stopping the process of considering new applicants; and sets a reasonable standard for when and how the state might authorize new grower and processor licenses. The original version of this bill would have required the approval of a legislative committee to consider new licenses before 2028, which raised the risk that well-connected licensees could have protected themselves from competition for a decade, to the detriment of consumers. The latest language allows the commission to undertake the process in 2024 and eliminates the Legislative Policy Committee’s veto power.

If the state Senate has better ideas, we’d certainly be eager to hear them. But what we don’t want to see is another General Assembly session end with these issues unresolved. The legislature’s failure to address diversity and other problems in the state’s medical cannabis industry last year was disappointing. Failing again this year would be disgraceful.

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