There are many developments in the coming year in the Rhode Island cannabis industry, which could really shape the local RI economy. There will be an expansion of the number of medical marijuana dispensaries (aka Compassion Centers), rumors of adult use marijuana swirling through the State House, and the hemp industry is growing in new and exciting ways.
Expanding Medical Marijuana
The 2020 Budget Bill, passed during the legislative session in 2019, originally contained provisions proposed by Governor Raimondo to introduce recreational marijuana (aka “adult use”) to Rhode Island. It was quickly shot down by leadership in the State House, and instead replaced with an expansion of the medical marijuana program.
Currently the medical marijuana program in Rhode Island permits patients to obtain a medical card if they have a specific debilitating condition listed in the statutes and/or regulations, or experience specific symptoms of a debilitating condition. At the end of 2019 there were only 18,025 RI registered patients, a huge drop from the 34,268 Rhode Island registered cardholders at the end of 2018. The biggest reason for this drop in Rhode Island registered patients is that RI started recognizing out-of-state cards, even for patients who are RI residents. As a result, many Rhode Island residents turned to online California-based doctors, who provide California cards via telemedicine.
Even with the drop in RI registrations, there is clearly a large medical marijuana patient population in the state. Currently there are only three Compassion Centers serving the entire state, however, located in Portsmouth, Providence and Warwick. This highly underserves the medical marijuana patient population in the state. For example, a patient living in Westerly would have to drive an hour and a half round trip to Warwick in order to get their medicine. In order to meet this need, and because the State House leadership didn’t feel ready for adult use marijuana, the 2020 budget bill included plans for six new Compassion Center licenses across the state.
The plan for the new Compassion Center licensing has been highly controversial. The regulations from the Department of Business Regulation (DBR) divided the state up into six regions, with the goal of having one more Compassion Center in each zone. The application fee is $10,000 per application per zone (non-refundable, of course). Because of all the accusations of corruption in the medical marijuana program, DBR will be holding a good old fashioned lottery for the licenses. Will it be names in a hat? Will it be a ball in a crank cage like in the lottery? We just don’t know yet, but it’s a little absurd that the corruption in this state has been so bad that we need a publicly televised lottery to make sure the selection is fair. If an applicant receives a license, the annual license fee will be a whopping $500,000, paid every year. According to DBR, the applications will be released in the next few weeks.
There is no requirement to officially strike a deal with towns for revenue sharing as there is in Massachusetts (called the Host Community Agreement or HCA), still many towns will have a lot of local control through the zoning process to determine if or where a new Compassion Center can be located in their town. There will likely be a lot of action on the local level, as towns decide to amend their zoning laws in order to either reject or accept additional medical marijuana dispensaries. Typically in other states that have adopted recreational marijuana, the medical dispensaries are given first crack at becoming recreational dispensaries, so where these new Compassion Centers are located will likely have a long lasting impact on both the towns they are located in and the state overall if RI ever adopts recreational marijuana.
Hemp
Marijuana and hemp are variations of the same plant: cannabis. The federal government and most states have defined hemp as any cannabis plant with less than .3% THC, with some complexities about how exactly those THC levels are measured. The legal distinction for hemp from marijuana started with the federal 2014 Farm Bill, which created some narrow situations for hemp to be cultivated as part of state agricultural pilot programs. The 2018 Farm Bill really changed the legal landscape for hemp, essentially delegating to the states the regulation of the plant, with the important caveat that the USDA would set a regulatory “floor” for all state plans. If a state decided to not come up with its own plan, or if the state’s plan didn’t comply with the USDA requirements, then hemp cultivators and processors will be able to obtain a license directly from the USDA.
The big snag in all of this for the hemp industry is that the Food and Drug Administration approved a drug named Epidiolex in June 2018. The drug is derived from cannabidiol (CBD), a compound found in cannabis and often in higher concentration in hemp. The drug was developed to treat childhood seizures, and according to its maker GW Pharma, the annual cost per patient is $32,500. Once something is approved by the FDA to be used as a prescription drug, under the Food, Drug, and Cosmetics Act (FDCA), that drug cannot be used as a nutritional supplement or added to foods. Because of this, the FDA’s stance is that all CBD is a drug, and is not permitted to be sold as a nutritional supplement. The FDA has issued cease and desist letters to companies selling CBD, but has chosen to focus enforcement on companies making unsubstantiated health claims. Currently CBD can be found in almost every gas station, health food grocer and pet store, even if the FDA says it’s a no-no.
In 2016, the Rhode Island Legislature passed the “Hemp Growth Act,” which established two license types for hemp: grower and handler (as well as a combo license). Currently there are two grower only licensees, two handler only licensees, and 10 dual grower and handler licensees. In an interesting twist, in 2019 the state added two new license types through the state budget bill — CBD Distributor and CBD Retailer. Both of these two new license types are specifically geared toward “consumable CBD,” creating a legal pathway to distribute and sell consumable CBD at retail. The passage of these two new license types was applauded by many in the hemp industry, as it meant that distributors and retailers would be able to sell their products without fear of a state crackdown, and hope that the focus from state regulators would be on testing and ensuring high quality products to consumers. The approach of Rhode Island in creating consumable CBD license types is in stark contrast to Massachusetts, where regulators have taken the approach that all forms of consumable CBD are prohibited because of the FDA’s position. To date, the regulations for the new consumable CBD have not been released by DBR, and it will be interesting to watch how this will play out. The Rhode Island Department of Health is holding strong to the position that CBD is a drug that cannot be introduced into food, so the conflicts between state statute, DBR regulations and DOH will have to be worked out.
In the meantime, there are so many interesting developments in the world of hemp that have the potential to be a great boost for the local economy. There are companies developing hemp clothing and experimenting with hemp plastics (Luxury Leaf), organic locally grown CBD products (Lovewell Farms) and developing products from other cannabis compounds such as CBG (Caduceus Science). There are whole ancillary businesses sprouting up around the local marijuana and hemp industries as well. Hemp is also seen as a crop that has many benefits to agricultural land in the state, and that can bring in extra income to struggling Rhode Island farms.
Megan E. Sheehan, Esq. is an attorney at Sheehan & Associates, and practices cannabis law in Rhode Island and Massachusetts. Megan is a member of the International Cannabis Bar Association.
