DHS Regulations

Application Period for New Arizona Medical Marijuana Dispensaries Begins July 18, 2016

The Arizona Department of Health Services announced on June 1, 2016, that it will accept applications for new Arizona medical marijuana dispensaries starting on July 18, 2016, and ending on July 29, 2016.  My contact at DHS says there will be 31 dispensary licenses available.  Here is the text of the DHS announcement:

The Department will accept dispensary registration certificate applications from July 18 – July 29, 2016. During this allocation, 31 dispensary registration certificates will be available. The “record date” for the allocation will be May 31, 2016. Because there are no available counties as of the record date, the Department will not allocate certificates under R9-17-303(B)(1). The top 31 CHAAs prioritized under R9-17-303(B)(2) will be made available by June 6. Any certificates not allocated under R9-17-303(B)(2) will be allocated under R9-17-303(B)(3).

At least 30 days before it begins accepting applications, the Department will announce (1) the dates during which applications will be accepted, (2) the number of dispensary registration certificates that will be available for the Summer 2016 allocation, and (3) the county(ies) and CHAAs in which dispensary registration certificates will be issued under the first two steps described below. The “record date” for the Summer 2016 allocation will be May 31, 2016. This means that changes in data variables affecting allocation priority which occur after the record date will not be considered for the Summer 2016 allocation.

Applications will be accepted for 10 consecutive business days. Thereafter, the Department’s review and allocation time frames will comply with R9-17-107.

The allocation process will follow these criteria:

  1. The Department will first determine whether there is a county in which a dispensary registration certificate does not exist. If so, the Department will publicly identify that county and allocate one dispensary registration certificate within each identified county according to R9-17-303(B)(1).

    [Richard Keyt’s comment: Every Arizona county has at least one medical marijuana dispensary so this criteria does not apply.]
  2. The Department will next prioritize the state’s 126 CHAAs based on the number of qualifying patients who reside within each CHAA and issue one of the available dispensary registration certificates in each of the highest ranked CHAAs. For example, if 30 dispensary registration certificates are available to be allocated during this step, the Department will publicly identify the 30 CHAAs with the highest number of qualifying patients who reside within the CHAA. The Department will then allocate one dispensary registration certificate within each identified CHAA according to R9-17-303(B)(2).

  3. If any available dispensary registration certificates are not issued in one of the publicly identified counties or CHAAs under the first two steps, the Department will prioritize and allocate the remaining available certificate(s) according to R9-17-303(B)(3). This third step should not become necessary unless no qualified application is received for a county or CHAA identified under the first two steps.

    If there is more than one applicant for an identified county or CHAA, each application that is substantively complete will be scored based on the number of qualifying patients who reside within 10 miles of the proposed dispensary location and the number of dispensaries operating within 10 miles of the proposed dispensary location. For example, if the proposed dispensary location is within 10 miles of one operating dispensary, the number of qualifying patients who reside within 10 miles of the proposed dispensary location will be divided by 2. If the proposed dispensary location is within 10 miles of two operating dispensaries, the number of qualifying patients who reside within 10 miles of the proposed dispensary location will be divided by 3.

    If there is a tie between two or more applicants or a margin of 0.1% or less in applicant scores generated by applying the criteria in R9-17-303(B), the Department may randomly select one of such applicants for allocation of the subject dispensary registration certificate.

    Per R9-17-303(C), “10 miles” includes the area contained within a circle that extends for 10 miles in all directions from a specific location.

    Per A.R.S. § 36-2810(A), qualifying patient, operating dispensary and proposed dispensary addresses will not be disclosed before or after the Summer 2016 allocation.

By |2017-02-11T17:05:20-07:00June 1st, 2016|Dept Health Services, DHS Rules|Comments Off on Application Period for New Arizona Medical Marijuana Dispensaries Begins July 18, 2016

Arizona to Accept New Medical Marijuana Dispensary Applications

Phoenix New Times:  “The Arizona Department of Health Services just announced that it will begin taking applications for new dispensaries this summer.  This is the first time the state will be reviewing new applications for dispensary operating certificates since a lottery was held in 2012 that resulted the current roll-out in Arizona of nearly 90 medical-cannabis retail stores. . . . ‘The Department will accept dispensary registration certificate applications this summer, following the allocation process and requirements in rules.’ “

By |2016-02-23T06:43:28-07:00February 23rd, 2016|Dept Health Services, DHS Rules, Stories & Articles|Comments Off on Arizona to Accept New Medical Marijuana Dispensary Applications

Arizona Nurses Want to Expand Medical Pot Uses

Casa Grande Dispatch:  “If some Arizona nurses get their way, medical marijuana will become available as early as next year to treat everything from arthritis and autism to Tourette’s syndrome and traumatic brain injury.  Members of the Arizona Cannabis Nurses Association are petitioning the Department of Health Services to add those conditions and four more to the list of what qualifies people to use the drug. The voter-approved Arizona Medical Marijuana Act requires the agency to consider the requests.”

 

By |2015-09-06T08:43:00-07:00August 31st, 2015|Dept Health Services, DHS Rules, Stories & Articles|Comments Off on Arizona Nurses Want to Expand Medical Pot Uses

Will Humble May Require Regs for Marijuana Snacks

East Valley Tribune:  “The state’s top health official is weighing new regulations to ensure that users of medical marijuana snacks and drinks know when to stop.  Will Humble said he may require dispensaries to certify that an employee has discussed with the customer the effects of the product being bought. Humble, the state’s health director, said he exploring the use of what might be called “secret shoppers” to ensure that customers are being told what they need to know to remain safe.”

 

By |2014-06-08T10:10:57-07:00June 6th, 2014|Dept Health Services, DHS Rules, Stories & Articles, Will Humble Speaks|Comments Off on Will Humble May Require Regs for Marijuana Snacks

New Arizona Medical Marijuana Law Rules

Tucson Weekly:  “Now Mr. Humble is hard at work adjusting and tinkering with and apparently improving the AMMA rules, figuring out nuances of law that mostly affect dispensary operators but which could also benefit you and me directly. . . . a judge recently ruled that the timeline for dispensary owners to get approval to operate was unfair, because of delays forced by Chief Finger-Wagger Jan, so the state had to rewrite those rules. From there, Humble decided to nip and tuck a couple other rules.”

By |2013-10-24T08:10:46-07:00October 24th, 2013|DHS Rules, Stories & Articles|Comments Off on New Arizona Medical Marijuana Law Rules

Medical-Pot Edibles Are Legal, but Prosecutors and Cops Aren’t Backing Off

Phoenix New Times:  “Uncle Herb’s medical-marijuana dispensary, tucked away near pine trees in an industrial area of south Payson, has the homey feel of a country store. . . . The super-potent paste gets added to Uncle Herb’s growing takeout menu of medicinal food and drink products sold to qualified patients . . . . Essentially, legal officials claim that the medical-pot law provides no protection for extracts, concentrates, or the food and drinks that may contain them. Under their theory, qualified patients and dispensary officials could be charged with a felony for possessing or making marijuana extracts.”

By |2013-10-14T06:58:17-07:00October 10th, 2013|DHS Rules, Legal Issues, Stories & Articles|Comments Off on Medical-Pot Edibles Are Legal, but Prosecutors and Cops Aren’t Backing Off

Judge Orders Arizona Department of Health Services Not to Reject Medical Marijuana Dispensary Application because Maricopa County Refuses to Issue Zoning Letters

Phoenix New Times:  “A county judge has put a halt to a state Department of Health Services rule that is preventing the approval of a would-be medical-marijuana dispensary.  White Mountain Health Center wants to open a dispensary in Sun City, but it can’t get the county to acknowledge or reject its request for zoning information. A state DHS rule requires such information for its dispensary applications.  Today, Maricopa County Superior Court Judge Michael Gordon put that state rule on hold for White Mountain, enjoining the state from rejecting the company’s application for not complying with that rule.”

Read the Judges’ order in the case of “White Mountain Health Center, inc.,  v. County of Maricopa.”

By |2012-07-25T07:00:55-07:00July 25th, 2012|AZ Marijuana Law Lawsuits, DHS Rules, Stories & Articles|Comments Off on Judge Orders Arizona Department of Health Services Not to Reject Medical Marijuana Dispensary Application because Maricopa County Refuses to Issue Zoning Letters

DHS’ Final Arizona Medical Marijuana Rules Now Final

As Will Humble said last week, the March 28, 2011, “final” version of the rules have been changed.  Today the Arizona Department of Health Services submitted to actual final rules to the Arizona Secretary of State.  Here is the  Department of Health Services summary of the changes made to the March 28, 2011, rules.

R9-17-302(A)(5) and R9-17-304(D)(1)(f)(ii)
The 03/28/11 rules allowed applicants for a dispensary registration certificate to submit documentation of $150,000 available to begin operating. The rule was clarified by requiring the documentation to be dated within 30 days before submitting the application, the monies to be under the control of the entity submitting the application or a principal officer of the entity, and the documentation to demonstrate that the monies had been under the control of the entity or principal officer for at least 30 days before the application was submitted.

R9-17-304(D)(1)
Two subsections were added: One subsection requires an applicant for a dispensary registration certificate to submit documentation from the local jurisdiction where the proposed dispensary is located that the local jurisdiction does not have any zoning restrictions or that the proposed dispensary location complies with the zoning restrictions. A second subsection requires an applicant for a dispensary registration certificate to submit documentation that the applicant owns the location of the proposed dispensary or has permission from the owner of the location to operate a dispensary at the location.

R9-17-313(E)
The 03/28/11 rules prohibited a medical director from providing a written certification for medical marijuana for a qualifying patient obtaining marijuana from the dispensary associated with the medical director. Because there is no way for a medical director to ensure that a qualifying patient would not obtain medical marijuana from the dispensary associated with the medical director, the rule was amended to prohibit a medical director from providing written certifications for medical marijuana to any qualifying patient.

By |2011-04-18T09:03:19-07:00April 14th, 2011|DHS Rules|1 Comment

Words of Wisdom from Will Humble on April 5, 2011

I attended the forum sponsored by the Arizona Medical Marijuana Association and the Marijuana Policy Project in Phoenix on April 5, 2011.  Will Humble spoke for about 30 minutes then answered questions for about 30 minutes.  Here are my notes from the Director’s presentation:

  • The final rules published by the Arizona Department of Health Services on March 28, 2011, are not the actual final rules.  The actual final rules will be the rules that DHS submits to the Arizona Secretary of State on April 14, 2011.  DHS intends to make some changes to the March 28, 2011, version of the rules.
  • The final rules will probably require that dispensary license applicants obtain a “comfort” letter from the landlord of the site where the dispensary’s address listed on the application.  Mr. Humble did not use the phrase “comfort” letter.  That is my characterization of what he said, which was the applicant must attach to the application something in writing from the owner of the site where the dispensary will operate that the owner is ok with the applicant using the owner’s address on the application.
  • Rather than merely requiring the applicant to affirm that the zoning of the prospective dispensary site is “groovy,” the applicant will be required to get something in writing from the city that the proposed site is in accordance with city zoning, i.e., it is properly zoned and not too close to a prohibited structure or area.
  • The March 28, 2011, rules will be modified, but DHS does not intend to make substantive changes.  I submit that the two preceding items, especially the second are substantive changes to the rules.
  • Patient and dispensary applications will be submitted online.  DHS’ goal is to reduce DHS costs.
  • There is no advantage in submitting a dispensary application early.
  • DHS will review dispensary license applications in July and August.  He predicted that there will more applications for licenses in highly populated CHAAs and fewer applications in low populated CHAAs.
  • A dispensary in Ajo that is in a low populated CHAA could have a big grow operation and sell marijuana to other dispensaries.
  • After a dispensary has been operating for three years, it can move any where in the state subject to proper zoning.
  • Dispensary licenses in CHAAs that are located in tribal land will be issued in 2012.
  • A dispensary can move any where within its approved CHAA during its first three years, subject to zoning.
  • If there are multiple dispensary license applicants who meet all five levels of review in a CHAA, the dispensary registration certificate will be awarded by a lottery conducted by the Arizona Lottery Commission.
  • Level five review consists of the applicants providing a letter from a bank that says that the applicant has $150,000 of available capital.  DHS doesn’t care if the available capital is cash in the bank or a line or credit or the ability to borrow $150,000, but it must say that the applicant (not an owner, officer or board member) has the money.  A questioner asked if it would be ok to remove the cash from the bank that day after the bank issued the letter.  Mr. Humble was stumped.  He had not thought of that and the March 28, 2011, version of the rules would not prohibit the removal.
  • Concerning the quality of the dispensary applications:  DHS will take into consideration and look to see if the required documents are submitted and appear to be comprehensive, but will not evaluate them for quality.  Not sure what he meant.
  • The security and inventory control policies and procedures must show that the applicant will be able to prevent the diversion of marijuana from its intended and state lawful use.
  • When asked if the applicant for a dispensary license will be notified if its application is defective and be given a chance to correct any defects, Mr. Humble said he doesn’t know yet.  He said that if the total number of applications for a dispensary license is relatively low, DHS will probably notice applicants of defects and give them a cure period, but will not do so if there are too many applications.  He did not give any indication of when the number of applications would be too many to give defect notices and cure periods.
  • He mentioned that the business plan should include references to the Arizona medical marijuana statutes and the DHS rules where appropriate.
  • As DHS receives applications for dispensary licenses, it will post the location on its CHAA maps.  He did not say what other information would be made available to the public.
  • Subject to applicable zoning requirements, a dispensary agent of a dispensary can deliver marijuana to its patients anywhere in Arizona as long as the agent remains with the marijuana at all times and complies with the DHS delivery rules.
  • It is ok to have multiple dispensary applications for the same site.
  • If a person or group of people who own one or more entities that apply for multiple dispensary licenses in multiple CHAAs were to win more thann one license, DHS expects and demands that a dispensary be opened in each CHAA.  Not sure how DHS would enforce this.  Would it try to terminate all of the licenses if the group failed to open or operate one of the dispensaries?
  • A medical director of a dispensary cannot write certifications for any patient.  Another doctor in the medical director’s medical group can write certifications, but the medical director must disclose that fact to DHS.
  • I asked Mr. Humble this question:  Can a for profit corporation get a dispensary license if it has one or more shareholders who own less than 20 percent of the shares and who are not officers or directors of the corporation if these shareholders do not meet the eligibility criteria including they are not residents of Arizona.  He said yes.

Caution:  What Mr. Humble says is not the official position of the DHS and may or may  not actually be implemented by DHS.  His comments are enlightening, but it is the official acts of DHS such as the rules that have legal significance.

By |2011-04-12T08:50:31-07:00April 12th, 2011|DHS Rules, Will Humble Speaks|Comments Off on Words of Wisdom from Will Humble on April 5, 2011

Update on the Bylaws Update

Before the “final” Arizona Department of Health Services rules issued on March 28, 2011, I prepared Bylaws for Arizona limited liability companies, for profit corporations and nonprofit corporations that intend to apply for a license to own and operate an Arizona medical marijuana dispensary.  I have not been able to “finalized” my Bylaws because I have been waiting for the “final” version of the DHS rules to be set in concrete.  I want to modify my Bylaws only one more time so I am waiting patently for DHS to “finalize” the rules.

You will notice that I have put “final” and “finalize” in quotes.  I did that because despite DHS’ statements that the March 28, 2011, version of the rules was the final version, the rules have not yet been “finalized.”  I attended a forum last Tuesday at which DHS Director Will Humble announced two important facts about the March 28, 2011, version of the rules.

  • The rules will not be final until DHS delivers them to the Arizona Secretary of State on or before April 14, 2011.
  • DHS intends to make changes to the March 28, 2011, version of the rules before submitting the rules to the Arizona Secretary of State.

Note to KEYTLaw Dispensary Clients & People Who Purchased Dispensary Bylaws Online in Our Store

My goal is to review the final final version of the rules delivered to the Arizona Secretary of State this coming weekend and modify the Bylaws as necessary to comply with the final rules.  You should anticipate that my “final” version of the Bylaws will be available beginning on April 18, 2011.

If you are an owner of a not for profit LLC or corporation that I formed to own and operate an Arizona medical marijuana dispensary, you should have gotten an email message from me that I sent to you three days ago.  In that message, I asked that the contact for your company send the following information to me so I can prepare the Bylaws for your company:

  • Names of all members of the board of directors of the company
  • Name of the President (must be one of the managers if the company is an LLC – can only have one President)
  • Name of the Secretary (can be the same as the President)
  • Name(s) of any Vice Presidents (optional officers)
  • Name of the Treasurer (optional officer)

If I formed your company, make sure that your contact person sends an email message to me asap with the above information.

See “All Arizona Medical Marijuana Dispensaries Must Have Bylaws.”

By |2012-05-13T16:21:55-07:00April 10th, 2011|DHS Rules, Legal Issues, Will Humble Speaks|Comments Off on Update on the Bylaws Update

Arizona Department of Health Services Publishes Dispensary FAQ

The Arizona Department of Health Services published a Frequently Asked Questions for prospective Arizona medical marijuana dispensaries.  This is a very enlightening document.  Here are some gems I discovered in the FAQ.

  • When can I apply for a dispensary license?ADHS will accept applications for dispensaries between June 1st and June 30th, 2011.
  • When will you award the dispensary certificates? ADHS anticipates the allocation process for initial dispensary certificates to be completed in August 2011.
  • On what basis will dispensary registration certificates be awarded? The Department will issue dispensary registration certificates using an evaluation process. If only one complete application is received for a dispensary in a particular CHAA, that applicant will be awarded a dispensary registration certificate. If more than one complete application is received for a dispensary in a particular CHAA, the Department will use the evaluation process to allocate the dispensary registry certificate.
  • Once I apply for a dispensary certificate, can I change the address in my application before I begin operating? Yes, as long as the new address complies with local zoning and you pay the fee.
  • Do I need a certificate of occupancy from my city in order to apply? No, applicants do not need to submit a certificate of occupancy in the initial application.
  • How many dispensary registration certificates will one entity be able to obtain? A person may be an applicant, principal officer, or board member on only one dispensary registration certificate application for a location in a single CHAA and on no more than five dispensary registration certificate applications for locations in different CHAAs.
  • In the dispensary application, I have to confirm whether: I’ve been a resident of Arizona for 3 years, whether I am delinquent on federal, state and local taxes, child support, or student loans etc., whether I’ve ever been bankrupt, whether Everyone with a 20% financial interest in the dispensary is an applicant or board member, and whether I have access to $150K in startup capital.
  • Are these requirements? All principal officers, board members and dispensary applicants must have lived in Arizona for the preceding three years before application. According to rules, a delinquency on federal, state, or local taxes, child support, or student loans, an unpaid judgment due to a governmental agency, or a past bankruptcy does not disqualify an applicant from being allocated a dispensary registration certificate. However, ADHS may use those factors as criteria in the selection of who will be allocated a dispensary registration certificate if there is more than one qualified applicant for a given CHAA.
  • Can a dispensary change the location of the dispensary? Within the first three years after receiving a dispensary registry certificate, a dispensary may move; the new location must also be within the CHAA for which the dispensary registration certificate was issued. After the first three years, a dispensary may move to a location in another CHAA.
  • Is a dispensary in a rural area of Arizona required to remain in the CHAA for which the dispensary registration certificate was issued? A dispensary in a rural CHAA must remain in the CHAA for which the dispensary registration certificate was issued for the first three years. After the first three years, a dispensary in a rural CHAA may move to a location in another CHAA but it must prove the new site complies with local zoning requirements.
By |2011-03-28T14:41:03-07:00March 28th, 2011|DHS Rules|Comments Off on Arizona Department of Health Services Publishes Dispensary FAQ

Arizona Department of Health Services Publishes the Final Medical Marijuana Rules

The Arizona Department of Health Services published its final medical marijuana rules (92 pages).

Here are my first impressions of the provisions that apply to would-be dispensaries:

  • DHS took my recommendation and added the owners of entities to its definition of board members who must satisfy the eligibility requirements to obtain a dispensary license.  R9-17-301.B adds the owners of limited liability companies, partnerships and members of a cooperative to the list of board members.  The section starts, “in addition to the individual or individuals identified in the dispensary’s by-laws as board members of the dispensary the following individuals are considered board members: If a corporation is applying for a dispensary registration certificate, the officers of the corporation”  Wow!  This subsection is astonishing because it shows how totally unaware of the business world DHS is.  First, the Bylaws do not normally name the members of the board of directors.  Second, the shareholders of the corporation are not considered principal officers or directors – only the officers of the corporation are deemed to be board members!!!!!!!!!!!!!!!!!!!!!  DHS open the door a mile wide.  People with excluded felonies and non-Arizona residents  apparently can be shareholders of a for profit corporation that seeks a dispensary license.
  • R9-17-302.A states, “If more than one dispensary registration certificate application. . . is received for a single CHAA, the Department shall review the dispensary registration certificate applications for the CHAA to determine if:

1.  Each applicant, principal officer, or board member associated with a dispensary registration certificate application has submitted Arizona state income tax returns for the previous three years with the dispensary registration certificate application;

2. Each applicant, principal officer, or board member associated with a dispensary registration certificate application:

a. Is current on paying court-ordered child support;

b. Is not delinquent paying taxes, interest, or penalties due to a governmental agency;

c. Does not have an unpaid judgment due to a governmental agency; and

d. Is not in default on a government-issued student loan;

3. Each individual who has 20% or more interest in the dispensary is the applicant or a principal officer or board member of the dispensary;

4. Each applicant, principal officer, or board member has never filed for personal or corporate bankruptcy; and

5. Documentation, from an in-state financial institution or an out-of-state financial institution, demonstrating that the dispensary has at least $150,000 available to begin operating was submitted with the dispensary registration certificate application.

Holy money bags Batman!  I didn’t see that one coming.  I guess the big money players won.  Mom & pops lose.  This new and outrageous rule apparently means that applicants for a dispensary license must have at least $150,000 in a bank account to get in the lottery.

What’s with the bankruptcy exclusion?  Many good people have been forced to file for bankruptcy.  There is no relationship to bankruptcy and being involved with a medical marijuana dispensary.  It’s just a DHS excuse to limit the possible pool of owners for what reason I cannot imagine.

R9-17-302.A.3 seems to require that every person who owns 20% or more of an entity (including a for profit corporation) that applies for a dispensary license must be a principal officer or a board member.

  • There are major changes in the way dispensary registration certificates will be awarded.  The lottery may or may not be used, depending on the actual to be determined facts associated with each CHAA.  DHS may award a dispensary registration certificate based on if there are no qualified applicants or multiple applicants at each of the five levels set forth in R9-17-302.A.  Think of R9-17-302.A as containing five review levels.  If only one qualified applicant exists at the A(1) level, that applicant gets a dispensary registration certificate.  If there are multiple qualified applicants at a R9-17-302.A level, they move to the next round/level.  For example, if there are multiple qualified applicants that meet the requirements of A(1), A(2) and A(3), they move to the A(4) level and if only one qualified applicant meets the A(4) level, that applicant gets the dispensary registration certificate.  If there are multiple qualified applicants that satisfy A(1), A(2), A(3), A(4) and A(5) then “the Department shall randomly select one of the dispensary registration applications” to get the dispensary registration certificate.  So, the lottery lives!
  • Looks like there will be a dispensary in all 124 of the 126 CHAAs.  If there are no qualified applicants for a dispensary registration certificate in a CHAA, DHS will select an applicant from another CHAA and award the dispensary registration certificate to that “lucky” or ‘unlucky” applicant.  R9-17-302.B.3 states, “If the Department determines that none of the reviewed dispensary registration certificate applications meets the criteria in subsection (A)(1), the Department shall randomly select one dispensary certificate registration application and allocate a dispensary registration certificate to that applicant.”
  • Multiple dispensary applications are allowed with one catch.  R9-17-302.C states,  “If an applicant submits more than one dispensary registration certificate application, the documentation in subsection (A)(5) needs to demonstrate there is at least $150,000 available for each dispensary registration certificate application submitted.”
  • R9-17-303.C states, “A city or town that contains more than one CHAA may request the reassignment of a dispensary registration certificate allocation from one CHAA to another CHAA under the jurisdiction of the city or town by submitting a written request to the Department by June 1, 2011”
  • DHS pushed back the start date for accepting applications for a dispensary registration certificate to June 1, 2011.  R9-17-303.D states, “The Department shall accept dispensary registration certificate applications for 30 calendar days beginning June 1, 2011.”
  • R9-17-304.A states, “An individual shall not be an applicant, principal officer, or board member on:

1. More than one dispensary registration certificate application for a location in a single CHAA, or

2. More than five dispensary registration certificate applications for locations in different CHAAs”

DHS sanctions multiple applications for dispensaries so long as the applications are in different CHAAs, no more than five applications are submitted and the applicant can get a letter from a bank that it has at least $150,000 for each dispensary application.  Big money wins again!  Shame on DHS for misleading people who don’t have $150,000 cash in the bank into believing for months that they could possibly obtain an Arizona medical marijuana dispensary license.

Note:  DHS appears to have taken my suggestion and that of Alan Sobol to clarify that dispensary applicants do not have to get final city or county zoning approval to be able to file an application for a dispensary registration certificate.  Rule R9-17-304.D.5 combined with R9-17-305.A give dispensary applicants a two stage zoning process.  R9-17-305.A requires final zoning approval only after the would-be dispensary obtains a dispensary registration certificate.  Unfortunately DHS took my suggestion and will allow the winner of a dispensary registration certificate to change its dispensary site to a different location within its CHAA if  final zoning is denied or some other reason exists to move to a different location arises.  Getting final zoning approval is a good thing to do before getting a dispensary registration certificate, but not a requirement to filing an application as some people said.

  • DHS actually set minimum requirements for a business plan.  R9-17-304.D.7 states that the application for a dispensary registration certificate must contain “A business plan demonstrating the on-going viability of the dispensary on a not-for-profit basis that includes:

a. A description of and total dollar amount of expenditures already incurred to establish the dispensary or to secure a dispensary registration certificate by the individual or business organization applying for the dispensary registration certificate,

b. A description and total dollar amount of monies or tangible assets received for operating the dispensary from entities other than the individual applying for the dispensary registration certificate or a principal officer or board member associated with the dispensary including the entity’s name and the interest in the dispensary or the benefit the entity obtained,

c. Projected expenditures expected before the dispensary is operational,

d. Projected expenditures after the dispensary is operational, and

e. Projected revenue;”

  • DHS apparently clarified that applicants for a dispensary registration certificate do not need to jump through all the city and county zoning hoops just t be eligible to apply for a dispensary license.  R9-17-305.A states, “To apply for approval to operate a dispensary, a person holding a dispensary registration certificate shall submit to the Department, at least 60 calendar days before the expiration of the dispensary registration certificate, the following:

2. A copy of documentation issued by the local jurisdiction to the dispensary authorizing occupancy of the building as a dispensary and, if applicable, as the dispensary’s cultivation site, such as a certificate of occupancy, a special use permit, or a conditional use permit;

3. A sworn statement signed and dated by the individual or individuals in R9-17-301 certifying that the dispensary is in compliance with local zoning restrictions”

  • Finally, we get some guidance on what it means for a dispensary to operate on a not-for-profit basis.  R9-17-310.A states, “A dispensary shall:

13. Not lend any part of the dispensary’s income or property without receiving adequate security and a reasonable rate of interest;

14. Not purchase property for more than adequate consideration in money or cash equivalent;

15. Not pay compensation for salaries or other compensation for personal services that is in excess of a reasonable allowance;

16. Not sell any part of the dispensary’s property or equipment for less than adequate consideration in money or cash equivalent; and

17. Not engage in any other transaction that results in a substantial diversion of the dispensary’s income or property.”

  • R9-17-316.B states, “A dispensary shall only acquire marijuana from:

1. The dispensary’s cultivation site,

2. Another dispensary or another dispensary’s cultivation site,

3 A qualifying patient authorized by the Department to cultivate marijuana, or

4 A designated caregiver authorized by the Department to cultivate marijuana.”

 

By |2011-04-03T22:43:13-07:00March 28th, 2011|DHS Rules, Video|Comments Off on Arizona Department of Health Services Publishes the Final Medical Marijuana Rules

Would Be Dispensaries Struggle to Lease a Dispensary Site

My DHS Wish

I continue to talk to many people who are having a very hard time finding a location to operate their Arizona medical marijuana dispensary.   The Arizona Department of Health Services has inadvertently created a nightmarish situation for would-be dispensary owners who do not own the real property on which to operate a dispensary.  The DHS rules coupled with very restrictive city zoning ordinances and many landlords who simply do not want to lease to a medical marijuana dispensary result in many more prospective dispensary tenants than available properly zoned dispensary sites.  A lot of people have told me that they believe that one or more big money outfits are going around Arizona tying up potential sites with the goal of reducing the number of prospective dispensaries that apply for a dispensary license.

A large number of nonprofit entities are all fighting to tie up a small number of properly zoned and available sites throughout Arizona.  This means that there will not be very many dispensary applications filed by the application deadline.  It is a supply and demand problem.  The demand among would-be dispensaries is high and the supply of properly zoned sites with willing landlords is low.  Econ 101 teaches that when demand exceeds supply, the cost of the item (rent) goes up.  Higher rents mean higher prices passed on to patients.  One of DHS’ goals should be to keep the patients cost of medical marijuana down, not be the cause of patients paying higher prices to purchase their medicine.

The current rules and restrictive city zoning ordinances create a bizzaro world where nonprofits that do not have a license to operate an Arizona medical marijuana dispensary are entering into leases and applying for zoning with cities and they will never get a dispensary license.  For many would be dispensaries it is a total waste of time and money, not to mention a waste of the cash-strapped cities’ time and money.

DHS should clarify in the final version of the rules that would be dispensaries need only to affirm on their applications for a dispensary license that their dispensary and grow locations comply with applicable zoning ordinances without the need to actually apply for or receive a city use permit.  The rules should also allow the winners of a license to change the location of their dispensaries and grow facilities after obtaining a dispensary registration certificate, but before obtaining the final dispensary license.  This would allow a dispensary to change locations after obtaining a dispensary registration certificate if the city denies the zoning use permit or any other problem arises with the site location stated in the initial dispensary application.

DHS:  Please amend the rules to solve this terrible problem that will reduce the number of actual dispensaries, increase the number of patients who grow their own and cause higher rents to be passed on to patients.

See “Phoenix Medical Marijuana Locations Reflect Restrictive Zoning.”

By |2011-03-23T07:43:30-07:00March 22nd, 2011|DHS Rules, Legal Issues, Real Estate Issues, Zoning|Comments Off on Would Be Dispensaries Struggle to Lease a Dispensary Site

The Part Local Zoning Plays in the AZ DHS Rules

Sonoran Star Remedies:  “Whoa, hold on there, cowboy!!! . . . There are severe ramifications to having DHS backpedal on the requirement (January 31 draft rules) to have each dispensary be in compliance with local zoning restrictions. I suggest that we take a step back and consider what it would mean to strip away the rights of local municipalities to determine and drive their own zoning process.”

This interesting blog post is apparently in response to “Alan Sobol Adds the Rose Law Group to His List that Includes DHS, MPP & AzMMA” that discusses Alan Sobol’s March 14, 2011, letter to Arizona Department of Health Services Director Will Humble in which he complains about the uncertainty and problems caused by the DHS rules and city zoning ordinances.  The author disagrees with Alan Sobol and suggests that the cities should be able to pick who gets a dispensary license rather than DHS.

By |2015-04-06T18:50:20-07:00March 15th, 2011|DHS Rules, Stories & Articles, Zoning|Comments Off on The Part Local Zoning Plays in the AZ DHS Rules

Arizona Department of Health Services Publishes Second Round of Public Comments to the Proposed Arizona Medical Marijuana Rules

On February 25, 2011, the Arizona Department of Health Services published comments from the public on the January 31, 2011, second draft of the proposed rules that implement Arizona’s new medical marijuana laws.  Here are the links to the comments.

The Department also received the comments below at the four public meetings held during February 14 to 17, 2011: Written Comment Forms

In addition, the Department received the following written comments: Group A and Group B

What follows are some comments I found interesting from the written comments submitted to the DHS.

  • Attorney Victor Mark agreed with one of my comments that the Arizona residency requirement is a violation of the U.S. Constitution.  He said:

“Probably the most unconstitutional provision of the 2nd draft of rules is contained in R9-17-303, where it requires each principal officer or board member of a dispensary to have been an Arizona resident for the three years immediately preceding the date the dispensary submits an application. Such residency requirements have repeatedly been held unconstitutional by the Supreme Court of the United States and other federal courts.”

  • Attorney Jordan Rose said in an email message to Tom Salow that applicants should be required to prove they have $750,000 of liquid assets to be eligible for consideration to get a license to operate a dispensary.  She proposed the following change to the rules:

“R9-17-303(B) Inset!: (9) A letter from a licensed financial institution indicating that the entity applying for the license has an open account with not less than $750,000.00 in cash (this is an estimated average cost associated with implementing the rigorous requirements of build-out, including all health and safety/security considerations, in compliance with DHS requirements and to operate over the fits! year of business) in an account. The letter must be updated one time and provided to the Department at the time the Department requests it prior to final approval of any Application. If the letter is not timely updated pursuant to this section then the application will be deemed incomplete.”

She also wants local sheriff’s department to approve the dispensary’s security plan after paying a fee.  In addition, she said, the rules should “require that the appropriate jurisdiction complete a form certifying that the applicant’s location meets all of the local jurisdiction’s zoning restrictions necessary to operate as a medical marijuana dispensary including if applicable a use permit and any other special requirements under that jurisdictions land use regulations.”

Here email message to DHS’ Tom Salow ends with this curious statement:

The information contained in this message is privileged and confidential It is intended only to be read by the individual or entity named above or their designee If the reader of this message is not the intended recipient, you are on notice that any distribution of this message, in any form is strictly prohibited If you have received this message in error, please immediately notify the sender by telephone at 480 505 3939 or by fax 480 505 3925 and delete or destroy any copy of this message Thank you”

I wonder if anybody will notify Ms. Rose about getting her message on the DHS website?

  • Two dudes claiming to be with the nonexistent Arizona Medical Marijuana Association submitted two lengthy statements.  See “What is the Arizona Medical Marijuana Association?”  The AzMMA statement also includes the results of an interesting public opinion poll commissioned by the AzMMA.  The AzMMA recommends that applicants for a dispensary license prove they have a minimum amount of liquid assets.  It does not like the lottery selection process or the CHAA system of dispersing dispensaries.
  • Page 111 of the comments in Group A is an estimated first year budget for a medical marijuana dispensary.  The start up costs are estimated to be a low of $749,000 and a high of $2,133,000.
  • The Biltmore Bank wants dispensary applicants to provide proof they have a minimum of $750,000 in liquid assets.  By coincidence, it proposed the exact same change (word for word) to R9-17-303(B) made by Jordan Rose.  Query:  Why is a bank commenting on Arizona’s medical marijuana rules?  Very odd!
  • The Pinal County Sheriff, Paul Babeu, wants dispensaries to submit their security plans to the local sheriff’s department and obtain the sheriff’s approval.  By another strange coincidence, he submitted the same word for word change to the rules on this issue as did Jordan Rose.
  • Attorney Lisa Hauser submitted comments on behalf of the nonexistent Arizona Medical Marijuana Association for the second time.  She said, “The Association is pleased that so many of its J January 7, 2011 comments made their way into the Department’s proposed rules.”  This nonexistent corporation/LLC was just one voice of many who submitted comments to the first draft of the rules and suggested the same changes.  The AzMMA is the only group I am aware of that tries to take credit for changes DHS made to the rules based on the large number of comments received.  Lisa said the two biggest problems the AzMMA has with the rules are the lottery and the CHAAs, both of which I too requested by dumped.
By |2011-02-26T09:27:38-07:00February 26th, 2011|DHS Rules|Comments Off on Arizona Department of Health Services Publishes Second Round of Public Comments to the Proposed Arizona Medical Marijuana Rules

Richard Keyt’s Suggested Changes to the DHS Rules

What follows below is the abbreviated text of my letter to Will Humble dated February 18, 2011.  You may also read or download a copy of the actual letter.

February 18, 2011

Will Humble, Director
Arizona Department of Health Services
150 N. 18th Avenue
Phoenix, AZ 85007

Re:  Comments to the Arizona Department of Health Services’ Proposed Rules to be Promulgated Under Arizona Revised Statutes Section 36-2801, et. Seq., Arizona’s Medical Marijuana Laws

Dear Mr. Humble:

I am the creator of a website called “Arizona Medical Marijuana Law” found on the internet at www.arizonamedicalmarijuanalaw.com. The purpose of this website is to inform the public about the new law created by the voters’ approval of Proposition 203. Although this new website is just shy of seven weeks old, it will have close to 20,000 visitors this month because it contains a treasure trove of information about this new law.

I am an Arizona attorney who has been practicing business law in Arizona since 1980. Since I started counting in 2002, I have formed over 3,000 Arizona limited liability companies, for profit corporations and nonprofit corporations. As of the date of this letter, I have been hired by more than 30 groups that intend to apply for a dispensary registration certificate. What follows are my suggested changes and comments to the proposed Rules.

1. The Lottery. Eliminate the lottery and replace it with a selection system based on the quality of the application and the applicant. Our country has been a country where people succeeded on merit, not on government give-aways. DHS should pick the applicants that are best qualified and most likely to operate a successful business. The people of Arizona deserve the best dispensary owners, not a group of winners who are lucky to have their names drawn out of a hat. The application fee of $5,000 is sufficient to pay for a review and analysis of each application. State in detail the criteria on which applications will be graded. Create a point system and say that dispensary registration certificates will be awarded to the top 124 scores. Provide in the Rules that if any of the 124 applicants selected for a license fails to actually obtain its dispensary license within one year, the dispensary registration certificate will be revoked and a new dispensary registration certificate be offered to the applicant whose total score was 125th and go down the list if other entities fail to open their dispensaries within the designated time period.

I submit to you that selecting dispensary owners by a lottery is the surest way for DHS to get sued and to cost the State of Arizona a large amount of defense money it does not have. The current Rules are totally lacking in any guidance or requirements for conducting a lottery. Here are just a few of the almost unlimited problems with a lottery: (more…)

By |2011-03-04T20:54:58-07:00February 18th, 2011|DHS Rules|2 Comments

Clauses to Include in a Contract between a Medical Director & a Dispensary

Question:  Are there any special clauses my dispensary should include in its contract with its medical director?

Answer:  Yes.  The contract should be an independent contractor agreement, not an employment agreement.  The contract should contain the standard clauses found in a good lawyer drafted independent contractor agreement plus the following clauses unique to this agreement:

  • The medical director will provide the specific duties of the medical director set forth in the rules.
  • The medical director must obtain and maintain at all times a dispensary agent registration from the Arizona Department of Health Services.  See R9-17-309.A.4.b., which states:

A dispensary shall . . . Not allow an individual who does not possess a dispensary agent registry identification card issued under the dispensary registration certificate to: . . . Serve as the medical director for the dispensary

  • The medical director will comply with the applicable laws contained in Arizona Revised Statutes Section 36-2801 et.seq (Arizona’s medical marijuana statutes), and all applicable DHS rules in effect as of the date of the agreement and during the term of the agreement.
  • The doctor represents and warrants that he or she satisfies all of DHS’ requirements to be a medical director not later than April 1, 2012.
  • The doctor will obtain a license from Arizona Department of Health Services to be a medical director not later than April 1, 2012.
  • If at any time the medical director ceases to be eligible to be a dispensary agent or if he or she cannot perform his or her duties for any reason, the contract must terminate without prior notice to the medical director.
  • The contract terminates if the dispensary loses its dispensary registration certificate or ceases to operate.
  • The medical director must grant a license to the dispensary to copy and use the copyrighted content the medical director gives to the dispensary as required under the rules.
  • The medical director must represent and warrant that all content he or she gives to the dispensary does not infringe on anybody’s copyrights.
  • The medical director must maintain at all times the types of insurance appropriate for the position in amounts not less than $500,000 or what is recommended by the medical director’s insurance agent.
  • The medical director must give to the dispensary proof of insurance satisfactory to the dispensary.
  • The medical director’s insurance company must be instructed to notify the dispensary of any change to or cancellation of any insurance policy.
  • The compensation payable to the medical director will be reduced by X percent for every additional dispensary the doctor acts as the medical director, but the compensation will not ever be less than Y percent of the compensation payable if the doctor is a medical director for only the dispensary.  If I’m representing a dispensary, I’ll try to put this clause in because the duties of the medical director are nonexistent once he or she does the initial set up so why should a doctor who is a medical director for multiple dispensaries get paid the same as a doctor who is the medical director for a single dispensary?
By |2012-08-18T09:20:26-07:00February 15th, 2011|DHS Rules, Legal Issues, Medical Directors, Questions People Ask|Comments Off on Clauses to Include in a Contract between a Medical Director & a Dispensary

Arizona Department of Health Services Public Hearings on the Rules

If you are interested in telling Arizona Department of Health Services how you fee about its medical marijuana rules, I suggest you attend one or more of the public hearings Arizona Department of Health Services is holding this week.  ADHS says that the public hearings are not intended for people who want to get a dispensary registration certificate.  Here’s the schedule.

  • Phoenix: Thursday, February 17, 2011, at 9:00 am – 12:00 pm, ASU Sandra Day O’Connor College of Law, The Great Hall, 1100 S. McAllister Ave

The following text is from the ADHS’ website:

  1. Each meeting will consist of Department staff listening to comments, concerns, and suggestions for improvements or solutions related to the Medical Marijuana Program draft rules.
  2. When giving an oral comment at a meeting please limit the comment to the substance and form of the draft rules. Do not hesitate to express support or opposition to earlier comments but please try to avoid repetition. Department staff may ask questions while an individual is talking in order to clarify the individual’s position.
  3. An individual may also submit written comments using the Comment Form that will be available at each meeting.
  4. There will be a marked container to put Comment Forms in at any time during each meeting or after each meeting concludes.
  5. Please submit all written comments by 5:00 pm on Friday, February 18, 2011.
  6. All input will be considered when finalizing the Medical Marijuana Program rules.
By |2011-02-16T18:33:34-07:00February 15th, 2011|DHS Rules|Comments Off on Arizona Department of Health Services Public Hearings on the Rules

Why DHS’ Lottery to Pick 125 Dispensary Winners is a Mistake

I believe that the proposed AZDHS rule whereby the Department will allocate Medical Marijuana Dispensaries to applicants by lottery is a big mistake, for the following reasons:

  • The rules require an applicant to submit a number of items with their application. Included are a business plan, an inventory plan, a security plan and other items. The Department might receive an application from one applicant including a business plan that is thorough and persuasive concerning the likely success of the applicant’s proposed operation of a dispensary. Another applicant might submit a sheet that says “Business Plan” at the top, but which contains little that is helpful or persuasive concerning the applicant’s likelihood of success. Since the Department’s rules contain nothing to help evaluate or rate or differentiate between the 2 submissions, each will be entitled to be submitted with an equal chance to be chosen from the lottery. (assuming some form of the other required items have been included with each application.)
  • The fact that, per the proposed rule, the business plan and other required submissions will not be read, evaluated or scored renders the required submission of those documents meaningless.
  • The Department is charging a fee of $5,000 to file an application. Only $1,000 would be refunded to an applicant who submitted a complete application and whose application was therefore submitted to the lottery. People have speculated that 2,000 or more applications could be filed. If 2,000 applications were submitted at $5,000 each, the gross would be $10,000,000. If every one of the applications were complete (unlikely), 1,875 refunds of $1,000 each ($1,875,000) would need to be made. The net would be a minimum of $8,125,000. Since some of the applications would likely be incomplete and the applicant would not receive a refund, the net would probably be even more. With this large amount of funds, certainly the Department should have the resources to read, evaluate and score the applications received.
  • If AZDHS awards the right to obtain a license to an obviously unqualified applicant because AZDHS has been unwilling to read, evaluate and score the applications received, even though it has received millions of dollars in application fees from applicants, it will subject itself to legal action by qualified applicants who were denied the right to obtain a license or even the opportunity to have their applications and evidence of qualifications evaluated.
  • The lottery proposal encourages gaming of the system or even fraud. I have heard of groups who intend to submit 20 or more applications. A group of investors could file applications by each of the individuals in the group with an agreement that if any of them were successful, the unsuccessful individuals would be brought into partnership with the successful applicant. There could even be straw applicants submitting applications on behalf of undisclosed principals. All of this would be incentivized by the unwillingness of the Department to read, evaluate and score the applications received.
  • The people who drafted the ballot measure made a great effort to make the Arizona Medical Marijuana system subject to comprehensive and sensible regulations in order to avoid some of the “free for all” problems occurring in some of the other States that have previously allowed Medical Marijuana. Providing a system where applications and the attached submissions are read, evaluated and scored will result in the most qualified applicants being chosen for the limited number of licenses. Refusing to evaluate the applications will promote the opposite, leading to instability in the industry and problems for law enforcement the public and the Agency.
  • If unqualified applicants are chosen by lottery for the right to submit the additional items necessary to receive permission to operate, and are unable to perform because they lack the resources or are incompetent, the dispensary permit could sit idle for a year until the next opportunity for the Department to receive applications. This would deny the public access to a dispensary in that area and would allow patients with cards to grow their own medical marijuana if they were more than 25 miles from the closest other dispensary.
  • Awarding licenses to unqualified applicants will likely cause problems with patient services as well as unpaid bills and other problems related to failure of dispensary businesses due to lack of qualifications of the applicants.
  • If the Department is unwilling to evaluate the suitability and qualifications of the applicants, it should at least require a bond or a posting of a cash deposit, to guarantee performance by a successful applicant. This should be required as a condition of submitting the initial application.
  • The nature of the business as well as the regulations imposed by the Statute and the Agency rules guarantee that it will be expensive to open and operate a dispensary. If a prospective applicant does not have the financial resources to be able to successfully open and operate a dispensary, he or she should get the backing of someone who does. This is no different from any other business opportunity. While those without resources might complain that it is unfair to deny them the chance to receive a license, it is just as unfair to choose someone without the qualifications, competence and resources necessary to be successful, on the basis of a “game of chance” over someone who has the qualifications, competence and resources required to be successful. It is also unfair to the public who will be using the services of dispensaries to impose upon them, based on a “game of chance”, prospective dispensary operators who are not likely to be competent and/or successful in providing good service to the patients.
  • If the State of Arizona wanted to have a low regulation industry and let the market choose the winners and losers, it could do that. Arizona has not made that choice, though. Arizona has chosen a highly regulated system involving very limited access to licenses. The regulations imposed by the State increase the resources and competence required to operate successfully. With this type of system, the State Agency has the responsibility to do what is necessary to increase the odds that the very limited number of business opportunities will be given to those who are likely to be able to perform.
By |2011-02-04T16:15:32-07:00February 4th, 2011|DHS Rules|Comments Off on Why DHS’ Lottery to Pick 125 Dispensary Winners is a Mistake

Is DHS’ Lottery for a Medical Marijuana Dispensary License Gambling in Violation of Arizona Law?

Under the second draft of Arizona’s medical marijuana rules issued by Arizona Department of Health Services on January 31, 2011, DHS proposes to select dispensary registration certificates (aka dispensary licenses) by a lottery.  The rules divides Arizona into 126 zones called Community Health Analysis Areas (CHAAs).  DHS will allow one dispensary in each CHAA.  Currently there will be 125 possible dispensaries so one CHAA may not have a dispensary.

DHS will begin accepting applications for dispensary registration certificates for thirty days on May 1, 2011.  On June 30, 2011, DHS will award dispensary registration certificates as follows:

  • If a CHAA has only one qualified application for a dispensary registration certificate, that applicant will be awarded the certificate.
  • If a CHAA has more than one qualified application for a dispensary registration certificate, DHS will conduct a lottery and the winner will be awarded the certificate.

DHS has created a new Arizona lottery.  Here is how the new lottery works.  Pay $5,000 and take a chance your chit will be pulled out of a hat.  If your number is picked, you will win a really big valuable prize, i.e., a state authorized monopoly to make money.

How can DHS unilaterally create a new Arizona lottery.  I thought legalized gambling in Arizona had to be authorized by a law passed by the legislature and signed by the governor.  Apparently I am wrong.

Arizona Revised Statutes Section 13-3301.1 states:

“Gambling” or “gamble” means one act of risking or giving something of value [$5,000] for the opportunity to obtain a benefit [a dispensary registration certificate] from a game or contest of chance [the lottery conducted by DHS for a dispensary registration certificate] or skill or a future contingent event but does not include bona fide business transactions which are valid under the law of contracts including contracts for the purchase or sale at a future date of securities or commodities, contracts of indemnity or guarantee and life, health or accident insurance.”

I submit that DHS process does not involve a contract.  There will not be any contract between the applicants and DHS so the contract exception will not apply.

Arizona Revised Statutes Section 13-3303 states:

A. Except for amusement, regulated or social gambling, a person commits promotion of gambling if he knowingly does either of the following for a benefit [a dispensary registration certificate] . . . Conducts, organizes, manages, directs, supervises or finances gambling.

B. Promotion of gambling is a class 5 felony.

Is the DHS lottery exempt from Section 13-3303 and therefore not illegal under Arizona law because it is amusement, regulated or social gambling as defined in Section 13-3301?  It is clear to me that the DHS lottery is not amusement or social gambling.  DHS would probably claim its lottery is regulated gambling, which is defined in Section 13-3301 as:

Regulated gambling” means either:(a) Gambling conducted in accordance with a tribal-state gaming compact or otherwise in accordance with the requirements of the Indian gaming regulatory act of 1988 (P.L. 100-497; 102 Stat. 2467; 25 United States Code sections 2701 through 2721 and 18 United States Code sections 1166 through 1168); or

(b) Gambling to which all of the following apply:

(i) It is operated and controlled in accordance with a statute, rule or order of this state or of the United States.

(ii) All federal, state or local taxes, fees and charges in lieu of taxes have been paid by the authorized person or entity on any activity arising out of or in connection with the gambling.

(iii) If conducted by an organization which is exempt from taxation of income under section 43-1201, the organization’s records are open to public inspection.

(iv) Beginning on June 1, 2003, none of the players is under twenty-one years of age.

Conclusion:  The DHS rules that create a lottery to select dispensary registration certificates is legalized gambling because it appears to be regulated gambling, which is exempt from the criminal prohibition on gambling set forth in Section 13-3303.  Given the public interest in the lottery and the high value of the prizes to be awarded to the sweepstakes winners, DHS should make public the lottery procedures and televise every drawing to avoid the appearance of impropriety and actual impropriety.

By |2017-02-11T20:34:34-07:00February 3rd, 2011|DHS Rules, Legal Issues|Comments Off on Is DHS’ Lottery for a Medical Marijuana Dispensary License Gambling in Violation of Arizona Law?

CHAA on This!

I am part of a group that plans to apply for one of the medical marijuana dispensary licenses to be awarded by the Arizona Department of Health Services. I believe the method the AZDHS has chosen to distribute the licenses throughout the State is flawed. Here are some of the reasons.

Prop. 203, as it was passed by the voters, expressly based the number of dispensary licenses to be awarded on the number of retail pharmacies in the State. Recently, the total for the State was 1,249, which, if rounded up would result in 125 dispensaries.

Prop. 203 does not expressly state how the dispensaries are to be distributed throughout the State of Arizona. There are two obvious methods that could be used. One would be to distribute them among Arizona’s 15 Counties according to the number of pharmacies in each county. After all, Prop. 203 based the total for the state on the number of pharmacies statewide. The other method would be to distribute the dispensaries throughout the 15 counties according to the per-capita population of each county compared to the total for the state.

Using either the pharmacy method or the population per county method would have similar results. Although urban areas have more pharmacies per capita than rural areas, the differences are not so great as to make the distribution result significantly different based on the method chosen.

In general, using numbers of pharmacies per county slightly increases the number of dispensaries in large urban areas and using population per county slightly decreases the share of the large urban areas and transfers a few of the dispensaries to smaller population counties.

In the 2d set of Agency rules distributed by AZDHS on January 31, 2011, they have come up with a different method of distributing the dispensaries. They have used AZDHS’s Community Health Analysis Areas (CHAA) and have decided to locate one dispensary in each one of them. There are 126 of these CHAA zones. 19 of them are located throughout the State on Indian Reservations Although I have not seen it in print, I have heard that possibly all of the 19 tribes may allow the State to refrain from locating a dispensary in their lands. I believe that AZDHS is counting on this. The reason I believe this is that in his January 28 posting to his blog, Director Humble stated that individual CHAA districts in Arizona include as few as 5,000 residents and as many as 190,000 residents. If you take into account Indian Reservation CHAA districts, there are 6 districts with fewer than 1,000 residents and 11 with fewer than 5,000 residents. On this basis, I am assuming that AZDHS does not plan to distribute dispensaries to the 19 Indian Reservation CHAA districts. AZDHS has not said whether it intends to distribute 19 additional dispensaries among the non-Indian Reservation CHAA zones in order to bring the total back up to 126. They will likely be required to do something to make up the difference between 107 and at least 125, since Prop 203. specifies that at least 1 dispensary license will be distributed for each 10 pharmacies. Since there are 1,249 pharmacies, AZDHS should be required to distribute at least 125 licenses.

To view the CHAAs go to the Medical Marijuana Dispensary CHAA Map.  You can zoom in and out or enter an address to determine the CHAA in which the address is located.   If you click on a CHAA, the map will display the name of the CHAA, its ID number, 2000 population and 2010 population.

Using the CHAA districts as the basis for distribution of the dispensaries throughout the State will result in a radical redistribution of dispensaries from urban areas to rural areas. I have learned, from the AZDHS website, the 2010 population totals for each of the 107 non Indian Reservation CHAA zones. The smallest is Ajo, in far West Pima County which had 4,290 residents. The largest is Maryvale in Phoenix which had 224,678 residents.

I divided the CHAAs into two groups. The first is the 54 CHAAs with the smallest 2010 population totals. The second group is the 53 CHAAs with the largest 2010 population totals. Here is some information comparing those two groups.

  • The 54 smallest CHAAs have a total of 1,165,676 residents. They average 21,587 residents per CHAA. Their total population represents 18% of Arizona’s total non-Indian Reservation population of 6,535,445.
  • The 53 largest CHAAs have a total of 5,335,808 residents. They average 100,808 residents per CHAA. Their total population represents 82% of Arizona’s total non-Indian Reservation population.
  • Under the AZDHS proposal group 1, representing 18% of Arizona’s population will receive 54 dispensaries. Group 2, representing 82% of Arizona’s population will receive 53 dispensaries.

I have also looked at how dispensaries would be distributed among Arizona’s 15 counties based on number of pharmacies per county, per capita population per county and distribution by CHAA. As mentioned above, by pharmacy total Maricopa County would receive 80 dispensaries. By per capita population it would receive 75. Since there are 41 CHAAs in Maricopa County, per the AZDHS proposal, Maricopa County would receive 41 dispensaries. Although Maricopa County has 64 % of the State’s pharmacies and 60 percent of the population, it would only receive 38% of the 107 non-Indian Reservation dispensaries.

Pima County receives a similar percentage of the number of dispensaries whether they are distributed by number of pharmacies, per capita population or by CHAA.

The difference between the 80 dispensaries out of 125 that Maricopa County would receive by pharmacy total and the 41 of 107 it would receive according to CHAAs would be distributed to the smaller and more rural Counties. Here are some facts concerning the population totals that would be served by Maricopa County’s 41 dispensaries and those of smaller rural Counties.

  • Maricopa County’s 41 dispensaries would each serve, on average, 98,130 residents.
  • La Paz County is the 2d smallest population County in Arizona. Its population is 21,616. It was one of the Counties that, per Prop… 203 was guaranteed at least one dispensary even though it would not receive one if it were determined by number of pharmacies or by population. Since La Paz County has 2 CHAAs, it would now receive 2 dispensaries which would each serve 10,808 residents.
  • Cochise County has a population of 140,623. If dispensaries were distributed by number of pharmacies (23), it would receive 2. If they were distributed by population, they would receive 3. Cochise County has 6 CHAAs and will receive 6 dispensaries per the AZDHS proposal. These dispensaries, would, on the average, serve 23,377 residents, compared to the Maricopa County average of 98,130 residents.
  • By virtue of distribution by CHAA, Santa Cruz County, Gila County, Navajo County and Coconino Counties would each gain dispensaries compared to the distribution by number of pharmacies or population. In each of these Counties, less than 30,000 residents, on average, would be served by the dispensaries the County would receive according to CHAAs.

AZDHS could make up the difference between the 107 non-Indian Reservation CHAAs and the 125 dispensaries required by Prop. 203 by distributing 18 or so additional dispensary licenses. The most logical way to do this would be to assign an additional license to each of the 18 highest population CHAAs, so that each of the 18 largest CHAAs would have 2 dispensaries instead of 1. 16 of these additional dispensaries would go to Maricopa County and 2 would go to Pima County. This would reduce to some extent the radical disparity between the treatment of urban and rural areas. The disparity would still be large. If Maricopa County received 57 dispensaries out of 125 as opposed to 41 out of 107, its share of dispensaries would increase to 46% from 38%. This compares to Maricopa County’s 60% share of Arizona’s population.

This would not alleviate the problems AZDHS will be creating by insisting that every tiny population CHAA receive a dispensary license. These problems are discussed in detail below.

According to AZDHS figures, Arizona has 6,535,445 non-Indian Reservation residents. Dividing this total by the 125 dispensaries mandated by Prop. 203 would result in an average of approximately 52,000 residents per dispensary. Close to this average would result whether the dispensaries were distributed by numbers of pharmacies or by per-capita population per County. Distributing the dispensaries by the AZDHS CHAA proposal radically revises the distribution so that dispensaries in rural areas will serve far fewer residents than those in urban areas.

In my opinion the AZDHS proposal is a clear and blatant violation of the Arizona Voter Protection Act and the provisions of Prop… 203. The fact that Prop. 203 provided that the total dispensaries in the State would be determined by a 1 to 10 ratio clearly implies that distribution of dispensaries throughout the State should be done by the same method. As mentioned above, distribution by per-capita population would yield similar results, with just a few dispensaries being transferred from Maricopa and Pima Counties to several smaller rural Counties.

Prop. 203 implied that distribution should be based on number of pharmacies. Moreover, it dealt specifically with the situation where a small population County might not be entitled to a dispensary because it has few pharmacies. It provided that each County, no matter how small, would be entitled to no less than one dispensary if there were a qualified applicant. Prop.. 203 provided that the State total of dispensaries could be increased above the number specified in the law, if necessary to provide at least one to each County. Distributing dispensaries by CHAA flies in the face of the clear language of Prop… 203. If litigation were filed, the CHAA distribution would probably be struck down by a Court, since it flies in the face of the language of Prop… 203 and its effects are so clearly unjust.

It is obvious that the reason AZDHS decided to distribute dispensaries per CHAA is that it will spread the dispensaries out throughout the entire State and increase the percentage of Arizona’s land that will be covered by “grow your own exclusion zones” of 25 mile radius which will exist around each dispensary. I can understand how many could consider this to be a worthy goal. Even if the goal is worthy, it does not justify such a radical perversion of the intent of Prop. 203.

I can see several specific negative consequences of distribution of dispensaries by CHAA.

  • Since the urban areas will have dispensaries serving very large populations, those dispensaries will become very large operations. This could be difficult in light of the fact that many if not most Cities and Counties are putting square footage limitations on dispensaries.
  • Of the 20 smallest CHAAs, 13 have 2010 populations of less than 10,000. All of the smallest 20 CHAAs have 2010 populations less than 15,000. Some have only the smallest of towns or settlements and may not have commercial suitable space available for a dispensary. Many of these CHAAs are very large geographically with their population densities being extremely low.
  • In many cases, because of the very small populations and very low population densities, these low population CHAAs may not be able to support the operation of a dispensary. Many of these dispensaries could fail and go out of business. As they were in the process of going out of business, numerous problems involving patient services, defaulting on financial obligations and others could arise. Having dispensaries go out of business would decrease the stability of the industry and create additional problems for AZDHS to have to deal with.
  • Presumably if a small population CHAA went out of business, the “grow your own exclusion zone” would go away and the original motive of those proposing distribution by CHAA would be frustrated.

The CHAA proposal is not necessary. There are better ways to distribute dispensaries in a way that would not create such radical distortions. Gila County is a good example. It would receive only one dispensary whether they are distributed by number of pharmacies or by population. Gila County’s population is divided, more or less evenly, between Payson in the North and Globe in the South. The road between the 2 towns is over 80 miles. They have a legitimate desire to have a “grow your own exclusion zone” surrounding both towns.

Here is a way to solve the problem without creating all of the problems involved with the CHAA rule. AZDHS could write a rule that would allow a County, such as Gila County, to request, based on its particular circumstances, that it have its one dispensary operate out of 2 locations, one in Payson and the other in Globe. It could qualify as one dispensary rather than 2 by operating out of the 2 locations on alternate days and never being both open at the same time. AZDHS would impose a “25 mile radius grow your own exclusion zone” around each location of the one dispensary.

Although the dispensary would have increased costs maintaining 2 operating locations, it would be able to share other costs like wages between the 2 locations. A single dispensary operating out of 2 separate limited hours locations would be more likely to survive financially than 2 separately owned dispensaries with larger operating costs.

Other rural Counties with large distances separating their population centers could benefit by such a rule. This would satisfy the goal of reducing the area where self cultivation is allowed while avoiding the instability involved with trying to force people to operate dispensaries in locations that are not viable. There will inevitably remain some locations that will not have dispensary locations even with the suggested rule. Even the CHAA rule does not completely eliminate areas where card holders could grow their own. These areas have very low population density and the number of card holders living in them would likely be quite small. It seems unlikely that many cardholders would move to one of these unprotected locations just so they could grow their own medical marijuana.

People who are interested in Prop. 203 should take the opportunity to submit their concerns and suggestions to AZDHS in the next several weeks. They should also consider attending the public meetings where they can voice their concerns and suggestions.

___________________________

Arizona Department of Health Services asks people to submit comments to the second draft of the rules not later than the end of the day on February 18, 2011.

By |2011-02-11T19:20:52-07:00February 3rd, 2011|CHAAs, DHS Rules, Legal Issues, Real Estate Issues, Stories & Articles|Comments Off on CHAA on This!

Doctors Recommending Medical Marijuana to be Scrutinized by State and Medical Boards

Phoenix New Times:  “Docs who write high numbers of recommendations [for medical marijuana] will be singled out for review, and if any of the recommendations “look at all suspicious, those (doctors) can count on getting a friendly call from me or someone else at the agency,” said Dr. Laura Nelson, DHS chief medical officer. . . . If officials determine that a physician is over-writing recommendations, they’ll complain to the appropriate governing board.”

By |2011-02-01T07:16:08-07:00February 1st, 2011|DHS Rules|Comments Off on Doctors Recommending Medical Marijuana to be Scrutinized by State and Medical Boards

DHS Divides Arizona into 126 Community Health Analysis Areas (CHAAs) for Dispensary Locations

The second draft of the Arizona Department of Health Services medical marijuana rules apparently divided Arizona into 126 areas where dispensaries can be located.  These areas are called “Community Health Analysis Areas (CHAAs).”  See the map of the CHAAs.  Read DHS Director Will Humble’s January 28, 2011, explaination of CHAAs in which he states:

“Several years ago, our public health statistics team divided the State into 126 Community Health Analysis Areas to help us analyze data for various disease monitoring programs.  The initial trigger to develop the CHAAs was a 1988 law that directed the ADHS to use the data in the cancer registry to identify areas and populations that need investigation.”

By |2011-02-06T09:13:21-07:00January 31st, 2011|CHAAs, DHS Rules, Will Humble Speaks|Comments Off on DHS Divides Arizona into 126 Community Health Analysis Areas (CHAAs) for Dispensary Locations

Proposal Suggests 126 Areas for Arizona Pot Dispensaries

Arizona Republic:  “The new proposal suggests distributing one dispensary to each Community Health Analysis Area, which divides the state based on geography and population. There are 126 of these areas in the state, close to the number of dispensaries allowed.”

By |2011-02-11T19:21:06-07:00January 31st, 2011|DHS Rules, Real Estate Issues|Comments Off on Proposal Suggests 126 Areas for Arizona Pot Dispensaries

Arizona Department of Health Services Issues 1/31/11 Draft of Its Medical Marijuana Rules

Today, January 31, 2011, Arizona Department of Health Services posted its second draft of its proposed Arizona medical marijuana rules.  Check back.  I will review the second draft of the rule as soon as possible and put up a new article.  Here are my first impressions of changes made to the first draft of the rules:

  • New:  “CHAA” means a Community Health Analysis Area, a geographic area based on population, established by the Department for use by public health programs.
  • New:  The walls of the cultivation site must prevent anybody from seeing the plants from outside the walls of the facility.
  • New:  There is a two stage process.  Stage 1:  Dispensary applies for and received a dispensary registration certificate.  Stage 2:  apply for a approval to operate a dispensary.  A dispensary that has a DRC may apply for a   The Department shall accept dispensary registration certificate applications for 30 calendar days beginning May 1, 2011.
  • Change:  The two year residency requirement went from two years to three years.
  • Change:  A business plan demonstrating the on-going viability of the dispensary as on a non-profit organization not-for-profit basis.  Very interesting!
  • ChangeThe dispensary is not required to grow any of its marijuana.
  • Change:  Medical directors can serve an unlimited number of dispensaries rather than just three.
  • Change: Eliminated the requirement for dispensary agents with respect to surety bonds and failure to file a tax return.
  • New:  Revoke a dispensary registration certificate if it operates before obtaining approval to operate a dispensary from the Department.

DHS asks the public to submit comments to the proposed rules.

Related story “CHAA on This!”

By |2011-02-03T16:17:09-07:00January 31st, 2011|DHS Rules|Comments Off on Arizona Department of Health Services Issues 1/31/11 Draft of Its Medical Marijuana Rules

Must All Dispensary Owners, Officers & Directors be U.S. Citizens?

Question:  Must all owners, officers and members of the board of directors of an Arizona medical marijuana dispensary be a citizen of the United States?

Answer:  Apparently “the principal officer” or one board member must be a U.S. citizen as of today, January 26, 2011. It appears that no other owner, officer or director must be a U.S. citizen, except for  the one  “principal officer” or board member selected by the insiders to give proof of U.S. citizenship to the Arizona Department of Health Services.

Although Proposition 203 does not contain U.S. citizenship or Arizona residency requirements, the first draft of the Arizona Department of Health Services rules contain both requirements.  Rule R9-17-107.F.1.d.v(1) requires that after a dispensary applicant receives the written notice of preliminary approval from DHS, the applicant shall submit to DHS “a copy of  the principal officer or board member’s Arizona driver’s license or identification card issued before October 1, 1996, and one of the following:

(1)  Birth certificate verifying U.S. citizenship,
(2 ) U. S. Certificate of Naturalization, or
(3)  U. S. Certificate of Citizenship.”

My take from reading this poorly worded rule is that only one person who is an owner, officer or board member of an Arizona medical marijuana dispensary must be a United States citizen.  The term “principal officer” is used 47 times in the rules, but the term is not defined.

By |2011-01-26T21:00:21-07:00January 26th, 2011|DHS Rules, Legal Issues, Questions People Ask|Comments Off on Must All Dispensary Owners, Officers & Directors be U.S. Citizens?

What is a Medical Director & Why Does Every Arizona Medical Marijuana Dispensary Need One?

Question:  I am an Arizona physician who is considering offering my services to be the medical director of an Arizona medical marijuana dispensary.  Does every dispensary need a medical director?  What are the duties of the medical director under the Arizona Department of Health Services rules?

Answer:  The Arizona Department of Health Services rules require that every Arizona medical marijuana dispensary hire a medical director.  Proposition 203 did not contain a requirement for a medical director, but DHS decided in its wisdom that every dispensary should spend a lot of money to hire a medical director who must be doctor of medicine who holds a valid and existing license to practice medicine pursuant to A.R.S. Title 32, Chapter 13 or its successor or a doctor of osteopathic medicine who holds a valid and existing license to practice osteopathic medicine pursuant to A.R.S. Title 32, Chapter 17 or its successor and who has been designated by a dispensary to provide medical oversight at the dispensary.  R 9-17-312.

The Arizona Department of Health Services rules (R 9-17-312) for Arizona medical marijuana dispensaries require that every dispensary contract with a medical director who shall provide oversight for the development and dissemination of educational materials for qualifying patients and designated caregivers.  Here is the text of R9-17-312:

A. A dispensary shall appoint an individual who is a physician to function as a medical director.

B. During hours of operation, a medical director or an individual who is a physician and is designated by the medical director to serve as medical director in the medical director’s absence is:

1. On-site, or

2. Able to be contacted by any means possible, such as by telephone or pager.

C. A medical director shall:

1. Develop and provide training to the dispensary’s dispensary agents at least once every 12 months from the initial date of the dispensary’s registration certificate on the following subjects:

a. Guidelines for providing information to qualifying patients related to risks, benefits, and sides effects associated with medical marijuana;

b. Guidelines for providing support to qualifying patients related to the qualifying patient’s self-assessment of the qualifying patient’s symptoms including a rating scale for pain, cachexia or wasting syndrome, nausea, seizures, muscle spasms, and agitation;

c. Recognizing signs and symptoms for substance abuse; and

d. Guidelines for refusing to provide medical marijuana to an individual who appears to be impaired or abusing medical marijuana; and

2. Assist in the development and implementation of review and improvement processes for patient education and support provided by the dispensary.

D. A medical director shall provide oversight for the development and dissemination of:

1. Educational materials for qualifying patients and designated caregivers that include:

a. Alternative medical options for the qualifying patient’s debilitating medical condition;

b. Information about possible side effects of and contraindications for medical marijuana including possible impairment with use and operation of a motor vehicle or heavy machinery, when caring for children, or of job performance;

c. Guidelines for notifying the physician who provided the written certification for medical marijuana if side effects or contraindications occur;

d. A description of the potential for differing strengths of medical marijuana strains and products;

e. Information about potential drug-drug interactions, including interactions with alcohol, prescription drugs, non-prescription drugs, and supplements;

f. Techniques for the use of medical marijuana and marijuana paraphernalia;

g. Information about different methods, forms, and routes of medical marijuana administration;

h. Signs and symptoms of substance abuse, including tolerance, dependency, and withdrawal; and

i. A listing of substance abuse programs and referral information;

2. A system for a qualifying patient or the qualifying patient’s designated caregiver to document the qualifying patient’s pain, cachexia or wasting syndrome, nausea, seizures, muscle spasms, or agitation that includes:

a. A log book, maintained by the qualifying patient and or the qualifying patient’s designated caregiver, to track the use and effects of specific medical marijuana strains and products;

b. A rating scale for pain, cachexia or wasting syndrome, nausea, seizures, muscles spasms, and agitation;

c. Guidelines for the qualifying patient’s self-assessment or, if applicable,assessment of the qualifying patient by the qualifying patient’s designated caregiver; and

d. Guidelines for reporting usage and symptoms to the physician providing the written certification for medical marijuana and any other treating physicians; and

3. Policies and procedures for refusing to provide medical marijuana to an individual who appears to be impaired or abusing medical marijuana.

E. A medical director shall not establish a physician-patient relationship with or provide a written certification for medical marijuana for a qualifying patient.

By |2011-02-12T08:51:04-07:00January 19th, 2011|DHS Rules, Legal Issues, Medical Directors, Questions People Ask|Comments Off on What is a Medical Director & Why Does Every Arizona Medical Marijuana Dispensary Need One?

Text of the Public Comments to the 1st Draft of the Rules

On December 17, 2010, the Arizona Department of Health Services posted a draft of the medical marijuana rules for public comment.  Read the following comments received by ADHS  via its online survey from December 17, 2010, through January 7, 2011:

The Department also received the additional comments below:

By |2011-01-18T19:12:41-07:00January 15th, 2011|DHS Rules|Comments Off on Text of the Public Comments to the 1st Draft of the Rules

Department of Health Services: Medical Marijuana Public Comments

The following was posted on the Arizona Department of Health Services’ blog today:

So far, we’ve received well over 1,300 comments on the Informal Draft Rules that we posted December 17.  Our first comment period ends today.  We’ll be reviewing the comments and revising our initial draft over the next couple of weeks.  We’ll be releasing new draft rules for public comment on Monday, January 31, kicking off our next comment period (which will go through February 18).  After that, we’ll craft the final Rules and publish the finished package on March 28.

The following issues are generating the most comments:

  • The definition/requirements for patient-physician relationship;
  • Adding additional medical conditions including mental illness, PTSD, fibromyalgia, depression, etc.;
  • The fee structure (especially for patients with limited income);
  • The 25 mile limit for patient/caregiver cultivation (which is actually in the Initiative, not the rules);
  • The requirement that dispensaries cultivate 70% of their own product;
  • The processes for approving dispensary registration certificate;
  • The requirement that dispensaries have a medical director;
  • The qualifications for medical directors (e.g. allow other medical professionals including a pharmacist, naturopathic physician, homeopathic physician, family nurse practitioner, physician assistant, or registered nurse to be the medical director);
  • The 2 year residency requirement for dispensary applicants; and
  • The requirement that cultivation facilities be licensed in association with a dispensary (which is actually in the Initiative).

Overall, the comments so far have been constructive and many have been positive and support much of the overall language in informal draft rules.  All the comments on the informal draft rule are part of the public record and will be available for review on our hub 203 website (with personal identifiers removed) by next Wednesday.

By |2011-01-18T19:14:36-07:00January 7th, 2011|DHS Rules|Comments Off on Department of Health Services: Medical Marijuana Public Comments

Arizona Pharmacy Alliance Comments on Medical Marijuana Rules

Mindy D. Smith, the Chief Executive Officer of the Arizona Pharmacy Alliance sent a letter dated January 7, 2011, to Will Humble, Director of the Arizona Department of Health Services, in which she states the AzPA’s suggested changes to the December 17, 2010, first draft of Arizona’s medical marijuana rules.

By |2011-01-18T19:15:03-07:00January 7th, 2011|DHS Rules|Comments Off on Arizona Pharmacy Alliance Comments on Medical Marijuana Rules