Liability of Medical Directors of an Arizona Medical Marijuana Dispensary

Arizona Medical Marijuana Medical Director:
What will you get sued for?
Can You Protect Yourself and Your Family from Financial Ruin?

Disclaimer: I am not an attorney. I am the business manager for Arizona Medical Marijuana Medical Directors: This article is strictly my opinion. It is not, nor should it be construed as offering: Advice, Instructions, Solutions, or anything other than my opinion on a subject: a subject that is changing everyday!

When I first examined the issue of the potential liability of the Medical Director of an Arizona medical marijuana dispensary I thought the answer was simple. I mean since the start of legalized medical marijuana in California, not one dispensary has been sued by a patient! In fact the only lawsuits I could find were municipalities suing dispensaries.

Unfortunately, after reviewing the final rules and having conversations with the Arizona Department of Health Services (ADHS) I now know the issue of Medical Director liability is complicated and may contain insurmountable problems for medical directors!

When you first read the job of the Medical Director it appears to be similar to a vendor providing a system for dispensary application and subsequent operation; similar to inventory control or security. However, on closer inspection of the rules and discussions with the ADHS it is MUCH, MUCH more then that!

First ask yourself: Why did Arizona require a Medical Director’s involvement in the dispensary application and operation process, but California and Colorado DID NOT?

We know the reason from discussions with the ADHS.  It is control. ADHS wants someone with a license at stake (the Medical Director) to be responsible for certain elements of the dispensary application and operation process.  How is this accomplished?  What follows is the text of the ADHS rules that specify the duties of the Medical Director or that have an affect the Medical Director.

i. Availability of different strains of marijuana and the purported effects of the different strains;

ii. Information about the purported effectiveness of various methods, forms, and routes of medical marijuana administration;

iii. Methods of tracking the effects on a qualifying patient of different strains and forms of marijuana; and

iv. Prohibition on the smoking of medical marijuana in public places;

  • R9-17-310.A.3: Maintain copies of the policies and procedures at the dispensary and provide copies to the Department for review upon request;
  • R9-17-312.E: A medical director shall not establish a physician-patient relationship with or write medical marijuana recommendations provide a written certification for medical marijuana for a qualifying patient.
  • R9-17-312.D: A medical director shall provide oversight for the development and dissemination of:
  • R9-17-314.A.5: A qualifying patient record is provided to the Department for review upon request;
  • R9-17-322.C. The Department shall deny an application for a dispensary registration certificate or a renewal if . . . The Department determines that the dispensary did not implement the policies and procedures or comply with the statements provided to the Department with the dispensary’s application.

These sections of the ADHS rules make a Medical Director responsible for activities that if not performed properly could result in the closure of the Dispensary. The Medical Director is responsible not only for development of educational materials and training, but also the “oversight” of the specific sections of the Qualifying Patient Records. The Qualifying Patient Records may be examined for compliance at anytime by ADHS. If the records are found non-compliant:

  • The dispensary could lose its license to operate. The Medical Director could be held responsible.
  • The ADHS will probably refer this to the appropriate medical board for disciplinary action. It will probably be a minor sanction, but who knows?
  • The dispensary owner will probably sue the Medical Director for lost revenue and/or business disruption. Easy to protect yourself from, but costly.

What is the biggest problem?  A dispensary agent may knowingly or unknowingly dispenses medical marijuana to an unqualified person. If that were to happen, the dispensary agent will lose his/her dispensary agent license.  R9-17-323.C.2.  The Most Important Question: Is this activity Criminal?  If it is who will the Attorney General of Arizona or County Attorneys prosecute?  Will it be the dispensary agent, owners of the dispensary entity and/or the Medical Director???

I see this as the Medical Director’s biggest liability! Unless there is a law passed to specifically address this question. It is still illegal to sell marijuana in Arizona except when a licensed medical marijuana dispensary sells to a qualified patient who has a valid registry identification card. This is Arizona not California. It is not unreasonable to expect everyone involved with the dispensary to get arrested for selling medical marijuana to an unqualified person.

Jim Mc Cready
602 578-4385
[email protected]

By |2015-04-06T18:51:47-07:00April 22nd, 2011|Legal Issues, Medical Directors|1 Comment

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
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