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Flurry of Legislative Developments Impacting New Jersey’s Cannabis Industry

Spring 2019 has been a busy season for New Jersey’s Cannabis Industry. On May 23, 2019 the New Jersey Assembly approved proposed revisions to the Jake Honig Compassionate Use Medical Marijuana Act that would effectively expand the state’s existing Medicinal Marijuana Program. The following week the Senate passed the bill 33-4.

May 31, 2019 saw the Food and Drug Administration (“FDA”) hold its first public hearing to assess the safety of CBD products. In opening remarks, Acting Commissioner of the FDA, Ned Sharpless, acknowledged that hemp derived CBD in food products is unchartered territory for the Agency. As such, in order to carefully evaluate potential pathways for CBD products, the FDA has formed an internal working group to address concerns such as how much CBD is safe for daily consumption, CBD’s combined effect if used both topically and orally and potential dangers to children should they consume a CBD edible.

On June 3, 2019, the New Jersey Department of Health announced that it is seeking new applicants to operate up to 108 additional Alternative Treatment Centers (“ATC”): Up to 38 in the northern region of the state, up to 38 in the central region, and up to 32 in the southern region. Three types of endorsements will be available for ATCs: cultivation, manufacturing and dispensary. In total, the Department will seek up to 24 cultivation endorsements, up to 30 manufacturing endorsements, and up to 54 dispensary endorsements. Permit application forms for ATCs will be available on July 1. Applications are due August 15.

While we wait for more direction from the FDA regarding hemp derived CBD, we want to take this time to summarize for you the proposed revisions to the Jake Honig Compassionate Use Medical Marijuana Act. It truly does expand the New Jersey Medicinal Marijuana Program in several ways.

First and foremost, the proposed bill establishes a new Cannabis Regulatory Commission (“CRC”) to oversee the medical cannabis program. (Sound familiar? That’s because we saw this in Senate Bill S2703). The CRC will consist of five, full-time members. At least one member is to be a State representative of a national organization or State branch of such an organization with a stated mission of studying, advocating, or adjudicating against forms of social injustice or inequality, and all members are to possess education, training, or experience with: legal, policy, or criminal justice issues; corporate or industry management, finance, securities, or production or distribution; medicine or pharmacology; or public health, mental health, or substance use disorders.

Of particular interest to both doctors and patients, the proposed bill changes the term “debilitating medical condition” to “qualifying medical condition,” and updates and revises the list of conditions, including adding conditions and providing that medical cannabis may be used as a treatment of first resort for any condition included in the original list. The amended bill also expands on the list of professions who can authorize patients for the medical use of cannabis. For example, it defines a “health care practitioner” as a physician, advanced practice nurse, or physician assistant. Quizzically, the bill eliminates the requirement for the professional to have a bona fide provider-patient relationship with the patient. With respect to minors, only a pediatric specialist can authorize a minor for medical use of cannabis. Finally, health care practitioners will not be required to register with the CRC, or be publicly listed in any CRC registry, as a condition of authorizing patients for medical cannabis.

For entrepreneurs already in the cannabis industry or those looking to get involved in the industry, the bill establishes four distinct permit types in connection with the production and dispensing of medical cannabis: medical cannabis cultivators, medical cannabis manufacturers, medical cannabis wholesalers, and medical cannabis dispensaries. These four permit types are analogous to the license types we previously saw in in Senate Bill S2703. The amended bill restricts the total number of entities authorized to cultivate medical cannabis to 23 for the first 18 months after the effective date of the bill, which includes any ATC already issued a permit prior to the effective date of the bill and the new permits required to be issued under the bill, but will not include microbusinesses issued a cultivator permit. Additionally, the bill establishes a new permit type, a “clinical registrant” which is essentially an entity that has a contractual relationship with an academic medical center whereby the parties will engage in clinical research related to the use of medical cannabis. At least 10% of the total permits issued for each permit type (excluding a clinical registrant) are to be issued to microbusinesses.

As expected, the bill will require laboratories to test medical cannabis product and said laboratories must register with the CRC. The CRC will be tasked with establishing testing standards, however, until such standards are created, laboratories will be authorized to use testing standards from a designated state selected by the CRC with a medical cannabis program.

For patients and caregivers – pay special attention to this. The bill provides that qualifying patients and caregivers may not be discriminated against when enrolling in schools, renting real property or in the issuance of a professional license, certification or permit issued by the state. However, schools, institutions of higher education, landlords, and licensing authorities will not be required to take any action that would jeopardize a monetary grant or privilege of licensure based on federal law. Schools, institutions, and landlords may not be penalized or denied benefits under State law solely based on enrolling or renting or leasing real property to a registered patient.

For those with questions regarding the tax implications of the expansion of the cannabis industry, most already know medical cannabis is subject to the State sales tax. Should the proposed bill become law, it will exempt medical cannabis from all state sales tax as of January 1, 2025. Until then, any sales tax assessed on medical cannabis is to be exclusively appropriated to programs for the treatment of mental health and substance use disorders. However, municipalities in which a medical cannabis dispensary or clinical registrant is located are allowed to establish a local transfer tax of up to two percent (2%) on the sales price of all medical cannabis dispensed by that dispensary or clinical registrant.

I see this bill as more than an expansion, rather a hybrid between Senate Bill 2703 and the current Jake Honig Compassionate Use Medical Marijuana Act. Since the bill passed the senate on May 30, 2019, the Assembly must take a new vote to accept a last-minute amendment the Senate approved allowing cannabis industry employees to unionize. The vote is expected June 10. We will continue to monitor developments in Trenton and communicate any relevant updates. Be sure you receive updates as soon as they are published by joining our Cannabis e-mail list from the homepage.

Disclaimer: Using, possessing, distributing and/or selling marijuana is illegal under federal law, regardless of any state law. Businesses and individuals should be aware that compliance with state law does not assure compliance with federal law. Federal laws may be enforced in the future. Legal advice provided by Lindabury, McCormick, Estabrook & Cooper, P.C., is designed to counsel clients regarding existing and/or proposed cannabis law. No legal advice we give is intended to provide any guidance or assistance in violating federal law.

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