During the Virginia Cannabis Control Authority’s (“VCCA”) meeting on January 31st, 2024, members officially addressed their proposed timeline—albeit very aggressive timeline—to grant the one (1) remaining pharmaceutical processor license. Let’s delve into what is next for Virginia’s medical cannabis program as recreational sales is right on its tail:
Background of Virginia’s Medical Cannabis Program
Virginia’s cannabis laws date back all the way to 1979, when the Virginia General Assembly eliminated prosecution for possession of cannabis if a written prescription was provided by a doctor for the treatment of cancer or glaucoma. Unfortunately, like many laws implemented prior to the cannabis revolution, it did not create a legal process for patients to obtain medical cannabis products. Although the Virginia General Assembly authorized possession of cannabis based on a doctor’s recommendation, as well as set forth the prohibition of prosecuting patients and parents or legal guardians of patients with epilepsy who possess CBD in 2015, the state still did not implement a regulatory framework for patient access thirty-six (36) years later. Neither the 1979 nor the 2015 laws legalized possession of cannabis products other than from CBD or THC oils.
Fortunately, for patients residing in the “Mother of Presidents” state, the Virginia General Assembly passed laws in 2018 to authorize the Virginia Board of Pharmacy to license pharmaceutical processors and established procedures for the distribution of medical cannabis. Pursuant to the new laws, there would be one (1) pharmaceutical processor in each of the five (5) designated Health Service Areas (“HSA”). A pharmaceutical processor is vertically integrated, which allows them to cultivate, process, and dispense at one location. In addition, upon recent approval of the regulations, pharmaceutical processors will be allowed to have one (1) additional cultivation facility through acquiring a cannabis cultivation permit. Further, there are cannabis dispensing facility permits, which allow up to five (5) facilities total and must be owned in part by a pharmaceutical processor as each dispensing facility must be located within the same Health Service Area.
In 2018, the Virginia Board of Pharmacy initiated a Request for Applications, in which fifty-one (51) applicants vied for a coveted pharmaceutical processor license. Illinois-based PharmaCann was conditionally approved for the license in the HSA-1 region, and along with the other chosen applicants, was required to complete specific steps toward becoming operational within one (1) year, including site construction deadlines for their cultivation and processing facility. In May 2019, PharmaCann purchased a ~6.6-acre site in Staunton, Virginia, to use that land to construct their facility for their operations. Although their officials knew that a gas line was running through the property when they purchased the land, they did not believe it would prevent construction. In November 2019, the Virginia Board of Pharmacy notified PharmaCann of its pending inspection to ensure the company was able to demonstrate the progress towards becoming operational; however, there was nothing to inspect as construction had yet to even start. PharmaCann filed a corrective action plan with the Board in January, informing them that construction would not be completed until October 2020. Due to COVID-19 related issues, the Board was not able to review the corrective action plan until June 2020, where they decided to rescind the conditional license.
Thereafter, PharmaCann filed a lawsuit claiming the board exceeded its statutory authority and unjustifiably treated the company differently from similarly situated applicants. However, the Court ruled against PharmaCann’s argument noting that the Board was authorized per the regulations to lawfully revoke the conditional license as a result of the applicant’s failure to meet regulatory requirements and deadlines.
As a result of the Court’s decision, it has opened a path for interested operators to make their mark in Virginia’s medical cannabis program, but first they must tackle the competitive application process.
Timeline to License the HSA-1 Pharmaceutical Processor License
In 2021, the adult-use of cannabis passed, creating the Virginia Cannabis Control Authority. The VCCA subsequently took authority over the medical and recreational cannabis programs in Virginia in January 2024. In accordance with their meeting held last week, members stated their proposed timeline to issue the remaining pharmaceutical processor license:
- Early February 2024: The draft of the Request for Application (now called “Notice” to be inline with the regulations’ terminology) will be reviewed by the subcommittee.
- Mid/Late February 2024: The Notice will be posted on the VCCA’s website.
- Late March 2024: Applications will be due for the HSA-1 Pharmaceutical Processor license.
- April 2024: Evaluation and scoring of the applications will be conducted.
- May 8th, 2024: The highest scoring applicant will be announced at the VCCA’s meeting.
- Mid May 2024: Finalist will have to get all requests from the VCCA in to ensure eligibility for licensure.
- June 2024: Approval of the conditional licensee.
What Should You Expect to Submit an Application?
Although the Notice has yet to be released, the prior pharmaceutical processor application provides some insight to what interested applicants can expect to submit a comprehensive application for this upcoming competitive round.
Applicants were required to describe the applicant’s, as well as their personnel’s experience in agriculture, production and dispensing to demonstrate their expertise in the industry. Further, the applicant needed to provide their financial position, including funding resources, any evidence of an escrow account, letter of credit or performance surety bond. An extremely important aspect of the application required the applicant to set forth its location’s compliance within the HSA-1 region, including zoning and distancing requirements, as well as its accessibility for patients, compatibility with other commercial and residential structures, and evidence of support from the locality. In the prior application round, applicants were required to provide blueprint, as well as text and graphic materials showing the exterior appearance of the proposed pharmaceutical processor.
To demonstrate the applicant’s readiness to operate in the industry, applicants were required to provide a review of their industry involvement and whether they were subject to any disciplinary actions. Moreover, the applicant had to be authorized to conduct business in Virginia in good standing, as well as demonstrate its location’s compliance with all local building, fire, and zoning requirements and local ordinances, including proof of right to occupy the premises. Applicants were further required to demonstrate their product and site safety, including list of cannabis oil products anticipated to be produced and dispensed, as well as their expected hours of operation. Numerous standard operating procedures were required including, a Security Plan, Marketing Plan, a Compassionate Need Plan (i.e.) discount pricing, Delivery Service Plan, and Research Plan.
In addition, the VCCA has proposed the following fees for a pharmaceutical processor license, as well as a cannabis dispensing facility permit:
Pharmaceutical Processor License:
- Initial Application – $18,000
- Initial Permit (License) – $165,000
- Annual Renewal – $132,000
Cannabis Dispensing Facility Permit
- Application – $5,000
- Initial Permit – $80,000
- Annual renewal – $64,000
For Cannabis Cultivation Permit
- Application – $5,000
- Initial Permit – $80,000
- Annual renewal – $64,000
Upcoming Recreational Market in Virginia
Although the spotlight is on the remaining pharmaceutical processor license, the creation of a regulatory framework for Virginia’s adult-use market is fast-approaching. The “Mother of Presidents” state has been on standby since adult-use passed in 2021, but legislators failed to enact provisions to implement a regulated program. However, with Democrats gaining control of both the House and Senate last year, it has been a hard-pressed issue to create a regulated market, so the state can get out of this gray market area it has been operating under the past few years.
Currently, SB 448 is making its way through Senate committees to ensure its success once it crosses over to the House. Most recently, it has been referred to Finance and Appropriations. Under SB 448, the VCCA will begin accepting applications for all applicants, including licensed pharmaceutical processors, on or after July 1, 2024. From July 1, 2024, to July 1, 2029, the VCCA has to reserve license slots for pharmaceutical processors, who meet all the applicable licensing requirements. However, retail sales will not be seen until January 1, 2025.
Moreover, SB 448 proposes eligibility criteria to ensure further equity in their adult-use market:
An applicant that has 66% ownership by person(s) who have: (i) have resided for at least three of the past five years historically economically disadvantaged community; (ii) have attended for at least five years a public elementary or secondary school located in a historically economically disadvantaged community; (iii) have received a federal Pell Grant or attended for at least two years a college or university at which at least 30 percent of the students, on average, are eligible for a federal Pell Grant; (iv) are a veteran of the armed forces of the United States and were discharged or released under conditions other than dishonorable; or (v) are an industrial hemp processor or grower that is registered with the Commissioner of Agriculture and Consumer Services pursuant to Chapter 41.1 (§ 3.2-4112 et seq.) of Title 3.2 and completed such registration prior to January 1, 2021.
Further, there is a competing bill in the House, House Bill 698, that is strongly favored by existing medical marijuana operators as it would allow them to begin sales earlier than the rest—other than sixty (60) equity-focused microbusinesses and five (5) existing licensed hemp processors. Further, HB 698 proposes eligibility criteria for those who wish to apply for a microbusiness license:
An applicant that has 66% ownership and control by person(s) who have been (i) have been convicted of or adjudicated delinquent for any misdemeanor violation of § 18.2-248.1, former § 18.2-250.1, or subsection A of § 18.2-265.3 as it relates to marijuana; (ii) are the parent, child, sibling, or spouse of a person who has been convicted of or adjudicated delinquent for any misdemeanor violation of § 18.2-416 248.1, former § 18.2-250.1, or subsection A of § 18.2-265.3 as it relates to marijuana; (iii) have resided for at least three of the past five years in a historically economically disadvantaged community; (iv) have attended for at least five years a public elementary or secondary school located in a historically economically disadvantaged community; (v) have received a federal Pell Grant or attended for at least two years a college or university located in the Commonwealth at which at least 30 percent of the students, on average, are eligible for a federal Pell Grant; or (vi) is veteran of the armed forces of the United States.
If SB 448 or HB 698 passes, interested applicants will finally be able to apply for a Virginia adult-use license. With only one (1) available pharmaceutical processor license and the recreational market fast approaching, it is paramount to work with a Team of experts to ensure your spot in Virginia’s cannabis programs. Contact our Team today to discuss your options!