Written by: Melissa Schiller – Cannabis Business Times
Montana’s medical marijuana program has faced it all in its nearly 15 years of existence—two successful voter initiatives, rising and falling patient numbers, federal raids, legislation meant to render it unworkable and plenty of confusion.
The state passed its first medical marijuana law in 2004, which was “a very thin statute,” according to Kate Cholewa, a lobbyist for the Montana Cannabis Industry Association (MTCIA).
“It was really more designed to support that good-Samaritan model of medical-marijuana provision, where there’s a humble caregiver providing for a cancer patient,” she says.
During that time, it was unclear if states could be involved in the regulatory process without violating federal laws, so the state legislature had little interest in fine-tuning the program, according to Chris Lindsey, senior legislative counsel with the Marijuana Policy Project (MPP), which helped pass the original initiative.
From 2004 to 2009, the program grew to support about 5,000 patients, but as political tides began to shift in 2009, the industry exploded in Montana. The 2009 Ogden Memo stated that the federal government would not interfere in states with regulated medical marijuana, which created a greater sense of safety for Montana’s cannabis businesses. Organized clinics began popping up in the state, and by the fall of 2011, the program had grown to roughly 30,000 patients and more than 4,000 providers, Cholewa says.
“It was an explosion, and meanwhile, you have this very thin law, really not designed to support the level of activity that was going on,” she says. “There were no inspections. There was no oversight. There was no licensing. So, you had inadequate law and a lot of activity. Not only that, you had people looking at the law and trying to construct their businesses with a law that really wasn’t comprehensive enough to support conducting business.”
Something had to give. While some thought only adequate regulation was needed, others decided the program should be repealed entirely.
Meanwhile, the federal government came down on Montana in 2011 with raids.
“Montana was hit very hard with federal raids, and then the legislature used the raids as rationale to pass legislation that was really to take down the program, without officially repealing it, in 2011,” Cholewa says.
“What they really wanted to do is make it so people couldn’t operate and patients just had to grow their own,” Lindsey adds. “That’s a terrible solution if you’re one of those patients because growing medical-grade cannabis is not an easy thing to do, and very few patients were able to actually do that.”
Patient numbers crashed, stabilizing around 12,000, Cholewa says.
The MTCIA became a vehicle to file a lawsuit against the law, which led to the courts enjoining several provisions that were not able to go into effect. For the next five years, until 2016, MTCIA continued to support the lawsuit and ensure patients could continue to access their medication.
In 2016, the Montana Supreme Court ruled in favor of the state, allowing the full law to take effect. MTCIA was prepared for this blow, and had launched efforts for a ballot initiative to essentially pass a medical marijuana law again. In November 2016, voters passed Montana’s second medical marijuana initiative to reboot the program.
“It’s been a very rough ride here for people,” Cholewa says. “In 2016, we passed our second medical marijuana initiative with good numbers and we passed a good law.”
“Now businesses could be licensed as businesses,” Lindsey adds. “There’s a system now in place. It’s not very robust. If you compare what Montana ended up with [to] some place like Colorado or California or these emerging regulatory systems, they don’t look very much like one another. But there are testing requirements. You have to label your products. There are familiar features.”
The law essentially removed some of the dysfunctional elements of the 2011 statute, Cholewa says, and added licensing and inspection requirements for businesses.
“Since 2004, we’ve had a medical marijuana program and no one’s ever walked into any of these businesses from the state,” she says. “No one’s licensed—they just register with the state. So, for the first time, we want to get somebody in these places and make sure there are basic health and safety standards that are met, make sure people are licensed [and] see who owns these places.”
Additional tracking and testing regulations were passed during the 2017 legislative session, and the plan was to conduct the first phase of inspections and licensing in the summer of 2017, then add tracking and testing requirements in the spring of 2018.
This plan quickly deteriorated, Cholewa says.
“The bureaucracy—the state agency assigned to regulate it—they didn’t do it,” she says. “And we kept saying, ‘Where are these inspections? Where are these licenses? Nothing’s happening.’”
The state ultimately removed a regulator and appointed a new one, who then started work on implementing a tracking system before inspecting and licensing the state’s businesses, Cholewa says.
“We laid out a really good plan—our law is good, our taxes are low [and] it was supposed to be strategically implemented to work well for the state agency to give them time to learn how to get things up and running, give the people who are in the program time to gear up,” she says. “But then we had our state agency drop and fumble the ball.”
Overall, though, Cholewa stands behind the state’s current medical marijuana law.
“The law was designed—how it was implemented is something else—but it was designed to give everybody time to figure out how to survive,” she says. “First, inspections and licensing, so before you need to learn about a tracking system and prepare for testing, you have time to get the proper locks on your doors. There was time to gear up. And by creating licenses, you had time to consolidate—join together with other small people to create a business.”
And although some businesses have consolidated and others have scaled up to survive, others still have dropped out of the race entirely. The trouble with Montana’s regulatory landscape, Cholewa says, lies in not only a messy implementation process, but also trying to impose any regulated system on businesses that have been operating without regulations for nearly 15 years, since Montana’s first medical marijuana law passed in 2004.
“Some people who might’ve really enjoyed growing cannabis and having people come over and providing it to their patients, they don’t want to do … a tracking system,” Cholewa says. “They don’t want to do that other stuff. This is not how they want to live their lives, and so they leave the system.”
Montana once had more than 600 medical marijuana providers, but the count has dropped to 300 to 400 since the current law passed, she says.
Businesses are required to be vertically integrated, and there is no licensing cap. However, when patients are approved for medical marijuana, they must register to purchase product from a single provider, Cholewa says.
“They can change, but they can’t just go here and go there, looking for the right products,” she says.
In addition, the number of patients a provider has dictates how much cannabis they can produce.
“It treats people like commodities in a very bad way, and it makes people compete to own customers,” Cholewa says.
MTCIA attempted to separate licensing from patient numbers in 2017, instead opting for licensing based on cultivation area, but the state agency did not implement this change into the final law that passed.
“Montana is still a little bit of a muddle,” Lindsey says. “And it’s partly because it’s such a small state that it doesn’t really come into the conversation very often, but it has been so convoluted that it’s difficult to really parse out what happened.”
While some may equate lax regulations with more freedom, most businesses crave the structure and guidance of more traditional rules, he adds. “You’d like to have lots of regulations because now you know exactly where you stand,” he says. “And getting back to the federal raids and all the messiness that happened around 2011 and 2012 and into ’13, it was the lack of careful regulatory oversight that was the biggest problem.”
And although Montana’s medical cannabis industry continues to struggle with implementation, Cholewa says the program has come a long way.
“We had raids in 2011, and then we had the bureaucracy really fumble the ball, but we have a really good law—we just need it properly implemented,” she says. “We just need to go in there and get that done.”
The businesses that have bested the hurdles thrown their way for the past 15 years have built quality operations that could generate investor and acquisition interest from other states, once the regulations are ironed out, Cholewa adds.
“The people who are still standing—and as you hear this story, you can imagine—they’ve been through a lot,” she says. “These are businesspeople who know how to deal with things changing and changing very quickly and needing to adapt and creating a wide variety of products. So, for all the wildness that Montana’s been through, I think it has created at least a set of very quality businesspeople.”
Montana can also be a lesson in the importance of creating industry standards, Cholewa adds.
“The development of these standards is critical,” she says. “It’s an issue at the national level. State bureaucrats don’t have answers and they don’t know good information from bad information. As a result, the standards conversation has a tendency to be about money. Cannabis testing labs testing too much to make a buck. Cannabis producers fighting testing to save a buck. Cannabis producers supporting too much testing because it’s expensive and will drive their competitors out of business. All these things come into play. None of them have anything to do with what testing is necessary and how it should be done. Independent standards organization ASTM International is focusing on creating standards and best practices for the emerging global cannabis markets. This is important and much-needed work.”
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