As Ohioans prepare for the upcoming integration of medicinally available cannabis in our state, the process has unfolded in a quick succession of announcements from the Department of Commerce and Board of Pharmacy with corresponding public forums of the Medical Marijuana Advisory Committee (MMAC) asking questions of representatives of the agency as the process is put into place. Having been an audience member at both forums in 2017, it has been an inspiring display of democracy. The members of the MMAC have all asked engaging questions, and have demonstrated genuine conviction and concern for the state, while at the same time making it clear that marijuana will be available to those in need on time in 2018.
In examining the law as written in the Ohio House Bill 523 as well as the regulations as detailed in ORC 3796: The Ohio Medical Marijuana Program (as well as the public forums), the mechanisms by which the state intends to bring this nascent industry into being have become much more clear. Even as the program has not initiated the large-scale processes to quickly bring the industry to Ohio, the stated aims of the law, the regulations and the enforcement are now defined enough to examine the requirements for businesses wishing to apply for certification to grow marijuana in Ohio.
The most important aspect of the application process to understand is that the Ohio Medical Marijuana Program (OMMP) has mandated that entities seeking certification present fully developed businesses at the outset. The idea that a company has to have a completed business before they can apply to start their business with the state is very counterintuitive, and as such I will be examining the sections required by the ORC 3796 and what a prospective company must have in place before the application deadline closes.
Ohio House Bill 523 sets out the process by which the Department of Commerce shall accept applications and determine which businesses are given initial approval to grow marijuana in the state of Ohio (ORC 3796.03 and ORC 3796.09). As the OMMP has released draft versions of the 3796 regulatory statutes required for meeting the law, they have established the scoring system for applying businesses, as well as the five required plans for a complete application.
The scoring system for applications, defined by the regulations as impartial and numerical (3796:2-1-03 (B)), establishes that entities must have a minimum required score in each criteria category, as well as the best overall score. In instances where two or more applicants score a tie for one license (by district), the entity with the highest operations plan score will be awarded the licenses. If a tie exists for the operations plan, the security plan acts as the tie-breaker. Should a tie persist for security plans, a panel will decide between the entities.
The first required plan for an applicant is the business plan (business model). What is meant by the business plan is beyond the mechanisms of making money, as the selling of marijuana is by definition going to be lucrative in an environment with a limited supply and ample demand. What the OMMP is looking for, at a minimum, in the plan is information about the ownership group, location information and a background check of all participants. Once that information is established, all projected costs (fixed and variable) as well as project revenue must be budgeted. As we examine the four other required plans, the difficulty of capturing this information pre-application will become clearer.
The second plan required for an applicant is the operations plan. Whereas the costs and revenue of the business plan are relatively easy to envision, for those who have not previously run a manufacturing or processing facility, it can be challenging to put together a functional step-by-step system. Even with years of experience process-mapping existing businesses, we have found that trying to map out the operations of a business that has not begun operation to be one of the most challenging exercises in business development. As part of the operation plan, the entity must demonstrate expertise in growing marijuana, employment practices (including the determination of Type I and Type II employees), standards for propagation of plants, organizing the growing environment to properly segregate plants by growth stage and define how advertising will be engaged.
The third plan required by the law is the Quality Assurance plan. The QA and security plan (discussed below) represent major endeavors by themselves, and organizations attempting to achieve certification will need to devote a great deal of time and effort towards making sure their plan is well thought out and detailed. Minimum requirements for the QA plan include general housekeeping (GMPs in manufacturing language), pesticide, fertilizer and agricultural product usage, inventory control, packaging and labeling, disposal, a fully developed recall plan, lab testing as well as record keeping and reporting. Most organizations will want to make quality assurance a description for a key employee, but either that person needs to be a principal involved at the outset, or a Quality Assurance consultant needs to be brought into the process to put appropriate plans in place. Special attention needs to be placed in recall management. Having managed a full recall during my career, this is something that a professional must put into place, and for which an experienced employee (or one that has undergone training) needs to be in charge of. A recall is much like a fire, in that one should not be learning how to deal with it as it is happening. There is too much at stake, and too many critical factors to manage to simply hope that a designated employee can “figure it out.”
The fourth plan required by the OMMP is the security plan. As I have listened to the ideas of individuals looking to create medical marijuana grow sites in arrangements utilizing decommissioned buildings, coop arrangements and other hybrid arrangements, this requirement specifically makes anything other than a single-use establishment unusable. As is the case with the Quality Assurance plan, the requirements for the security plan are extensive, and a knowledgeable professional should be consulted on these matters before submission of any application to the OMMP. Included in this plan are requirements for general security and surveillance, transportation, employee identification cards, loss or theft reporting and the handling of acts prohibited by the department of commerce.
The fifth and final plan required by the law is a financial plan, and while it is not as extensive as the operations, quality assurance and security plans, it is nevertheless important to consult with a financial professional in compiling these documents. Included in these requirements are the identities and information for each of the principals involved with the organization applying for the license, the costs of building and maintaining the infrastructure of the organization, proof of adequate financial resources, escrow or bonding of the required amount, and tax payments of each principal for the previous five year period.
As entities begin the process of compiling the required records, finding and securing the required land needed and or building a facility to house the operation, sign a qualified expert to run the operations, and construct the necessary programs just to meet the minimum requirements to apply for inspection, it is important to have a structure or framework for organizing this information. Attempting to use the application as a means of understanding what is being asked for is a recipe for confusion, and ultimately failure to secure a license. We are here to help with our developed processes, our expertise and support in helping to put a system and application together that will meet the requirement of the OMMP.
Kellerman Consulting specializes in regulatory compliance consultation, and we are ready to work with your business to meet the requirements of the state of Ohio and ultimately gain approval to participate in the new medical marijuana industry in Ohio.