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Tag: Virginia Cannabis Control Authority

Competition’s fierce for Shenandoah medical marijuana permit

UPDATE: State delays choosing Shenandoah medical marijuana provider

The Virginia Cannabis Control Authority (CCA) received 40 complete applications for conditional permits to operate as the state’s sole licensed pharmaceutical processor of medical cannabis for a region including the Shenandoah Valley, as well as Charlottesville, Fredericksburg and the counties of Spotsylvania and Stafford.

Applications were due April 30, and the state authority planned to announce the selected company at the end of June, according to CCA Chief Officer Jeremy Preiss.

Each company paid an $18,000 fee for the opportunity to be granted the sole medical marijuana license to serve the CCA’s health service area 1 (HSA 1), which has been tied up in litigation for years. HSA 1 has not had a licensed medical marijuana dispensary available since the state began issuing pharmaceutical processor licenses for its five HSAs in September 2018.

“This is a pay to try-to-play,” says Eric Postow, Fairfax County-based managing partner for Holon Law Partners. “That really just kind of demonstrates the interest in the business community wanting to service the cannabis sector.” Postow led a team that helped put together an application for Albemarle County-based Integra Vertical.

The competition also reflects the lucrative nature of the license, which allows licensees to open and operate dispensaries within their designated HSA. While the CCA doesn’t track sales revenues, the state’s dispensaries made 3.4 million medical cannabis dispensations in 2023. Virginia patients paid an average $14 per gram for medical cannabis flower at dispensaries, compared with $10 in Florida and Pennsylvania, according to a November 2023 market study conducted for the authority.

Along with multiple out-of-state businesses, Pure Virginia, a company connected to Elkton-based CBD and hemp products business Pure Shenandoah, applied for the conditional permit. Pure Virginia CEO Tanner Johnson says 40 applicants was on the higher end of what he’d expected, but he’s optimistic about his family business’s chances.

“To us, it didn’t really come down to the competition we were against but how good of an application we could put in, and I think that we put in a really, really good one,” he says.

Greenwood-based Jackpot 777 Farms, the company behind applicant Integra Vertical, currently produces hemp flower and CBD-infused products. “When the opportunity came up and Virginia decided to put HSA 1 up for application,” says Integra Vertical CEO Mike Tabor, “it seemed like an opportune time to make the shift into cannabis.”   

State delays choosing Shenandoah medical marijuana provider

At its June 26 meeting, the Virginia Cannabis Control Authority was expected to announce which company, among 40 applicants, had been selected from a highly competitive process to become the sole licensed pharmaceutical processor of medical cannabis for a region including the entire Shenandoah Valley, as well as the cities of Charlottesville and Fredericksburg and the counties of Spotsylvania and Stafford. 

However, during Wednesday’s meeting of the board of directors for the CCA, which began overseeing the state’s medical marijuana program in January, Shawn Casey, deputy chief of CCA’s regulatory, policy and external affairs office, said CCA staff and legal counsel need more time to study the scoring of the applications and to ensure the authority’s choice complies with all regulatory requirements. Casey noted the application materials totaled 16,000 pages. 

“Given the great interest in the application process, as shown by the number of applications, … we know the result will be highly scrutinized,” Casey said. “We wanted to make sure that we’re taking the time necessary to ensure the integrity and comprehensiveness of the recommendation that gets to the board and we’ll have an updated timeline whenever we can.”

Scoring of the applications was tabulated by five members of a review committee. Jeremy Preiss, the CCA’s acting head and chief officer, declined to name the committee members. However, one speaker at the meeting noted that board members Bette Brand and Anthony D. Williams sat on the committee. 

Virginia is divided into five health service areas, or HSAs, for regulating medical marijuana. The state currently has four approved pharmaceutical processors. The region currently being considered, HSA 1, has not had a licensed medical marijuana dispensary since the state began issuing pharmaceutical processor licenses in 2018.

The processor initially granted a conditional permit for HSA 1 was PharmaCann Virginia, originally a subsidiary of Illinois-based PharmaCann. That permit was revoked in 2020, however, after the company failed to build a facility by a December 2019 deadline. The permit was then tied up in legislation for years.

In February, the CCA announced it was ready to begin accepting applications for a pharmaceutical provider for HSA 1. Each of the 40 companies that applied paid an $18,000 fee to be considered. 

Tanner Johnson CEO of Pure Virginia, a company connected to Pure Shenandoah, an Elkton-based, family-run CBD and hemp products business, and one of the 40 companies who submitted an application spoke during the public comment portion of the meeting. 

“We are all too aware of extra-extraordinary efforts required to submit a truly competitive application, between the enormous upfront capital cost, the need to secure highly qualified cannabis industry experts, site control of the processor and dispensary locations in compliance with all the zoning and setback requirements, as well as demonstrating strong support from the local community,” he said.

In a statement to Virginia Business, Johnson said, “Delays are common, but you still hate to see it.”  Later, he added, “We hate to see it because every delay impacts the patients of HSA 1.” 

Greg Habeeb, chair of Gentry Locke’s Government and Regulatory Affairs Practice Group and also the president of Gentry Locke Consulting, a lobbying group representing the Virginia Cannabis Association, heard on Monday that the CCA would not be naming the permit recipient for HSA 1.

“Obviously, there’s a lot of applications, and I think there might have been a lot of applications that were missing information, and so, I’m not sure if that was it, or if it was just more work than they expected, or what’s going on,” he said.

Virginia’s four pharmaceutical processors of medical marijuana are owned by three out-of-state companies. 

Several of the applicants to serve HSA 1 were tied to multistate marijuana businesses with headquarters in other states. In his public statement, Johnson noted that a total of 21 companies are behind the 40 applications submitted for the HSA 1 license. Preiss confirmed that information Wednesday afternoon.

Habeeb doesn’t expect a lot of time to pass before the CCA makes an announcement about HSA 1. “I’m not sure why it would take a long time from here, unless, again … if they have concerns about some of the information and want to check behind it,” he said.

At Wednesday’s meeting, Johnson thanked the CCA staff and board members for their efforts.

“For too long, our medical patients of HSA 1 have been denied proper access to medical cannabis,” he said, “and we believe that through your efforts, that wait is almost over.” 

Shenandoah medical marijuana applications due April 30

While working as an occupational therapist, Stewart Bossman injured his back attempting to help a falling patient.

That happened almost 25 years ago, but Bossman continues to deal with back pain. “I’ve had four back surgeries and one neck surgery,” he said, “so sometimes it’s just hard to take.”

Bossman, 69, buys CBD drops, which are made from the active ingredient in cannabis that is derived from the hemp plant. He described the drops as being “better than nothing” as far as helping his pain. He has a prescription for Hydrocodone, but he holds off taking that medication unless he’s really suffering. “I like something more natural than a prescription,” he said.

A licensed practitioner provided a written certification for Bossman to buy medical cannabis. The only problem: The Shenandoah Valley doesn’t have a state-licensed medical marijuana provider.

In September 2018, months after then-Gov. Ralph Northam signed legislation allowing doctors to prescribe cannabis oil to patients, the Virginia Board of Pharmacy issued five regional pharmaceutical processor licenses for medical cannabis dispensaries.

Virginia is divided into five health service areas, or HSAs, for regulating medical marijuana. The state currently has four licensed pharmaceutical processing firms.

The processor initially given a conditional permit for HSA 1, which includes the Shenandoah Valley, as well as the cities of Charlottesville and Fredericksburg and the counties of Spotsylvania and Stafford, was PharmaCann Virginia, originally a subsidiary of Illinois-based PharmaCann. However, that permit was revoked in 2020 after the company failed to build a facility by the December 2019 deadline.

PharmaCann Virginia filed suit against the Virginia Board of Pharmacy in Henrico County Circuit Court in September 2020. The Board of Pharmacy’s second requests for applications for conditional permits for pharmaceutical processors in HSA 1 was put on hold during the litigation. In April 2023, Virginia’s Court of Appeals agreed with the circuit court, which rejected PharmaCann Virginia’s argument that the Board of Pharmacy treated it differently than the four other pharmaceutical processors in the state.

In late February 2024, Virginia’s Cannabis Control Authority, which began overseeing the state’s medical marijuana program at the beginning of the year, announced it was accepting applications for pharmaceutical providers for HSA 1. They’re due 5 p.m. Tuesday, April 30, with an application fee of $18,000.

Jeremy Preiss, the state Cannabis Control Authority’s acting head and chief officer, said that opening applications for HSA 1 was one of his top priorities when he joined the authority as its second employee in January 2022.

Not having a provider to dispense medical marijuana in the Shenandoah Valley, he said, is a disservice to the people who live there. For instance, people who have cancer or chronic illnesses may have a hard time driving from the Shenandoah Valley to Richmond or Northern Virginia to obtain medical marijuana.

“I do think some people discount the inconvenience, and it is a hardship,” he said. “People should have easy access to a product that a medical professional has deemed worthy of receiving, that they would get benefits from having access to it, and they shouldn’t have to travel great distances just to access it.”

Preiss said he did not know how many applications had been turned in as of Monday. “We’re not reviewing them as we receive them,” he said. “We will review them all at once.”

Jean E. Gonnell, a partner at Troutman Pepper who works with clients in the cannabis industry, said she expects there could be more than 10 applicants for the conditional permit to be the state-licensed pharmaceutical provider for HSA 1. There were nine applicants for that area in 2018.

A review committee will score the applications and present the results to CCA board members on June 26.

Tanner Johnson, CEO of Elkton-based Pure Shenandoah, a CBD and hemp products business he runs with his three brothers, will be among those submitting licenses. The seed-to-sale company has invested more than $500,000 preparing applications to be the pharmaceutical provider for HSA 1 in 2020 and for this round in 2024, according to Johnson.

The state’s four licensed medical marijuana dispensers fall under the ownership of three out-of-state companies. Johnson would like to see a Virginia company win this conditional permit.

For his family-owned company, the idea of growing medical marijuana products to help patients is “very near and dear,” he said. Johnson thinks they’ll provide better service to medical marijuana patients than companies that dispense across multiple states.

Johnson estimates it will cost Pure Shenandoah about $50 million to build a vertically integrated facility that cultivates cannabis plants, produces cannabis products and dispenses cannabis to qualified patients, as well as to establish five satellite dispensaries.

Johnson is concerned that under the CCA’s rules, the review committee can use a lottery to pick which company earns the conditional permit if more than one applicant has a highest ranked score. “It’s not who’s the best company; it’s who’s the best company that’s lucky,” he said.

Preiss questioned how likely it will be that multiple applicants will tie, however.

And even if one applicant faces off against another in a lottery, that still offers a 50/50 chance of winning, Gonnell pointed out.

“It’s a lot of money to put these applications together,” she said. “It’s not cheap obviously. That makes people always worry.”

MedMen Enterprises, a multistate cannabis operator based in California, acquired PharmaCann Virginia in 2019, according to the U.S. Securities and Exchange Commission.

A request for comment to MedMen was not immediately returned on Monday. The company filed for bankruptcy under Canada’s Bankruptcy and Insolvency Act on April 24.

Virginia currently has four pharmaceutical processors of medical marijuana owned by three out-of-state companies:
Maryland-based Green Leaf Medical was selected to serve patients in HSA IV, which includes Richmond, while New York-based Columbia Care was tapped to serve HSA V, which includes the Hampton Roads area. In 2021, Columbia Care bought Green Leaf Medical for $240 million. Columbia Care, which rebranded as the Cannabist Company in September 2023, has operations in 15 states. It had more than $511 million in revenue in 2023 and reported that Virginia operations made up $16.5% of that number.
Abingdon-based Dharma Pharmaceuticals received the processing license for HSA III, which encompasses  Southwest Virginia. Chicago-based Green Thumb Industries purchased Dharma Pharmaceuticals in 2021, reportedly paying about $80 million in cash and stocks. With operations in 14 states, Green Thumb Industries reported a revenue of $1.05 billion in 2023.
Alexandria-based Dalitso received the permit to operate in Health Service Area II, which includes Northern Virginia. In December 2020, Florida-based Jushi Holdings announced it had acquired the 100% of the issued and outstanding equity of Dalitso. In 2019, it reported having paid about $16 million for 62% of the company. Jushi reported total revenue of $269.4 million in 2023.
Messages to Green Thumb Industries and Jushi were not immediately returned.

Va. legislation details micro business funding criteria for retail cannabis market

RICHMOND — Virginia’s plan for a recreational cannabis market includes a way to help micro businesses, formerly known as the social equity license, get involved with what is anticipated to be a multimillion dollar business — if the plan survives the governor’s desk.

The Virginia Cannabis Equity Loan Fund will provide grants, low-interest and zero-interest loans to qualified micro business licensees, according to legislation passed by the General Assembly.

Del. Paul Krizek, D-Fairfax, and Sen. Aaron Rouse, D-Virginia Beach, reached a compromise between their two measures to create a state cannabis market.

An applicant must meet certain criteria to qualify, including having at least 66% ownership and direct control of the business.

The applicant must either have been convicted or adjudicated of a prior misdemeanor violation for marijuana to qualify.

The applicant could also qualify if they lived at least three of the past five years, or attended at least five years of public school, in a historically economically disadvantaged community.

Another qualification would be if the applicant received a federal Pell Grant or attended for at least two years a college or university where an average of at least 30% of the students are eligible for a federal Pell Grant.

Any veteran of the U.S. armed forces would qualify if they met the 66% ownership and direct control qualification.

The Virginia Cannabis Control Authority board of directors will regulate the application process. The board will also determine what percentage of license fees can be waived and promote participation in the loan program despite the ability to pay such fees, according to the bill.

Either the director of the Office of Diversity, Equity, and Inclusion, or a majority of the members of the Cannabis Equity Reinvestment Board, will sign off on the disbursement of funds.

The General Assembly approved $1.8 million each year, which will transfer to the Cannabis Equity Business Loan Fund in July, if the governor does not appoint a director of the Office of Diversity, Equity, and Inclusion, according to the budget. The governor renamed it the Office of Diversity, Opportunity, and Inclusion in 2022.

“The program will be funded by 100% of the licensing fees collected by the authority in the first year,” Krizek said in a Senate committee meeting for Rehabilitation and Social Services. “After that time, the program will be supported by 60% of the tax revenue from retail sales of marijuana.”

The equity fund will foster business ownership and economic growth within communities that have been affected by the prohibition of cannabis.

“The marijuana market bills are the most promising that we’ve had since 2021,” said Chelsea Higgs Wise, executive director of Marijuana Justice. “It includes the equity portions and includes repair for communities and includes certain funds and this is what we’ve been promising Virginia.”

The loan fund was created by the 2021 General Assembly and given $3 million to help develop an adult-use retail market, the CCA stated in an email. The 2023 General Assembly returned the $3 million back to the general fund, since the recreational cannabis market was not reenacted.

“We have an equity fund already established in statute,” said Sen. Barbara Favola, D-Arlington, at the committee of Rehabilitation and Social Services. “But it needs to be funded to make sure that our micro business really do have access to capital so they can start their cultivation and be able to get to the market.”

The CCA will collaborate with a community development financial institution that provides credit and financial services for disadvantaged communities to help manage the fund.

“We’re really hoping that it will be people of color, folks from certain communities that will be able to take advantage of entering the business and the setups that we’ve put into place,” Higgs Wise said.

Cannabis tax will be 8% and the revenue is estimated to be $6.41 million in 2025 and increase to $77.1 million by 2030, according to the bill’s final fiscal impact statement.

The state will add a 1.115% tax, and a locality can add an extra tax up to 2.5%.

The CCA stated that it could not respond to questions about potential licensing costs, because no adult-use cannabis market exists. Applications would start in September if the bill is signed.

The current application fee for a medical cannabis pharmaceutical processor permit is $18,000. The initial permit fee is $165,000 and the annual renewal fee is $132,000, according to the CCA.

Gov. Glenn Youngkin has stated many times that he’s not interested in signing the adult-use market legislation. He has issued 80 vetoes as of March 26, although some are duplicate bills. When asked about the cannabis bill on March 14, Youngkin told a Virginia Mercury reporter that he would read it and that it is a long bill.

Youngkin has until April 8 to take action on all bills that cleared the General Assembly. The legislature will reconvene on April 17 to review his changes, but Democrats do not have the super majority needed to overturn a veto.

Capital News Service is a program of Virginia Commonwealth University’s Robertson School of Media and Culture. Students in the program provide state government coverage for a variety of media outlets in Virginia.