An update on the launch of the medicinal cannabis program

While recent news has focused on adult launches and program launches on the East Coast, a handful of states are beginning to launch a cannabis market for the first time. In the Appalachian, Southern, and Great Plains regions, numerous regulators have made or are about to make progress toward launching sales in recent months.

This week’s industry blog provides an overview of recent and upcoming activity in emerging medical cannabis states including Alabama, Georgia, Mississippi, South Dakota and West Virginia.

Alabama

Alabama legalized medicinal cannabis during the 2021 state legislature with 18 months’ notice before the bill goes into effect. A fourteen-strong panel has been meeting, soliciting public input and working on rulemaking for over a year, which recently concluded with the announcement of the adopted rules last week.

The Alabama Medical Cannabis Commission will shortly begin accepting applications for standalone and vertically integrated licenses, including cultivation, manufacturing and distribution (dispensaries), and transportation and testing facilities. Based on the proposed rules, there could be as many as 37 pharmacies nationwide in the future.

The current schedule is for a September launch, allowing potential licensees to express their interest in applying, and an application window between October 24th and December 30th.

Georgia

It’s been over a year since Georgia The Access to Medical Cannabis Commission announced its decision to proceed with the licensing of six production licenses. The agency selected a mix of local and national applicants – including affiliates of Fine Fettle, Trulieve and Nature’s Medicines, among others – in two license classes:

  • class 1 Applicants are granted permission to grow and process cannabis, including up to 100,000 square feet of canopy space
  • 2nd grade Applicants are limited to 50,000 square feet of canopy

Final rulemaking for pharmacies and dispensing licenses is ongoing and no timeline has been released to date.

Unfortunately, bureaucratic deadlock has held up the launch of this program since last summer. In the time since last year’s selection was announced, the state has been inundated with appeals and objections from unsuccessful applicants, including well-known multi-state operators like Curaleaf.

Various bills were introduced during the 2022 legislature to scrap the 2021 licensing process, issue new licenses and even raise the cap to 28 manufacturing sites. No law has prevailed to pass both chambers.

More recently, Governor Brian Kemp announced a new commission chair in April, while in May the panel voted unanimously to proceed with appeals. The state Bureau of State Administrative Hearings will be responsible for hearing objections to last year’s permitting decisions. Once this is complete, licensing will move forward, but unfortunately there is no timeline for now.

Mississippi

Mississippi voters overwhelmingly supported a constitutional amendment to bring medicinal cannabis to Magnolia State — over 73% voted in favor in 2020. However, a challenge in the state’s courts resulted in this being overturned.

Earlier this year, lawmakers followed suit, establishing a legal medicinal cannabis market with similar provisions. The state makes history in the South by being the first state at the regional level to have no statewide license caps. Unlike Arkansas, Florida, Georgia, Louisiana, and Texas, the state has no license caps.

Regulation of the state’s medicinal cannabis industry is shared by the Department of Health, which oversees production, testing, and transportation, and the Alcoholic Beverages Control Board, which handles dispensary licensing and sales. While the state lacks licensing caps, municipalities have chosen to deny some or all business licenses. Over 80 cities and nearly 20 counties have opted to ban the sale of cannabis.

To date, regulators have issued over 90 dispensary licenses, nine for cultivation (including seven standard and two “micro” licenses), three processing licenses, one transporter, and no labs. Interestingly, the majority of companies receiving cultivation licenses aren’t vertically integrated to include sales — this could be a future trend to watch as more licenses are awarded.

In addition, pharmacy licenses have been granted to firms with out-of-state connections, including firms in Oklahoma, Missouri and California, as well as past applicants in Louisiana and likely future applicants in Alabama.

South Dakota

Similar to Mississippi, voter choice in South Dakota was overruled in 2022 when a 2020 legalization measure for adult use (Constitutional Amendment A) was overturned by the state Supreme Court. At the same time, with the passage of Measure 26, potential owners of cannabis companies were given the opportunity to finally enter the industry and create a market for medical cannabis without state-wide license caps.

The state has been issuing licenses on an ongoing basis since January this year, with over 30 farmers, nearly a dozen manufacturing plants and over 70 dispensaries having received licenses to date.

Entrepreneurs and their models vary. Some have opted for vertical integration, while others have opted for single locations or multiple branches. While the number of licenses continues to grow steadily each month, only one state-licensed dispensary has recently opened (outside of Sioux Falls), a subsidiary of Colorado-based Unity Road. More retail openings are expected in the coming weeks.

West Virginia

The Mountain State has also seen steady program rollout this year, concluding a five-year saga from legislation to implementation. West Virginia Gov. Jim Justice signed the state’s medical cannabis law into law in early 2017, but various banking concerns caused a long delay, and the state missed its 2019 deadline for filing applications.

Nearly 300 applications were accepted in early 2020, and three lotteries were held by the end of 2020 to award licenses for 20 manufacturing facilities and 100 pharmacies. License winners include a mix of multi-state operators including Verano, Trulieve, Curaleaf and Columbia Care, as well as local businesses.

More and more facilities are coming into operation. Almost all farmers and over a quarter of the state’s pharmacies are operational, according to a recent weekly report. In addition, half of the state’s manufacturing facilities are now operational. Due to the state’s geography and market, growers can open two cultivation facilities — an option currently only exercised by two licensees. More pharmacy openings are expected as fall approaches.

Future of Medical Cannabis program rollouts.

Overall, these markets will continue to develop in the short and long term. Short-term expansion is more likely in South Dakota and West Virginia, where previously licensed facilities are continuing with their first harvests and dispensaries will continue to open.

The first cultivators in Mississippi will be ready for harvest later this year, with sales following shortly thereafter. Alabama and Georgia likely won’t have any more licensing activity before the end of the year, but could see additional opportunities for operators in 2023.

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