HB 706
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
First Reader
House Bill 706 (Delegate Ivey)
Health and Government Operations
Medical Cannabis – Dispensary Grower–Processor License
This bill establishes a new dispensary grower-processor license category within the State’s
medical cannabis program that authorizes a licensee to grow, process, and dispense medical
cannabis on the same premises. The bill establishes procedures for applying for, evaluating,
and issuing the licenses, as well as reporting requirements for licensees, and makes
conforming changes to the current statutory framework for the State’s medical cannabis
program. Among other things, only licensed dispensaries are eligible for the new license
and the Natalie M. LaPrade Medical Cannabis Commission must grant Stage One
preapproval to all applications that score within the top 50th percentile of the license
application evaluation process.
Fiscal Summary
State Effect: Special fund expenditures for the commission increase by almost
$1.2 million in FY 2022 for staff and contractual expenses to evaluate license applications;
out-years primarily reflect annualization and elimination of one-time costs. Special fund
revenues increase significantly beginning in FY 2022 from application and licensing fees.
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
SF Revenue - - - - -
SF Expenditure $1,170,900 $608,100 $526,600 $510,900 $529,100
Net Effect (-) - - - -
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: None.
Small Business Effect: Meaningful.
Analysis
Bill Summary:
Relevant Definitions
A “dispensary grower-processor” is an entity licensed under the State’s medical cannabis
program to act as a grower, processor, and dispensary. A “dispensary grower-processor
agent” is an owner, member, employee, volunteer, officer, or director of a dispensary
grower-processor.
Dispensary Grower-processor Licensing Requirements
To be licensed as a dispensary grower-processor, an applicant must (1) hold a medical
cannabis dispensary license; (2) meet local zoning and planning requirements; and
(3) submit various application materials and an application fee to the commission. An
applicant may not have been subject to specified disciplinary actions from the commission
or have failed to meet any deadline imposed by the commission in relation to the
applicant’s dispensary license.
A person holding a dispensary grower-processor license may not have an ownership
interest in or control of more than one dispensary.
Application Evaluation Requirements for the Commission
The commission must issue a determination on a dispensary grower-processor application
within 90 days of receiving the application. The commission must (1) provide the blank
grower and processor application forms that were available in 2016 on the commission’s
website; (2) use the Stage One scoring criteria that the Regional Economic Studies Institute
(RESI) of Towson University used to evaluate processor and grower applications in 2016;
and (3) grant Stage One preapproval to all applications that score within the top 50th percentile.
When evaluating applications for Stage Two review criteria, the commission must use the
criteria used to evaluate processor and grower applications. Finally, the commission must
establish and implement criteria to review, evaluate, and rank applications under the bill.
The commission must, to the extent authorized by federal and State law, actively seek to
achieve racial, ethnic, gender, and geographic diversity when licensing dispensary
grower-processors and must encourage applicants who qualify as a minority business
enterprise or who are small, minority, or women-owned business entities to apply for
licensure.
HB 706/ Page 2
Administrative Requirements for the Commission
The commission must establish security and manufacturing process requirements that a
dispensary grower-processor licensee must meet to obtain a license, as specified. The
commission is authorized to inspect a licensed dispensary grower-processor to ensure
compliance with the bill’s requirements. In consultation with the Maryland Department of
Health, the commission must adopt regulations (1) regarding the packaging, labeling,
marketing, and appearance of edible cannabis products to ensure the safety of minors and
(2) that require dispensary grower-processors to meet any additional requirements the
commission deems necessary, including requiring a permit, to dispense edible cannabis
products. The commission may impose penalties or rescind the license of a dispensary
grower-processor that does not meet licensure standards.
Dispensary Grower-processor Agents
The bill establishes minimum requirements for dispensary grower-processor agents,
requires a dispensary grower-processor licensee to register dispensary grower-processor
agents, and establishes procedures that must be followed when an agent ceases to be
associated with the licensee. The bill also establishes legal protections for a dispensary
grower-processor agent acting in conformance with related statutory provisions.
Current Law:
Natalie M. LaPrade Medical Cannabis Commission
The Natalie M. LaPrade Medical Cannabis Commission is responsible for implementation
of the State’s medical cannabis program, which is intended to make medical cannabis
available to qualifying patients in a safe and effective manner. The program allows for the
licensure of growers, processors, and dispensaries and the registration of their agents, as
well as registration of independent testing laboratories and their agents. There is a
framework to certify health care providers (including physicians, dentists, podiatrists,
nurse practitioners, nurse midwives, and physician assistants), qualifying patients, and their
caregivers to provide qualifying patients with medical cannabis legally under State law via
written certification. Additionally, there are legal protections for third-party vendors
authorized by the commission to test, transport, or dispose of medical cannabis, medical
cannabis products, and medical cannabis waste.
The commission is authorized to set fees to cover its operating costs; these fees were
established by regulations promulgated in September 2015. Exhibit 1 shows the current
application and licensing fees by license type.
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Exhibit 1
Application and License Fees by License Type
Application Stage One Stage Two Annual
Fee License Fee License Fee License Fee
Grower $6,000 $2,000 $4,000 $125,000
Grower-Dispensary 11,000 3,000 8,000 165,000
Processor 6,000 2,000 4,000 40,000
Dispensary 5,000 1,000 4,000 40,000
Source: Code of Maryland Regulations; Department of Legislative Services
Revisions to Process After Initial Issuance of Licenses
After controversy over geographic, racial, and ethnic diversity following the initial award
of grower, processor, and dispensary Stage One license preapprovals in 2016, Chapter 598
of 2018, an emergency bill, made a number of significant reforms, including (1) requiring
outreach to encourage participation in the medical cannabis industry by small, minority,
and women business owners; (2) requiring the commission to promulgate emergency
remedial regulations based on the results of a disparity study and delay reviewing, ranking,
or evaluating license applications until the regulations were adopted; (3) raising the
statutory cap on grower licenses from 15 to 22; and (4) establishing a new license cap of
28 for processors.
The disparity study conducted in accordance with Chapter 598 concluded that the State has
a compelling interest in implementing remedial measures to facilitate participation in the
medical cannabis industry by minorities and women. Based on these findings, the
commission adopted emergency regulations in November 2018 altering the application
review process for medical cannabis grower, processor, and dispensary licenses to
incorporate remedial measures to assist minorities and women in the medical cannabis
industry. The regulations also altered the weighted criteria used to rank license applicants
to include certain race-neutral and race-conscious provisions intended to address the needs
of women and minority applicants. The new criteria account for 15% of the total points on
the license application.
State Revenues: Special fund revenues increase significantly, beginning in fiscal 2022
from application fees, and in out-years from application and annual licensing fees, from
the new dispensary grower-processor licenses. The commission advises that it plans to
charge $4,000 for the Stage One application fee, $8,000 for the Stage Two application fee,
and $205,000 for annual license fees. Based on the timing to issue past licenses, it is likely
HB 706/ Page 4
that applicants begin applying in fiscal 2022, and Stage Two and annual license fees begin
to be collected in fiscal 2023.
The commission advises that there are currently 94 licensed dispensaries in Maryland, and
an additional 7 dispensaries are likely to finalize their licenses in the next six months. Thus,
there will likely be 101 licensed dispensaries by the time the bill goes into effect.
For illustrative purposes only, if all 101 licensed dispensaries were to apply for the
new license in fiscal 2022, and the top 50 were to pay the Stage Two application fee and
the first-year annual license fee of $205,000 when approved in fiscal 2023, special fund
revenues would increase by $404,000 in fiscal 2022 and by $10.65 million in fiscal 2023.
Annually thereafter, these 50 licensees would continue to pay the $205,000 annual license
fee, resulting in special fund revenues of $10.25 million annually. Because the bill requires
a dispensary grower-processor licensee to hold a dispensary license, all new licensees
would continue to pay their annual dispensary license fees.
This illustrative example does not reflect any special fund revenues attributable to
dispensary grower-processor agents as the Department of Legislative Services (DLS) does
not have a reliable estimate for the number of agents hired by each licensee. Growers,
dispensaries, and processors pay a $200 registration fee for each agent.
State Expenditures: Special fund expenditures increase by $1,170,850 in fiscal 2022,
which accounts for the bill’s October 1, 2021 effective date. This estimate reflects the cost
of hiring six full-time permanent employees (four policy analysts and two enforcement
officers) and two full-time contractual enforcement officers (for two years) to (1) issue new
licenses; (2) establish new policies and procedures related to the new license category;
(3) conduct inspections of new facilities; (4) issue grants and conduct outreach to small,
minority, and women business owners and entrepreneurs who have an interest in applying
for the new license; and (5) generally implement the bill. It includes salaries, fringe
benefits, one-time start-up costs (including grant funding and contractual costs for an
outside entity to evaluate the dispensary grower-processor license applications), and
ongoing operating expenses. The information and assumptions used in calculating the
estimate are stated below:
Establishing a new license category and issuing new licenses triggers current law
requirements for the commission to make grants to appropriate educational and
business development organizations to train and assist small, minority, and women
business owners and entrepreneurs seeking to become licensed.
The contractual cost to hire a third party to evaluate license applications is based on
actual contractual costs to evaluate license applications during past license cycles.
HB 706/ Page 5
Based on the number of currently licensed dispensaries and dispensaries that will
obtain final licensure in the near future, the commission receives as many as
101 applications for licensure and issues as many as 50 grower dispensary-processor
licenses under the bill.
Issuing as many as 50 additional combined grower dispensary-processor licenses
significantly expands the commission’s workload, and the commission cannot
implement the bill without additional staff.
Permanent Positions 6.0
Contractual Positions 2.0
Salaries and Fringe Benefits $479,200
Third-party Contractor Costs 500,000
Grants 135,000
Other Operating Expenses 56,650
Total FY 2022 State Expenditures $1,170,850
Future year expenditures reflect full salaries with annual increases and employee turnover,
ongoing operating expenses, and termination of the two contractual enforcement officers
in fiscal 2024 after the initial licensure cycle is complete.
This estimate does not include any health insurance costs that could be incurred for
specified contractual employees under the State’s implementation of the federal Patient
Protection and Affordable Care Act.
Small Business Effect: Small businesses may become licensed as dispensary
grower-processors, which gives increased access to the medical cannabis market since
individual grower and processor licenses are capped at significantly lower rates under
current law. However, any small business growers and processors already licensed may be
negatively affected due to the additional competition for market share. It is unknown
whether any applicants under the bill, or currently licensed dispensaries, would be or are
small businesses.
Additional Comments: DLS and the commission note that requiring the commission to
use the Stage One scoring criteria that RESI used to evaluate processor and grower
applications in 2016 runs contrary to current law and policy. New evaluation criteria that
were adopted after the disparity study evaluation concluded that the State has a compelling
interest in implementing remedial measures to facilitate participation in the medical
cannabis industry by minorities and women. The 2016 criteria do not include any such
remedial measures.
HB 706/ Page 6
Additional Information
Prior Introductions: HB 1317 of 2020 received a hearing in the House Health and
Government Operations Committee, but no further action was taken. Its cross file, SB 953,
received a hearing in the Senate Finance Committee, but no further action was taken.
Designated Cross File: None.
Information Source(s): Office of the Attorney General (Consumer Protection Division);
Maryland Department of Health; Department of Legislative Services
Fiscal Note History: First Reader - February 12, 2021
rh/jc
Analysis by: Kathleen P. Kennedy Direct Inquiries to:
(410) 946-5510
(301) 970-5510
HB 706/ Page 7
Statutes affected: Text - First - Medical Cannabis – Dispensary Grower–Processor License: 13-3304 Health General, 13-3311.1 Health General, 13-3301 Health General, 13-3302 Health General, 13-3303 Health General, 13-3303.1 Health General, 13-3304 Health General, 13-3304.1 Health General, 13-3306 Health General, 13-3307.1 Health General, 13-3309 Health General, 13-3310 Health General, 13-3311.1 Health General, 13-3313 Health General, 13-3307.1 Health General, 13-3313.1 Health General