New York Medical Cannabis Providers Sue State to Block Program Expansion

medicalmarijuana May 2, 2017 Comments Off on New York Medical Cannabis Providers Sue State to Block Program Expansion
New York Medical Cannabis Providers Sue State to Block Program Expansion

Four of New York’s five medical marijuana companies have filed suit against the state Department of Health to stop it from licensing additional operators to take part in the tightly run state program. The companies argue that the expansion could tank the nascent industry and potentially harm thousands of patients who rely on medical marijuana to treat their ailments.

A judge did not immediately grant a request for an injunction to stop the process.

DOH spokeswoman Jill Montag said the agency “will continue to fight any attempts to block patients from the relief they deserve.”

The lawsuit comes as DOH has privately told companies that new licenses could be issued as soon as next month, according to the New York Medical Cannabis Industry Association. The association, which represents the five companies currently licensed, filed the lawsuit Friday on behalf of four of them.

Executives from Vireo Health of New York, Etain, PharmaCann — all of which have Albany dispensaries — and Bloomfield Industries submitted affidavits in support of the lawsuit.

A spokeswoman for the fifth registered organization, Columbia Care, did not immediately respond to a request for comment Friday.

DOH has been considering licensing the applicants that scored sixth through 10th in the initial licensing process in 2015. DOH has publicly said it is seeking to issue five new licenses by July.

In its 28-page lawsuit filed in state Supreme Court in Albany, the Medical Cannabis Industry Association claims the DOH’s attempt to license new companies “will completely overstep its authority delegated by the Legislature” in the 2014 Compassionate Care Act by exceeding what the association interprets as a statutory cap of five “registered organizations” at one time.

The suit argues that even if DOH had authority to issue more licenses, patient demand doesn’t warrant doubling the current supply market. The companies also claim DOH is arbitrarily offering preferential treatment to “stale” applicants “that may not actually exist, and certainly do not exist as they did two years ago” in considering only original applicants who came in six through 10, and not 33 other applicants from the original 2015 process.

“The DOH’s premature doubling of the supply market, before patient demand has grown to a level that can sustain even the existing market, will immediately launch the collapse of the medical cannabis industry in New York,” the lawsuit states.

It contends that, should expansion occur, current companies would be forced to kill plans to introduce expensive, highly refined medications used to treat children with severe epilepsy, and freeze efforts to reduce prices on their products.

“Today is the first step in protecting the patients we serve on a regular basis across New York state,” the Medical Cannabis Industry Association stated.

Montag said DOH has “made clear our commitment to the continued growth of this program so that the New Yorkers who qualify for this therapy have access to it.”

“The court’s decision today not to block this expansion while the lawsuit is pending certainly helps those residents,” she said.

The lawsuit follows months of growing anger among the current medical marijuana producers. From the companies’ perspective, licensing more companies would be bad for an industry that has struggled. One company, Bloomfield Industries, changed hands after last year finding itself “in a precarious financial position, as CEO and Chairman Adam Bierman put in his affidavit in support of the lawsuit.

The companies have noted that a large segment of the patient population (which has grown to more than 17,500 New Yorkers as of this week) isn’t returning to dispensaries for a second round of medication. Earlier this year, DOH revealed that only roughly half of the patients who were certified to buy and use medical marijuana were repeat customers.

Anecdotally, there have been concerns that high prices and a lack of insurance coverage for medical marijuana — which remains illegal on the federal level — keep patients from coming to dispensaries. But even as companies turn to discount programs in an effort to boost their customer bases, significant pricing changes have not been in the cards.

DOH has pointed to other issues as well, including the fact that some patients and doctors (976 practitioners had signed up to certify patients for the program as of this week) likely remain wary of such a new treatment option. In other cases, it’s possible that medical marijuana is simply ineffective or some seriously ill patients may have died before they had a chance to buy the drug.

“The program is still in its infancy, and patient demand is currently too low to support an expansion of the supply market for medical marijuana,” Friday’s lawsuit states. “As it is, all five of (the Medical Cannabis Industry Association’s) members are sustaining tremendous operating losses, after having made millions of dollars in initial investments.”

The New York Medical Cannabis Industry Association said companies have invested more than $50 million to build out their operations. Without enough patients, those investments have left several companies each with enough product on hand to supply all patients in the program for the next 18 to 24 months, according to the lawsuit.

“We are here for the right reasons, and we’ve shown that commitment to regulators, patients and physicians since day one,” the association said. “It’s time that commitment to making New York’s program the best in the country was matched by our partners in government.”

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