The state of medical cannabis in Pennsylvania

Green Leaf Medical looks like something between a greenhouse, a pharmaceutical company and the set of a sci-fi movie.

Workers cover themselves head-to-toe in white suits to prevent bugs, mold spores and other contaminants from reaching the crops. Fans create a dull roar in rooms that are so bright with yellow, artificial sunlight that workers recommend wearing sunglasses inside. Irrigation pipes snake along pristine white walls.

It is all in preparation for 2,500 tiny plants sprouting inside containers with labels like “Acapulco Gold,” “Pain Killer” and “Blue Cheese.” An additional 500 older plants grow in another room in cubes made of molten rock fibers. Thousands more could follow.

Green Leaf Medical LLC is one of the first companies to grow medical cannabis in Maryland. The 3,000 plants inside are the seeds of a business that could employ 20 people, help untold numbers of patients and bring in net revenue of $29 million per year, according to chief executive Philip Goldberg. But they are seeds Goldberg cannot plant in Pennsylvania, at least for now.

Video tour of Green Leaf facility

Green Leaf was one of the 177 businesses that applied for a growing and processing license in Pennsylvania after the state legalized medical cannabis in April 2016. Goldberg bought a 275,000-square-foot factory in Bedford County for his planned Pennsylvania location, thinking Green Leaf’s track record in Maryland would make it a shoe-in for winning one of the keystone state’s 25 licenses.

Only 12 companies received licenses when Pennsylvania announced the first round of winners in June. Green Leaf was not one of them.

The process has left Green Leaf and the other 164 denied applicants hanging in limbo as they wait to see what Pennsylvania will do with its remaining 13 licenses. The future looks even more uncertain in the face of a staunchly anti-cannabis federal Justice Department and an injunction filed in Pennsylvania last month that threatens to topple the entire program.

Delays in Maryland
To understand where Pennsylvania is going, it helps to understand where Maryland has already been. And that path was not exactly an easy one.

Maryland legalized medical cannabis in 2013, initially limiting licenses to academic research centers but later opening the applications to the larger business community. Because of a tangle of legislative and legal roadblocks, four years would pass before companies could start putting plants in the ground.

Those obstacles included conflict-of-interest allegations against some of the officials who scored companies’ applications, an abrupt cap on the number of processing licenses allowed in the state and a lawsuit that urged Maryland officials to halt the entire program because of a lack of racial diversity in the leadership of companies that won licenses to grow.

Maryland’s program did eventually take off, with 15 growers, 15 processors and about 100 dispensaries receiving preliminary approval to move forward. Goldberg was one of several growers who received the final OK in August.

Still, the amount of time that elapsed between the legislation’s initial passage and the first cannabis plant taking root gave Maryland one of the slowest program rollouts of the 27 states that have legalized medical cannabis.

For growers like Goldberg, the delay meant continuing to pay bills for a business; meanwhile, they had no idea when or if it would be allowed to start making money. With every delay and lawsuit, Goldberg said, raising money became more challenging.

He hopes Pennsylvania and other states will learn from Maryland’s foibles, as well as its successes.

“They were trying to have a real medical program, not just some kind of ruse for recreational,” he said of Maryland officials. “Would we have liked it to go faster? Yes, no doubt about it. Did we spend a lot of time and resources during the waiting process? Yes. But what we have at the end of the day is what I consider to be one of the best programs in the country.”

Obstacles in Pennsylvania
It’s hard to say if Pennsylvania will encounter similar delays, but a series of lawsuits and grievances suggest lawmakers will have their hands full if they hope to meet their deadline of having an operational program by 2018.

Among the hurdles is what Barley Snyder attorney Ryan Logan called the “nuclear option”: a complaint that seeks to rescind all of the Pennsylvania grower/processor and dispensary licenses, forcing the state to start over.

The company with its hand over the big red button is Keystone ReLeaf, a Bethlehem-based business that applied for and failed to receive both a grower/processor license and a dispensary license in Pennsylvania. (Pennsylvania, unlike Maryland, combined its growing and processing licenses. That means that every company that grows cannabis can process it in-house as opposed to sending it to a separate facility.)

Keystone ReLeaf wants a judge to halt the medical cannabis program altogether on the grounds that the state was too secretive in its permitting process, did not take enough care to screen out criminals, and arbitrarily awarded points to and waived certain requirements for some applicants.

Attorneys from Florio, Perrucci, Steinhardt & Fader, the firm representing Keystone ReLeaf, did not return a request from the Central Penn Business Journal for more information. A spokeswoman for the Pennsylvania Department of Health said the department does not comment on pending litigation.

It’s tough to say how much of a chance Keystone ReLeaf’s request actually has of succeeding but some attorneys have noted that it has the potential at least to gum up the works of Pennsylvania’s medical cannabis program, just as similar complaints did in Maryland.

Logan, who is involved with the Pennsylvania Medical Cannabis Society, declined to comment on that likelihood but noted that the threat of an injunction has medical cannabis advocates talking about the impact a hold-up could have on the 250,000 patients who could potentially benefit from the drug in Pennsylvania.

State Sen. Daylin Leach (D-Montgomery/Delaware) is one of those advocates.

“For them to be asking for the entire program to be shut down is breathtakingly immoral and cruel,” Leach said in an interview with the Central Penn Business Journal a few days after Keystone ReLeaf filed its complaint.

Leach was one of the architects of Pennsylvania’s medical cannabis laws. He sent a letter to Keystone ReLeaf’s attorneys pleading for them to reconsider their lawsuit, saying that people with diseases like cancer, seizure disorders and post-traumatic stress disorder could “needlessly endure excruciating pain, agony, and, in some cases, death” if the program is delayed even a few months.

Leach knew when the legislation passed that aspiring grower/processors who did not receive licenses would appeal the state’s decisions — and at least 140, including Green Leaf, have done just that. He also suspected some companies would try to sue the state in response to individual license requests — an aspiring grower/processor in the Scranton area has done that, challenging the state’s decision to award a license to a company under investigation in Minnesota for smuggling cannabis oil across state lines.

“I really didn’t think someone would ask to shut down the whole program,” Leach said.

Leach acknowledges the application process was not perfect — he would have preferred, for example, to give approved grower/processors more than the allotted six months to get up and running — but he stands by one of the most controversial aspects of the law: the decision to keep secret the names of panelists who scored applications.

The state’s Office of Open Records ruled in August that the Department of Health must disclose those names. The department had yet to do so as of late September and still has the option to appeal.

Leach maintains that keeping those identities under wraps was a necessary step to protect the panelists from being unduly influenced by applicants, although he believes the state should release those names after the permitting process is done.

Ready to grow
Despite all the legal wrangling, Pennsylvania’s program remains on track, at least for now, to meet the Health Department’s goal of becoming operational in 2018. The state expects to award the final 13 grower/processor licenses next year as well.

Goldberg remains hopeful that Pennsylvania will learn from Maryland’s missteps and meet those targets. He also feels good about his chances of winning his appeal in Pennsylvania and receiving one of the remaining licenses.

In the meantime, he has cannabis to grow.

His Maryland facility has room for 10,000 plants, which he can sell wholesale to processors and dispensaries at a rate of about $3,500 per pound. His company is currently valued at about $48.5 million and has about 20 employees who make between $30,000 and $65,000 per year.

He hopes to eventually add processing and dispensary capabilities to his operations, either by winning a license from the state or buying an existing company. His long-term goal is to position Green Leaf for acquisition by a pharmaceutical company, something that would not happen under current law but he suspects would become possible if Americans continue to support medical cannabis.

Goldberg is also eyeing operations in Ohio and other states, as well as international markets.

He believes spreading the availability of medical cannabis would greatly benefit the people who need it most: children with seizure disorders, people with chronic pain, patients who might otherwise turn to potentially deadly opioids for relief.

But he also believes his business model is a good one. Other industries, he figures, have thrived with much less up-front demand. Even if he doesn’t win one of Pennsylvania’s golden tickets, his business still has plenty of room to grow.

For more information:
Green Leaf

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