Pennsylvania Lawmakers Approve Bill To Allow More Medical Marijuana Companies To Vertically Integrate

Pennsylvania’s legislature has sent a bill to the governor’s desk that would allow the more of the state’s medical marijuana growers and processors to act as retailers—and let more of the state’s retailers grow and process cannabis.

The Senate signed off on House changes to the bill on Tuesday, and it now goes to Gov. Josh Shapiro (D).

Under current state law, no more than five of the state’s 25 grower-processor license holders can also hold dispensary licenses. Others must sell their products to a licensed dispensary, which in turn can sell products to patients.

As proposed in the bill heading to Shapiro’s desk, SB 773, all 10 of the state’s independent grower-processors could receive a dispensary permit that would allow them to operate up to three retail locations. And all independent dispensaries would be eligible to grow and process marijuana products.

Supporters have said the changes will make the state’s medical marijuana industry more competitive by allowing more participants to engage in commercial activity.

A fiscal note posted last month also estimates that the reform would bring in nearly $2 million in revenue from application and permit fees. For subsequent fiscal years, the state could expect to generate about $90,000 annually. Some of that revenue would be offset by administrative costs that the health department would take on to process applications and oversee the permitting.

Ahead of the measure’s passage in the House last month, it was amended to reduce the number of dispensary permits that grower-processors would be automatically eligible for down to just one—a change the Senate has now agreed to.

The bill’s author, Sen. Chris Gebhard (R), had originally proposed grower-processors be eligible for two licenses.

“That’s certainly frustrating to us, because we did a lot of market research and calculations in terms of what we determined should be two permits versus one,” Gebhard told PennLive after the change. Referring to growers who might try to expand into retail sales, the lawmaker added: “We are putting them in a very difficult position long term to compete in the marketplace.”

The House also amended the measure to allow dispensaries to also become grower-processors, an expansion from the original bill’s proposal to simply let grower-processors open retail locations.

Over the course of the legislative session, some lawmakers had predicted SB 773 would be amended to make more sweeping changes to the state’s marijuana law, for example by legalizing home cultivation of medical marijuana or even expanding legalization to include adult use. But those substantive changes were not incorporated into the bill transmitted back to the Senate for concurrence.

One provision in the legislation would bar licensees from transferring permits for a period of time, which lawmakers said is meant to prevent larger, sometimes out-of-state companies to buy up permits and control the market.

Republican Sen. Camera Bartolotta, who supports expanding medical marijuana, said that it’s “very concerning to me what it allows foreign entities to do as far as purchasing licenses for dispensaries and growing on our soil,” according to PennLive.

While Pennsylvania has yet to enact adult-use legalization, there’s a growing expectation that the state will eventually follow others in the region and begin allowing recreational sales. Some businesses have felt the strain as anticipation about the policy change builds, especially as wholesale marijuana prices drop and multi-state operators continue to acquire smaller businesses.

A Pennsylvania House committee convened last month for an informational meeting to hear from experts about adult-use marijuana legalization as legislators chart a path for the reform, which the panel’s chairman says may involve consideration of a state-run cannabis sales model.

Meanwhile U.S. Sen. John Fetterman (D-PA) says the state is being “lapped” on marijuana policy as neighboring states enact legalization.

“It’s absolutely absurd—how many states around Pennsylvania are we falling behind?” Fetterman said, reflecting on Ohio’s recent vote to legalize cannabis at the ballot box. “I don’t know why Republicans are opposing it, because the majority of their constituents want this. It shouldn’t be that hard in Pennsylvania.”

Two bipartisan lawmakers are now seeking co-sponsors for a more modest change. Bartolotta and Sen. Sharif Street (D) recently circulated a legislative proposal that would decriminalize marijuana, downgrading simple possession from a misdemeanor crime to a civil offense.

“Medical marijuana has provided many patients with relief from their respective ailments and has aided them in their ability to cope effectively,” says a co-sponsorship memo sent out earlier this month. “Yet, we still criminalize recreational cannabis and incarcerate those who possess small amounts of it. This seems injudicious and, frankly, inappropriate.”

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Photo courtesy of Chris Wallis // Side Pocket Images.