By Evan Wyloge
Arizona Capitol Times
Cancer may pick its victims randomly, but Patric Allan thinks that’s a lousy way for the state to decide who gets licenses to sell medical marijuana.
Allan’s mom died of breast cancer in 1991, and now one of his close friends is fighting the same disease. Because of the promise marijuana shows in helping patients endure chemotherapy treatments, Allan has a personal interest in seeing Arizona’s medical marijuana system succeed.
But he doesn’t want to just watch. Allan, a Chandler resident, wants to become a medical marijuana dispensary operator. And because he has owned a health care marketing business for 12 years, Allan said he has above-average qualifications.
But after looking over the latest version of the Arizona Department of Health Services’ proposed regulations for the yet-to-be created medical marijuana program, Allan said he is wary of the way dispensary licenses are going to be given out, and he worries that cancer patients like his friend could end up with less-than-the best possible system.
The part of the regulations that worries Allan is the random selection process that will determine who gets to own and run the state’s maximum of 124 dispensaries.
Patric Allan, who operates a health insurance marketing office in the East Valley, wants to own a pot dispensary, but he is skeptical of the proposed lottery system that will decide who gets a state license. (Photo by Evan Wyloge/Arizona Capitol Times)
“I’m really concerned about the patients,” Allan said. “It will be detrimental to the patients if you have some guy who’s underfunded and can barely open up a booth to serve potentially thousands of patients who have real needs.”
The lottery that Allan and other would-be dispensary owners must consider is just one part of the second version of the proposed regulations DHS released Jan. 31.
The Health Department, tasked with drafting the rules for, and putting into operation, Arizona’s medical marijuana system following the November passage of Proposition 203, will go through one more revision before the program starts this year. And so Health Department officials have urged critics like Allan to remember that the proposed rules are still just that: a proposal that is subject to alteration.
The proposed lottery will work hand-in-hand with statewide geographical zones, each of which will be eligible to get one dispensary.
The 126 zones, called Community Health Analysis Areas or CHAAs, were drawn in 2005 for reasons unrelated to medical marijuana. But because the CHAAs also correspond to population density, Health Department Director Will Humble decided to use them to ensure access to medical marijuana in rural parts of the state and prevent urban clustering of pot dispensaries.
And Humble said that for technical reasons, some of the CHAAs will not end up with any dispensary applicants.
When the Health Department begins accepting applications for dispensary licenses on May 1, if more than one person submits an application that meets the Health Department’s requirements in any CHAA, one qualified applicant will be randomly selected for a preliminary dispensary certificate. That person will then have to prepare a dispensary and get final approval to begin operating.
Health Department officials haven’t yet decided on a method to select an applicant, but said they might use a state lottery-style tumbler or a random-number generator.
Defending the lottery system, Humble said there were three possible ways to select who would get to run the pot shops, and a lottery system is the one that comes with the least chance of lawsuits over discrimination or favoritism.
The other selection methods, Humble said, would be to have a third party evaluate each applicant, or to hand out the licenses to qualified applicants on a first-come-first-served basis.
Those selection options, Humble said, could lead to claims of discrimination or favoritism. Costly and time-consuming litigation could result, both delaying the start of Arizona’s medical marijuana system in some CHAAs and distracting the department from its normal work.
Although he is wary of the lottery system, Allan said he still plans to apply for a license because he already has invested time, money and energy into securing a location for the dispensary he wants to open in the East Valley.
But at least one other would-be dispensary owner is wavering.
Mitch Love, who has been using medical marijuana for 17 years to help deal with his Crohn’s Disease and who had been interested in opening a dispensary in Cave Creek, said he’s not sure he can afford to gamble the $5,000 non-refundable dispensary license application fee.
“It seems a little absurd to me,” the Cave Creek resident said. “Is it going to be worth it if you have 100 or 200 people vying over one dispensary license?
It would almost make more sense to take my $5,000, go to Vegas and put it all on black.”
But despite the skepticism among some potential dispensary owners, Gus Escamilla, founder of Greenway University, said the lottery makes sense.
Escamilla, who founded the Denver-based medical-marijuana business school in 2009, and a year later got the school sanctioned by Colorado’s Department of Higher Education, said other states have struggled with how to distribute the licenses.
“(Humble) is 100 percent spot on,” Escamilla said. “You get rid of any chance of discrimination or favoritism lawsuits when it’s just an independent lottery system for those who qualify.”
Escamilla said that after watching a similar lottery take place in Long Beach, Calif., in 2010, he has no doubt that those selected for the dispensary licenses will be able to easily find private investors or business loans since each operation will essentially have a guaranteed client base.
“We’ve also seen it here in Colorado,” Escamilla said. “There was a large infusion of investment capital. It takes some good legal advice and capital investment structuring, but they will not have a problem acquiring the capital to offset their ability to perform or function.”
Even if the financial backing becomes available, Andrew Myers, who ran the Proposition 203 campaign and who heads a nonprofit patient and industry association called the Arizona Medical Marijuana Association, said he prefers a system to judge all applicants on the soundness of their qualifications to make sure that dispensary owners have a superior business plan that, above all else, serves patients.
Tom Salow, the acting rules attorney for the Health Department, said he knows there will still be ways to improve the second draft of the proposed rules. Salow pointed to the generally well-received improvements made to the first draft and reiterated that those improvements came from the public comments they received.
“We’re now waiting for public comments again,” Salow said. “What are some better options? Provide us with some suggestions and let’s look at some alternatives.”
Public comments may be submitted at the Arizona Department of Health Services website www.azdhs.gov until Feb. 18 or at four upcoming public forums.
The Health Department’s public meeting schedule:
• Flagstaff: Monday, Feb. 14, 10
a.m. to 1 p.m., Flagstaff City Hall, Council Chambers, 211 W. Aspen Ave.
• Tempe: Tuesday, Feb. 15, 3:30 p.m. to 6:30 p.m., Arizona State University Sandra Day O’Connor College of Law, The Great Hall, 1100 S. McAllister Ave.
• Tucson: Wednesday, Feb. 16, 3 p.m. to 6 p.m., University of Arizona James E. Rodgers College of Law, Ares Auditorium, 1201 E. Speedway.
• Tempe: Thursday, Feb. 17, 9 a.m. to noon, ASU Sandra Day O’Connor College of Law, The Great Hall, 1100 S. McAllister Ave.