Authored By:  William F. McDevitt, Esq.

The news from Trenton and Albany suggests New Jersey and New York soon will legalize cannabis for adult or recreational use. The most commonly cited reason is the potential tax revenue, with public opinion supporting legalization coming in second and job creation usually ranking third. The shift in public opinion is so significant that proposed federal legislation to direct the Drug Enforcement Administration to reschedule cannabis, and thereby allow medical and commercial sales across state lines, has the public support of numerous members of Congress.

If other mid-Atlantic states legalize adult-use marijuana, it is very likely Pennsylvania will follow suit. Although Governor Tom Wolf’s administration is very pro-cannabis (and pro−industrial hemp), a shift to adult-use cannabis would be significant. Following the 2016 enactment of Pennsylvania’s Medical Marijuana Act (MMA), the Commonwealth expended significant resources in establishing a medical marijuana paradigm emphasizing research and innovation in the development of medicinal cannabis. The MMA requires the Department of Health (DOH) to conduct studies on the efficacy of medical cannabis, though only if such studies are federally approved (said approval has not been forthcoming). The statute also provides a mechanism for Academic Clinical Research Centers (ACRCs) – essentially medical schools that also operate hospitals – to partner with private entities called Clinical Registrants (CRs) to study, identify and develop cannabis and cannabis-based products that will target specific medical conditions. Although the DOH has certified eight ACRCs, a recent Commonwealth Court decision enjoined the Commonwealth from awarding CR “super-permits” to cultivate and distribute cannabis on a large scale.

So, what happens to the entities that relied on the MMA’s pharmacological paradigm if the Commonwealth (or the federal government) allows adult-use cannabis? This shift likely would affect the various sectors of Pennsylvania’s current medical marijuana infrastructure differently:

● Grower-processors might benefit the most from a shift to adult use, since there does not appear to be any reason why cultivators could not segment production for different markets. Indeed, in recent litigation before the Commonwealth Court of Pennsylvania, four of the five entities holding both grower/processor and dispensary licenses (“vertically integrated” entities) argued they are capable of separately growing specific cannabis strains for medical research conducted by ACRCs. It is more likely than not that Pennsylvania grower-processors will expand cultivation facilities (subject to DOH oversight) in advance of any shift in Pennsylvania law (something that licensed New Jersey growers have already begun doing).

● Licensed dispensaries likely will see a decrease in sales volume as potential patients avoid registration with the DOH, physician certification and higher-priced medical products. Dispensaries will remain an important portal for the sale of cannabis strains developed to treat specific medical conditions or branded in conjunction with medical use. Dispensaries also will be an important delivery system for patients who wish to avoid the social or professional stigma of adult-use cannabis. To the extent insurance companies recognize and reimburse patients for medical cannabis, dispensaries may retain market share. Unfortunately, all of these factors undermine the ability of medical dispensaries to simultaneously participate in adult use and medical cannabis sales at the same locations.

● Medical research in the Commonwealth may be affected adversely by legalization of adult-use cannabis. First, if the number of people registering as medical marijuana patients decreases, the number of potential test subjects also may decrease. Second, legalized adult use potentially increases the (already present) problem of test subjects self-medicating when participating in clinical studies. Lastly, private investment in medical marijuana research might decrease if adult-use enterprises are available. In fact, to defer the costs of medical research, the DOH’s Chapter 20 regulations governing ACRCs (presently the subject of an injunction) allowed CRs to operate as commercial cultivators and dispensaries, separate and apart from any medical research. Rightly or wrongly, the DOH apparently believed that private entities would not significantly invest in medical cannabis research without immediate financial returns.

The legalization of adult-use cannabis in Pennsylvania will require a major shift in the Commonwealth’s existing medical marijuana infrastructure. While many purveyors in other states, such as Colorado and California, successfully adapted to this type of regulatory change, medical cannabis entities in Pennsylvania invested more resources over a shorter period of time to comply with a stringent regulatory model. It remains to be seen if Pennsylvania cannabis licensees (including ACRCs) will evolve as easily to function in a shifting regulatory landscape.

About the Author

William F. McDevitt is a partner in the Philadelphia office of national law firm Wilson Elser, where he is a member of the firm’s Cannabis Law practice. He can be reached at william.mcdevitt@wilsonelser.com.