Authored By: Patrick McKnight.
Co-author Gaetano P. Piccirilli is a partner in the Litigation Department at Klehr Harrison.
Already known to inhabit a constant state of flux, COVID-19 presents a new arena of legal uncertainty for medical marijuana. Despite concerns about how the medical marijuana industry would fare in the face of COVID-19 and increasing state restrictions on business, early indicators show the industry is performing well with many states relaxing rules to encourage greater patient access while containing the spread of COVID-19.
04.01.20
The United States medical marijuana market is estimated to reach nearly $8 billion in sales in 2020 with annual growth around 17%. Currently, 33 states allow some type of medical marijuana program with an estimated 3 million total patients across the country. The industry employs 240,000 people. In Pennsylvania, medical marijuana sales exceeded $500 million during its first two years of existence with about 150,000 patients. Likewise, New Jersey’s medical marijuana industry has demonstrated remarkable growth following recent expansions of eligibility.
Governors across the country are taking emergency steps to limit the spread of COVID-19, with Pennsylvania and New Jersey being among the most aggressive. By and large, the executive orders coming out of state capitals seek to restrict the operations of “non-essential” businesses during the duration of the emergency. While the definition of “essential,” or in the case of Pennsylvania “life sustaining,” has generated confusion amongst business leaders, governors have been left to their own discretion. Some states have instituted processes whereby businesses may apply for waivers. By way of example, on March 19, 2020 Pennsylvania Governor Tom Wolf announced all “non-life-sustaining businesses” must close their physical locations. Following Pennsylvania, New York and New Jersey announced similar restrictions on March 20, 2020 and March 21, 2020, respectively.
Medical marijuana has fared well under these emergency conditions. Indeed, nearly every state with a medical marijuana program has determined the industry should continue operating as an “essential” business. Under this designation, medical marijuana dispensaries are treated like pharmacies providing essential healthcare products.
Beyond maintaining status quo, some states eased existing restrictions to accommodate the “essential” business function and CDC recommended social distancing. For example, on March 20, 2020, the Pennsylvania Department of Health announced the temporary suspension of several important restrictions allowing patients and caregivers to pick up medical marijuana outside the four walls of the dispensaries. Other Pennsylvania regulations include:
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- Waiver of limits on how much medical marijuana may be purchased.
- Elimination of background checks for caregivers.
- Relaxed restrictions on the number of patients per caregiver.
- Allowing remote consultations for the renewal of medical marijuana cards.
“In the midst of COVID-19, we need to ensure medical marijuana patients have access to medication,” Secretary of Health Dr. Rachel Levine said in a press release. “Medical marijuana grower/processors and dispensaries are considered life-sustaining businesses under the Governor’s order for nonlife-sustaining businesses to close. We want to be sure cardholders in the medical marijuana program can receive medication for one of 23 serious medical conditions during this difficult time.”
New Jersey also relaxed restrictions on medical marijuana establishments, known as Alternative Treatment Centers (ATCs). New Jersey is allowing curbside pickup and reducing fees for caregivers from $100 to $20. On March 24, 2020, the New Jersey Department of Health’s Division of Medical Marijuana released guidance on how ATCs may hire employees during the emergency period. The guidance relaxes restrictions on background checks for “provisional” employees. New Jersey has about 73,000 medical marijuana patients and generated an estimated $100 million in sales in 2019.
The New York Department of Health considers all medical marijuana companies to be “essential businesses” and implemented similar steps to ensure access during the outbreak. Regulations on home-delivery are temporarily relaxed and sales are now permitted at the door of dispensaries.
Some states, like Connecticut have gone beyond those recommendations of “essential businesses” provided by Department of Homeland (DHS) Security Cybersecurity and Infrastructure Security Agency. DHS listed 16 critical infrastructure sectors and excluded medical marijuana—reflecting the state of federal law. In adopting DHS’s list, Connecticut affirmatively chose to place medical marijuana as “essential” healthcare.
Not all things are positive, however. As predicted, the federal Small Business Administration is prohibited from offering disaster relief loans to any cannabis business, including those engaged in state-regulated medical marijuana.
By all appearances, in states with legal medical marijuana, officials are looking to ensure continued access. Indeed, preliminary sales indicators show that patients may have been concerned with ongoing availability as initial demand for medical marijuana during the COVID-19 outbreak was reported as very strong (a nationwide 20% increase). Since then, available data suggests that the spike was followed by a steep, sudden decline.
For the industry, however, state recognition that the business is “essential” is a significant step forward.
The Coronavirus Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the COVID-19 situation develops.
Co-author Patrick McKnight is an associate in the Litigation Department. Co-author Gaetano P. Piccirilli is a partner in the Litigation Department at Klehr Harrison.
