Illinois Collects $62 Million in Cannabis Revenue to Support Neighborhoods

The next step is distributing those funds as planned.

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Study Finds Cannabis May Not Negatively Impact Liver Transplant Patients

Another study indicates that cannabis may not be harmful to patients undergoing organ transplants.

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MLK Day: Cannabis and Civil Rights

It has become an annual MLK Day tradition here at Canna Law Blog to remind our readers that, first and foremost, cannabis is a civil rights issue. We’ve explained why here, here, here and here.

The past year ushered in some promising developments, from progress with the MORE Act, to state and local developments on social equity licensing measures, to increased expungement of criminal records related to cannabis convictions. Things are looking up for 2021 as well, federally and in many states.

But it’s not enough. Regulation of cannabis–and the composition, orientation and momentum of the industry at large–is nowhere where it needs to be on civil rights issues. Not even close.

Here at Harris Bricken, we are committed to honoring MLK’s legacy this year through our continued work with the Last Prisoner Project, through reduced fees for minority-owned cannabis businesses, and through review and promotion of robust state-level social equity legislation.

Although Dr. King died 53 years ago, his legacy continues to resonate and expand. On this day honoring one of our greatest leaders, it is important to remember all of the reasons we strive to end prohibition– including the most important ones.

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California, Cannabis and Telehealth: Part I

The ancillary companies that provide goods and services to the cannabis industry are legion. From equipment, real estate, legal services, and technology to packaging, labeling, intellectual property, hardware, and apparel, the list is basically endless for the opportunities that abound in the cannabis ancillary sector. One of the cooler ancillary areas that hasn’t gotten a ton of play is the cross section of telehealth and medical cannabis, especially where medical cannabis has overwhelmingly been deemed an essential service during COVID.

Just like state cannabis regulations, telehealth regulations vary by state. Telehealth (also known as telemedicine) is “. . . the distribution of  health-related services and information via electronic information and telecommunication technologies.” The use of telehealth has seen a considerable uptick during the pandemic. And securing cannabis recommendations from physicians via telehealth apps or platforms is no exception. Of course, giving and securing a recommendation in this manner comes with some caveats. In this post, I focus specifically on California’s current relationship with telehealth and cannabis, which has thankfully evolved.

Telehealth compliance in California is governed by, among other things, Business & Professions Code, Section 2290.5. The Medical Board of California (“MBC”) also provides comprehensive guidance regarding telehealth as well as guidance on physicians recommending cannabis for their patients. Specifically, MBC guidance on cannabis and telehealth provides that “[t]he use of telehealth in compliance with B&P Code section 2290.5, and used in a manner consistent with the standard of care is permissible.” Does this mean then that California physicians can start using telehealth to virtually dole out cannabis recommendation after recommendation? Definitely not. Let’s start with the cannabis side of things.

Proposition 215 (aka Health and Safety Code Section 11362.5), passed in 1996, permits qualified patients to acquire and use cannabis for specific medical needs via recommendations from their treating physician (cannabis cannot be prescribed because it is a federally illegal, Schedule I controlled substance). According to the MBC:

physicians should document that an appropriate physician-patient relationship has been established, prior to providing a recommendation, attestation, or authorization for cannabis to the patient. Consistent with the prevailing standard of care, physicians should not recommend, attest, or otherwise authorize cannabis for themselves or family members.

Further, pursuant to Business and Professions Code section 2525.2, a physician can’t recommend cannabis for medical purposes to a patient unless the physician is the patient’s attending physician, and “attending physician” means a “physician who has taken responsibility for an aspect of the medical care, treatment, diagnosis, counseling, or referral of a patient.”

The physician must also conduct and document a medical examination of the patient before deciding whether or not medical cannabis is appropriate for recommendation. At minimum, per the MBC, that physical exam (which maybe could be done now remotely because of COVID) should include:

the patient’s history of present illness; social history; past medical and surgical history; alcohol and substance use history; family history with emphasis on addiction, psychotic disorders, or mental illness; documentation of therapies with inadequate response; and diagnosis requiring the cannabis recommendation.

Business and Professions Code section 2525.3 states that physicians recommending cannabis to a patient for a medical purpose without an appropriate prior examination and a medical indication, constitutes unprofessional conduct. And all of this is in the context of a physician exercising the appropriate standard of care, which also includes, among other things, maintaining a treatment plan, ongoing monitoring of the patient, and compliant recordkeeping.

So, how can a cannabis telehealth business take advantage of Prop. 215?

There are two types of telehealth business models in play. Synchronous (use of video conferencing or a telemedicine app or platform to recreate an in-person experience) and asynchronous (where there’s no virtual interaction between physician and patient, but the patient provides all of their medical information via an app or tech platform to be reviewed later by their treating physician). Typically, a third party company (made up of non-physicians) provides the app or tech platform while the physicians that utilize the platform treat patients accordingly. When we get inquiries from telehealth companies around cannabis recommendations in California, they want to know whether it can be done in the first place (“yes”), and whether they can have a financial relationship with a dispensary or other cannabis licensee that will provide cannabis to those patients accessing their app or tech platform.

And that is where things get interesting. In my next post, I’ll analyze whether a telehealth company can lawfully have such a set up in California. So, stay tuned.

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BCC Announces Proposed Regulations re: AB 1525 and Financial Services

On January 14^th, the California Bureau of Cannabis Control (BCC) issued an announcement of proposed regulations pursuant to AB 1525, which was approved by the Governor in September 2020. The purpose of AB 1525 was to:

provide that an entity, as defined, that receives deposits, extends credit, conducts fund transfers, transports cash or financial instruments, or provides other financial services, including public accounting, as provided, does not commit a crime under any California law solely by virtue of the fact that the person receiving the benefit of any of those services engages in commercial cannabis activity as a licensee.

The bill would also:

authorize a person licensed to engage in commercial cannabis activity to request, in writing, that a state or local licensing authority, state or local agency, or joint powers authority share the person’s application, license, and other regulatory and financial information, as specified, with a financial institution of the person’s designation and would require the request to include a waiver authorizing the transfer of that information and waiving any confidentiality or privilege that applies to that information [and would] authorize a state or local licensing authority, state or local agency, or joint powers authority upon receipt of a written request and waiver as described above, to share regulatory and financial information with the designated financial institution for the purpose of facilitating the provision of financial services for the requesting licensee until such time that the state or local licensing authority, state or local agency, or joint powers authority receives a withdrawal of the waiver.

The purpose of AB 1525 and the proposed regulations is to facilitate greater access to financial services for licensed commercial cannabis businesses. As we’ve written about extensively, cannabis businesses in California have often struggled to secure financial services, including bank accounts, which has led to a whole host of problems. You can read more about banking issues faced by the cannabis industry here:

• Cannabis Banking: A Fourth Corner Credit Union Follow Up
• Cannabis Banking: State Treasurers Ask Congress to Include SAFE Act in COVID-19 Relief Legislation
• Industrial Hemp and the Banks: Slow Going
• Credit Unions and Hemp: New Federal Guidance is Here!
• Federal Agencies Provide New Guidance for Hemp Banking
• California Cannabis: Department of Business Oversight Issues Somewhat Helpful Guidance to Financial Institutions
• ICYMI: The House Passes the SAFE Banking Act!
• Hemp Banking for Credit Unions: Five Key Questions

According to the press release issued by the BCC, the proposed regulations will:

create a pathway for licensees to authorize sharing of non-public information with selected financial institutions and provide a mechanism for financial institutions to more readily conduct the federally-required reviews of the cannabis business. By reducing the burden of providing financial services to cannabis businesses, more financial institutions may be willing to provide services, thereby reducing the need to keep cash on-hand and improving public safety.

Our firm has worked with a number of credit unions to develop their due diligence protocols for working with cannabis businesses, and frankly, the level of due diligence required to ensure compliance is one of the biggest deterrents for financial institutions. Monitoring the regulatory compliance of a cannabis business client can be a logistical nightmare, so we’re hopeful that these new regulations will ease some of that burden and allow easier access to basic banking services for everyone in the industry.

The public comment period is now open – comments must be submitted to both the Office of Administrative Law and the BCC – and the proposed regulations can be found here.

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Shop these 5 excellent Black-owned cannabis brands of California

Fire hash and flower from Oakland Extracts, Peakz Co, Viola, SF Roots and Ball Family Farms.

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California Tries Again with CBD

California has a rocky history when it comes to hemp-derived CBD. Despite the fact that the state adopted a robust medical and recreational cannabis program, for years it has taken the mystifying position that many kinds of hemp-derived products simply can’t be sold. Essentially, foods, beverages, and dietary supplements are a no-go according to the CA Department of Public Health (you can read an older analysis of mine on the CDPH’s position here).

For some history, in 2019, the state legislature tried to pass AB-228, which would have cleared the pathway for many new kinds of CBD ingestible products in California. That bill made it pretty far through the state legislature but ultimately died close to the end of the process given intense opposition, among other things.

Last year, at the very end of the legislative session, the legislature tried to quickly draft and pass a bill, AB-2028 (you can read about it briefly here) which didn’t get enough support to pass. A large part of the reason that AB-2028 failed was that it was introduced so late in the session, due mainly to COVID-19 delays and the state’s shifting of resources.

The 2021 legislative session recently kicked off, and a new CBD bill, AB-45, was introduced. Like its predecessor bills, the goal of AB-45 is to “legalize” many different CBD products. AB-45 takes a lot of concepts from AB-228, but adds some things that–while intended to compromise apparently controversial aspects of prior legislative attempts–are sure to upset some people in the industry.

Below is a high-level analysis of some of the key points of AB-45:

1. AB-45 will essentially be a temporary measure until the feds formally regulate CBD products. Once that happens, the state will be forced to adhere to those regulations to the extent that they are different.
2. The bill would give the CDPH regulatory authority over CBD products. Keep in mind that there are no existing CBD laws, but CDPH has taken it upon itself to effectively regulate away CBD products via the FAQ document linked above. It will be interesting to see how CDPH decides to regulate CBD products and how it will do so differently from cannabis products.
3. CBD product manufacturers will be prohibited from making untrue health-related statements with respect to their products. This is largely consistent with what the Food and Drug Administration has been taking issue with over the past few years, though notably not as broad as the FDA’s position which essentially bans any health-related statement. The law also contains other stringent labeling requirements that are largely consistent with other states’ requirements.
4. Wholesale food manufacturing facilities that make products containing hemp derivatives will need to comply with good manufacturing practices as defined by California law, and will be prohibited from using hemp in food products or dietary supplements unless it comes from a state or county that has adopted a hemp production plan in compliance with federal law and the cultivator at issue is in good standing under its jurisdiction’s laws. This means that ensuring that hemp comes from a lawful source will be critical for hemp product manufacturers.
5. The bill states that foods, beverages, dietary supplements, and cosmetics are not considered adulterated just by virtue of containing CBD. This is an important point, given that the CDPH and local health departments have in many cases taken the position that CBD is an adulterant. Of course, this new law would not say that these products are by definition adulterated–for example, adding poisonous or harmful substances could still render a product adulterated–but it would dramatically change the way the state looks at CBD.
6. “Industrial hemp products”, which are defined as foods, food additives, dietary supplements, herbs, and cosmetics (but NOT smokable products, as discussed below) may only be sold if, among other things, they have a certificate of analysis showing that they have a permissible THC level and were derived from lawful hemp.
7. The CDPH will have the ability to adopt age requirements for the sale of some products. This is an interesting feature of the bill. The state decided (so far) not to require that all CBD products be sold to persons over 21 or 18, but is giving CDPH the discretion to decide that essentially on a product by product basis and based on scientific research. That said, the bill contains provisions that restrict advertising to people under 18, so it’s a safe bet that some kind of age requirements will eventually be imposed.
8. The bill makes clear that hemp derivatives cannot be added to medical devices, prescription drugs, products containing nicotine, tobacco, or alcohol, or any other smokable product (including both smokable flower and vape products). This last category is sure to be an issue for the industry as there are many companies that manufacture and sell smokable hemp products across the state. This provision of the bill is likely to be the most hotly debated provision during the legislative cycle.

Again, these are just some of the bigger ticket items in the new bill and there is still a lot more. There’s a high probability that parts of the bill will be modified over time and things may be added or taken away. We plan to follow AB-45 closely as it progresses through the state legislature, so please stay tuned.

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