A 2016 bill – the Medical Marijuana Regulation and Safety Act (MMRSA) – allows California to begin regulating the country’s oldest medical marijuana industry, which had been operating in a legal gray area. Now that these provisions are in place, medical marijuana businesses can operate with regulatory best practices in mind. But there’s a lot to understand as a business operator.
The state of California is working to make it easier for people who need medicinal cannabis by creating laws that allow dispensaries and other businesses involved with selling or growing medical cannabis more freedom regarding how they operate their business. These laws are also being passed to maintain some common-sense regulations within the state.
Nearly 20 years after Californians voted “yes” on Proposition 215 (1996) to make the use of pot medically acceptable under certain conditions, Governor Jerry Brown signed this legislation. It’s quite powerful, with a design that regulates an industry with an estimated annual value in the billions.
Between retail sales and related activities like transportation, cultivation, distribution, and testing services within his own jurisdiction. The new law went into effect on January 1, 2016.
But what exactly is the MMRSA?
In this article, we cover the ins and outs of the MMRSA. Everything you should know as medical marijuana business owners operating within state and local laws – including each licensing authority in charge of regulations – will be covered!
Operating a medical cannabis operation in California? Northstar is here to guide your success!
Contact us now to speak with one of our experts to learn how we’ll scale your operation in this budding space.
The Importance of Medical Cannabis in America
Medical marijuana is a treatment that has substantial evidence that shows it works medicinally to improve the quality of life for sick and chronically ill patients.
Unfortunately, the morals of some people have hindered scientific progress. But even with this being the case, states throughout the country have implemented laws to ensure access to marijuana for medical purposes.
At this point, the medical marijuana industry needs more data highlighting the plant’s efficacy in treating various ailments. However, the current research reveals that using the plant can help some patients.
The History, Pharmacology, & Implications of Medical Cannabis
Medical marijuana regulation came long after the plant became commonplace for personal medical treatment. People began using and distributing medical cannabis as far back as 2900 BC when the Chinese emperor Fu Hsi recorded it as a popular treatment for public health that contains both aspects of yin and yang.
Delving into some research on how marijuana is used from a public health aspect, every content – besides Antarctica – possesses a documented history showing its application.
These days, in the United States, commercial medical cannabis activity has become somewhat commonplace. But it wasn’t always this way.
Long before the stigma, Jamestown, Virginia passed a law that required farmers to grow cannabis – without requiring cultivation licenses, of course. One of the founding fathers, Thomas Jefferson, is known to have grown, too. But eventually, Massachusetts became the first state to ban cannabis and cannabis products in 1911.
What Happened?
While there was some concern about controlled substances getting in the wrong hands, some people realized that there was money to be made off of cannabis by making it illegal – even for medical purposes.
Not long after it became illegal, infamous propaganda films were released to instill fear into the American public. But none is more infamous than Reefer Madness.
By 1937, illegal possession was a crime, and the first documented conviction for selling marijuana happened under United States Federal Law.
The propaganda developed a stigma surrounding the plant. But people continued to use it recreationally and for healing purposes, despite the government refusing to permit cultivation and sales.
Fast forward to the present and we see how much progress has been made with medical marijuana regulation and legalization through the Medical Marijuana Regulation and Safety Act.
Medical Cannabis Regulation: Why?
Medical marijuana regulation is essential for this industry. Without these state and local governments’ regulations in place, it’s nearly impossible for law enforcement officers to do their jobs effectively. Ultimately, a local government will have the last say in how these businesses can operate in an area.
Similar to pharmaceuticals, patients need to be assured of the quality and safety of the products they’re receiving. A new law, which has just recently gone into effect this year, is set out to ensure that protection.
While a local ordinance can ensure law enforcement handles consumer affairs with a health and safety code in place, localities can still ban medical marijuana cultivation and sales. However, deliveries are usually still permitted to patients.
State and local agencies have been tasked with medical cannabis regulation. But in California, the Medical Marijuana Regulation and Safety Act directs the California department (Department of Cannabis Control) is responsible for handling consumer affairs for personal medical use marijuana products and enforcing the health and safety code.
What is the MMRSA?
The MMRSA is also known as the California Medical Marijuana Regulation and Safety Act (MMRSA). Through this legislation, California’s local government established comprehensive regulations and standards to govern almost all aspects of California’s medical cannabis industry. From taxation to licensing, quality control, packaging, shipping, and standards for cultivation, the MMRSA is the go-to regulation and safety act for insight into how medical cannabis businesses must operate. This, of course, includes manufacturers and distributors of medical cannabis products.
The MMRSA is composed of three laws, Assembly Bill 266, Assembly Bill 243, and Senate Bill 643. The following are summaries of the provisions these three laws offer:
AB 266
AB 266 established the Bureau of Medical Cannabis Regulation under the California Department of Consumer Affairs. The Bureau keeps track of commercial cannabis activity. This includes tracking licensees and handling the annual report for the movement of cannabis and cannabis-related products.
AB 266 also establishes 17 different license types for marijuana producers, testing facilities, dispensaries, distributors, and transporters. These include the following local license options:
1.Type 1 = Cultivation; Specialty outdoor; Up to 5,000 square feet of canopy, or up to 50 noncontiguous plants.
2.Type 1A = Cultivation; Specialty indoor; Up to 5000 square feet.
3.Type 1B = Cultivation; Specialty mixed-light; Using exclusively artificial lighting.
4.Type 2 = Cultivation; Outdoor. Up to 5000 square feet; Using a combination of artificial and natural lighting.
5.Type 2A = Cultivation; Indoor; 5001 -10,000 square feet.
6.Type 2B = Cultivation; Mixed-light. 5001 -10,000 square feet.
7.Type 3 = Cultivation; Outdoor. 10,001 square feet – 1 Acre.
8.Type 3A = Cultivation; Indoor. 10,001 – 22,000 square feet.
9.Type 3B = Cultivation; Mixed-light. 10,001 – 22,000 square feet.
10.Type 4 = Cultivation; Nursery.
11.Type 6 = Manufacturer 1 for products that don’t use volatile solvents.
12.Type 7 = Manufacturer 2 for products that use volatile solvents.
13.Type 8 = Testing.
14.Type 10 = Dispensary; General.
15.Type 10A = Dispensary; No more than three retail sites.
16.Type 11 = Distribution.
17.Type 12 = Transporter.
For medical marijuana cultivators, the licensing authority also sets a maximum allowable size for cultivation operations that aligns with the type of license obtained. The law also prevents vertical integration for licensees’ businesses by only allowing operations to hold licenses in up to two separate categories.
The regulatory California department also places quality control restrictions on adult use and medical marijuana. But these restrictions are currently being developed.
The California legislature limits distributors on the content of cannabinoids, contaminants, microbiological impurities, and other compounds. But at this point, the standards have not been fully developed by the California Department of Public Health. The state also includes a provision for a new fee for testing that the distributors must charge to cover any new taxes that might be imposed on these controlled substances in the future.
AB 266 also establishes a set of written laws that highlight which actions performed by licensees are permitted by a state license and local government. This means that these actions are no longer prohibited under state law to offer the licensee protection from legal repercussions. It also offers provisions for older facilities that were in compliance with the laws in place on or before January 1, 2018. This makes it so these facilities can continue their operations until their licenses are either approved or denied.
AB 266 also has rules in place to regulate cannabis deliveries that demand documentation for each delivery. The licensee must maintain a physical copy of their delivery requests during deliveries. This needs to be made available any time a law enforcement officer requests it, as required by the California licensing authority.
Furthermore, all dispensaries offering medical cannabis or medical cannabis product delivery must have their employees carry a copy of the dispensary’s license, as well as their government-issued identification.
Deliveries are only permitted by licensed transporters to qualified patients and dispensaries in cities and counties that do not prohibit deliveries by local ordinances.
However, equally important is the fact that deliveries can be taxed by the local jurisdiction. The law also offers some protection for patient and caregiver privacy, giving them confidentiality for their names and medical conditions.
AB 243 & Senate Bill 643
AB 243 and Senate Bill 643 grant the California Department of Food and Agriculture (DFA) the responsibility to regulate marijuana cultivation. The California Department of Public Health has the task of creating the standards for edible manufacturing, testing, production, and labeling.
The California Department of Pesticide Regulation also has the responsibility to develop the standards for pesticide regulation in marijuana cultivation. This California department ensures that anyone with a state license to grow medical marijuana does so without threatening public health.
The California Department of Fish and Wildlife and the California State Water Resources Control Board work on the development of measures that protect water quality that could be impacted by adult use and medical marijuana cultivation. Each California department plays its role in ensuring anyone who has a state license to cultivate recreational or medical marijuana does so without adversely impacting the environment.
The DFA also created a track and trace program for all adult-use and medical marijuana plants at cultivation sites. It also put civil penalties in place for cultivation operations that violate any of these provisions. However, qualified patients can be exempt from the track and trace program if they cultivate their own plants in an area that’s less than 100 square feet for personal medical use. A primary caregiver who has five or fewer in their patient collectives is allowed to grow plants in a proposed location of up to 500 square feet, as well.
Thus, primary caregivers must be wary of how many plants they grow under the Compassionate Use Act, particularly if they do not operate a licensed facility.
Senate Bill 643 also outlines qualifications for licensing. This includes proof of local approval. Applicants must also undergo a DOJ background check at a Public Live Scan Site. These qualifications allow for-profit entities to operate.
New cultivation and dispensary facilities cannot be located in school zones. They must be at least 600 feet away from schools.
Senate Bill 643 also includes several provisions regarding attending physician recommendations. However, these provisions do not significantly impact or impair a patient’s ability to access medicinal marijuana. The Medical Board must consult with the California Center for Medicinal Cannabis Research to develop the medical guidelines for medicinal marijuana recommendations, as well.
Physicians are not allowed to make medical recommendations to patients if the physician or a family member has a financial interest in a licensed medical cannabis facility. Physicians also must include a warning notice telling patients that medical marijuana is still a controlled Schedule I substance at the federal level.
Organic Standards for Cannabis Production Through Senate Bill 643
Through the Medical Marijuana Regulation and Safety Act, the following information outlines organic regulations for medical cannabis products:
(a) The CDFA licensing authority for medicinal marijuana was also tasked to make available a certified organic designation and organic certification program for medical marijuana no later than January 1, 2020. However, it must be allowed under federal law, along with the National Organic Program and Article 7 of Chapter 5 of Part 5 of Division 104 of the Health and Safety Code.
(b) The bureau can establish appellations of origin for all cannabis grown in California.
(c) It’s illegal for medical marijuana to be marketed, labeled, or sold as grown in a California county if the medical marijuana wasn’t cultivated in that county in accordance with the local ordinance.
(d) It is unlawful to use the name of a California county in the labeling, marketing, or packaging of medical marijuana products unless the product was grown in that county.
Vertical Integration Under MMRSA
The MMRSA established the Bureau of Medical Marijuana Regulation and formed the state’s system for medicinal marijuana business licensing. Later on, the law was changed through several small bills and renamed the Medical Cannabis Regulation and Safety Act (MCRSA). After the state legalized adult-use marijuana, it combined licensing structures for medicinal and recreational operations through the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).
Ganjapreneurs interested in operating for-profit medical marijuana businesses in California need to get the right license. The license must be for a specific niche in the cannabis sector. For example, manufacturing, cultivation, testing, distribution, etc.
Some people would like their operations to work at multiple stages in the supply chain. For instance, a dispensary might want to grow and distribute marijuana products themselves. However, specific rules and complex licensing demands in place allow these operations to work at several levels in the distribution chain.
Limitations for Vertical Integration Under MCRSA/MMRSA
The MCRSA allows businesses to apply for 17 types of commercial licenses, as discussed above. The MAUCRSA now permits at least 20 types of licenses with each license focused on a certain stage of production.
Businesses interested in operating at multiple stages of production need to hold all of the right licenses to operate vertically. However, the general rule of the MCRSA is that licensees can only hold licenses in up to two different license categories.
Vertical Integration Under MAUCRSA
As of January 1, 2018, the MAUCRSA changed Cali’s marijuana licensing structure. These alterations combined medicinal and non-medicinal licensing structures to revise various MCRSA provisions. Through the MAUCRSA, some restrictions regarding vertical integration were repealed. Thus, single licensees are now allowed to own multiple licenses with some restrictions still in place.
Even though single individuals are now able to hold more than two licenses, they have to operate as separate and distinct businesses. Furthermore, some combinations are still prohibited.
Since testing sites can’t have other types of licenses, this causes a dilemma for some. Large-scale commercial growers are also not allowed to have a distributor license or a micro-business license. Vertical integration is also something some local city and county ordinances can ban.
How Licensing Works Under MMRSA
- Businesses that have both been in operation and in good standing with their localities before 2016 have priority to receive their licenses.
- Applicants must obtain a permit from their city or county before obtaining a license from the state of California before they can operate a cannabis business. Both are necessary to comply with the new commercial cannabis laws. For example, state licensure still requires a local permit, just as someone with a locally granted permit must have state licensure.
- Even though local jurisdictions can change their ordinances to allow or ban medical marijuana licenses for business operations, all of these localities must still adhere to the minimum standards established by the MMRSA and the state of California.
- The law creates seventeen types of commercial licenses. Whether an operation can get one of these licenses depends on if the cannabis is cultivated indoors or outdoors, as well as the size of the operation and the amount of medical cannabis cultivated.
- Some limitations exist regarding the types and number of licenses that one licensee can hold. Generally speaking, the new laws allow licensees to only hold a state license in up to two separate license categories. Equally important to consider is the fact that a licensee cannot hold an ownership interest in real property, personal property, or any other assets connected with another license category.
- Licensees also cannot be licensed to sell alcoholic beverages as a retailer.
- Licenses are valid for a year from the date they’re issued. These licenses must be renewed annually for the licensee to continue lawful commercial cannabis operations.
- Businesses that were previously granted permission to cultivate, manufacture, and dispense cannabis or cannabis products under one permit may receive an exception. Also important to note is that there are several requirements in place. The most important of these demands is that the business must have continuously complied with local ordinances without interruption before July 1, 2015.
Safety Act Compliance
Both a state license and local permission are essential for cannabis operations to comply with the MMRSA. But changes to the rules will continue, and it’s essential to remain diligent in how these alterations might impact your operation.
This is why it helps to have a team monitoring the legislative changes throughout California state and the locality in which you operate.
Operating a medical cannabis business in California? Northstar is here to successfully scale your operation!
Contact us now to speak with one of our experts to learn how our financial services will grow your business in this budding sector.
