With Rhode Island poised to issue licenses for six new cannabis dispensaries, some applicants say the selection process will hamper the chances of experienced in-state applicants getting any of the potentially lucrative licenses.
The state is planning to hire an independent third party to establish and operate a lottery system to determine who will get the six licenses, a process that state officials believe will avoid the effects of favoritism and influence. The winners will be granted licenses to dispense medically prescribed cannabis and cultivate the product, too.
Establishing a method of fairly distributing marijuana licenses will take on even more importance as state lawmakers consider legalizing the recreational use of cannabis, which would lead the state to issue many more licenses in the future.
One of the 28 applicants for the dispensary licenses set to become available in May said some of the applicants believe the selection process should be based on merit, not luck.
The applicant, Spencer Blier, who is a local cannabis cultivator, said Rhode Island-based applicants should be given preference. His company, Mammoth Inc. in Warwick, has applied for dispensary licenses in two areas of the state.
“I’m from Rhode Island. I grew up here,” said Blier.
In some cases, out-of-state interests are competing with local cultivators who have been licensed and involved in the cannabis industry since the state’s legalization of medical marijuana in 2016, he noted.
“I get what [the state is] doing with the lottery in not allowing backdoor deals,” Blier said. “But at the same time, I believe that local Rhode Island companies that have paid the license fee every year and have followed the rules and regulations, and thrived in this competitive, regulated market, should be given credit for it.”
Lotteries have been used in other states around the country to determine who gets cannabis licenses. Rhode Island is following suit, and it has issued a request for proposals for a company to design and develop a random selection process to be held on May 14.
The stakes are high.
There are only three licensed dispensaries in the state. With the issuance of the six licenses, it will expand to nine, allowing these businesses to dispense cannabis to people who have prescriptions. The marijuana will be at least partially supplied by the state’s roughly 60 licensed cultivators.
If recreational marijuana is legalized in Rhode Island, those already-licensed dispensaries will also be allowed to expand to sell the drug for recreational use.
On March 9, Senate leaders unveiled a 68-page bill detailing a system of legalized marijuana. Gov. Daniel J. McKee is introducing his own legalization plan as part of his budget proposal released on March 11.
It’s clear the industry is lucrative. The three existing compassion centers netted a combined $68 million during the previous fiscal year, according to the R.I. Department of Revenue. That was an increase of $15 million from the prior year.
According to the R.I. Department of Business Regulation, Rhode Island regulates dispensary prices and product quality. The state receives 61% of revenue, store operators receive 29% and hosting communities receive 10%.
The state will issue one license for each of six designated zones throughout Rhode Island. Since some of the applicants are seeking licenses in more than one zone, a total of 45 applications have been filed with the DBR. Only one license can be issued per applicant.
Meanwhile, the fee to hold a dispensary license has skyrocketed to $500,000 annually. Applicants for the licenses paid a $10,000 nonrefundable fee.
Some applicants like the idea of a lottery system, which they said will provide them with a fair opportunity to enter the marketplace.
Attorney Valerio Romano of VGR Law Firm LLC, who is legal counsel and compliance officer for applicant Faded Minds Inc., said seeking to get a dispensary license is “not a cash grab. If you are in this because you think it is going to be a cash cow, you are going to be sorely disappointed.”
Thomas Mirza, CEO, president and chief compliance officer of dispensary applicant New Leaf Compassion Center Inc., agreed.
“Of course, it’s a business,” he said, “and, of course, we’re hoping to be successful at it. But we are a small Walgreens or CVS – when I tell people what we are. We’re a pharmacy without the hard goods.”
Cassius Shuman is a PBN staff writer. Email him at Shuman@PBN.com.
