The competition for 39 permits to grow, process and dispense medical marijuana in Pennsylvania was bound to leave many applicants speed-dialing their lawyers to complain about unfair evaluations.
Sure enough, this month a Bethlehem applicant sued the state Department of Health to shut down the new medical marijuana program because of what it considered a bungled permitting process. Advocates decried that company, Keystone ReLeaf, as self-serving and inconsiderate of the ailing children and adults who have long sought relief.
But a review by Morning Call of more than 130 administrative appeals filed against the state Department of Health’s Office of Medical Marijuana reveals a broader scope of the complaints that threaten to plunge the nascent industry into a legal morass over an evaluation committee’s handling of applications.
Seemingly cut-and-dried application requirements such as photo IDs and resumes were expected to be scored for completion. Instead, many were graded on a sliding scale — and to the hundredth decimal point. One yes-or-no question worth 50 points yielded a score of 41.38 for one applicant and 6.30 points for another, though both answered in the affirmative.
More than two dozen applications, usually comprising several hundred pages, were disqualified for apparent technical glitches or clerical oversights, and applicants were offered no chance to make what would have been easy fixes, according to the appeals.
And nearly every appeal took issue with how the committee quantified diversity initiatives and community impact pitches.
The state received about one administrative challenge for every three denied applications.
The Morning Call obtained most of them, as well as scoring rubrics, through an open records request.
Some advocates say Pennsylvania is stumbling down the same litigious path as other state bureaucracies that micro-managed the issuance of a limited number of permits. The Keystone ReLeaf lawsuit, they say, will only be the beginning.
“It’s Groundhog Day,” said Chris Goldstein, a cannabis legalization advocate in Philadelphia. “States that have attempted to do limited permits have been fraught with the most lawsuits, regulatory delays and problems with implementation. This was so predictable.”
Others say the issues are ultimately procedural molehills that are not remotely serious enough to delay patients access to medical cannabis.
“The process used by the Department of Health was extremely well-vetted, and the appeals seem like a natural part of the process,” said Michael Bronstein, co-founder of the American Trade Association of Cannabis and Hemp and the director of a coalition made up of the successful Pennsylvania applicants. “Patients who have been waiting for years need access as quickly as possible.”
Companies paid nonrefundable application fees of $10,000 and $5,000 for grower/processor and dispensary applications, respectively.
At least two dozen applicants challenged the Health Department’s decision to not even score applications that were deemed incomplete.
Jill Lamoureux, CEO of Pittsburgh Pure Keystone LLC in Pittsburgh, submitted two growing applications and one dispensary application, each exceeding 400 pages. According to Pure Keystone’s appeal, she experienced formatting glitches while transferring 12 required application attachments between computers.
In the process of fixing broken forms before sending them, she inadvertently included one attachment twice, omitting another. She submitted the missing attachment March 23, according to the appeal.
After not hearing back from the Health Department, Lamoureux emailed Eric Hagarty, one of Gov. Tom Wolf’s deputy chiefs of staff, asking if he had heard of other applicants experiencing similar issues.
According to an email included in the appeal, Hagarty responded, “There were a couple folks who seemed to have issues with the formatting, but DOH was never able to re-create the issues on their end. I don’t think there’s any cause for concern that DOH would disqualify an applicant over something like that.”
Two months later, all three Pure Keystone applications were rejected as incomplete.
In its appeal, Keystone ReLeaf also claimed Hagarty said the state would not disqualify its grower/processor application because of a USB drive glitch.
The disqualifications were not just overly severe, but also illegal, other appeals claim. The Medical Marijuana Act includes a paragraph that says the department “shall notify” applicants if further documentation is required, and that applicants have 30 days to provide the additional material.
Plus, several appeals point out that the Health Department did allow one Pittsburgh-area applicant to resubmit after its application was destroyed in the mail.
In its three appeals, Pure Keystone attorney Ansley Westbrook II argued that rejection based on technical glitches “would be an abuse of discretion, would have no reasonable relation to any governmental interest and would be in violation of substantive and procedural due process and equal protection.”
He added, “The impact of this issue … cannot support the basis for the rejection of the application.”
John M. Cascioli of Bangor, owner of CannaMed Green Inc., also had two applications rejected for one missing attachment. He insists the attachment was on a USB drive mailed to the department, but said that whatever happened, it did not warrant disqualification.
“We literally spent $2 million preparing for this,” he said. “I can’t believe it. I just don’t understand.”
Applicants who at least received a scorecard found other reasons to express incredulity.
Though some application sections were evaluated on a pass/fail basis, the evaluation committee mainly used a five-level scoring scale. For example, a response to a 50-point question that “meets expectations” earned 21 to 30 points.
Denied applicants claim the department should have explained which sections the review panel would score using the scale. They also say the scale never should have been used to score certain elements.
Take the capital requirements section. The Medical Marijuana Act required grow facilities to have at least $2 million and dispensaries to have at least $150,000 in financial backing, and the application simply instructed companies to summarize their available capital. During the submission period, multiple applicants asked if they could score more points if they demonstrated they had more than the minimum capital, but the Health Department said it “could not provide a response” to this specific question.
Sure enough, the more financial backing an applicant said it had, the closer it came to getting all 75 points, according to the appeals. Some appellants said they would have demonstrated a greater war chest had they known the question was not pass/fail.
For the “personal identification” attachment, applicants were supposed to provide resumes and photo IDs of each financial backer, operator and employee. The Health Department did not state in its instructions and pre-deadline Q&As that it would grade resumes (or photos, for that matter) on quality.
Nevertheless, the committee scored the section using the sliding scale. Mission Pennsylvania, which earned a Lehigh County dispensary permit but was denied a growing permit, scored 37.11 points.
Despite identical responses, Keystone ReLeaf scored 36.40 on one dispensary application and 31.40 on another.
“It is inconceivable that there is some subjective or holistic scoring approach to determining whether the application did or did not include the required photo identification and resumes,” wrote Seth Tipton, Keystone ReLeaf’s attorney.
Companies such as Keystone that submitted applications in multiple regions of the state caught inconsistencies across their multiple scorecards, according to their appeals. Take PharmaCann LLC, an Illinois company that wanted to open one of two potential grow facilities in Lackawanna County. Nineteen identical sections in PharmaCann’s two applications received different scores from the evaluation committee.
All those decimal points apparently proved challenging to add up. An appeal by Columbia Care LLC, which earned a dispensary permit but not a growing permit, claimed that half of the applications’ total scores were miscalculated. The miscalculations usually amounted to less than a tenth of a point, but some of the scores were indeed wrong.
Ari Molovinsky, a principal of Mission Pennsylvania, wrote in its appeal that random, unpredictable scoring is exactly what launched challenges to various state-licensed medical marijuana programs. This “only serves to delay rollout and harm patients who are eagerly awaiting medication.”
‘Shroud of secrecy’
Numerous companies lambasted the appeals process itself as an exercise in futility, given the scope of information that remained confidential.
Many winning applications were almost entirely redacted by the companies themselves as part of the initial submission process.
Many losing applicants did the same thing. But they say the department is violating the rejected applicants’ right to due process by not publishing the winners’ unredacted versions.
“Columbia Care’s ability to appeal on the grounds that the department’s evaluation and scoring may be contrary to the evidence has been arbitrarily and unreasonably restricted,” attorney Richard Limburg wrote.
Others noted that the Health Department continues to conceal the identities of the evaluation committee members and has failed to make grading criteria widely available.
“The shroud of secrecy with which the application process and grading was performed allowed for no transparency, review or critique,” wrote Mary Parker, CEO of Global Resource Operations LLC.
The department faces another problem: It’s given winning applicants six months to get up and running. They keep barreling forward as the department slogs through a mountain of appeals. Any suspension or revocation of specific permits would come at a significant cost to the winners as they invest in business operations.
Health Department spokeswoman April Hutcheson did not answer a list of questions from The Morning Call about the permitting process. But in legal responses to administrative appeals, the department has insisted that “the evaluation of the content of the application for compliance with the Act … is the sole and exclusive responsibility of the [Office of Medical Marijuana] and is accomplished in the sole exercise of the discretion of the Office.
“Appellant’s self-serving declarations of compliance with the requirements for application criteria … attempts to usurp the discretion afforded the Office by the General Assembly to interpret and implement the Act.”
Becky Dansky, legislative counsel for the Marijuana Policy Project, a pro-legalization group, said the scoring discrepancies for identical sections of applications do raise questions. She hoped the department would clarify whether multiple members of the evaluation panel reviewed each application.
“One of the purposes of having people from different agencies is that they brought different areas of expertise,” she said. “Hopefully more than one set of eyes was on each application.”
Still, the most concerning issues raised in the appeals don’t seem to reach the “alarming or catastrophic” level that would warrant “shutting down the program and starting over again,” she said.
Peter Schweyer, an Allentown state representative who helped write the medical marijuana legislation, also acknowledged the scoring discrepancies were disconcerting and need to be investigated.
“But I think the idea of halting a hugely popular program over certain questions about procedure is a tough one to swallow,” he said. “If I were a parent of a child who’s going to get relief because of this program, I wouldn’t give two seconds of thought about a few procedural issues.”
BY THE NUMBERS
418 unsuccessful applications
140 administrative appeals filed across the state
12 grower/processor permit recipients
27 dispensary permit recipients
73 total northeast region applications (including the Lehigh Valley)
2 regional grower/processor permit recipients
4 regional dispensary permit recipients
28 administrative appeals filed across the region
2 lawsuits filed by regional applicants in Commonwealth Court