Today, the new Michigan Marijuana Regulatory Agency (MRA) issued a press release regarding recent Michigan Court of Claims rulings, explaining how “temporary operators” will be treated going forward as well as how “caregiver” product will be used to keep a supply chain open to meet patient demand. The Executive Director of the MRA, Andrew Brisbo, also discussed these issues at his Senate confirmation hearing today.

As followers of the Michigan medical marijuana market and readers of this blog know, Michigan allowed legacy dispensaries to operate as “temporary operators” as the state transitioned from a gray market to a new regulated market. As the licensing process dragged on, the deadline for when temporary operators had to be licensed or close continued to move, resulting in lawsuits from as-yet unlicensed temporary operators every time a new deadline approached.

On April 30, the Michigan Court of Claims issued a decision in a collection of cases brought by temporary operators. The Court concluded that temporary operation equated to a “provisional license” that could only be taken away if due process is afforded the operator, and that the state simply selecting an end date without reference to the process was arbitrary and capricious. The Court enjoined the State from closing temporary operators until they have an opportunity to receive a final agency decision and seek judicial review of any denial. The Court also noted that the MRA can enforce the law against temporary operators; i.e., they can be held to the same operational standards as licensees, something the State has never done.

In a separate case, the Court of Claims ruled against a licensed provisioning center (dispensary) that had asked the Court to order the State to allow licensed operators to buy marijuana product from caregivers and sell that product without the requisite testing. (Under Michigan law, caregivers are legally permitted to sell marijuana only to a maximum of five patients, and licensees are required to buy product only from licensed growers and processors and to sell it only after testing.)

Mr. Brisbo was questioned extensively today on how the MRA is reacting to the Court decisions. Highlights from Executive Director Andrew Brisbo’s testimony:

  • On regulating the temporary operators: the MRA is “looking at options on standards” and ultimately wants to have everybody operating under the same rules. Mr. Brisbo did not commit to requiring this while temporary operators have their applications still pending, however.
  • On resolving temporary operator applications: Mr. Brisbo acknowledged that 77 temporary operator applicants have not yet received a decision even though they filed their initial applications by February 15, 2018. Most of these, he explained, are applicants who have either gone dormant or have never filed a fully completed application. Mr. Brisbo committed to deciding all such applications by June 1. He did not address whether the MRA will take steps to expedite the administrative hearings that denied applicants receive before their denial is final.
  • On ensuring adequate product supply: Mr. Brisbo stated that it is the MRA’s position that all product must come through licensed growers and processors. He testified that regulated supply is making progress but is still not meeting demand, so MRA will allow supplemental product to come from caregivers until data shows that licensed supply can fulfill demand. That supplemental product, however, must come through licensed growers/processors to ensure it is tested, transported and tracked in accordance with the law.
  • On testing: Mr. Brisbo explained that there is adequate capacity at the State’s labs for testing, and committed to a position that all product must be tested before being sold. (MRA, however, will still allow the sale of untested caregiver product already in inventory at licensed provisioning centers.)

In its press release and related communications to licensees, the MRA announced that it will allow caregiver product in the market consistent with the former Medical Marihuana Licensing Board’s March 21, 2019 resolution. Under this framework,

Licensed Provisions Centers:

  • May obtain marijuana products only from a licensed grower or licensed processor.
  • Must obtain a patient consent prior to selling any untested products that had been obtained from caregivers on or before April 30, 2019.
  • Must enter all inventory into METRC immediately upon receipt.
  • Must notify MRA within one business day of becoming aware of any adverse reaction to a product sold or transferred.

Licensed Growers and Licensed Processors:

  • May obtain marijuana products from caregivers.
  • Must enter all inventory into METRC immediately upon receipt.
  • May only transfer marijuana products that have been tested in compliance with state law and rules.
  • Must tag or package all inventory identified in METRC.
  • Must transfer marijuana products by means of a secure transporter, except as otherwise exempted by law.
  • Must notify MRA within one business day of becoming aware of any adverse reaction to a product sold or transferred.

Going forward, it is unclear whether the State will appeal any of the Court of Claims rulings, or whether licensed provisioning centers will continue to challenge the requirement that they adhere to the law in sourcing product and selling it only after it is tested. It does appear, however, that for temporary operators that are allowed to continue operation, MRA will take an aggressive approach of expeditiously approving or denying those applications.