Opening A Cannabis Dispensary in Ohio

So you want to open a medical marijuana dispensary in Ohio, now that it’s legal? Here’s a rundown of what is involved.

Licenses Available

At this time, the Ohio medical marijuana program only allows the state pharmacy board to issue up to 60 provisional dispensary licenses. The board has issued 56 licenses so far. The reason for not issuing all 60 licenses is that applications were not submitted for every district, and not every district had viable applicants. However, the board is not accepting new license applications at this time. There are 31 districts, with a maximum number of licenses that can be awarded in each district. Applicants are limited to 5 licenses state-wide, and 66% of licenses in any single district.

The board has the authority to increase the number of licenses after the program is operational. It’s my belief that until the board sees that it can manage the program effectively, it will keep a low limit on the number of licenses. The board is supposed to consider, on a biennial basis, whether the number of licenses is appropriate based on state population, patient demand, and geographic distribution of dispensaries. 

The board issues provisional licenses to qualifying applicants, and then those provisional licensees have 6 months to demonstrate their compliance with the dispensary operational requirements, in order to obtain a certificate of operation. So far, only 13 licensees have received certificates of operation. For the period beginning January 16, 2019 (the first date sales began) through March 31, 2019, the 13 dispensaries in operation have total combined sales of $2,884,096.

Restrictions on Applicants

There are a number of restrictions on who can be granted a license:

  1. Applicants must pass a criminal background check, showing that they have not been convicted or pleaded guilty to a disqualifying offense within the 5 years before applying for a license.
  2. Applicants cannot have an ownership or investment interest in or compensation arrangement with a licensed medical marijuana lab, or an applicant for such a lab license. The dispensary applicant also cannot share any officers or employees with a licensed lab or an applicant for a lab license.
  3. The applicant must demonstrate that the dispensary will not be within 500 feet of a school, church (including synagogues, mosques, etc.), public library, public playground, or public park. Schools include day-care centers and pre-schools.
  4. The applicant must be in compliance with tax laws.

Who is subject to the criminal background check? The administrator or other person responsible for daily operation of the license applicant, as well as any owner, prospective owner, officer, prospective officer, board member, or prospective board member of the applicant. All employees of dispensaries will also have to pass a criminal background check.

Other things that the board reviews in determining whether to grant a license are whether the applicant has the minimal amount of capital required, whether zoning approvals are in place, and whether the applicant has an appropriate business plan, operations plan, and patient care plan.

License Fees

When applying for a license, applicants must submit a $5,000 application fee. At the time the board grants a certificate of operation, the licensee must pay an additional fee of $70,000. Licenses must renew their certificate of operation every two years, with a renewal fee of $70,000, and if the renewal is not filed on time, there’s a penalty of $10,000. 

There are also fees for change of ownership ($5,000), relocation ($5,000), and major modification or renovation ($5,000).

Finally, there are fees for associated key employees ($500 each), key employees ($250 each), and support employees ($100 each).

Forms of Medical Marijuana

Let’s start with what dispensaries are not allowed to sell – joints, buds, or any other marijuana that you can smoke. Vaping is permitted, however. Other permitted forms include oils, tinctures, edibles, patches, plant matter, and anything else that the state pharmacy board approves (so long as it isn’t smokable). Also, the law prohibits any form or method that is attractive to children, as specified in rules adopted by the board. That could include certain types of edibles, such as candy, or chewing gum. THC content of plant material is limited to 35%, and THC content of extracts cannot exceed 70%.

Local Restrictions

In addition to the 500-ft restriction mentioned before, localities can pass restrictions prohibiting or limiting the number of cultivators, processors, or retail dispensaries within their boundaries.

Operating Requirements

There are extensive regulations governing all aspects of dispensary operation, so I will just touch on a few. All dispensaries are required to have security alarms, as well as video surveillance systems, and other internal and external security systems. All medical marijuana must be stored in an approved safe or vault, within a restricted access area. All medical marijuana must be packaged and labeled according to state regulations. Within five minutesof dispensing medical marijuana to a patient, the dispensary must electronically transmit certain information about the sale to the board. Dispensary names, logos, signs, and advertisements must be submitted to the state board for approval. Advertisements cannot be place on billboards; radio or TV broadcast (including cable, on-demand, satellite, internet); any handheld or portable sign; or within 500 feet of a prohibited facility, community addiction service provider, or game arcade (unless admission is restricted to people age 21 and over).

What’s the bottom line? Applying for and operating a medical marijuana dispensary in Ohio is not going to be an easy, move-fast-and-break-things type of undertaking. Prospective applicants should have firm commitments for at least $250,000 in funding, to cover application fees, application preparation, certificate of operation fees, leasehold improvements, equipment, and setting up operational rules and processes. Also, prospective applicants may need to wait until the board expands the number of licenses it will grant. However, if enough provisional licensees are unable to obtain their certificates of operation, the board may accept applications for those spots.  

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