Three Missouri marijuana operations agree to terms with DHSS requiring transfer or surrender of licenses

Last month, the Department of Health and Senior Services and operators of three Missouri Medical marijuana operations plagued by scrutiny, administrative holds, and investigations agreed to terms that would dictate a change in management and ownership or force the surrender of multiple licenses.

First reported by Jack Suntrup of St. Louis Post-Dispatch, the terms of the settlement outline a plan that removes control of three medical marijuana operations in the state. Archimedes Medical Holdings, FUJM, and Holistic Health Capital will be required to obtain a management company to control operations of the licenses by June 30 or seek Department approval to continue operations.

“Licensees may execute a management agreement with a third party (“the Management Company”) to manage and operate the facilities connected with licenses CUL000022, CUL000024, CUL000060, and MAN000085 no later than June 30, 2022. If Licensees do not enter into a management agreement described in 3(j) and 3(k) by June 30, 2022, Licensees agree, beginning July 1, 2022, to cease to operate CUL000022, CUL000024, CUL000060, and MAN000085, including plant or product care or maintenance, unless approved or directed by the Department. The Management Company must have experience operating state-licensed marijuana facilities; be capable of complying with applicable Department regulations; have no common control, ownership, or management with Licensees; and participate in a conference call with the Department prior to assuming control of operations in order to demonstrate competence in seed-to-sale tracking requirements and other regulatory requirements. The lifting of the suspensions on CUL000022 and CUL000060 is not a prerequisite to the Management Company assuming operational control over Licensees’ four facilities.”

Those companies saw the partial suspension of operations of Archimedes’ CUL00022, Archimedes’ CUL00024, and FUJM’s CUL00060 licenses on September 22, 2021, October 5, 2021, October 8,  2021, and November 1, 2021. The suspensions for Archimedes’ CUL00022 and FUJM’s CUL00060 currently remain in place.

On October 5, 2021, the Department of Health and Senior Services placed an administrative hold on all product originating from the three cultivation licenses, days later on October 12, the hold was released on manufactured products, that passed mandatory testing – restricting only flower and pre-rolls. That hold had remained in place for flower product produced by two of the three cultivation licenses prior to the agreement reached by the Department and the licensees.

The agreement further requires that by the end of November ownership of all four affected licenses be transferred or face revocation.

“By November 30, 2022, Licensees shall submit change of ownership or transfer of license change requests to the Department for licenses CUL000022, CUL000024, CUL000060, and MAN000085. Each such change request must include all Department-required documents. Prior to completing the documents, Licensees will work with its licensing specialist for the most up to date Department required documents for change of ownership and transfer of license change requests. The Department’s approval of the change of ownership or transfer of the licenses is contingent upon Licensees divesting themselves of all product currently in their possession. As to product that the parties have agreed to designate for destruction, this means that Licensees have completed the process of destroying all such product. As to product that the parties have agreed to designate for “extraction only,” this means that Licensees have either (1) voluntarily destroyed the product; (2) performed extraction on the product at MAN000085; or (3) transferred the product to another Missouri medical marijuana facility licensee for extraction.”

“As to each of CUL000022, CUL000024, CUL000060, and MAN000085, if Licensees fail to submit a timely change request, as required by paragraph 3(l), that license will be deemed to have been surrendered to the Department, effective December 1, 2022.”

In the interim, all plant material onsite at Archimedes’ CUL000022 license must be destroyed, additionally, any medical marijuana product currently on administrative hold in licensed medical marijuana dispensaries originating from Archimedes’ CUL000022 and pre-rolls that contain plant material originating from CUL000022 must also be destroyed. Other plant material to be used for extraction purposes has been released for processing.

Meanwhile, plant material originating from FUJM’s CUL000060 license identified by the group must be destroyed while the remaining product and material that had been on administrative hold will be released for extraction or destruction. Finally, plants or plant material not tagged in Metrc at FUJM’s CUL000060 facility or at the Holistic Health MAN000085 facility must be destroyed. 

The Department will require the destruction of all designated product and plant material to be overseen by DHSS personnel. 

The destruction or processing of all remaining plant material is a requirement from the Department to approve any transfer of ownership before the November Deadline. 

Industry Impact

   

At this time it is unclear what impact the agreement will have on operators who have sat with unusable plant material in the months since the initial administrative hold was placed on October 5. One section of the agreement between the Department and the licensees reads in part, “Licensees agree that if other Missouri medical marijuana licensees present true and correct copies of [communication from the Department sent to Licensees], they will accept them as evidence of how much product in that licensee’s possession was affected by this negotiated resolution.” 

The Department confirmed that licensees with product on administrative hold have now received communication with direction on whether that product may be used for extraction or must be destroyed, but what that means for those operators financially remains uncertain, as no specific criteria or resolution is outlined in the agreement between the Department and the operators of Archimedes, FUJM, and Holistic Health.

License Renewal

In the midst of the required changes to ownership and management for the licensees comes the renewal process. The three cultivation licenses must be renewed before July 29, while the manufacturing license must be renewed by August 13. The terms of the agreement allow for the licenses to be renewed, but restrict operations with the licensees agreeing not to plant new marijuana crops unless and until a management company or new ownership has requested and passed a compliance inspection and received approval to commence operations.

While that process plays out, should the Department lift or remove suspensions on Archimedes’ CUL000022 and FUJM’s CUL000060, before the designation of a management company, the licensees are restricted to maintaining, harvesting, packaging, and selling the marijuana plants and plant material currently growing in either of the two facilities.

While the restrictions affect both FUJM and Archimedes, it’s important to note that Archimedes’ CUL000024 license and Holistic Health’s MAN000085 are unaffected by any restrictions or designations on current operations, outside of the requirement to obtain a management company and complete a license transfer along with the other licenses involved in the agreement.

Future Licensing

Should Missouri approve the legalization of adult-use marijuana prior to a final decision regarding any change request or transfer of ownership, the operators of the four licenses have agreed not to pursue or request to convert any of their facility licenses to a comprehensive or recreational marijuana facility license. 

Lisa Cox, Communications Director for Missouri Department of Health and Senior Services, confirmed to Greenway that “The primary owners of these licenses will not be eligible to own licenses in the future.”