Missouri regulators drop new draft rules just ahead of the holidays

With just 5 days before Christmas, Missouri’s cannabis regulators dropped new draft rules on Tuesday.

Now the cannabis industry is in a mad dash to review the more than 90 pages of proposed rules before the December 28 deadline for public feedback.

While a few causes for concern with the first round of draft rules released in November have been remedied, the majority of proposals that had drawn concern and ire from industry participants remain unchanged.

One positive change comes in a dispensary rule that would require a 1:1 ratio of employees to customers inside dispensaries, revised language allows for a 1:3 ratio of patients and consumers to staff. Something dispensary operators had hoped for with the addition of adult-use sales in coming months. Allowing consumers and patients to shop while staff processes orders.

Another change to the dispensary rules proposed in November is the removal of a rule that read “Dispensary facility employees must be at least twenty-one (21) years of age.” However, language still exists within the most recent draft rules that reads, “No one under the age of 21 may enter any areas beyond the facility’s access point area, unless the individual is a qualifying patient.” While that rule would appear to be specifically targeted at consumers and customers, the language could cause problems for any employee under age 21 if they do not maintain a medical marijuana card.

This change is accompanied by revised language in the Facility Ownership and Employment draft rules which reads “Beginning February 6, 2023, all facility agents must be twenty-one (21) years
of age or older. Individuals under twenty-one (21) who possess a facility agent identification card prior to February 6, 2023 may keep their agent identification card.” For operators who have staff members currently under 21, this is a welcome change as many operators had been unhappy with the prospect of terminating existing employees only to find, train, and replace new hires based solely on age.

But for the few positives evoked from the drafts, the list of negatives contained within is lengthy.

Jack Haddox, Director of Dispensary Operations at SWADE, sees multiple areas of concern.

“The rule requiring cameras in every area greater than 3’x3′ would be unnecessary, and unduly burdensome,” Haddox explained. “The expense of additional cameras to our 5 locations would be prohibitively expensive.”

Greenway previously reported on proposed changes to security requirements, including the expansion of camera coverage to all limited access areas inside facilities.

The rule would require that “Video cameras must provide coverage of
(I) All facility building entry and exit points, including windows;
(II) All limited access areas, except for restrooms, locker rooms, lactation spaces, and closets smaller than three feet (3’) by three feet (3’).”

Beyond the cost of updating and installing security cameras to cover every space within a facility, many operators feel the requirement is overreaching and beyond rationality. Security rules also require that cameras are “capable of being accessed remotely at all times by the department or a law enforcement agency in real-time.” Meaning that conference rooms, private offices, break rooms and any other location on the grounds of a facility would be subject to more exhaustive security measures and monitoring than any state prison, correctional institution, or most secure military installations – all for privately owned companies.

Additionally, changes found in the Packaging, Labeling, and Product Design proposals would cost Missouri businesses millions of dollars in unusable packaging and redesign efforts all while creating thousands of pounds of waste to create more restrictive packaging requirements than the state has operated under for more than two years of retail marijuana sales in a medical marijuana market. Those packaging restrictions may even be unconstitutional according to Josh Mitchem, Chief Executive Officer at CLOVR.

“These rules are in direct violation of the constitution by making the packaging more stringent than alcohol, promotion is done through packaging, that’s why the cereal aisle is the most colorful aisle in the grocery store,” Mitchem said. “I don’t understand the mindset here. It will not surprise me to see multiple temporary restraining orders and multiple lawsuits filed claiming that some of these regulations are unconstitutional.”

Sections of Amendment 3, passed with 53% approval in November, specifically reference the abilities of the Department to create rules and regulations for marijuana businesses in the state, but two sections stand out in the minds of many operators that spoke to Greenway. The section of text referenced by Mitchem which reads, “While the department shall have the general power to regulate the advertising and promotion of marijuana sales, under all circumstances, any such regulation shall be no more stringent than comparable state regulations on the advertising and promotion of alcohol sales.” The other section of constitutional law that was referenced multiple times by operators was a line that reads, “The department shall not have the authority to promulgate, apply, or enforce any rule or regulation that is unduly burdensome or act to undermine the purposes of this section.“

The term “unduly burdensome” is defined in the constitution to mean that “the measures necessary to comply with the rules or ordinances adopted pursuant to this section subject licensees or potential licensees to such a high investment of money, time, or any other resource or asset that a reasonably prudent businessperson would not operate the marijuana facility.”

It is in that regard that Mitchem and many other Missouri operators feel the draft rules have become overreaching and cumbersome. “You shouldn’t be seeing rules become more strict in a market that is now two years old and is progressing through the natural evolution of what the industry does.”

Another draft rule, contained in the Transportation and Storage document, would restrict facility operators from having offsite warehouses located outside of the congressional district in which
the facility license was awarded. While that rule may not seem immediately troublesome, it puts some operations at a significant and distinct disadvantage and creates a drastically uneven playing field for businesses that choose to operate offsite warehouses. For instance, an operator located in the 8th congressional district could, in theory, have a storage facility located in Rolla while the facility itself could sit in Caruthersville, over 200 miles and nearly 4 hours away. In contrast, a business whose facility is located in the City of St. Louis or Kansas City would be restricted to building its off-site storage facility within a roughly 30-mile radius.

Another area of concern is a rule requiring license holders to “become fully accredited to the current standards set forth by ISO 9001 within one (1) year of the date the facility receives department approval to operate and shall maintain its accreditation.” The language can be found in the Facilities Generally document.

“Having worked in other regulated industries. Getting an ISO accreditation is usually a multi-year process,” Haddox explained. In addition to the concerns voiced by Haddox, other operators told Greenway that they see the process as unneeded and unduly burdensome.

“Licensees can be successful, compliant operators without requiring an arbitrary third-party certification. This is going to add tens of thousands of dollars in annual direct costs combined with facility resource costs while licensees are already struggling to make income in this market,” Jonathan Milo, Chief Executive Officer at VIBE Cannabis.

You can review each of the draft documents in full below:

Consumers, Qualifying Patients, and Primary Caregivers (12-20-2022)
Cultivation Facilities (12-20-2022)
Definitions (12-20-2022)
Dispensary Facilities (12-20-2022)
Facilities Generally (12-20-2022)
Facility Application and Selection (12-20-2022)
Facility Employee Training (12-20-2022)
Facility Ownership and Employment (12-20-2022)
Facility Security (12-20-2022)
Generally Applicable Provisions (12-20-2022)
Inspections Investigations Complaints (12-20-2022)
Inventory Control and Seed to Sale Tracking (12-20-2022)
Manufacturing Facilities (12-20-2022)
Marijuana Waste Disposal (12-20-2022)
Microbusinesses (12-20-2022)
Packaging, Labeling, and Product Design (12-20-2022)
Physicians and Nurse Practitioners (12-20-2022)
Testing Facility (12-20-2022)
Transportation and Storage (12-20-2022)

The Department of Health and Senior Services Division of Cannabis Regulation previously responded to Greenway‘s inquiry regarding proposed draft language saying, “It is important to note that these rules are not final—they are only in draft form at this point. We will continue to work on these drafts and expect they will be revised before filing based on continuing research and public input. Any suggestions from the public on program implementation or rule drafting, including industry suggestions, will be reviewed starting as early as this week. Once rules are in final form, we’ll be working to address any questions that remain.”

For those looking to comment on the draft rules, you can submit feedback here, https://health.mo.gov/safety/medical-marijuana/suggestions.php

The Department is also currently still accepting suggestions regarding Amendment 3 itself in order to craft regulations and draft rules. You can find that form here https://stateofmissouri.wufoo.com/forms/m1p9djdq0if974p/