Scoring takes center stage in appeals
The winning applicants set to become licensed cannabis business in Missouri have been announced over the December and January months.
The cannabis community and the denied applicants have expressed great concern about discrepancies in the scoring process upon hearing many of the announcements, hence the multiple lawsuits filed against the Department of Health and Senior Services.
The most common worry among the community seems to be that identical applications receiving different scores – something some Missouri attorneys are calling a “a systematic failure.” Applicants answered the same question on separate applications the same way, but saw different scores for the same answer score. In addition, applications with the same answers were sent back to their owners for changes to be made, but the reasons given for the return were different, despite the consistent identicalness of the applications.
Greenway talked to several attorneys focusing on license appeals about trends and insights.
Eric Walter, a partner at St. Louis-based law firm Armstrong Teasdale. Walter said, “When comparing scores for identical responses submitted on different types of facility license applications (cultivation v. manufacturing), it is critical to keep in mind that the scorers for those different applications types would logically look for different content on many of the questions.”
This eases some of the concern for scoring applications with the same answers in a different way. However, Walter adds that even questions asking about the facilities’ diversity plan varied in score, when that should not be something that varies dependent upon the type of facility you are.
“These arguments are strongest when the difference exists between two applications for the same type of facility license,” Walter said, “But for some of the questions, such as Question 21 (diversity plan), one would expect an identical response to receive an identical score, irrespective of the facility type.”
The Department of Health and Senior Services responded to an inquiry from Andrew Mullins, the Executive Director of MoCannTrade, and addressed some of the community’s major concerns regarding scoring, especially the question: “What is your marketing plan, including to whom, method of delivery, and costs?” Over 65 percent of cultivation applicants received a 0 on their answer.
The Department is confident that each person hired to score the applications has a professional and relevant background that deems them competent for the role. The Department added “no scorer knew the identity of any applicant or owner; and each question within a facility type was scored by a single person.”
The Department verified one person scored all 578 applications for this question. The department says the criteria set forth by the scorer required the applicant to “meet minimum expectations,” have “no significant weaknesses,” and there should be “reasonable confidence in the proposed approach or ability to fulfill claims,” as well as the applicant providing a clear and detailed answer.
“It is good to see the department is backing up their scorers, however, it does not address the issue of the scoring guidelines failing to require some things in the answers in order to get a given score,” Brian Stumpe of Stumpe & Schrimpf in Jefferson City said. Stumpe told Greenway he believes the inconsistencies are “a systematic failure of the scorers to grade the applicants on an objective basis.”
There has been speculation that the majority of winners were out of state and national entities. Further, it’s rumored that in order to meet the natural persons ownership requirement, these entities “used” a Missouri resident as their majority owner, despite not having any sort of residency in the state. The enforcement of natural persons ownership is just one of the issues Christopher McHugh of Joseph, Hollander, and Craft has been challenging.
McHugh told Greenway he appreciates the department’s transparency relating to this question, “but a grade of zero for 67 percent of applicants does not indicate a problem with those answers. Just the opposite, it indicates a problem with the question and the grading.”
McHugh’s clients have challenged the zip code bump, calculation of the zip code bump, enforcement of the natural persons ownership requirement, the inconsistent rejection notices sent to applicants, and the inconsistency in answer grading.
“All of these things are equally frustrating to clients who spend so much time and money on their applications, but the most disappointing has to be the inconsistency in grading,” McHugh said. “We’re seeing identical answers scored differently, with no explanation and against DHSS rules.”
With dozens of appeals already filed before the Administrative Hearing Commission and at least two suits filed in court, the conversation for many who are conditionally denied has turned to if, whether, and how many additional licenses the Department may be forced to award.
“There is no question in my mind that DHSS will have to issue additional licenses to applicants through the appeal process,” McHugh said. “Overall, DHSS has done an outstanding job standing up the medical marijuana program in Missouri. But there has not been a state yet that has no issued additional licenses through appeals. And there were just too many mistakes made here for the process to be considered entirely fair. The only way to remedy that is to issue additional licenses.”
Stumpe agreed, believing some of the appeals filed so far hold merit.
“I don’t think they will issue additional licenses to everyone that has appealed, however, by reading all of the appeals that have been filed to date it seems that some of them have merit and additional licenses will be granted,” Stumpe said.
Industry thought leaders across the state agree scoring inconsistency is a “big issue with applicants,” securing potentially additional licenses.
“I hope DHSS will issue more licenses, in all categories,” Dan Viets, MCIA and Missouri NORML president, told Greenway. “Article XIV sets only a minimum, not a maximum number of licenses. DHSS, on its own initiative, issued 5 times more testing licenses than Article XIV requires. More licenses means more competition in the marketplace, which will mean lower prices for patients.”
Dispensary licenses are to be awarded on Friday, January 24. The analysis of application scores is difficult to interpret to forecast dispensary awards.
“I think dispensaries are a completely different ball game,” McHugh said. “DHSS used pretty much the same grading process for cultivations and manufacturing. But dispensaries are eligible for a large amount of bonus points based on what state house district they are in and how far they are from other high-scoring applicants. So trying to predict dispensary winners from cultivation scores is like trying to predict how well your favorite NBA player would do as a wide receiver. It’s anyone’s guess.”
The Department of Health and Senior Services concluded in their letter they have no intention of answering any more questions relating to general scoring inquiries.
