The New Business of Medical Marijuana in Nevada

Medical Marijuana Establishments

Medical Marijuana occupied substantial time and energy during the 77th Legislature in the form of Senate Bill 374. Governor Brian Sandoval signed SB 374 on June 12, 2013, and with the stroke of a pen created the framework for some new and unique business establishments in Nevada. Beginning New Years Day 2014, companies may begin servicing patients who are legally authorized to consume marijuana for medicinal purposes in treating health ailments. SB 374 authorizes medical marijuana dispensaries, cultivating facilities, marijuana-infused and edible products, and independent testing laboratories. These are known as medical marijuana establishments (“MMEs”) under the law.

Legislative Intent: Medicinal and Professional

The express terms of the law and the legislative intent on which it is based can be described in two words: medicinal and professional. Voters approved a ballot question 13 years ago entitled “A Medical Marijuana Initiative,” which amended the Nevada constitution to provide for the medical use of marijuana for the treatment of sickness and disease such as cancer, glaucoma, AIDS and other chronic conditions. SB 374 acknowledges this purpose and requires MMEs to reflect the intent of the law. For example, Section 10.5 requires MMEs to:

• Have an appearance, both as to the interior and exterior, that is professional, orderly, dignified and consistent with the traditional style of pharmacies and medical offices; and
• Have discreet and professional signage that is consistent with the traditional style of signage for pharmacies and medical offices.

Nevada will be the opposite of California’s medical-marijuana business ventures represented by the spectacle of these establishments lining the boardwalk of infamous Venice Beach with marijuana plants adorning placards announcing that the “doctor is in”. In Nevada, think of a typical pharmacy or physician’s office.

Serious Business-Minded Entrepreneurs

To encourage serious business-minded individuals and entities to apply for certificates to operate the MMEs, SB 374 requires thorough background checks and a sizeable investments in the business venture. Each application, which will be available through the Nevada Division of Health, must be accompanied by a one-time non-refundable fee of $5,000. For those who secure certificates to operate the MMEs, the initial fees range from $30,000 for a dispensary to $3,000 for a production facility for marijuana-infused and edible products. Annual renewal fees range from $1,000 to $5,000.

Successful applicants will demonstrate control of at least $250,000 in liquid assets to cover initial operating and compliance-related expenses. Keep in mind that under federal law, marijuana is a Schedule I drug and possessing it is a felony. Therefore, traditional forms of business financing are largely unavailable.

Medical Marijuana Establishment Registration Certificates

A medical marijuana establishment registration certificate will be issued by the Division of Health to authorize the operation of MMEs. To secure a certificate, one must submit a completed application and pay the requisite fee to the Division. Among other requirements, an applicant must provide information about the name, location and property ownership or leasehold of the MME facility and anyone associated with the MME from owners to employees who all must be reviewed and registered.

Under SB 374, there is a limited number of certificates available to operate dispensaries--no more than one dispensary for every 10 pharmacies in a county. For example, in the county the number of dispensaries is expected to be 40 based on the number of pharmacies located in the county. The number of dispensaries will strongly influence the number of certificates issued for other MMEs. Applications for the certificates will be evaluated on a merit-based system. Section 11.7 sets forth the criteria that the Division of Health will employ in evaluating applications. Among other requirements, the criteria includes:

• The liquid and illiquid financial resources of the applicant.
• The proposed owners’, officers’ or board members’ prior business experience, educational achievements and/or knowledge or expertise in compassionate use of medical marijuana.
• The likely impact on the community in which the MME is proposed to be located.
• The existence of an integrated plan for the care, quality, and safekeeping of medical marijuana from seed to sale.
• The amount of taxes paid by and other financial contributions made by the applicant, owners, officers, or board members to the State of Nevada or its political subdivisions.

Conclusion

The business of medical marijuana is coming to Nevada. This new and unique industry will present both opportunities and risks for the serious-minded entrepreneur who is willing to operate a medical marijuana establishment.

Senator Mark Hutchison co-sponsored SB 374 and worked closely with the primary sponsor of the bill, Senator Tick Segerblom, in sheparding the law through the 77th Legislature.