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License Scoring

  • Cecil King posted an article
    DHSS state regulators cannot keep information from medical marijuana license applications secret see more

    Another Legal Blow For DHSS

    The Department of Health and Senior Services (DHSS), which regulates Missouri's medical marijuana program was dealt another legal blow in a ruling by the Western District Court of Appeals on Tuesday, May 18, 2021. The court said state regulators cannot keep information from medical marijuana license applications secret.

    DHSS wants to keep all data from the medical marijuana applications and the resulting scores of those applicants confidential. The department has maintained that the law passed by voters in 2018, now Article XIV of the Missouri Constitution, ensures the confidentiality of license applicants and licensees information.

    Kings Garden Midwest, a California-based cannabis cultivator, is one of the more than 800 denied applicants who have filed lawsuits against DHSS. In their lawsuit they argued the state’s scoring process was “arbitrary and capricious in that other applicants were awarded more points for the same and/or similar answers provided by Kings Garden.”

    The company is requesting application information from other successful applicants in their challenge of DHSS' license denial. They hope to prove that DHSS had no basis for denying their license if there were no significant differences to answers on their applications versus other applications from approved licensees.

    DHSS LogoThe Court of Appeals said it would be “unreasonable and absurd” to keep the applications secret from companies trying to determine why their applications to grow, distribute or sell marijuana were denied.

    “Because applications are not judged solely on their own merits but are ranked competitively against other applications, the only way to determine whether the Department denied Kings Garden’s applications in an arbitrary or capricious manner is to compare its applications against information from those of successful applicants,” stated in the court's ruling.

    DHSS will continue to fight this ruling all the way to the Missouri Supreme Court.

    Lyndall Fraker, Director of Medical Marijuana Regulation in Missouri, estimated to a House panel in March 2021, the department will spend at least $12.4 million fighting legal challenges to applications in the coming year.

    House Budget Committee Chairman Cody Smith of Carthage stated the initial license caps imposed by the department has resulted in the subsequent legal challenges and the “staggering” legal fees, higher product prices, and an unfilled demand for cannabis product that encourages the thriving black market. Cody suggested that by issuing more licenses the department could put an end to the ongoing legal costs.

    Fraker disagreed during his testimony indicating additional licensees would force the state to spend more to regulate the industry. He also said an overabundant legal supply could create a black market.

    Out of the more than 2100 applications received for Missouri's medical marijuana program, a total of 853 administrative appeals had been filed against the state by denied applicants. DHSS indicated that 785 remained unresolved at the beginning of the 4th quarter 2020.

  • David Bennett posted an article
    The reason why cannabis licenses are limited see more

    The Economics of Scarcity

    The artificial creation of the scarcity of facility licenses increased their value exponentially and created a parallel “license economy” outside of the normal business activity of producing and distributing products and serving customers. Demand outstripped supply of available licenses ten to one. While the normal economic response to scarcity is for the price to go up and the scarce resource is allocated to the buyer willing to pay the most, this was an intentionally created scarcity that the buyers competed for, not by willingness to pay more but by participating in a beauty contest in an idiotic competitive scoring system and 500 page applications.

    348 licenses that were granted immediately became worth millions of dollars each. At least a half a billion dollars in wealth was created out of thin air before the first seed sprouted.

    The scarcity of licenses is a permanent feature of the cannabis market prescribed in Article 14.  With the state having a complete corner on the market for licenses, they control the supply and therefore the price of cannabis products. Businesses must compete for the scarce licenses in whatever manner the department chooses. Every license is in some sense a monopoly and a grant of market share.

    The market conditions created by the scarcity of licenses makes the application process a high risk, high reward endeavor and raises the “bar of entry” too high for most normal businesses. There is no advantage for the patients for there to be a scarcity of licenses and a lack of competition. The scarcity of licenses does nothing to protect the health and safety of society, and in fact, undermines the public confidence in government and the industry by providing opportunities for corruption and patronage politics.