Comments on the proposed New York State cannabis law
I am sharing with you a few things I find particularly interesting in the latest version of the medical cannabis law proposed for New York State. First, this bill now provides for the creation of an advisory committee that will advise the Commissioner of Health in promulgating the regulations that will give effect to the law. Second, it changes the characteristics of who can operate on the supply side of the market. Third, it allocates to a county government half of the revenue from excise taxes imposed on the cannabis grown and sold in that jurisdiction.
The advisory committee provision is extremely important. It greatly increases the likelihood that New York State can create a progressive, workable regulatory structure of a legal cannabis market (even if only for medical use). Considering that this regulatory structure will govern the immensely complex City of New York, one of the largest markets in North America, it must be progressive and workable.
The Commissioner picks the Committee members and may also create subcommittees and appoint their members as well. The Committee members shall (note mandatory language) include (I paraphrase):
- health care practitioners (presumably including substance abuse prevention and addiction treatment professionals)
- patients and patient advocates
- experts in regulating controlled substance (which presumably could include the regulatory side and the industry side)
- cannabis industry professionals and
- law enforcement
Bringing stakeholders together in an open advisory process is the new trend in cannabis regulation. Colorado, which I consider generally the gold standard, created an extensive committee system to assist in formulating the regulations that will implement its general legalization law. Massachusetts is doing the same thing in preparing to legalize medical use. A public forum in which stakeholders meet and discuss regulations in subcommittees by topic is the best way to avoid the litigation nightmares that have reigned in other jurisdictions to date. I commend the New York bill drafters for adding such a provision this year.
I do not yet understand the reason for the revision to the sections on who can operate on the supply-side of the market.
The third change is straightforward. There has been extensive litigation around the country over the tendency of local governments to ban supply-side operations. This revenue-sharing mechanism presumably provides local governments with an incentive to welcome grow operations and dispensaries.
Background and basic operation of the proposed New York law
New York State Assembly Member Richard Gottfried, Democrat from the extremely liberal Upper West Side of Manhattan, has consistently introduced a medical cannabis bill every legislative session since at least 2007, the first time I looked at the bill.
Up until this past session, Senator Tom Duane, Democrat from the also extremely liberal West Village in Manhattan consistently introduced the companion bill in the Senate. This term Senator Diane Savino from Staten Island stepped into the role of Senate sponsor.
Year after year the Democrat-controlled State Assembly (the lower house) passes the bill. The word on the street is that the reason why the bill fails year after year is because of resistance in the Republican-controlled Senate, particularly via the work of Kemp Hannon, Senator from Nassau County, Long Island, who is the chair of the Health Committee. Why no one has tried direct action demonstrations in front of his district office is beyond me.
Compassionate Care NY (an affiliate of the Drug Policy Alliance) has posted a useful summary of the bill.
My summary of the bill is as follows. If enacted, the bill would create an affirmative defense to criminal prosecution for purchase, possession and use of cannabis by duly-licensed patients and caregivers and for the manufacture and sale of cannabis by duly-licensed manufacturers and distributors. It will be a closed market that will require anyone wishing to enter to obtain a license from one administrative agency: the New York State Department of Health. On the demand side, a prospective patient applies to the Department of Health for a registration card, which serves as the patient’s license to purchase, possess and use cannabis. The application must include a certification by a physician, nurse practitioner or physician assistant that the patient has a “serious medical condition,” as defined in the statute. The patient can request registration of a “designated caregiver” who can act on the patient’s behalf and be protected from penalties in the same way that the patient is. A person seeking to enter the supply side of the market – manufacture, wholesale distribution and retail distribution – applies to the Department of Health to be licensed as a “registered organization.”
That’s the big picture of how the system works. It’s conservative in that it routes all market functions through the state executive branch – there will be no Wild West situation like California in which the supply side has been essentially unregulated (i.e. no licensing by the state). It is a form of what I call the “Second Generation” of medical cannabis statutes, statutes that require licensure of the supply side of the market in addition to giving patients and caregivers a statutory affirmative defense to cannabis crimes. The statutes in Colorado, New Jersey, Rhode Island, DC, Maryland, Massachusetts and Delaware are in this category. It's also progressive in that it's short and simple (delegating to the Department of Health authority to flesh out the particulars), includes that super-important advisory committee that will enable the public to participate in the rulemaking process, and should be construed not to preempt the ability of local governments to regulate the market, while also providing local governments with a financial incentive to allow the supply-side to operate.
As you may have deduced, the New York bill does not legalize home cultivation. Previous versions of the bill contained such a provision. I assume that removal of a provision extending the medical use affirmative defense to cannabis cultivation by end-users or their agents was part of an attempt to defuse opposition. It is, of course, ludicrous to prohibit cultivation of a plant but then the march of rationality has been a crawl in the realm of psychoactive substance law. Reformers in New York State are still struggling to pass a conservative medical bill while choking on the dust of other states that are cruising into the horizon of general adult legalization. The march of rational policy in New York has been an inchworm crawl.
The bill is interesting in that it gives no explicit regulatory authority to local government. However, I believe that there is a local-control mechanism built in. Part of the process of obtaining a supply-side license from the state government requires demonstrating that the applicant has the ability to use sufficient land to carry on its proposed operations, and that requires a certificate of occupancy, which is a license issued by local government. No certificate of occupancy from the local government, no application to the State. If the local government declares that cannabis cultivation and/or distribution are land uses not permitted in the zoning code, no certificate of occupancy. That’s how localities around the country have banned or just severely limited the medical cannabis market. Anyway, I believe that New York State case law will prevent localities from enforcing complete permanent bans on Registered Organizations.
A tour through certain select supply-side provisions of the bill
The bill, if enacted, would make changes to the New York Public Health Law, Tax Law, General Business Law, and Penal Law. The changes to the Public Health Law are the most extensive. The bill will create a new Title V-A, “Medical Use of Marihuana,” in Article 33 of the Public Health law. (New York still follows the quaint spelling.)
This new title contains Sections 3360 through 3369-B. Section 3360 provides general definitions. Sections 3361 through 3363 create the framework for the demand side (patients, physician certifications, designated caregivers, and registration cards). Sections 3364 through 3365 create the framework for the supply side: all the participants on the supply side of the market (manufacturers, wholesalers and retailers) are defined in the statute as “Registered Organizations.” Section 3364 discusses the general nature and operation of Registered Organizations. Section 3365 describes the specific steps for obtaining and retaining a license as a Registered Organization. Sections 3366 through 3369-B contain miscellaneous provisions, such as reporting requirements for registered organizations, and reports by the Department of Health to the legislature and Governor on how the system is operating. Section 3369 contains the affirmative defense to criminal prosecution that is the essential practical provision in the bill. Section 3369-A provides for creation of the advisory committee in the Department of Health that I consider supremely important.
A. The supply side
This year’s bill simplifies the supply side. When I first started writing about the bill in 2010, the bill provided for six different types of Registered Organizations: (a) the State Department of Health, (b) a County Department of Health, (c) a pharmacy, (d) an entity registered under Public Health Law Article 28, which in practice means a hospital (although there are other entities under Article 28), (e) a not-for -profit organization organized for the purpose of acting as a dispensary and (f) any type of entity, i.e. even a for-profit entity, that is permitted only to distribute to other Registered Organizations. As I understand it, the idea was that only nonprofit entities could dispense directly to end-users in the private sector of the retail market while for-profit entities could operate in the market but could distribute only to other Registered Organizations (i.e. only in wholesale cultivation and distribution).
I thought it highly unlikely if not impossible that the state Health Department and county departments of health would actually apply to be Registered Organizations unless they wished to create government monopolies. Even more so would pharmacies forego application since pharmacies depend on licensure from the DEA and dispensing a Schedule I controlled substance to the general public is a death wish for anyone associated with a pharmacy. I thought it equally impossible that a hospital could be a Registered Organization considering the oceans of federal money flowing through hospitals that would likewise be jeopardized by flouting federal law.
This year there are just two categories allowed under Section 3364: (a) an Article 28 health care entity (e.g. a hospital) and (b) both for-profit and not-for-profit organizations. I’m surprised that the health care category stayed in but then maybe someone in Health Law has a better understanding as to why the bill-drafters believe that New York State hospitals could pull it off. I am even more surprised that the private sector side has opened up. At this point it appears that the Department of Health will be deciding on a case-by-case basis who can fulfill what role on the supply side. There are no requirements of vertical integration as were implemented in Colorado (i.e. each dispensary was required to manufacture its merchandise). As of now it appears that a private sector-side Registered Organization can perform one or all of the different functions – manufacture, whole distribution or retail distribution – for which it is licensed.
This observation brings me to another point: this statute delegates a significant amount of discretion to the Commissioner of Health. Whereas the statutes of other states, e.g. New Jersey, consist of reams of pages, the New York bill is short and simple. It provides general standards to the Department of Health, delegates the authority to promulgate regulations, and requires that the Commissioner report back to the Governor and legislature as to how the program is working.
I note that according to the language of Section 3364(1)(2)(B), it appears that the applicant can register for any number of activities: just cultivation, cultivation and wholesale distribution, cultivation and retail distribution or even complete vertical integration (cultivation, wholesale distribution and retail distribution). I note also that proposed Sections 3360 through 3369-B appear to be based on Public Health Law Title Article 33, Title 2, Sections 3310 through 3322, which describes the requirements for manufacturing and distributing controlled substances generally. I assume that the Commissioner of Health will likely attempt to implement the medical cannabis law in a manner similar to its implementation of those sections of the Public Health Law.
B. Tax revenue incentive to local government to facilitate supply side operations
The bill provides an incentive to a local government to allow Registered Organizations to operate in its jurisdiction: new Section 490(3) in the Tax Law will provide that half of the revenue resulting from an excise tax on manufacture or sale will be transferred to the county in which the cannabis was manufactured or sold. This is an interesting approach: it provides an incentive for local governments to refrain from the standard response in localities across the country in which they have banned or otherwise made life difficult for supply-side operators. This response tends to generate litigation by prospective supply-siders who argue that state law preempts local law. (Note that I believe that the law of state-local preemption in New York will not permit outright bans on dispensaries but will permit moratoria; see discussion further down.)
C. The most important new provision: an advisory committee in the Department of Health
We now arrive at what I consider the best part of the new bill.
Section 3369-A provides as follows:
Advisory committee. There is hereby established in the department an advisory committee on medical use of marihuana (the "advisory committee") to advise the commissioner on making regulations under this title and on any matters relating to the implementation of this title as the commissioner shall determine. The members of the advisory committee and any subcommittee of the advisory committee ("subcommittee") shall be appointed by the commissioner and include but not be limited to: health care practitioners, patients or representatives of patients with serious conditions, experts in the regulation of controlled substances for medical use, medical marihuana industry professionals and law enforcement. The commissioner may also form subcommittees of the advisory committee. The commissioner shall form a subcommittee to advise the commissioner on clinical matters relating to medical marihuana, the members of which shall predominantly be clinical professionals in appropriate areas of expertise and shall also include representatives of patients and the general public. Members of a subcommittee need not be members of the advisory committee. Members of the advisory committee or a subcommittee shall serve at the pleasure of the commissioner. Members of the advisory committee or a subcommittee may receive reimbursement by the department for their reasonable and necessary expenses incurred as members of the advisory committee or a subcommittee. A public employee may be a member of the advisory committee or a subcommittee.
If I were someone with something professional to say about a medical cannabis bill – whether cannabis tycoons from Rhode Island or Colorado roaring across the border to get in on the action or public safety and/or public health officials and professionals seeking to protect the citizenry from potential excesses of cannabis capitalism – I would get in line for that advisory committee.
Why is this provision so important? It gives stakeholders the opportunity to go on record articulating their concerns. In legal world, we request that people state their positions so that if new challenges and objections emerge after there is a resolution of the first round, those new challenges and objections can be dismissed as pretextual. In other words, state your concerns upfront and be precluded from throwing up other roadblocks unless there is a new development later to justify them.
The more positive view is that an advisory committee provides the opportunity to design a good system, one that will take into account the legitimate concerns of different stakeholders and obviate the need for local governments to delay implementation of the bill.
The more cynical view is the product of listening to decades of decoy, bad-faith distortions and misrepresentations, most recently coming from New York City Mayor Michael Bloomberg and his Special Narcotics Prosecutor Bridget Brennan, whose authority to comment on the proposed bill is a mystery. (The New York City Police Department has remained silent so far, which is another mystery.)
The dominant paradigm in drug control has been to refuse discussion of legalizing the markets for psychoactive substances, particularly cannabis, or even lessening penalties, on the grounds that such discussion might weaken the essential message that any use of any drug is wrong and dangerous. The theory is that saying anything that might cause youth to believe that cannabis isn’t really that dangerous encourages experimentation, which leads directly and inexorably to addiction.
In other words, no dissent. Enforced silence of all but the official orthodox government message has been the policy-making approach to psychoactive substance regulation in general and cannabis regulation in particular.
This approach is not a responsible form of policy-making. If you wish in good faith to implement a functional regulatory system, you engage in dialogue with the persons interested in the issue, and when I say “interested” I mean stakeholders. (I believe strongly that the opponents of cannabis legalization, whether for general use or for the more restrictive medical use legalization, are not operating in good faith. Their goal is to keep cannabis prohibited forever based on their own moral, ideological or financial reasons.)
The opponents of reform flourish in an environment in which they can avoid particularizing their objections to a specific plan. For example, the public officials in New York who oppose the conservative and highly-regulated proposed cannabis law never identify any specific provision of the bill which they consider problematic. Were they to do so then they would invite a dialogue as to what could be done to minimize the potential harms they see. Such a dialogue might lead to solutions and they do not want solutions: they insist that a safe and effective regulated market cannabis just per se cannot be done. They might be led into a position in which they will have had a full and fair opportunity to present concerns and negotiate. Such a full and open dialogue would disclose whether they actually are willing to try something that might help the population or whether they want to make sure that New York will never implement a legal cannabis regime – even for medical use.
An open public discussion gives the participants the opportunity review evidence, examine the experience of other states, examine similar market regulations in New York (alcohol, tobacco, and pharmaceuticals) and give everyone the opportunity to state what are their requirements and concerns. It should obviate the panic that ensues when a medical cannabis bill is passed, as in Massachusetts, where, predictably, municipalities around the state passed moratoria against dispensaries. It is really the only responsible approach to policy-making.
The cannabis market has been illegal for about a century in New York. It is worth engaging in a public discussion about how it will be implemented. The advisory committee is the appropriate first forum for doing so.
New York City Mayor Bloomberg has steadfastly opposed the bill (he called it a "hoax" a few days ago), which means that the entire New York City executive branch bureaucracy (which is huge) is precluded from planning for implementation of the bill should it become law. Special Narcotics Prosecutor Brennan has made such egregious lies and misrepresentations about the bill and about cannabis law generally that there are only two possibilities: (a) she has not read the bill but feels comfortable making public statements about it or (b) she has read the bill and feels comfortable lying to the public. Either way she has called into question her qualification to hold public office. The same is true for Mayor Bloomberg – who, fortunately for all cannabis reform activists, will be leaving office this year.
The advisory committee should expose the bad faith of the other opponents of the bill.
That’s why it is so important. I commend the bill drafters for including it.
Final comment: the ability of local governments to ban Registered Organizations
Section 3365 provides for the process of obtaining and renewing licensure as a Registered Organization. Section 3365(1)(A) requires that the applicant demonstrate in its application that, among other things, it
(I) and its managing officers are of good moral character, (II) possesses or has the right to use sufficient land, buildings, and other premises (which shall be specified in the application) and equipment to properly carry on the activity described in the application, (III) is able to maintain effective security and control to prevent diversion, abuse, and other illegal conduct relating to the marihuana, and (IV) is able to comply with all applicable state laws and regulations relating to the activities in which it intends to engage under the registration.
I read (II) as possibly requiring the applicant to demonstrate that it has a certificate of occupancy for the space in which it intends to operate - and a C of O comes from the Department of Buildings here in New York City. I see no other mechanism for local control. However, even if the Department of Health does not construe (II) to require a certificate of occupancy, I note also the Court of Appeals decision in Village of Nyack v. Daytop Village, 78 N.Y. 500 (1991), in which the State’s highest court held that a local government could validly enjoin from operation an addiction treatment facility licensed by the State Division of Substance Abuse Services pending approval of a variance and a certificate of occupancy. (The facility did not even apply.) The facility argued that because the State had approved its application to operate it need not obtain local approval. The Court held that state law did not preempt all local laws governing the siting of all substance abuse treatment facilities. In other words, even though the state regulates the industry, local government can also regulate. Likewise there is nothing in the proposed bill that tends to preempt zoning local laws governing the location and operation of Registered Organizations.
Lack of state preemption should not be a problem for New York City, where the City Council is on record as desiring a medical cannabis law. It could be a problem for localities outside New York City. On the other hand, even though New York law is very deferential to local governments in their ability to regulate beyond the scope of what state law requires, local governments can neither permit what state law prohibits nor prohibit what state law permits. Jancyn Manufacturing Corp. v. County of Suffolk, 71 N.Y.2d 91 (1987). This principle also appeared in a recent ruling by the Massachusetts Attorney General which invalidated a ban enacted by a locality after enactment of the medical cannabis law there. I believe that this doctrine should prevent local governments in New York State from prohibiting Registered Organizations entirely.
If the Senate Republicans get out of the way, New York State can have a medical cannabis bill.
It will be an exciting time for lots of stakeholders. Now is the time for local governments, especially New York City, to start planning.