New group of petitioners challenging NM DOH medical cannabis rules

The list of medical cannabis companies filing legal complaints against the New Mexico Department of Health continues to grow. 

This week, two more medical cannabis producers, a cannabis manufacturer, a cannabis testing laboratory and a patient licensed to grow medical cannabis filed petitions in state district court asking a judge to annul rules adopted by the DOH earlier this month. That’s in addition to the two other medical cannabis producers who filed petitions against the state last week. 

Also notable is the list of attorneys representing the medical cannabis companies, as it includes two current legislators, a former commissioner with the state’s Public Regulation Commission, a former attorney general candidate and a former congressional candidate, all from across the state’s political spectrum. 

Medical cannabis producer Ultra Health was the first company to file a petition last week and is represented in part by Brian Egolf, a Democrat who also serves as the state’s Speaker of the House. On Tuesday, former PRC commissioner Jason Marks, also a Democrat, filed a separate petition on behalf of his clients, Scepter Lab, one of two testing laboratories in the state, and medical cannabis manufacturer Vitality Extracts. 

Then on Thursday, Jacob Candelaria, who serves as a Democratic state senator, filed a petition on behalf of medical cannabis producer and manufacturer G&G Genetics. Also joining the initial case on Thursday was medical cannabis patient and licensed cannabis grower Heath Grider, represented by former Libertarian attorney general candidate Blair Dunn and Jared Vander Dussen, who recently lost in a three-way primary for the Republican nomination in New Mexico’s First Congressional District. 

All of the petitioners are asking for generally the same thing: for a judge to invalidate rules recently promulgated by the Department of Health, which oversees the state’s Medical Cannabis Program. 

The new petitioners, like the initial petitioners, argue that many of the new rules regarding cannabis testing, labeling and growing are “arbitrary and capricious.”

But the new petitioners are also adding to the list of concerns.  

Increased testing, increased prices

Marks, who is representing Scepter Lab and Vitality Extracts in a case of their own, argued in his petition that the department’s new testing standards are not based on actual data or research, but instead based on language borrowed from other states — particularly states with less arid climates that New Mexico. 

One of the new rules is that medical cannabis must be tested for mycotoxins or naturally occurring toxic substances that come from certain types of fungi. 

Marks argued that out of more than 15,000 tests conducted in New Mexico since the rule was implemented, none came back positive for mycotoxins. 

He added that tests for mycotoxin testing on a national level produced a relatively small amount of positives but that those results were likely from “climates more likely to lead to mycotoxin production than New Mexico’s.”

Marks also argued that testing standards for heavy metals and pesticides were not based on true research. Heavy metals, Marks wrote, are only introduced through soil and water and that testing water systems and soil used to grow medical cannabis would be the better way to detect heavy metals.

It could be awhile before the NM Supreme Court decides to rule on cannabis tax case, if at all

Medical cannabis producers in New Mexico will be on the hook for gross receipts taxes for the foreseeable future, or at least until the state Supreme Court decides whether it will weigh-in on the issue. 

Last week, a response filed by New Mexico cannabis producer Sacred Garden was the latest in a pending case between the producer and the state’s Taxation and Revenue Department (TRD). Earlier this month, the TRD filed a petition asking the high court to consider the case, with the hopes that it might overturn a previous state Court of Appeals decision. 

Santa Fe attorney Joe Lennihan, on behalf of Sacred Garden, argued that a review by the Supreme Court was unnecessary since the Court of Appeals already determined that medical cannabis should be viewed in a similar light as prescription drugs, which are exempt from gross receipts taxes. 

“Sales of medical marijuana are restricted to patients approved to use it and must do so under the care and supervision of a physician,” Lennihan wrote. 

Both TRD and Sacred Garden have repeatedly made their respective arguments in previous court filings and now both must wait to see if the state Supreme Court decides to weigh-in. 

For the most part, TRD has argued that since medical cannabis use is recommended, not prescribed, by a doctor, medical cannabis sales are subject to gross receipts taxes. Sacred Garden’s view on the matter is that because a 2019 update to the state medical cannabis law states that medical cannabis should be viewed in a similar light as any other prescription drug, medical cannabis producers should be exempt from the tax. The Court of Appeals ruled in favor of Sacred Garden, citing a lack of expected tax revenue in legislative financial impact reports. 

But in its request for the Supreme Court to consider the case, the TRD turned the legislative intent argument around and said that if the Legislature wanted to exempt medical cannabis from gross receipts taxes, it could have specified this by amending state tax laws. 

Gross receipts taxes, sometimes incorrectly referred to as sales taxes, are charged by the state and local municipalities for goods and services. Businesses often pass the tax along to the consumer, although they are not required to.

Judge rules non-residents can get medical cannabis cards

Out of state residents who qualify as a medical cannabis patient are now eligible to get a New Mexico medical cannabis card. 

A state district judge ruled Thursday that the New Mexico Department of Health must issue medical cannabis cards to qualified patients, regardless of where they live full-time. Thursday’s hearing was the latest in a back-and-forth between a medical cannabis producer and state officials—including Gov. Michelle Lujan Grisham—over whether a recent change in law opened the state’s program to non-residents. 

Though the judge ruled that DOH would have to start issuing cards to non-residents, the governor’s office said they aren’t giving up. 

Tripp Stelnicki, a spokesman for Lujan Grisham, said the governor’s office plans to appeal the decision, but not before he took a shot at one of the petitioners in the case, Duke Rodriguez, who is an Arizona resident and also the president and CEO of the prominent medical cannabis producer Ultra Health. “We remain of the opinion that New Mexico’s Medical Cannabis Program should not be bulldozed by an out-of-state litigant operating with his own financial interests at heart rather than those of the state’s medical program or of the many New Mexicans who depend upon it,” Stelnicki said in a statement. “Today’s decision contradicts both the intent of the legislative sponsor and the interpretation of the New Mexico Department of Health, and the state plans to appeal the decision.”

Rodriguez declined to comment on what he called a “personal attack,” but that he’s ultimately happy with the decision    

“There was a lot of good testimonies from both sides today, but I think the judge did a superb job of refining the issues down to one core issue—that if you were to remove the word cannabis from the discussion this becomes an issue of treating it like any other medical care,” Rodriguez said. 

Rodriguez is one of the three petitioners, all of whom reside primarily in other states, who asked the court to compel DOH to issue cards to non-residents. DOH did not officially deny the applications from the three petitioners, but the department placed their applications on hold until they could show a valid New Mexico identification card address. 

David Morgan, a spokesman for DOH, said the department hasn’t determined whether they will start approving applications that come from out of state residents. 

“We are considering how to proceed given the judge’s ruling and the fact that an appeal is forthcoming,” Morgan said. 

If DOH does start issuing cards to non-residents, the next question is whether the state can adequately supply patients with enough cannabis. 

Plant counts for producers has long been an issue, specifically involving Rodriguez and DOH. 

For much of the Medical Cannabis Program’s existence, producers were only allowed to have 450 plants at any given time.

State judge says DOH will have to issue medical cannabis cards to out-of-state residents

A state district court judge on Monday ordered the state’s Medical Cannabis Program to start issuing medical cannabis cards to individuals who qualify, regardless of where they live. 

The question of whether non-residents of New Mexico could become medical cannabis patients started when major changes to the state’s medical cannabis law went into effect. One minor word replacement drastically changed who could become a patient, argued Duke Rodriguez, president and CEO of medical cannabis producer Ultra Health. Before July 2019, the law stated that qualified patients must be a resident of New Mexico. Now, the law defines a qualified patient as a “person.” Rodriguez’s company bought both internet and radio ads promoting the change. But the Department of Health, which oversees the Medical Cannabis Program, along with the governor and at least one legislator, argued the intention of the law was never to open the program up to non-residents. 

Now, barring a compelling argument from DOH, the state could be forced to expand eligibility to anyone from across the country. 

The law is clear

In his ruling Monday morning, Santa Fe district Judge Bryan Biedscheid wrote that the law is clear.

Should the state increase regulation of homegrown medical cannabis?

During a New Mexico Department of Health public hearing earlier this month that allowed public input into proposed rule changes to the state’s Medical Cannabis Program, a major player in the industry raised concerns with some patients. 

Willie Ford, managing director of the medical cannabis consulting company Reynold Greenleaf and Associates, told DOH officials he wanted more state oversight of patients who grow their own cannabis.   

“PPLs need more regulation, they need more oversight for public safety issues,” Ford said. “These are significant and serious issues that affect the general public and their safety.”

PPLs, or Personal Production Licenses, allow patients who qualify to grow up to four plants for their own use. He voice concern with a proposed rule change that would allow PPL holders to take their harvested cannabis to licensed manufacturers to produce extracts and concentrates. Four plants, Ford said, could equal about 20 pounds a year per PPL. 

Ford’s comments, and the online rebuttals from PPL patients that came after, highlight an issue that DOH will likely be forced to address, especially before New Mexico legalizes cannabis for recreational use: whether PPL patients should be regulated similar to Licensed Non-Profit Producers who sell products through their dispensaries. 

Josh McCurdy with the New Mexico Medical Cannabis Patients Advocate Alliance told NM Political Report that he didn’t appreciate the suggestion that PPL patients are doing anything other than growing their own medicine, often in places where dispensaries are far and few between. 

“We need more competition,” McCurdy, who lives and grows his own cannabis in Ruidoso, said. “That’s the reason it’s $10 a gram in Albuquerque and it goes from $12 to $15 in rural areas.”

He estimated his homegrown cannabis costs about $5 to $6 a gram to grow. 

McCurdy disagreed with Ford’s claim that four plants harvested around 4 to five times a year could yield about 20 pounds. 

“I’ve been by a few hundred PPL grows in this state and 99 percent of them are struggling just to yield a couple of ounces every four months,” McCurdy said. 

McCurdy dismissed a common sentiment he said he’s heard from producers—that home growers contribute to illegal cannabis sales. 

“The producers have put it in a way, where they like to do some fear mongering and act like the PPLs are the illicit black market,” McCurdy said.

Board to look at possible big changes to medical cannabis program

A series of possible changes to the Medical Cannabis Program could take place in New Mexico, pending a signature from the governor and decisions from the state Department of Health. DOH officials are in a holding pattern of sorts, waiting for Gov. Michelle Lujan Grisham to decide whether or not to sign a key medical cannabis bill and to hear recommendations from the Medical Cannabis Advisory Board regarding what conditions qualify for medical cannabis use. Update: Medical panel approves opioid use disorder for cannabis, DOH expected to approve

Lujan Grisham has until the end of next week to decide on Senate Bill 406, which would  clarify the state’s medical cannabis law. But on Friday a medical panel will hear what the public wants when it comes to expanding qualifying conditions. Public Petitions

The Drug Policy Alliance and other groups have long proposed that medical cannabis may help combat Opioid Use Disorder or severe addiction to opioids, which has been a problem in New Mexico for decades.

Marijuana

DOH: Reports on cannabis for opioid abuse are ‘poor in quality’

New Mexico, along with most of the U.S., is struggling to find a way to combat opioid abuse, overdoses and death, a problem often referred to as an epidemic or crisis. One possible solution, according to a recent study, is using cannabis to help fight the addictions to deadly addictive drugs like heroin or prescription drugs. New Mexico Secretary of Health Lynn Gallagher has already shot down the possibility of adding opioid use disorder or substance abuse disorder to the list of 21 qualifying conditions for medical cannabis numerous times. Internal documents show the New Mexico Department of Health, which oversees the medical cannabis program, will likely disapprove it for opioid use disorder again. The revelation that DOH officials have compiled more than a dozen studies that show cannabis not only doesn’t help addiction, but worsens it, has at least one producer in polite disagreement with the Martinez administration and two others openly frustrated.