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Denied medical marijuana applicants move to appeal

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The state has determined the lineup for Missouri’s medical marijuana industry, and some entrepreneurs denied access to the billion-dollar market are appealing those decisions.

To get into the burgeoning business, entrepreneurs filled out hundreds of pages of applications, hired attorneys, worked with architects on potential store layouts and invested hundreds of thousands of dollars.

Denied applicants are pointing to inconsistencies in the scoring, which was contracted to a third-party company to avoid conflicts of interest and favoritism. The Missouri Department of Health and Senior Services received over 2,100 applications last year for just 348 available licenses, doled out over the last two months.

As mandated in Amendment 2 that approved medical marijuana in Missouri, applications were scored by such qualifications as the overall business plan, site security, experience in a legal cannabis market, work in health care and economic impact. The highest scoring applications received licenses.

Locally, most denied applicants have remained quiet about any plans to appeal. Not Desmond Morris, CEO and president of The Wholesome Bud Co. He said the company would be appealing all three license applications that were denied: cultivation, infused-product manufacturing and a dispensary.

A Sarcoxie company has gone so far as to sue the state. The Callicoat family had planned to open Sarcoxie Nursery in the small town between Springfield and Joplin. In the suit, the family alleges the 60-license limit for cultivation facilities in Amendment 2 violates the constitutional “right to farm,” according to past Springfield Business Journal reporting.

Appeals are made through the state’s Administrative Hearing Committee, while full-blown lawsuits are handled by Missouri courts. The state solicited bids for attorneys in January for legal representation.

In an SBJ CEO Roundtable discussion on medical marijuana in December 2019, DHSS Medical Marijuana Program Director Lyndall Fraker anticipated legal action.

“When you have 2,269 applicants and you’re going to issue 340 licenses, you’ve got a one-sixth chance of getting a license. We’re going to get sued,” he said.

The AHC had received 180 appeals by press time, according to DHSS director of communications Lisa Cox. She said the Sarcoxie Nursery lawsuit is the only suit that’s been brought against the state on application scoring.

Inconsistencies
Nancy Price, counsel of record on appeal and co-owner of a 14-member ownership group, is appealing six denied applications for cultivation and manufacturing facilities.

The business partners, organized as Mo Retail Products Group Inc., had applied for 11 licenses and were awarded three dispensaries, two of which are slated to open in Springfield. Price, a Springfield attorney, called the scoring on the three different facility applications inconsistent and arbitrary.

For example, she pointed to the scoring of the group’s resume, where she said the partners received 4 points for cultivation and 10 points for the manufacturing and dispensary applications. And on a question that asks applicants to describe how they would keep minors from obtaining marijuana, Price said the same answer was provided for all three cultivation applications, which resulted in two scores of 4 and one score of 7.

“When we say the scores are wildly inconsistent, they truly are,” she said. “We haven’t given up on the appeals.”

Mo Retail Products Group co-owner Julie Belk, a local nurse anesthetist, said she and her fellow owners have plenty of relevant experience. The team comprises local health care professionals, attorneys and other businesspeople.

“With two anesthesia providers, that’s what we deal with is pain,” Belk said.

Morris said The Wholesome Bud’s rejected applications also showed inconsistent scoring across each application for questions related to the team’s community engagement, diversity and legal cannabis market experience. Morris also said some of the questions made room for discrimination.

“We feel it’s wrong the department is grading us on subjective topics like diversity,” he said. “We want to ensure that The Wholesome Bud team received a fair review in this process, and if not, we want to know why.”

Two questions addressed diversity in the workplace for medical marijuana facility applications. Question 21 asks applicants to describe their plan to address diversity of racial groups, sex and veteran status in terms of ownership and staffing. Question 32 asks how the business will train employees on diversity and cultural awareness.

The state’s Administrative Hearing Commission acts as a neutral officer to avoid situations where a state agency could become a prosecutor or decision maker, according to AHC.Mo.gov.

Cox said those appealing the decision have to file a petition to the AHC within 30 days of the license announcements. That means appeals for testing, transportation and cultivation facilities were closed by press time.

Cox said she does not have a breakdown of the types of facilities included in the 180 appeals received so far.

“It’s taking about two weeks after each 30-day deadline to get a good grasp on how many appeals per facility type,” she said.

Scoring guide
DHSS officials hired Wise Health Solutions LLC and furnished a scoring guide for the third-party company to follow.

The Missouri-based company is a joint venture between Oaksterdam University, a cannabis college, and Veracious Investigative & Compliance Solutions LLC, according to a DHSS news release. Officials with Wise Health Solutions did not return requests for comment by press time.

The guide maintains that a scorer must treat every response in a consistent manner. For example, two applicants applying for the same facility type with identical responses should receive the same score.

Jay Preston, attorney and shareholder at Carnahan Evans Cantwell & Brown PC, has worked alongside attorney Chip Sheppard in local medical marijuana appeals. Preston said the firm is working on behalf of at least 12 medical marijuana groups.

“The scorer’s guide does not explicitly require that identical responses across different facility types receive the same score, but large variances ... are problematic,” Preston said in an email.

“It raises concerns about whether the scoring was truly objective.”

Other scoring concerns have been brought to light since the cultivation license announcements in December.

The Missouri Medical Cannabis Trade Association, aka MoCannTrade, found 380 cultivation applications had received a score of zero on a question regarding marketing plans. That’s 67% of the applicant pool.

In a letter to DHSS, MoCannTrade officials suggested an error was made in the scoring process.

“This pattern doesn’t follow the scoring for any of the other questions and might possibly be the result of human or technological error,” the letter reads.

In the state’s response, Fraker said his team didn’t find any errors after examining the claim. He said the same scorer looked at every marketing question in the 578 cultivation applications and that all of the scorers had qualifying professional backgrounds. He also said each scorer went through a training process, was assigned to a single question and did not know the identity of the applicants.

“After reviewing initial complaints, we continue to have every reason to believe the scoring was completed by the blind scoring vendor and its team in a way that is both highly professionally competent and legally valid,” Fraker said.

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