Legislature passes updated cannabis integration bill

CHARLESTON, W.Va. — The medical cannabis vertical integration bill that fell to a veto after the 2019 regular session has been repaired and re-passed and will return to the governor.

SB 1037 passed the Senate 23-7 and the House 81-17 on Monday, when the Legislature resumed its special session devoted to “education betterment.” Monday was devoted to handling bills the governor vetoed for various technical reasons and encouraged legislators to tweak.

SB 1037 and its regular session predecessor HB 2079 amended the medical cannabis law – set to take effect July 1 – in various ways. Its primary change was enabling vertical integration: allowing a single person or company to simultaneously hold grower, processor and dispenser permits.

As previously reported in great detail, federal tax law makes it nearly impossible for medical cannabis businesses to operate profitably without vertical integration.

But HB 2079 contained a Senate amendment that led to the veto: differentiated tax rate. Growers and processors that sold to unrelated cannabis businesses were subject to a 10% gross receipts tax while integrated businesses were subject to a 5% receipts tax based on dispensary sales.

Gov. Jim Justice objected to the inequity. But experts and bill proponents told The Dominion Post after the veto that no unrelated businesses would ever succeed, or exist.

So SB 1037, which came from the governor’s office, eliminates all but the 10% dispensary receipts tax.

The House also agreed to a Senate floor amendment offered by Sens. Stephen Baldwin, D-Greenbrier, and Rollan Roberts, R-Raleigh (both ministers, Baldwin noted with a chuckle).

Here’s what they changed. HB 2079 called for the Department of Agriculture to conduct all product testing, and contract it out if needed. SB 1037, as introduced, allowed for testing by private abs unless Agriculture decided to take it over.

The amendment eliminated the Agriculture opt-in and put all testing in the hands of private labs.

Sen. Stephen Baldwin, D-Greenbrier

Baldwin said the opt-in gave the government a leg up over private business – “a significant leg up. I don’t see how that’s fair at all.” New York is the only state that requires government testing. And private labs have the capacity to handle the testing and are ready to do it, while government labs are already running behind.

The amendment passed in a voice vote. As in March, the bill garnered seven “no” votes, but not from the same people. In March, Sens. Mike Azinger, Sue Cline, Mark Maynard, Roberts, Tom Takubo, Eric Tarr and Ryan Weld voted no. This time it was Azinger, Donna Boley (who was absent in March), Maynard, Patricia Rucker, Randy Smith, Tarr and Weld.

In the House, Delegate Seam Hornbuckle, D-Cabell, proposed an amendment to require the Bureau for Public Health, which oversees the cannabis program, to track the number of veteran, women and minority owners, set diversity licensing goals if needed, and help set up training programs to meet the goals.

Judiciary chair John Shott, R-Mercer, opposed it, saying the amendment imposed too much burden far outside the scope of the bureau.

It failed 37-61.

HB 2079 passed the House 84-16 in February. Among the opponents was Delegate Daryl Cowles, R-Morgan, who spoke against this version.

He said it wasn’t clear if this bill allows patients to smoke cannabis, although Health chair Joe Ellington, R-Mercer, told him this bill doesn’t touch that ban.

Cowles also objected to the addition of “severe chronic or intractable pain,” in HB 2079 and SB 1037, as a condition eligible for certification for cannabis treatment. He opposed vertical integration and removal of a requirement – in both bills – for a pharmacist to be present at every dispensary.

Among other changes from current law: It removes a requirement that a provider try or consider opioids before recommending cannabis; it requires companies seeking permits to be majority-owned by West Virginians; it removes the five regions for business distribution and calls for the board to consider geographic location among the permitting criteria; sets the number of dispensaries at 100, with 10 per individual owner; allows for pre-registration of eligible patients before July 1.

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