Two of New Jersey’s biggest and most established cannabis operators are facing fines of $100,000 and $50,000 after the state’s Cannabis Regulatory Commission (CRC) board members voted to issue steeper than recommended penalties for their violations.
The CRC commissioners voted, 3-1, during their Sept. 8 board meeting to impose the $100,000 civil penalty on Toronto-based TerrAscend for five infractions related to medical cannabis patient access. Specifically, CRC Executive Director Jeff Brown said he received complaints that patients were being told they needed to make purchases off the adult-use menu, which are more expensive and are taxed higher than medicinal products.
Brown said the CRC staff recommended to the board not to go above a maximum penalty of $5,000 per violation, or $25,000 total.
“[TerrAscend] did submit a corrective action plan,” Brown said. “There was a complaint received after that, which would be potentially dealt with at a later date, but largely did correct their actions, created new [standard operating procedures], retrained their staff. They submitted documentation to the CRC that that occurred. Additionally, this is all relatively new still, not only for businesses, but for consumers. And so, we certainly don’t recommend going above the maximum penalty there and would ask the board to consider other factors in the entity’s compliance at this time.”
Disregarding Brown’s recommendation, the CRC’s commissioners slapped TerrAscend with four times the recommended maximum penalty as outlined in state regulations.
A TerrAscend spokesperson provided the following company statement to Cannabis Business Times:
“TerrAscend has a deep history of compliance in New Jersey, as this is the first violation of any type we’ve received in our four years of operating in the state. In June 2023, we were informed that the CRC had received five medical patient complaints related to the fact that certain products were listed only on our adult-use menu. While these patients were still able to purchase these products, it violated a CRC requirement that all products available on our adult-use menu must also be listed on our medical menu. Once informed of this deviation, TerrAscend took immediate action to refine product listing procedures, including IT improvements and further employee training to ensure full compliance with these requirements. We share in the CRC’s focus on ensuring that New Jersey’s medical patients are treated with the priority and care they deserve.”
The board commissioners then voted, 3-1, to impose a $50,000 penalty on New York-based Columbia Care for letting a labor peace agreement, which is required by New Jersey cannabis regulations, to lapse for 13 days in early June, according to CRC.
“There was one violation,” Brown said. “They rectified it quickly. They corrected it. So, I certainly—I don’t think I would even recommend going up to the $5,000 [maximum penalty] on this. They have a labor peace agreement in place.”
Again, the board commissioners cold-shouldered Brown’s recommendation and threw the book at Columbia Care with 10 times the maximum recommended penalty.
Notably, CRC Board Chair Dianna Houenou clarified before the votes that the matrix used for Brown’s recommendations are non-binding and that it is in the board’s authority to issue up to $50,000 fines for Category V (non-major) violations.
CBT reached out to Columbia Care for comment.
For the Columbia Care fine, Commissioner Krista Nash put forward a motion to issue a $5,000 daily sanction, for each day the company went without a collective bargaining agreement, up to the statutory maximum of $50,000. Nash has been vocal about New Jersey’s adult-use cannabis law including an extension of the state’s “long history of protecting workers’ rights” at previous board meetings.
“I would say that we need to place a high importance on labor peace agreements,” Nash said Friday. “And it is a mandatory requirement of licensure. Regardless of whether this applicant lapsed for three days or 10 days or 13, they’re not taking it as seriously, it appears, in my opinion, as we are. Because if they had, they would’ve been on it.”
Columbia Care and TerrAscend were among seven multistate cannabis operators with existing medical program footprints in New Jerey that were granted first mover-advantage when the state launched its adult-use market in April 2022. And among those seven companies, Columbia Care and TerrAscend were the only ones that originally remained compliant with regard to honoring patient-only hours during the first week of operations.
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Despite this history of compliance compared their peers, Columbia Cara and TerrAscend were not given leeway during the Sept. 8 board meeting.
Specifically as it relates to TerrAscend’s $100,000 fine, Chairwoman Houenou explained her motion to impose the six-figure citation. She said she believes the amount reflects the serious nature that the board considers when prioritizing patients. She said the five violations related to products on the adult-use menu that were absent from the medical menu occurred at all three of the company’s dispensaries.
“The investigator, in a very thorough report, pointed out that there still seems to be a rampant issue with TerrAscend New Jersey and their staff that they are simply not offering all advertised cannabis products to medicinal patients and making it purchasable as a medicinal purchase that is tax free as per their requirement,” Houenou said.
The patient complaints came in January 2023, and TerrAscend adopted a standard operating procedure on Feb. 8 to address the issues, Houenou said. She added that TerrAscend did not produce training records that the company is required to maintain under state regulations.
“[The training records] would have allowed, I think, this board to better ascertain exactly where the gaps exist in TerrAscend’s training to prevent these kinds of disruptions to patients,” Houenou said. “I do believe that failing to provide a detailed record of employee training leaves me no choice but to believe that the purported corrective actions taken by TerrAscend thus far are unlikely to prevent recurrence of this mistreatment of our registered patients.”
Instead of going with the executive director’s recommendation not to go above a $5,000 civil penalty, Houenou made the motion to cite TerrAscend $20,000 for each of the five violations issued, which she called more reasonable penalties.
In both the Columbia Care and TerrAscend votes, CRC Vice Chair Sam Delgado was the lone dissenter in issuing the penalties. Board Commissioner Maria Del Cid-Kosso was absent from the meeting.
In the case for TerrAscend, Delgado called Houenou’s $100,000 motion “extremely” onerous and shocking as well as shortsighted. He also said he believes workers at TerrAscend will lose their jobs over the penalty amount and that there will be a disinvestment in the state.
“I think before you take the vote, you ought to think about who’s going to get hurt,” Delgato said.
“I’m pausing because I want to control myself,” he said. “I think this is a new industry and we as commissioners have to be responsible. I think we’re being irresponsible in imposing this amount. I understand the medical patients. But I’ve never heard of a pharmacy being fined a hundred thousand dollars for such an infraction.”
Commissioner Charles Barker, who earlier this year was critical of the CRC for not doing enough to help aspiring social equity entrepreneurs find equal footing in the state’s adult-use market, said Friday that reactions to the $100,000 fine doesn’t have to include laying off workers or disinvesting in the state, as Delgato suggested.
“You mentioned this is a new industry. It is, but these are not new players,” Barker said. “These are players that have been in state after state, after state, after state. They know the rules. They’re also not your average small business. Hundreds of millions of dollars, billions of dollars. And so, to say that all of this is going to definitely happen doesn’t necessarily have to be. TerrAscend doesn’t have to fire anybody. They don’t.”
Instead, the $100,000 fine could act as a signal to the state marketplace that New Jersey’s commissioners take regulations seriously and hold violators accountable, Barker said.
Houenou added that there are people who have already “been hurt” by the associated violations of TerrAscend: the patients who have complained, she said. In addition to paying higher prices—with the average adult-use flower price being $373 per ounce in 2023 compared to $323 for medical flower—TerrAscend’s patients were forced to pay taxes and lost their ability to use discounts when they were told to order off the adult-use menu, Houenou said.
Delgato went back to the example of how pharmacies are regulated differently in New Jersey, saying that when his brother was dying last year of kidney cancer and was yelling in pain in his bed, he had to wait for an hour for his medicine to come up from the pharmacy downstairs.
“I never heard of the hospital getting fined,” Delgato said. “I think by [imposing a $100,000 penalty] you’re creating a separate class of medical patients.”
Houenou thanked Delgato for sharing his personal experience. She added that the New Jersey Cannabis Regulatory Commission does not regulate hospitals.
“We do not regulate pharmaceutical companies and we do not regulate pharmacies,” she said. “Maybe if we did, things would be different, but here we are. And so, we have a responsibility to our patients that are registered under New Jersey law in accordance with the New Jersey regulations for medicinal cannabis.”
No further discussions were made following Houenou’s comment.
