New Jersey’s medical cannabis industry has a supply problem. Gov. Phil Murphy, a staunch supporter of the program, signed an executive order in March that expanded access to medical cannabis in New Jersey and prompted an additional 10,000 patients to enroll in the burgeoning marketplace. All told, the state’s medical cannabis program is serving some 25,000 patients now.
But with only six licensed businesses in the state, the math has gone pear-shaped.
On July 16, the state issued a request for business applications. Regulators intend to license another six vertically integrated medical cannabis businesses, effectively doubling the market and broadening the access for patients across New Jersey.
“We look forward to the opening of six new dispensaries so we can ensure that all qualifying patients who want access to medicinal marijuana can have it,” Murphy said in a public statement.
Jonathan Havens, co-chair of the cannabis law practice at Saul Ewing Arnstein & Lehr, and Ruth Rauls, a New Jersey-based partner in the firm’s cannabis law practice, have been watching the New Jersey medical cannabis market develop in recent years. This latest request signals a real sense of progress for a state program that’s lagged behind its regional counterparts in measures of patient support and political efficiency.
Prospective businesses must be vertically integrated, although the request for applications hints at upcoming licensing rounds for stand-alone operations. They must be competitive and extremely detailed in their applications. And they’d better hurry--for this current round of licensing, applications are due Aug. 31. A mandatory "pre-application" conference for all applicants is scheduled for Aug. 9 at the Department of Health headquarters in Trenton.
The current licensed businesses in New Jersey include: Curaleaf NJ, Greenleaf Compassion Center, Harmony Foundation of New Jersey, Breakwater Alternative Treatment Center, Compassionate Care Foundation and Garden State Dispensary.
Those six businesses are ineligible for this next round of licenses.
Here, Havens and Rauls offer their perspectives on New Jersey’s expanding medical cannabis market and the work needed to compete for a business license.
1. Know Your Geography
After New Jersey first legalized medical cannabis in 2010, the state slowly set up a process for approving two vertically integrated businesses in each of three main geographic areas: North, Central and South Jersey. (Whether there’s a “Central Jersey” is a matter of local debate, but the state’s medical cannabis regulators saw a need to delineate cities like Trenton from the more populous greater Newark area and the cities lining the Atlantic coast.)
“They're going to follow that model,” Rauls says. But while the plan is to approve two new businesses per region, Rauls said that the state may alter its intent to keep pace with patient demand.
Applicants may pick more than one region on their application, but they must prioritize which region they prefer.
2. Show Your Work
Much of the cannabis business license application is built around a weighted scoring system, with different sections constructed around the details of different parts of the business: operational plans, procedures, security and so on. The key here is to be as detailed and as clear as possible.
When it comes time to assess these applications, fortune will favor the well-prepared.
“You have to show your work,” Rauls says. “You have to walk through and show your work on how you're going to do all of it. Generalized statements don't work. You really have to think about it and write it out and explain it and make sure it's feasible.”
Of course, it helps immensely to draw on experience in the industry. Partnering with an established national brand may help the cause, but that just makes it even more vital to clearly show the state how your company is going to meet the needs of the New Jersey medical cannabis patient base.
“I see a lot of potentially different types of people applying for this,” Havens says. “I see a local team who's been following the market and maybe has been studying the existing six alternative treatment centers (ATCs, the local term for medical cannabis dispensaries) and knows what it's going to take to get one of these things off the ground. … I don't want to mince words; I think it will be an uphill climb for a small group of people who have no experience in the industry who aren't well capitalized. It's a very tall order to be able to write one of these applications not understanding how one of these businesses works.”
3. Identify Your Base
The scored portion of the application is only one half of the mandate, though. The first part of the application is the requirement to show control of property or real estate and approval from the municipality.
“And those are two things that do not come quickly,” Rauls says. “Those two things are as important if not more important than the actual scoring. You have to have a place to put this operation down. I think what New Jersey is focused on and what is laid out in this notice is they want to make sure that there is adequate supply of product for patients. That's why they're putting this request out the way they are. They want to see that you are ready to hit the ground running, [that] you have a space and you can operate it once you get the license.”
To anyone interested in applying for this round of medical cannabis licenses, property control and municipal approval should already be secured. It’s likely that there will be additional windows for medical cannabis license applications in the future, but that just underscores the need for speed even more: Don’t wait to secure the most fundamental parts of your business.
4. Don’t Wait!
It bears repeating.
“You can't do one of these applications in two days,” Havens says. “It's just not feasible. You might not be able to do one in two weeks or three weeks. A month is tight, but I think if you have people working around the clock you might be able to do it.”
The cannabis industry at large is a highly competitive field. Those who wish to enter must surround themselves with the sort of experience and expertise that will tee up the full range of business success in this unique marketplace.
Get your team in place now for long-term success.
“Having a turnkey operation from another state and having procedures and a business plan and staffing and expertise that you can deploy -- is obviously very helpful,” Havens says. “That being said, [success] kind of depends on who's scoring the applications and what they want to see. Maybe they want to see more of a local team that's an entrepreneur who's learning this as they go.
“The result, though, is you don't want someone learning as you go and the people paying the price are the patients who need the medicine. It's this balance. A lot of people who have affiliated themselves with these national operators ... I think have found that they really enjoy the expertise of people who have filled out applications before and who know how to prioritize the different sections based on how they're weighted. I think there's a benefit there.”
5. Stay Focused on the Task at Hand
Glancing briefly at the tea leaves, it’s hard to ignore the talk about adult-use legalization in New Jersey. With Massachusetts’ market blossoming this summer, New England neighbors are taking notice.
“It is not entirely clear that they've got the votes to do it,” Rauls says. “There's a lot of political wrangling going on in Trenton. Whether it happens—I don't think we know if that's going to happen or not. I don't think that's relevant specifically to this application. This application and the notice -- what they said was this application, the reason they're opening up the six additional licenses is to make sure that there's adequate supply for registered patients.
“Because of the actions the administration has taken to open up this program so that more patients can participate, they want to make sure there's adequate supply,” Rauls says. “That, I think, is the main concern. … You can kind of pontificate if later on it's going to be helpful to be able to flip a medical facility into an adult-use facility and do both, but I just don't think that should factor into the application process itself.”
Indeed, this latest request represents a shot at meeting the increased demand for medical cannabis in New Jersey’s marketplace. Keen observers will be watching the regional headlines and the national cannabis news cycles, of course, but the engaged business team can only confront what lies before it.
“Despite the fact that some people expect that it's going to go recreational in New Jersey and elsewhere,” Havens says, “that's not the case right now.”
Top photo courtesy of Adobe Stock
