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Marijuana growers seek to extinguish Pa.'s cannabis research program

Calling it "disruptive" and "unlawful," a group of Pennsylvania marijuana growers and retailers wants to snuff out the state's pioneering research before it is launched.

A marijuana plant
A marijuana plantRead moreTed S. Warren

Calling it "disruptive" and "unlawful," a group of Pennsylvania marijuana growers and retailers wants to snuff out the state's pioneering research program before it is launched.

The first of its kind in the nation, the research program would allow eight of the state's teaching hospitals to contract with a cannabis producer. Each contract is estimated to be worth tens of millions of dollars. The agreements grant the producers a "super-permit" to operate an indoor grow facility and to open six retail dispensaries that can sell medical marijuana to any approved patient.

But the group of commercial growers and retailers filed a petition last week in Commonwealth Court, saying the research program would give the hospital-affiliated producers an unfair advantage, "flood the market with medical marijuana," and kill their businesses.

The complaint asks a judge to review the regulations and declare them invalid. A hearing is scheduled for May 2 in Harrisburg.

If the court agrees, it would effectively shut down the state's institutional research ambitions.

"We are in no way trying to bring down the Department of Health or the entire medical marijuana program," said Judith Cassel, a lawyer with Harrisburg law firm Hawke McKeon & Sniscak, which is representing the group of six growers and nine dispensary owners.

"But the regulations don't match the law or put the right emphasis on research," Cassel said.

A spokeswoman for the Department of Health declined to comment on the suit. A spokesman for Solterra Care, an aspiring grower paired with Jefferson Health, also declined to comment.

Executives for the current growers and dispensaries would not speak on the record, saying they feared retribution from the health department.

Several executives complained that they had spent millions to win their permits in the first phase of a grueling and competitive process. There were 177 companies that applied for the first 12 grower permits. The applications were reviewed and scored by anonymous teams of state-appointed experts.

The state is preparing to accept applications for another round of commercial growers and dispensaries that will be similarly scored. When Phase 2 of the process is over, the state will host 25 commercial growers and a total of 150 commercial dispensaries.

The research component would add an additional eight growers and 48 dispensaries.

But many of the research producers that strike contracts with the teaching hospitals won't have to go through the competitive ordeal. That makes the current growers irate. The complaint maintains that only the state — and not the research hospitals — should have the power to decide who can participate.

Under the current regulations, the teaching hospitals would choose their own marijuana partners.

Many already have paired up.

Lake Erie College of Osteopathic Medicine is linked with Franklin Labs, whose Chairman of the Board John Hanger was once a gubernatorial candidate and adviser to Gov. Wolf.

Drexel University is said to have signed an agreement with Prime Wellness of Pennsylvania, whose parent company, Acreage Holdings recently added former U.S. Rep. John Boehner and  former Massachusetts Gov. William Weld to its board of directors.

Franklin Labs and Prime Wellness were top scorers during Phase 1 and were granted permits to grow medical marijuana by the state.

But other aspiring research producers either didn't compete in Phase 1 or scored poorly and were eliminated.

Jefferson Health has partnered with Solterra Care LLC,  which did not apply in the first round. Solterra is backed by Main Line Investment Partners, run by Jefferson's former board chairman, William Landman.

Temple University is paired with Laurel Harvest Labs. The company, which also did not participate in Phase 1, is headed by Nick Karalis, CEO and president of Delaware County-based Elwyn Specialty Pharmacy Group.

The University of Pennsylvania has reportedly matched with Palliatech, a Massachusetts-based grower, which scored 105th out of a field of 164 aspirants. On an October 2017 company fund-raising prospectus, Palliatech claimed it was "selected by a leading medical university" in Pennsylvania and would "receive 1 of 8 super licenses for medical cannabis for 2017."

None of the arrangements is officially a done deal. The state hasn't granted a single permit to the hospitals or the research growers. And the complaint seeks to stop the process before it begins.

The state is accepting applications from the teaching hospitals until May 24.  The Department of Health is accepting applications from the aspiring research growers until July 12.