The U.S. Drug Enforcement Administration will soon start accepting applications for a variety of plant-touching businesses beyond dispensaries as part of the federal government’s seismic policy shift to reschedule medical cannabis to a Schedule III drug.
The application window, according to the DEA’s Diversion Control Division website, will open “in the coming weeks” for MMJ manufactures, growers, testing labs and distributors.
Nearly 400 applications have been filed by state-licensed medical marijuana dispensaries since the first registration window opened April 29, according to the Marijuana Herald and other media reports. Retailers must file within 60 days, or by June 26 for an expedited review within six months.
If the DEA follows a similar timeline, the next round of applicants should be preparing documents, certifications and other internal operational charts now to ensure first-mover advantages, according to several legal and compliance experts interviewed for the story.
Another top priority: separating adult-use and medical marijuana businesses units to avoid registration traps, according to Jay Caplan, founder of Tuross Group, a Santa Barbara-based firm that provides cannabis companies with financial management services.
“If you’re filing as a medical-only entity that sits inside a mixed-use group, the entity structure and intercompany agreements need to be airtight before the application goes in,” he told Cultivated via email.
The DEA did not immediately respond to a request for comment.
Attention to detail
Applicants should prepare a litany of other documentation before filing, including:
Full standard operating procedures (SOPs).
Training records and employee qualifications.
Quality management, inventory, tracking and security systems.
Facility layouts and controls.
Audit reports, ideally with third-party certifications.
Active local and state permits/licenses.
Corporate structure and full ownership charts.
From an application standpoint, attention to detail is everything, according to Kim Anzarut Stuck, founder of Portland, Ore.-based Allay Consulting LLC.
“Inconsistencies, vague answers, or missing documentation will slow you down or get you denied,” she told Cultivated via email. “You need to clearly demonstrate that you operated within state regulations, that you have a strong compliance history, and that you’ve taken steps to align with federal expectations moving forward.”
Certifications for Current Good Manufacturing Practice (cGMP) and Occupational Safety and Health Administration are particularly helpful, she added.
The gotcha questions
The liability section of the application requires the most careful preparation, says Shay Aaron Gilmore, a California cannabis and hemp business attorney.
That’s because of four key questions inquiring about controlled substances, criminal charges, prior registrations and related enforcement actions.
Has the applicant ever been convicted of a crime in connection with controlled substances under state or federal law?
Has the applicant ever surrendered (for cause) or had a federal controlled substance registration revoked, suspended, restricted, or denied?
Has the applicant ever surrendered (for cause) or had a state professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation?
For corporations, partnerships, and associations: has any officer, partner, stockholder, or proprietor been convicted or had registrations revoked as above?
“When it comes to prior cannabis activity, honesty is critical,” Gilmore told Cultivated. “Most applicants will have operated in state-legal markets that were federally illegal at the time. That’s understood. What matters is how you present it.”
Avoid getting creative on the DEA application, particularly with so many unknowns regarding the approval process, says Amber D. Lengacher, founder and CEO of Purple Circle LLC, a cannabis consultancy based in Lakewood, Co.
“As an attorney who has helped businesses submit DEA applications in the past, it's very important to assume that every disclosure will be scrutinized and any omission will be viewed as a red flag,” she told Cultivated.