Soon after health officials announced they would dole out Arizona’s first licenses for medical marijuana dispensaries, Ryan Hurley, co-chairman of the medical marijuana practice at the Rose Law Group here, noticed a common trait among some of the people most eager to enlist his services: They were already in the business in other states.
There was a family who owns dispensaries in Washington State. There was an investor from Los Angeles who has a stake in several California dispensaries. There was a disabled Navy veteran who makes a living running a medical marijuana delivery service in San Diego.
Arizona has one of the country’s strictest set of requirements governing the sale of medical marijuana — and, Mr. Hurley said, they were all looking to tap into its market because of that.
“There’s a sense of legitimacy that comes from having so many rules,” he said.
Medical marijuana programs exist in a gray area. They are legal in 17 states and the District of Columbia, but illegal under federal law, where selling and consuming marijuana, even if for therapeutic purposes, is still a crime. It is a risky undertaking: In California, where rules governing the business are particularly lax, medical marijuana ventures have been targets of raids.
In Arizona, it is a costly and cumbersome enterprise.
Dispensaries have to abide by zoning regulations that change from one municipality to the next. Applicants must offer detailed plans on how to secure, store and track the marijuana they hope to sell. They have to offer educational materials, which is standard practice, and hire a medical director to supervise the operation, the only requirement of its kind in the country.
“A physician can get involved in how it’s being used as medicine on a day-to-day basis, and that’s the big kicker here. If you’re going to use cannabis as medicine, you’ve got to be able to understand the science and also apply the science,” said Michael Backes, director of research and development for Abatin, a consultant to three dispensaries in California that have applied to open two more in Arizona.
There is a limit to the number of dispensary licenses the state will give out in this first phase: 126, one for each of the geographic regions carved out by health officials. For the state, it prevents the marijuana business from becoming too expansive, as happened in California and Colorado, before Colorado legislators passed laws to control it. California is still struggling to tighten its rules.
For prospective dispensary operators like Douglas McCrady, a disabled veteran who applied to open two dispensaries in Mesa, a suburb of Phoenix, it is “a legitimate way to keep the competition in check.”
The requirements were cobbled together from other states that health officials here felt were doing things right: rules on inventory control were inspired by those in Colorado and a requirement that doctors analyze 12 months’ worth of medical records before certifying a patient for medical marijuana use was borrowed from New Jersey.
Then there were things they learned from the public, through official and surreptitious means. Will Humble, director of the Arizona Health Services Department, said his staff used a fake Facebook page to monitor the conversation about the state’s medical marijuana program, which is how they got to hear about loopholes they never knew existed.
For example, the state gives preference to people who have $150,000 or more in cash for each dispensary application they file; a bank statement would have sufficed as proof the money was there. But people suggested they would just transfer the money from one bank to another, then use the statements to support different applications.
The state went on to ask applicants to prove the money had been in the bank for at least 30 days, Mr. Humble said.
“There was a fork on the road, really, and to the left would be California, where it’s a free-for-all, where you have a medical marijuana program that’s really a recreational marijuana program,” he said. “We said, look, let’s go to the opposite direction and let’s try to do it right.”
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