Oct. 23, 2016
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ultra checks
New spaces are rented, but the state won't let them open.
Courtesy of Ultra Health

Cannabis Supply in Checkmate

Producer says low plant limit stunts job growth

July 25, 2016, 5:00 pm
An internal report produced by New Mexico Department of Health’s Office of Policy and Accountability reveals that Medical Cannabis Program administrators, who have been struggling to keep up with new patient registrations and annual program renewals, only processed 62 percent of them on time between January and March.

State law requires the paperwork be approved or denied in 30 days or less, but the report (see page 49) shows that administrators set a goal to complete only 97 percent of the applications within the legal timeframe even though the Lynn and Erin Compassionate Use Act doesn’t provide them that option.

A SFR investigation reveals the backlog that's lasting up to 60 days for some applicants is just the tip of the iceberg.

Duke Rodriguez, the president and chief executive officer of Ultra Health, which already manages six cannabis dispensary locations in New Mexico, tells SFR that he’s prepared to create 85 new dispensary jobs around the state with an average pay of $15 per hour, but the health department is dragging its feet. He wants them to approve his plan to open 13 new dispensaries in rural cities without full-time dispensaries (stores that are open at least 40 hours a week.)

Rodriguez, who is already writing rent checks for leased, but still unoccupied spaces in Alamogordo, Silver City, Deming, Carlsbad and other cities, says Charles Castillo, a health department compliance officer, emailed his staff last Friday to express concerns about Ultra Health’s ability to reliably supply enough medication to the proposed new locations. 

Ultra Health has proposed 13 new medical cannabis dispensary locations in underserved areas of the state. (Click on each location marker for more site information).

Growers currently pay a $90,000 annual licensure fee, but are limited to 450 plants.

“The issue which has affected further consideration of your organization’s amendments requesting additional dispensaries relates only to your ability to adequately supply those proposed dispensaries with a steady and reliable supply of usable medical cannabis,” writes Castillo. “Simply stated, you yourself have indicated on numerous occasions that with the maximum 450 plant count it would be extremely difficult, even under optimal conditions and an ideal production cycle, to adequately serve the needs of even six dispensaries with that plant count.”

Instead, Castillo wants Rodriguez to negotiate wholesale agreements with smaller producers without a large dispensary infrastructure or Ultra Health's marketing expertise.

“You were advised on several occasions that if you could produce Memorandums of Understanding (MOU), Memorandums of Agreement (MOA), or other formal agreements between yourselves and such producers, that we could move forward in considering additional dispensaries,” writes Castillo.

Castillo's explanation doesn’t sit well with Rodriguez or Ultra Health General Manager Leonard Salgado. They tell SFR that before last Friday they had not heard anything from program staff since the end of April and that they were never told that “adequate supply” was the sole concern for delaying their business expansion.

After reviewing Castillo’s email, Rodriguez and Salgado want the department to provide them any modeling data that shows how the regulators calculate adequate supply based on patient demand, since the number of enrolled patients is up 93 percent since last summer. 

They also want to know what regulatory criteria being used to consider other growers’ requests to open additional locations, like New Mexicann Natural Medicine’s newest stores in Taos, Española and Las Vegas.

At the same time, Rodriguez is expressing another level of frustration.

He claims that prospective employees, just like patients, are having to wait up to two months for their Licensed Nonprofit Employee cards to be processed.

“By the time we call them, they’ve already found other jobs,” says Rodriguez. "Most people can't wait two months to start work."

Last week, SFR asked health department spokesman Kenny Vigil why employee cards are also being delayed, but after initially stating he'd check, we didn't get an answer before publication. If we hear back we'll update the post.

For now, Rodriguez and Salgado estimate the state will receive up to $3.5 million in gross receipts taxes from medical cannabis sales this fiscal year. They want lawmakers to propose bills to lift plant limits imposed by the health department and consider transferring regulator control from the health department to the regulation and licensing department. 

Rodriguez also suggests that if lawmakers return to the Roundhouse for a special session to deal with a looming budget deficit, they once again consider legalizing cannabis for social use. 

“It could generate up to $131 million in new revenues, depending on the tax rate” says Rodriguez, who cautions about more deep spending cuts.

“We do not have a spending problem; we have a revenue problem. In healthcare it is well understood that if you cut too deeply, you are no longer cutting into fat but are cutting into needed muscle,” says Rodriguez, adding the cannabis could be the perfect prescription for what ails New Mexico.


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