JEFFERSON CITY — The state has announced the winners of medical marijuana business licenses, but concerns over its selection process continue to linger as rejected applicants clamor for more information.
For weeks, lawmakers have heard their complaints: possible conflicts of interest, excessive limits on licenses and flubbed application scores. The program continues to field legal challenges from rejected applicants.
On Wednesday, the state’s top medical marijuana officials responded during a hearing of the House Special Committee on Government Oversight. One concern is that the state didn’t license enough companies to meet patient demand.
The state received 2,266 marijuana business applications filed by at least 700 different groups. It awarded 60 licenses to grow marijuana, 86 to make marijuana-infused products and 192 to open dispensaries.
“It would be my belief that access would mean the more providers that are qualified to be out there, the better,” said Rep. Peter Merideth, D-St. Louis. “That drives costs down. That means that there’s more access.”
Lyndall Fraker, director of the program, said “we certainly want to make sure the supply and demand is in balance.” He said Missouri was already licensing more marijuana cultivators than other states, such as Illinois.
“If there is too much product, there is a great incentive for regulated entities to divert product,” said Amy Moore, deputy medical marijuana director. “This is something that we had to take seriously.”
Moore referenced a study last year by the University of Missouri. The study said that if the state licensed 26,000 patients, 29 growers would be able to meet demand.
As of Monday, there were 33,259 approved patients and 60 licensed cultivation facilities (though businesses are not yet authorized to start growing).
Rep. Robert Ross, the Yukon Republican chairing the oversight committee, said the panel would continue looking into the medical marijuana program next week.
The state in August named a third-party scorer, Nevada-based Wise Health Solutions, to score applications. The state could pay the company as much as $582,061 for its work.
Rejected applicants have complained that Wise Health Solutions assigned different scores for some of the same answers on applications.
“Applications that were largely identical received substantially different scores,” attorneys for NGWMO LLC said in a filing with the Administrative Hearing Commission, filed Jan. 23. That company is appealing after its two cultivation applications for northern Missouri cultivation operations were rejected.
The committee did not address scoring discrepancies on Wednesday.
Several rejected applicants also allege a conflict of interest by Wise Health.
In a Jan. 22 filing, rejected applicant Missouri Now Association LLC said Wise Health Solutions was a newly formed venture between Oaksterdam University and Veracious Investigative and Compliance Solutions.
Oakland, California-based Oaksterdam is an unaccredited institution that offers training for people and businesses hoping to enter the legal cannabis industry.
“Based on information and belief Wise Health Solutions intentionally or unintentionally exploited the subjective, open-ended” state application “to reward those applicants who had paid Oaksterdam,” the filing alleges.
Merideth asked if companies paid Wise Health for application advice.
“Once they were awarded the contract, they were subject to a conflict-of-interest provision in the contract that prohibited them from doing anything like that,” Moore said.
If applicants received training from the company, it would’ve taken place before the state awarded the contract to Wise Health, Moore said, adding that the medical marijuana program had not substantiated any conflict of interest complaints.
“We do not believe that is true,” Moore said in response to a question about whether Wise Health trained applicants after it became the state scorer.
A spokesman for Oaksterdam did not immediately respond to a request for comment.
Sen. Doug Libla, R-Poplar Bluff, has said he would introduce legislation to deal with the long list of rejected applicants. He has called the scoring process a “boondoggle” with “serious flaws.”
“My phone burned up driving back from Poplar Bluff with people that felt like they did not get a fair shake on these evaluations,” Libla said this week on the Senate floor.
The state has asked for bids from law firms to help it handle the onslaught of legal challenges. Money generated from the medical marijuana program is supposed to go to veteran services, but the department will dip into the newly created veterans fund to deal with legal expenses, the state has said.
“I don’t think there’s going to be much (money for veterans) left over by the time we get done,” Libla said.
The department, meanwhile, has revealed only select information about medical marijuana program applicants.
In response to a Sunshine Law request last year, the Department of Health and Senior Services said it would charge the Post-Dispatch $184,115 for copies of marijuana business applications that are almost completely redacted.
The state also said it will not release copies of each business applicant’s “ownership structure form,” which would reveal the identity of all individuals with an ownership stake in a company.
This would reveal out-of-state firms’ interest in Missouri companies, as well as any ownership stakes by elected officials or others.
Officials say the secrecy is due to rigid language included in last fall’s constitutional amendment legalizing medical marijuana.
The Post-Dispatch was able to obtain a spreadsheet with the name and contact information for the person who filed each application, but detailed business ownership information — and each company’s application with the state — has been closed from public scrutiny.
The spreadsheet listed each business group as a limited liability company. Missouri law does not require ownership of limited liability companies to be public record. In many cases, the person who filed an application was listed only as the group’s legal counsel or attorney.
Kurt Erickson and Nassim Benchaabane of the Post-Dispatch contributed to this report.