Texas’ Medical Cannabis Program May Soon Be Sittin’ Pretty | Bradley Arant Boult Cummings LLP

Texas is increasingly a purple political state. The motto of the state’s capital city implores its citizens to keep it weird.[1] Recent polling shows that Texans overwhelmingly support medical cannabis.[2] Every one of Texas’ neighboring states has a real medical cannabis program.

All of this raises a question: How on earth does Texas not already have a legitimate, robust medical cannabis program?

Texas is preparing to expand its compassionate use program, or CUP, which allows certain qualified physicians to prescribe low-THC products — max of 1% THC by weight — to patients who have certain medical conditions.[3]

Although the state’s Department of Public Safety has only licensed three entities across Texas as dispensing organizations to cultivate, process and dispense low-THC cannabis, a window for new applications is now open and will run until April 28.

The application form[4] can be submitted through the Regulatory Services Division Contact Us portal.[5] It is not yet clear how many licenses will be awarded.

Does this matter? And, if so, how?

Texas is one of only 13 states without a comprehensive medical cannabis law.[6] So, on the one hand, expanding an anemic program seems somewhat less than overwhelming.

On the other hand, while this expansion does not create a truly robust medical cannabis program, it is consequential to the extent it signals that Texas may be willing to consider growing its current program.

This latest hint at an expanded program comes less than two years after Gov. Greg Abbott signed H.B. 1535, which, among other things, added cancer — not just terminal cancer — and post-traumatic stress disorder to the list of qualifying medical conditions, and increased the low-THC limit of 0.5% to the still very low amount of 1%. As they say, baby steps.

If the Texas Legislature wants to get in line with the will of its constituents and implement a real medical cannabis program, it can do so during the current legislative session. There is no shortage of proposed bills on the subject.

On Nov. 14, 2022, Democratic senators pre-filed three separate bills, two proposing a more robust medical cannabis program and one going straight to adult use. The bills were
officially introduced at the beginning of the current legislative session in January.

Sen. José Menéndez, D-San Antonio, filed S.B. 121, which sets forth a comprehensive medical cannabis program that, among other things, creates a medical cannabis research program and significantly revises the existing CUP.

Those revisions include removal of the low-THC designation; not expressly limiting THC content or possession amounts; and creating separate business licenses for cultivators, processors, dispensaries, testers and researchers.

While this bill envisions a limited license program, it would initially authorize up to 300 dispensary licenses, regionally designated based on the populations of the state’s 11 public health regions; one cultivator license for every four dispensaries; one processor license for every three dispensaries; and the number of testers necessary to meet demand.

Once the patient count reaches 100,000, and for every 100,000 additional patients thereafter, at least 24 more dispensary licenses per 100,000 patients, and other licenses, can be issued, based on the same ratio applied to the first 100,000 patients.

The bill does not contain a residency requirement for business licenses, and it prohibits local governments from disallowing a medical cannabis establishment to operate in its jurisdiction.

Also, physicians are not bound under the bill by a limited list of medical conditions to recommend medical cannabis usage, but they can recommend use if the physician believes the patient is “likely to receive therapeutic or palliative benefit from medical cannabis.”

Sen. Carol Alvarado, D-Houston, filed S.B. 127, which sets forth a medical cannabis program that retains the low-THC dispensing organizations but creates separate medical cannabis dispensing organizations.

These entities could, if licensed, cultivate, process and dispense medical cannabis of any type without being subject to THC limitations.

Other highlights of this proposed bill include no residency requirement for cannabis business licenses; a provision prohibiting any local government from disallowing a medical cannabis establishment to operate in its jurisdiction; the same list of medical conditions currently applicable under the CUP; and no express possession limit, as physicians have liberty to establish a patient treatment plan.

Finally, Sen. Sarah Eckhardt, D-Austin, filed S.B. 209, which proposes a full-on adult-use program. And, just in the past two weeks, several representatives introduced two bills, H.B. 1937 and H.B. 1831, also proposing an adult-use program in Texas.

Should any of that legislation gain traction, future content will certainly be forthcoming.

Given Texas’ reluctance, so far, to adopt a meaningful medical cannabis program, jumping straight to an adult-use program certainly seems to be a pipe dream.

Not to be outdone, a Democratic member of the Texas House of Representatives introduced a medical cannabis bill on Jan. 6.

Rep. Ron Reynolds, D-Missouri City, filed H.B. 1200, which sets forth another version of a comprehensive medical cannabis program.

Reynolds’ bill more closely resembles Alvarado’s bill, with highlights including:

  • No express business license caps;
  • No residency requirement for business licenses;
  • A new list of debilitating medical conditions beyond those listed in the CUP;
  • The creation of cannabis testing facility tier of licensees;
  • Provisions for nonresident cardholders to obtain medical cannabis in Texas;
  • Retaining the “dispensing organization” classification of cultivators, processors and dispensers rather than separate licenses for each type of business;
  • Provisions for setting possession limits; and
  • No express THC limit.

In addition to these bills, Texas Commissioner of Agriculture Sid Miller published a memo last July advocating for an expansion of the CUP.[7]

Noting that “four out of five Texans support compassionate use,” Miller closed the memo by saying, “We owe it to our fellow Texans, especially those who are suffering, to lead or just get out of the way if we cannot formulate effective cannabis policy for Texas.”

One can only interpret all of the foregoing as serious momentum.

So, if the CUP expands beyond its current form, what would the program look like?

Well, we know firsthand that the word “Oklahoma” was viewed by many as a dirty word when medical cannabis reform was being discussed in Mississippi and Alabama. The lack of limits on licenses in Oklahoma has created a narrative that the state’s program is the poster child for what not to be.

And recent news stories about the black market that has sprouted, due in part to the apparent overabundance of licensed cultivators and product being harvested, aren’t helping the Sooner State’s image in this respect.[8]

With Oklahoma being a border state to Texas, we highly suspect the future Texas medical cannabis program will have more restrictions in place than Oklahoma.

That being said, the proposed legislation we discuss above looks little like the limited license states near Texas, such as Louisiana, Arkansas and Alabama.

Only one bill, S.B. 121, expressly limits available business licenses. But that limitation, as currently written, would still initially authorize 300 dispensary licenses, 75 cultivator licenses and 100 processing licenses.

And, once the patient numbers get to 100,000, another 24 dispensary licenses, six cultivation licenses and eight processing licenses could be issued, with that same calculation taking place whenever an additional 100,000 patients are authorized.

Also, one doesn’t have to think too critically to conclude that those who already hold a coveted dispensing organization license under the existing low-THC CUP program will be sittin’ mighty pretty when a real medical program launches.

The impact that a real-deal medical cannabis program in Texas would have on the national cannabis market cannot be overstated.

Texas is the second most populated state and boasts the second-highest GDP.[9] Two of its largest cities are growing faster than any in the country.[10] Austin may have more former California residents living there now than native Texans.

To suggest that a full-blown medical cannabis program in Texas would greatly enhance the U.S. cannabis industry and be a major boom for the larger multistate operators is far from going out on a limb.

With other states’ markets facing some struggles lately, a Texas medical cannabis program may be just what the doctor ordered to offset some of the challenges experienced in other states.[11]

The precise future of Texas’ CUP is not clear. The last two years, and notably the last three months, have shown us, however, that change does not appear to be too far away.

When that happens, Willie Nelson — one of the most beloved native Texans and perhaps the state’s most famous cannabis user — would surely celebrate, likely singing that Texas is
goin’ places it’s never been.

Republished with permission. This article, “Texas’ Medical Cannabis Program May Soon Be Sittin’ Pretty,” was published by Law360 on February 13, 2023.

Footnotes

[1] https://en.wikipedia.org/wiki/Keep_Austin_Weird.

[2] https://www.marijuanamoment.net/majority-of-texas-voters-back-marijuanalegalization-
and-three-in-four-support-decriminalization-poll-finds/.

[3] https://www.buddingtrendsblog.com/2023/01/is-texas-getting-ready-to-expand-itscompassionate-
use-program/.

[4] https://www.dps.texas.gov/internetforms/getForm.ashx?id=CUP-101.pdf.

[5] https://www.dps.texas.gov/rsd/contact/Contact?sProgram=CUP.

[6] https://www.mpp.org/states/texas/.

[7] https://www.texasagriculture.gov/News-Events/News-Events-Details/Article/7380/EDITORIAL-STANDING-UP-FOR-COMPASSIONATE-USE.

[8] See, e.g., https://www.wsj.com/articles/oklahoma-has-become-a-top-source-of-blackmarket-weed-11671990991.

[9] https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_GDP.

[10] https://www.cnbc.com/2022/11/09/fastest-growing-us-cities-kenan-institute.html.

[11] See https://mjbizdaily.com/washington-state-cannabis-sales-decline-for-first-timesince-adult-use-legalization/; https://mjbizdaily.com/massachusetts-recreationalmarijuana-
prices-nosedive-in-oversaturated-market/; https://mjbizdaily.com/pennsylvaniamarijuana-market-in-tumult-amid-falling-pricesconsolidation/;https://mjbizdaily.com/michigan-wholesale-marijuana-flower-pricesplummet/;https://mjbizdaily.com/colorado-cannabis-wholesale-flower-prices-plummet-toall-time-low/.

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