11/03/2015 13:42
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Starting Mon, two state firms will begin taking on applications from prospective medicinal marijuana vendors and growers.
Joseph Friedman is a pharmacist at Mark Drugs in Deerfield. The Lincolnshire man together with his associates aspire to obtain three state licenses to start medical marijuana dispensaries in Mundelein, Roselle and Schaumburg.
"This is certainly a unique challenge, and there are hurdles in each and every direction," suggests pharmacist Joseph Friedman.
They must reveal their funds.
They have to present real-time video from security cameras.
They will have to draw diagrams of the production models.
But medicinal marijuana growers seeking the new state permits can remain quiet on one element of their strategic business plans: how they will get their first seeds and starter plants.
On Monday, the Illinois Department of Agriculture will start taking permit applications from prospective cultivators and suppliers. Those eager for 1 of the 21 growing or 60 retail permits are dashing to satisfy the state's specifications -- considered the most challenging in the nation -- ahead of the Sept 22 deadline.
Lawmakers are expecting regulators will give the licenses ahead of the end of 2014, but it will take another 4-6 months before the first plant is ready for the market.
Growers will start with seeds or clones (starter plants) for which theoretically there is no authorized source. Although 20-plus states have legalized medical marijuana, the federal government hasn't, hence transferring seeds across state lines is prohibited. In Illinois, possessing marihuana will continue to be outlawed except for authorized cultivators, sellers and card-carrying patients.
As state regulators look the other way, farmers, consequently, will rely on an underground marketplace.
"It is known as the 'immaculate conception,'" stated Michael Froelich, an attorney representing growing and retail hopefuls.
By the time they turn in their applications to the Illinois Department of Agriculture, the serious farmers will have schemes ready to obtain seeds or clones, mentioned Dan Linn, exec director of Illinois NORML, which has been working for marijuana legalization. They can provide those plans on the application, however only need to identify the strains of medicinal marijuana they plan to grow.
"It is kind of a 'don't-ask, don't-tell,'" claims Michael Mayes, CEO of Quantum 9 Inc., a cannabis consulting and technology organization in Chicago.
Starting out
How to find the perfect seeds comes down to genetics. Depending on whom you ask, breeders in Vancouver, Holland, California and Colorado provide the purebreds of marihuana crops -- tailor-made for particular ailments.
The most used process here? Cloning, Linn states. A large number of growers cut off and replant a branch from an immature crop, a procedure that provides consistency and, some think, a faster harvest.
International seed banks often ship small packages illegally via U.S. mail. And farmers from states that have legalized recreational and medicinal marijuana smuggle in clones.
Nearer to home, blackmarket growers will either market or give away seeds to cultivation centers. In the latter case, the payoff for their kind-heartedness is in bragging rights.
"They would, possibly as a matter of pride and ego, give it to have their very own brand name out there," Linn stated.
An incident earlier this spring, however, may suggest the feds aren't fully happy to look the other way. In May, U.S. Drug Enforcement Administration agents confiscated industrial hemp seeds sent from Italy to University of Kentucky researchers in a program mastered by the state's Department of Agriculture. After clearing customs in Chicago, the DEA intercepted the seeds in Louisville.
A federal law enacted in Feb allows pilot studies in states like Kentucky that have approved production of industrial hemp -- which contains lower than 1 % of THC, marijuana's primary psychoactive substance.
Several weeks after the raid, the DEA turned over the 250-pound delivery in the face of a lawsuit from the Kentucky Department of Agriculture, whose chiefs agreed to apply for a federal license to ship in hemp seeds.
"Eventually, (the DEA) caved to the political demands," Linn said.
Illinois state Rep. Lou Lang, lead sponsor on the Compassionate Usage of Medicinal marihuana Pilot Program Act, is expecting no retaliation from federal drug agents against Illinois farmers, however he cautioned that international trade invites attention.
"The feds have stated, 'You follow the laws of your state, and we'll stay clear of you,'" the Skokie Democrat mentioned.
'Unique challenge'
The shadowy market for seeds is among the examples of disagreement between the Twenty three states that have sanctioned medical cannabis laws and federal rules.
"When organizations here are up and running, the obstacles they will experience won't be unique to Illinois," claimed Rebecca Millican, a legal professional with the Canna Law Group's Chicago branch.
Both potential growers and suppliers have had trouble to open accounts with banking institutions, regardless of federal guidelines designed to encourage banking institutions to open their doors to the business.
"We believe the law is still the law," mentioned Linda Koch, president and CEO of the Illinois Bankers Association. "And the federal law these days regards marijuana as a prohibited substance and thus would subject financial institutions to penalties."
Bankers fear they could be charged with financial crimes for catering to cannabis traders. U.S. Deputy Attorney General Jame Cole pointed out in a February memo to legal professionals when prosecution "might not be appropriate," but that's not legal protection.
Financial institutions need to record "suspicious activity reports" for marihuana-related companies. "Banking institutions need to be constant in that oversight of that customer relationship," Koch stated.
A few marijuana organizations have looked to private investors and, occasionally, credit unions for startup funding. But many applicants state they prefer to run as all-cash corporations.
"This is an extremely one-of-a-kind challenge, and there are obstructions in each and every direction," adds Joseph Friedman, a Lincolnshire pharmacist who is trying to get 3 dispensary permits.
Blake Lange, a horticulturist intending to start up a cultivation center in the Chicago region (he won't reveal where), continues working to get investors on board. The Illinois local views out-of-staters with deeper pockets and experience in cultivating medicinal marijuana as his stiffest competition.
"I'm kind of like the David vs some of these Goliaths," Lange stated.
Costly road blocks
Potenttial cultivators must clear costly road blocks: a $25,000 nonrefundable application fee, along with showing they've got no less than $500,000 in liquid assets. For cultivators who acquire a permit, they must show they have $2 million in an escrow account or surety bond.
Applications will be scored in 6 different categories with a chance at bonus points. And they will be evaluated heavily on security plans.
“We're going to be looking for those that are most likely ready to go immediately after we give out a permit," stated Bob Morgan, the state's coordinator for the 4 yr pilot program.
State Rep. Lang anticipates the state giving permits in November and December.
By springtime 2015, the state expects, patients with at least 1 of about 40 qualifying health problems will finally begin buying the substance, in limited amounts, from shops.
Froelich guesses the potential price of an ounce is going to be $200 to $400. Patients are going to be allowed to purchase around 2.5 ounces each and every 2 weeks.
The state won't manage the costs charged at shops, however dispensary applicants could get bonus points for offering discounts to low-income patients.
Given their startup costs, cultivation centers are not expected to turn a profit until the end of the pilot program in 2017, when professionals claim the value of the Illinois medical cannabis business might top $250 million yearly.
"There's a great deal on the line here," Blake Lange said.