Ohio medical marijuana: Minority quota for dispensary licenses struck down

COLUMBUS – A Madison County judge has struck down a state law granting minority-owned medical marijuana businesses a leg up during the competitive licensing process.

The ruling against Ohio's "racial quota" is the latest blow to state lawmakers' attempt at making the industry more diverse. It could lead to more dispensary licenses being issued beyond the current total of 56 statewide.

Ohio's 2016 medical marijuana law required 15% of all licenses to grow, process and sell marijuana be awarded to companies majority-owned and operated by a racial minority. A Franklin County judge struck down the provision as it applied to cultivators and processors in November 2018.

This week's ruling applies to dispensaries, which are regulated by the Ohio State Board of Pharmacy. A board spokeswoman said the agency is still reviewing the judge’s ruling and determining next steps.

Pure Ohio Wellness LLC challenged the quota in court after failing to receive a license for a dispensary in London despite having the highest score. The company also has licenses for large-scale cultivation and processing and for dispensaries in Dayton and Springfield.

"As a currently vertically-integrated Ohio medical marijuana company we are focused on providing the best and safest cannabis available on the market," Pure Ohio Wellness President Larry Pegram said in a statement. "We look forward to ultimately receiving our third dispensary license so that we can provide much needed relief to more of Ohio’s patients."

Minority applicants favored

The pharmacy board awarded limited the number of dispensary licenses to 60 allocated among 31 districts consisting of one or more counties. At least nine had to go to businesses owned by someone from one of several "economically disadvantaged" groups: African-Americans, American Indians, Hispanics or Latinos, or Asians.

In order to get to nine, the board awarded licenses to minority-owned businesses over higher-scoring applicants. One of those applicants was Pure Ohio Wellness.

Pure Ohio Wellness was the highest-scoring dispensary applicant in the district, encompassing Fayette, Madison and Greene counties. But third-ranked Harvest of Ohio LLC was awarded the sole license for the district.

Harvest, a subsidiary of multi-state operator Harvest Health and Recreation, also skipped over eight other businesses in Franklin County. Several received licenses in other districts to bring them to the maximum of five. The Franklin County license would have made five for Cannascend Ohio Columbus, which does business as Strawberry Fields.

Harvest has not opened any of its three Ohio dispensaries because the pharmacy board is disputing it is actually owned by an African-Armerican Cleveland woman as claimed in its application.

Harvest's cultivation and processing facilities are on hold pending a similar probe by the Department of Commerce.

The pharmacy board wouldn't say Thursday whether it plans to award licenses to Pure Ohio Wellness for the London location in question or others. After the 2018 ruling, the Ohio Department of Commerce issued two additional cultivation licenses, including one to the plaintiff in that case, Greenleaf Gardens LLC.

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Judge's ruling

During debate on the bill, legislators cited statistics showing African-Americans and other minorities are disproportionately arrested for marijuana crimes. The set-aside was seen as a way to make sure communities hurt by the war on drugs were able to participate in the newly legal industry.

Minority preference has been upheld when government officials can show evidence of past discrimination and the preference is narrowly tailored. Echoing last year's ruling, Madison County Judge Eamon Costello wrote the state failed to do so for Ohio's newest industry.

"The board has not put forward any statistical evidence as to racial discrimination in the medical marijuana industry in Ohio," Costello wrote in the ruling issued Monday. "And while remedying the present effects of past discrimination can be a compelling interest, the state does not have a compelling interest in remedying generalized societal discrimination."