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As Ohio officials prepare to grant more than two dozen companies lucrative licenses to grow medical marijuana in the state, they may want to alert their legal teams.


The selection process, which will take place in the coming weeks, will remove 185 applicants from the original list, meaning 161 of them - who collectively spent millions of dollars vying for the opportunity - will go home empty-handed.

MAP: Where you can grow medical marijuana in Ohio

And in other states, it's not only causing strong feelings.

In Pennsylvania, a company that was dropped last month for getting a growing number of licenses sued the state, saying its process was opaque or unfair. The company is asking the court to let the state restart the licensing process.

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Maryland is facing a lawsuit brought by a company that was not granted a growth permit and claims the state improperly considered the location of a proposed facility.

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Legal issues have hindered the spread of medical marijuana in Florida, Nevada, Massachusetts and elsewhere .


"This happens in every state," said Alan Brochstein, a financial expert on the cannabis industry . "Losers don't like to fail, and they've invested a lot of time and money, so they'll put in extraordinary effort to keep the dream alive."

Brett Roper, a medical marijuana licensing consultant, said the companies are spending hundreds of thousands to millions of dollars in hopes of gaining a foothold in an industry that could reach $100 million in annual revenue.

Related: Medical Marijuana in Ohio: What's Really Happening?

Roper, who has worked with a number of applicants in Ohio, said the state appears to be trying to learn from the problems that have occurred elsewhere.

"I think ultimately, if Ohio does a good job of reviewing applications and scoring them consistently, I don't think anyone has a real axe to grind," he said. "There's nothing in (the application process) that would make me think it would leave them wide open for litigation."

But, Roper said, most of the challenges in other states come from how applications are scored, and Ohio has yet to see that process.

How this works

The Ohio Department of Commerce is tasked with licensing growers under the law, while other aspects of Ohio's medical marijuana program are overseen by the Ohio State Board of Dispensaries and the Ohio Medical Board.

"(The agencies have) developed a legislative blueprint for the program and met all statutory requirements to date," said Commerce Department spokeswoman Stephanie Gostomski in an emailed response to questions about efforts to ensure a fair process.

"The Commerce Department has conducted due diligence in the study and worked with stakeholders every step of the way to meet legislative guidelines and deadlines," she said.

Related: Multi-state company a major player in Ohio's burgeoning medical tank trade

After growers, the state still needs to license processors, testing labs and dispensaries and make the program fully operational by September 2018.

"If Ohio can meet the September 2018 deadline ...... will be one of the best medical marijuana implementations as far as meeting those timelines," Brochstein said.

The Ohio Controlling Board in June approved the Commerce Department to pay three consulting firms up to $150,000 to score the applications. They are Meade & Wing, LLC, based in Arizona; B&B Grow Solutions, based in Illinois; and iCann, based in Dublin, Ohio.

To eliminate bias in scoring, any references that identified the applicant were removed and replaced with aliases. Applicants may lose points for including information that identifies them.

Related: Southwest Ohio Allows 15 Medical Marijuana Stores

Gostomski said, "The scoring system is one of the many aspects of the program where businesses utilize information obtained from states that have previously participated in similar medical marijuana programs." "It's critical for the program that the final score reflects the quality of the application, not the quality of the applicant."

Ohio's rules prohibit anyone from having ownership of more than one facility. Several people have submitted multiple applications at multiple locations, but can only be licensed for one of them. Even investors can only have an interest in one facility.

Consultants will score applications through a process that places special emphasis on experience and standard operating procedures, as well as quality assurance and safety.

Related: Xenia Medical Marijuana Ban Won't Stop Central National Labs, City Says

Roper said the problem that has arisen in Pennsylvania is that scoring appears to be arbitrary: A company will submit an application for two different locations, and the same part of the application will receive very different scores.

"If Ohio has some sort of scoring criteria where six different people score the questions, then I don't think that's fair to the applicants," he said. "If Ohio had the same scoring process for all similar applications ...... then I think they could avoid that potential risk."

Location doesn't matter

One factor that won't be considered is location.

The I-Team's analysis of applications shows they are concentrated in the Cleveland-Columbus-Cincinnati corridor. Dayton, with seven applications, ranks fourth in the state, followed by Columbus, Akron and Toledo.

Monroe has four proposed facilities. There is only one in Clark County, in Mad River Twp.

There are application clusters in several areas. The Village of Johnstown, northeast of Columbus, has five applicants. Most revolve around the Johnstown company Apeks Supercritical, a leading manufacturer of cannabis oil extraction equipment.

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There's nothing stopping the state from licensing facilities clustered in one part of the state.

"The location of the proposed facility is not part of the scoring review process," Gostomski said.

All applicants must submit a form stating that there are no legal restrictions on using the land for medical marijuana at the time they apply. But the review process doesn't look to see if that has since changed.

Huber Heights, for example, had two proposed cultivation sites. But the City Council voted down a zoning change that would have allowed medical marijuana into the city. The city polled residents in August and found that half of those surveyed supported allowing it and half opposed it.

Related: Ohio buys $6 million seed-to-sale marijuana tracking system

Gostomski did not answer questions about how the issue would be addressed. But the question did appear in a previous question-and-answer session on the department's website.

"If a local municipality passes a moratorium after an application is submitted or a temporary permit is granted, can a successful applicant change locations?" One applicant asked.

"If this issue arises, the department will address it," was the response.

Minority hurdles

Another potential legal barrier is the part of the law that requires no less than 15 percent of cultivator, processor or laboratory permits to be granted to "an Ohioan who is one of the following economically disadvantaged groups: Black or African American. American Indians. Hispanics or Latinos, and Asians."

The math alone could be a problem, as 15 percent of 24 is 3.6.

If four of the 24 top-scoring applicants qualify as economically disadvantaged companies, Roper said, then that would not be a problem. But if the state rounds the number up to three or four, those who are excluded may decide to sue, he said.

When asked about it, state officials said only that they would comply with the law.

Related: Ohio buys $6 million seed-to-sale marijuana tracking system

Some of the applications list the names of prominent minority business owners. Locally, that includes Stephen Hightower, founder of Middletown-based Hightower Petroleum, who is listed as the owner of a company seeking a cultivation license in Cincinnati. hightower did not return calls for comment on the state's process.

Of the 185 applications, 109 were for Tier 1 permits, which allow for initial growth of up to 25,000 square feet. The other 76 were for Tier 2 permits, which allow for initial growth of up to 3,000 square feet. All planting sites must be indoors.

'Hope this doesn't happen'

The potential payoff for companies entering the bottom tier can be seen in the amount of money spent.

There is a $20,000 application fee for a Tier 1 application; a $2,000 application fee for a Tier 2 permit. The fees are non-refundable, which means $2.3 million was spent on the application alone.

The state's medical marijuana program has a $5 million budget that is designed to be self-funding through fees. Its budget includes money for administrative hearings requested by applicants who are not licensed and want to object to the agency's choice.

A spokeswoman for the Pennsylvania Department of Health said it has handled 141 appeals from growers, processors and distributors, in addition to lawsuits seeking to halt the entire program.

Brochstein, who founded the news aggregation site New Cannabis Ventures, said the company faces a lot at stake, but not as much as patients desperately waiting for medical marijuana to ease their pain and suffering.

Companies that sue and delay their plans need to take that into account, he said.

"They forget this is about medical marijuana patients and helping patients when these delays can actually mean the difference between life and death and force people to break the law," he said.

"Hopefully that won't happen in Ohio."

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