Dear Friends, This week, Ohio released the 12 provisional winners of the large-scale cultivation licenses, and it looks like lawsuits are already being contemplated. Part of the controversy is that two applicants tied to successful Arizona companies were able to secure provisional licenses due their status as "economically disadvantaged" despite having lower scores than other applicants. Parma Wellness ranked #18, while Harvest placed #32. There are two views about set-asides, but many are going to question the spirit of the action if the recipients weren't truly disadvantaged.



Another big issue is that the rules weren't properly disclosed, at least based on the feedback we received from several applicants. We reported that 2/3 of all applicants were disqualified because at least one of the five plans they submitted didn't score a minimum of 60%. We were surprised to see several well-known multi-state operators who have scored highly in other states be disqualified or end up with a low score. We haven't been able to review any applications and aren't in a position to judge the competence of the group that reviewed them, but we expect that this will be questioned in these pending lawsuits.



Even without potential delays, the program is already going to be challenged to hit its September 2018 launch date given the time necessary to construct facilities and begin cultivation in advance of that date. Once again, patients are likely to suffer due to bureaucratic issues. Merit-based application processes like Ohio employed seem to be inevitably poisoned by politics, and it begs the question of what is the best way to allocate new licenses. The limited number of licenses protects the early entrants from undue competition, but it also keeps out those who may be qualified to serve patients. Arizona uses a lottery, which, as crazy as that sounds, may be a better way to allocate licenses, at least based on the experience we have seen in the Midwest and East Coast markets.