N.J. medical marijuana program set for major expansion after full legalization effort failed

New Jersey’s medical marijuana program is poised to explode in its size and scope if Gov. Phil Murphy, whose efforts to legalize recreational use were stymied by political infighting, gets his way.

On Monday, the Department of Health revealed it was “seeking new applicants” to operate up to 108 new medical marijuana businesses in the Garden State. Applications will be available July 1 and must be submitted before 3 p.m. Aug. 15.

“We are at a point where patients just cannot wait any longer for easily accessible, affordable therapy,” said Health Commissioner Shereef Elnahal in a statement.

The Health Department intends to add 24 cannabis cultivation facilities, 30 processors, and 54 dispensaries.

“This expansion of the medical program will broaden the market,” said attorney Bridget Hill-Zayat of the cannabis-focused Hoban Law Group. “They’re trying not to hold the patients hostage while they work on passing an adult-use bill.”

The bill to legalize adult-use, an issue that Murphy campaigned on, stalled in the legislature when it appeared it would not garner enough votes to pass.

Hope of a reconsideration this year became unlikely after a simmering dispute between Murphy and South Jersey power broker George E. Norcross III flared into a full-fledged political war.

In January, Murphy appointed a team to investigate billions of dollars in tax breaks distributed by the state Economic Development Authority. The tax breaks were created to lure businesses and jobs to Camden and other impoverished cities. The investigation’s targets now include companies tied to Norcross, whose childhood friend Stephen Sweeney is president of the New Jersey Senate.

State officials said the announced expansion of the medical marijuana program is not a way of bypassing the legislative process. An updated bill to legalize for adult use is pending in the Assembly — a bill that would take the power to regulate marijuana from the Health Department and give it to a newly created, five-person Cannabis Regulatory Commission.

“It’s not a workaround. It’s not at all,” said Jeff Brown, deputy health commissioner for the medical marijuana program. “We’re operating under our statutory authority. We said last year we intended to do this, and today’s the big day. We’ve been delaying to see what happens legislatively.”

Under Murphy, the number of patients participating in the program has swelled from 17,000 to 47,000. Brown said he expects the number to grow to 60,000 by the end of June.

When there are more patients, there’s more demand. Currently there are six “vertical” cannabis businesses — cannabis growers that also run dispensaries — operating in New Jersey. Six more were approved last year.

The expansion quadruples the number of growers, and mushrooms the number of dispensaries. It also allows firms to specialize in one type of business. If an aspiring retailer wants to only sell cannabis, it no longer has to grow it, too.

The Health Department will put a cap on the number of marijuana businesses any one firm can control. Applicants are limited to winning a total of three permits in this round and can control only one grow facility, one processor, and up to three dispensaries, said Brown.

“We’re learning from what’s going on in other states,” said Brown.

The explicit cap is designed to prevent the backdoor consolidation of businesses seen in Pennsylvania, Massachusetts, and Maryland, Brown said. In addition, there are severe penalties for companies that may think they can slip through loopholes not considered by the New Jersey statute.

“If a business is planning to get intellectual property or management services from another entity, it must be disclosed in this application process,” Brown said. “if they don’t disclose it and we find out later that it’s affiliated with another company, they could be disqualified.”

The Health Department will hold a webinar on July 16 for interested applicants. It will accept written questions up until July 5 that will be answered during the online event.