Louisiana’s medical marijuana industry is exclusive. Will lawmakers open the market up? | Legislature

As medical marijuana has rocketed from a niche product to a multi-million dollar market in Louisiana, a growing number of lawmakers and advocates are questioning the strict limits put on licenses for growing and selling the drug.

The most robust effort to change the insular structure will soon play out at the Legislature. Several prominent lawmakers have filed bills, some competing with one another, to overhaul the system. All of them cite similar goals: Expand access for patients and drive down prices, which have drawn complaints from patients and advocates.

Which route the Legislature takes will determine whether the 11 current licensees – two growers and nine pharmacies – will hold onto their increasingly valuable exclusive rights, or whether other businesses will be allowed into the club. There are also multiple proposals to dramatically change how medical marijuana is regulated, giving the Louisiana Department of Health instead of the state’s agriculture agency oversight power.

As always, a host of political factors are at play – including the entry of Boysie Bollinger, one of the state’s wealthiest businessmen and most generous political donors, into the market.

The two growers are companies hired by the LSU and Southern University agricultural centers, respectively, which were given exclusivity in an unusual arrangement as part of the initial medical marijuana legislation. Lawmakers involved with that effort said the universities’ agriculture centers were chosen because they were struggling financially, and the move would appease certain pot opponents who supported the ag centers.

A host of legislators want to see the schools retain that right, which brings with it millions in revenue. That’s especially important to supporters of Southern University, which has received nearly $4.2 million from the arrangement, according to a spokesperson.

LSU, a spokesperson said, has received $5.4 million from its growing partner for “research investments, guaranteed minimum financial payments, reimbursement of annual license fees and performance bonds.” LSU’s campus brings in roughly seven times as much total revenue as Southern’s.

If lawmakers stick with the university model for growers, several universities including Nicholls State, McNeese and Grambling have expressed interest in getting into the medical marijuana game, three sources with knowledge of the discussions said. No bills have been filed to do that, but amendments could accomplish that goal.

For the first three years, the only lobbyist for LSU’s growing partner was John Davis, president of the firm. Davis is the husband of state Rep. Paula Davis, R-Baton Rouge. But in the past year, Good Day has steadily amassed a strong lobbying corps, hiring 11 other lobbyists to represent its interests before the Legislature and governor. Ilera Holistic Healthcare, the grower hired by Southern, has three lobbyists on staff.

Since Good Day took over as LSU’s growing partner, in 2020, the group has invested tens of millions of dollars into a dramatic expansion of its operation in Ruston, where the company says a cavernous new growing facility will be able to meet market demand.

A sizable investment from Bollinger, a prominent GOP donor and shipbuilding magnate, helped the company do that.

Bollinger said in an interview he made a “substantial commitment,” amounting to tens of millions of dollars, in Good Day. Regulators approved the new ownership stake, made through Riverbend Agriculture LLC, last year. Bollinger said the move was simply an investment opportunity: He liked that it was a company with Louisiana operations, in a new market with only two licensees.

Bollinger said it’s “premature” to expand the number of licensed growers. The two incumbents have argued in public hearings – backed by their regulator Mike Strain, the commissioner of agriculture, that they have the ability to meet Louisiana’s demand.

“We try to educate the legislators on anything they want to know,” Bollinger said. “I think there’s a pretty good consensus based on what we’ve heard that it’s too early to expand the growing licenses.”

Not everyone agrees.

Flurry of bills filed

While this year’s medical marijuana bills run a broad gamut, legislation that would expand the number of growers and pharmacies will likely draw the most attention.

Rep. Larry Bagley, a Stonewall Republican who was once skeptical of medical marijuana, has filed legislation to increase the number of pharmacy licenses from 10 to 20, and another bill to remove the cap on growing licenses, while moving the program to LDH. State law currently allows 10 pharmacy permits, but the Louisiana Board of Pharmacy has only handed out nine, with each in a different region of the state.

Importantly, Bagley is the chair of the House Health & Welfare Committee, which hears many of the medical marijuana bills. He said in an interview he’s willing to wait a few years before licensing new growers, to give the current licensees time to capitalize on their investment. But he said there should be a freer market.

“I’m not sure why anybody would be against that,” he said. “We certainly don’t want a monopoly…Nobody else would be able to afford to compete against them.”

Rep. Joe Marino, No Party-Gretna, brought a bill last year to give the Jefferson Parish Economic Development District a third exclusive grower’s license, a bill that was killed in Bagley’s committee. Marino said he’s no longer interested in handing out licenses to specific institutions or people. Instead, he has filed legislation to add six more grower’s licenses through a bid process that would favor Louisianans instead of people from out of state. He also proposes to add 15 more pharmacy licenses, and to repeal the ban on campaign donors getting a grower’s license, which he said would let more Louisiana residents vie for a license.

“The question isn’t whether we should expand,” Marino said. “The question is why should we maintain a monopoly on medicine?”

Both Bagley and Marino agree the proposals to add growing licenses will be more controversial than legislation to license more pharmacies.

Speaker Pro Tem Tanner Magee, R-Houma, has filed a sweeping bill that would overhaul the regulations for the program, moving it from Strain’s office to LDH and streamlining testing, which has been a complaint from growers for years. The bill would also add more pharmacy permits as the market grows, but for now, they would go to the owners of existing pharmacies. Magee said he’s still working through that component and the bill will be amended to potentially open it up to others.

Magee said he’s taking aim at two of the three parts of the program – the pharmacies and regulator – while leaving the production licenses alone. If the price doesn’t come down after the bill passes, then “we know who is at fault. It’s the grower,” he said.

“Nobody is trying to lock it up forever,” Magee said. “It’s making sure we grow at a pace the market can sustain.

“I’ve told every stakeholder, all 11 businesses, that this is not going to be like gaming is,” he added. “I’ve told all of them they have to accept this is an expansion industry and at some point other players are going to come in this space…I don’t want the public to think we’re creating a good-ol’ boy network. At the same time this is a highly regulated product. I don’t know if the public is comfortable with opening up to anyone who wants (to produce it).”

Times have changed

State Sen. Fred Mills, a Republican and longtime pharmacist from Parks, is widely seen as the father of Louisiana’s marijuana program, after deftly guiding it through a skeptical Legislature toward the end of Gov. Bobby Jindal’s tenure.

Mills said he initially wanted the producer’s space to be highly competitive. But he had to make concessions, so he settled on two licenses that would be awarded to LSU and Southern, whose ag schools were struggling for money at the time. The limited number appeased law enforcement groups worried about keeping tabs on the sources of legal production.

Now, with opponents’ concerns largely alleviated, Mills said “of course” the program should be expanded. But he also said that decision should be made based on data – namely, how much demand exists.

“Until these pharmacies are bursting at the seams, having too many dispensaries in the same market could be extremely problematic,” Mills said. “Because it’s expensive to do these pharmacies.”

He said if legislation expanding the program gets to his committee, he’ll consult with regulators to see if the numbers justify expansion.

Testing woes

In the early years of the program, the two growers warred with Strain over his regulatory power over them.

While that battle has simmered, Strain’s testing of the product has emerged as a sticking point as flower – the popular smokable form of the drug – has finally hit the shelves this year.

Records from Strain’s office show Ilera Holistic Healthcare, the company hired by Southern, had 330 pounds of flower fail testing because of yeast and mold issues. The failures happened between late November, when growers were preparing for the flower rollout, and late January. Since then, Ilera’s products have passed all testing, and Tabitha Irvin, who oversees medical marijuana for Strain, said the products that failed were remediated and later approved.

The records also show long testing delays, of up to 17 working days, at the beginning of the flower rollout. But that number has improved since January, averaging six working days for results to…