Pennsylvania Marijuana Legalization Hearing Features Testimony From Expert On Regulatory Systems In Other States

A Pennsylvania House committee held a second informational hearing on marijuana legalization this week as momentum builds in the state to enact the reform. After Ohio voters’ decision last month to legalize recreational cannabis, both Pennsylvania Gov. Josh Shapiro (D) and U.S. Sen. John Fetterman (D-PA) have said it’s time for Pennsylvania to make the change, too.

“It’s just so simple and so easy—just give people what they want,” Fetterman said late last month. “Make it safe, make it pure and make jobs.”

At the hearing of the House Health Subcommittee on Health Care on Wednesday, state lawmakers heard testimony from Gillian Schauer, executive director of the Cannabis Regulators Association (CANNRA), a nonpartisan group of officials involved in state-level cannabis regulation. Members queried Schauer on various elements of marijuana oversight, including promoting social equity and business opportunities, laboratory testing and public versus private operation of a state-legal cannabis industry.

“I know that after our last meeting, I walked away convinced that if our goal is to correct the harms from the criminalization of cannabis, while promoting health and safety, how we regulate legal cannabis will play a huge role in the outcome,” Rep. Dan Frankel (D), the full Health Committee chair, said at the opening of Wednesday’s meeting.

Frankel, who has previously sponsored cannabis legalization legislation, circulated a cosponsorship memo earlier this year previewing plans to file another reform bill this session.

Much of the informational meeting consisted of a presentation by Schauer, who was the day’s only guest speaker. A research scientist and consultant with a PhD in behavioral science and a master’s in public health, she told the subcommittee that her focus wasn’t advocacy but instead support and education “in this emerging issue.”

Among the most important takeaways of the presentation, she told the lawmakers, were the importance of having a single regulatory agency overseeing both medical marijuana and adult-use cannabis—as well as hemp-derived cannabinoid products and the need to provide “regulatory flexibility” to give that oversight agency discretion to set rules under an implementation timeline that balances expediency against public safety and equity considerations.

Schauer also stressed the importance of public education, around not only cannabis itself and how to responsibly use of the substance, but also campaigns around exactly what will change under any law that’s adopted, and when certain legal changes will kick in.

Watch the committee’s second marijuana legalization informational meeting in the video below: 

Regarding what she described as “regulatory flexibility,” Schauer told lawmakers that because state cannabis regulators often have to adjust quickly to fast-moving issues, it can be “extremely challenging” for an agency to have to return to a state legislature to seek approval for an assortment of rules.

As for the timeline on legalization, she said, it’s about trying to find “where the sweet spot is.”

“If a timeline for implementation of a new policy and opening of stores is too short,” Schauer explained, “you may end up compromising on some of those public health and safety variables—and sometimes its equity variables, as well. If it’s too long, you may end up having an illicit market that takes hold and, you know, takes some time to diminish.”

She also advised the subcommittee to think about interstate commerce. “It is not here now. It may not be here tomorrow,” she said. “But it will be here, and you need to craft the policy that will set Pennsylvania up to have the market that you’d like it to have in interstate commerce.”

“How can you make it so that the businesses that set up are successful not just now, not tomorrow, but in the long run as well?” she advised lawmakers to ask.

One reason the panel invited Schauer to appear is to answer questions from lawmakers about various choices available when deliberating how to legalize and regulate marijuana.

Rep. Rick Krajewski (D), who chairs the subcommittee, said that after last month’s initial hearing, for example, “we heard a lot of extensive questions from members related to how cannabis is regulated in other states and provinces [and] what different regulatory structures can be used to make sure that we promote public health safety and equity.”

As lawmakers asked questions of Schauer, Frankel, the full committee chair, asked how best to support small, independent and equity-owned businesses.

“I’m concerned about how we do social equity,” he told Schauer, adding that he wanted to know how to “provide opportunities beyond how we allocate tax revenues to address social equity, in terms of how we do the business modeling as we move to adult-use.”

Schauer said she was less qualified than certain state regulators, to whom she offered to refer the subcommittee, in terms of speaking to social equity. But broadly she explained that there are three general areas of marijuana social equity: expungement and record clearance, community reinvestment and involvement in the marketplace for people from communities that have been harmed by the war on drugs.

“We know that expungement needs to be automatic, it shouldn’t require a petition process, it needs to be funded,” she said. “Equity in the market, I’ll just be frank and say I think has been a challenge for a lot of different reasons.”

One, she said, is that “adult-use is often overlaid over a medical program that has not has equity as a focus, and so that creates a challenge.”

She said in terms of adult-use licenses, however, regulators are “learning some of the variables that matter a lot here,” including providing early access for social equity applicants.

State that allow “access to everybody at once, or access to licenses to medical operators first and foremost, have had a harder time with equity,” she said. “I think you’re seeing a number of states that are prioritizing equity applicants as the first round of applicants for adult-use licensure.”

“But giving a license is not sufficient,” she continued, emphasizing that “wraparound services are really critical” to ensure equity-owned operators not only enter the market but also remain for the lifecycle of their businesses.

“You have to provide technical assistance to make sure that folks can be successful,” she said, “so we’ve seen states allocate money to technical assistance,” Schauer said. “You have to think about access to capital—the banking system itself has inherent biases in it, and so access to capital may be harder for some of the small business and applicants that you’re trying to lift up with licensure—so we’ve seen states put together funds that can be accessed by social equity applicants for starting capital.”

Vertical integration also poses a complication, Schauer explained. Small-scale, craft businesses, which are often equity-owned, might want to be vertically integrated so they can grow, produce and sell products directly to consumers. “Vertical integration on a large scale,” she added, “can make it more difficult for equity applicants to make it, because it requires a lot of resources and knowledge and capital, basically, to succeed.”

Frankel also asked about “the best method for state oversight of labs,” noting that some states have had problems with so-called “lab shopping,”

Because of the federal prohibition of cannabis, Schauer replied, “we’ve ended up with every state having, effectively, a third-party lab system, where the states are licensing third-party labs that have as their customer the industry.” That can create incentives for labs to inflate THC numbers to earn customers—and for businesses to seek out the labs that provide the numbers they want.

Many states now require either their own inspectors to be present when samples of products are pulled or labs themselves to be on-site for the pull, Schauer said, “to make sure that the initial sample for testing is pulled from something that is reflective of the actual batch of cannabis.”

But “first and foremost,” she noted, having a DEA-licensed state reference lab able to test cannabis is one of the best ways to ensure accuracy. “Very few states have state reference labs, but we’re seeing more and more figure out how to do it and go through the process.”

During the subcommittee’s first meeting on marijuana legalization, Frankel noted that state-run stores are “certainly an option” in Pennsylvania, similar to what New Hampshire Gov. Chris Sununu (R) recommended for that state earlier this year, though a state commission later shied away from that plan.

At Wednesday’s hearing, Krajewski again raised the topic.

“Have you seen that model in other states?” he asked. “What do you think are the pros and cons of having a private point-of-sale structure versus like a public structure?”

After first reminding the lawmaker that she was speaking for herself, and not CANNRA as an organization, Schauer noted although there are lot of different ways to approach legalization, “the way that we have selected across every state so far is a commercial model that does sometimes put public health and safety outcomes in a more challenging light.”

“I would love to see more experimentation across the policy landscape,” she continued, such as nonprofit models, state-run systems and others. New Hampshire currently requires medical marijuana providers to be run as nonprofits, she added, but that’s the only such example in the U.S.

In Uruguay, she pointed out, cannabis is available through pharmacies “without any advertising or marketing, so that’s worth looking at and studying, too.”

“Unfortunately,” Schauer concluded, “we’ve not seen the policy landscape to give me insight to comment on what the effects would be.”

Frankel followed up to point out that some provinces in Canada had experimented with a state-run model, including Quebec, which continues to sell marijuana exclusively through government-owned stores.

Schauer replied that he was correct, but she wasn’t familiar enough with the outcomes to comment on that system.

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With a new, narrow Democratic majority in the House this session and support from the governor, the prospects of legalization in Pennsylvania have picked up—but there’s still an open question about how the GOP-controlled Senate might approach reform if the House delivered it a bill.

That said, more Republican senators have come on board with the policy change, with a bipartisan legalization measure already having been filed in the body this session by Sens. Dan Laughlin (R) and Sharif Street (D).

Street and Republican Sen. Camera Bartolotta, meanwhile, recently circulated an alternative legislative proposal that would decriminalize marijuana, downgrading simple possession from a misdemeanor crime to a civil offense.

In addition to the more conventional legalization proposal that’s being sponsored by bipartisan senators this session, House lawmakers have also filed separate bills to legalize marijuana sales through state-run stores and to provide permits for farmers and small agriculture businesses to cultivate cannabis once adult-use sales are allowed.

The House also approved a large-scale tax reform bill in October that contains language to provide state-level relief to medical marijuana businesses as they continue to struggle under federal financial barriers. The reform drew the ire of Republican members—who normally champion tax cuts—as a Democratic giveaway to the cannabis industry.

Another measure to allow all licensed medical marijuana grower-processors in the state to sell their cannabis products directly to patients cleared the Senate in September, and it advanced through the House Health Committee the next month. This week lawmakers sent that bill to Gov. Shapiro’s desk after approving changes that would also allow dispensaries to apply to grow and process their own marijuana, further vertically integrating the industry.

Last year, the Senate Law and Justice Committee held a series of hearings on marijuana legalization that were meant to inform legislation that the panel’s Republican chairman, Sen. Mike Regan (R), was drafting.

Former Gov. Tom Wolf (D), who came around to support legalization near the end of his term, also signed large-scale legislation last year that included provisions to protect banks and insurers in the state that work with licensed medical marijuana businesses.

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