The Medical Use of Marijuana and Legal Issues Associated with MA Registered Marijuana Dispensaries

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By: Andrew S. Levine, Esq., Robert K. Blaisdell, Esq., and Kathleen A. Harrell, MPH

This is the first article in a two-part series on the medical use of marijuana in Massachusetts. This article addresses some of the issues associated with opening a registered marijuana dispensary (RMD). The second article will address physician and clinician issues associated with RMDs.

See Exhibit 1 [Chart] here.

 Background Information

In November 2012, sixty-three percent of Massachusetts voters approved a ballot initiative allowing qualified patients with debilitating medical conditions to purchase and possess marijuana.[1]  This measure – An Act for the Humanitarian Medical Use of Marijuana, Chapter 369 of the Acts of 2012 – became law on January 1, 2013, making Massachusetts the eighteenth state in the nation (along with the District of Columbia)[2] to approve the use of marijuana for medical purposes.[3]  The newly-enacted law eliminated state civil and criminal penalties for the possession of marijuana for individuals who are certified by a physician as having at least one statutorily-defined debilitating clinical condition,[4] and who may benefit from use of the drug.  Additionally, the law provided for the implementation of up to thirty-five medical marijuana treatment centers (MMTCs) across the Commonwealth.[5]  Furthermore, the law charged the Massachusetts Department of Public Health (DPH) with promulgating regulations for the implementation of treatment centers, which DPH now refers to as registered marijuana dispensaries (RMDs), and creating a policy framework for qualified patients to obtain written certification from physicians for medically-necessary marijuana.[6]  In early 2013, DPH carried out a public engagement process – through listening sessions, hearings, and a public comment period – seeking feedback on both the proposed regulations, as well as the overall selection process for RMDs.  On May 8, 2013, the Massachusetts Public Health Council unanimously approved regulations that outline the registration process for qualifying patients, personal caregivers and certifying physicians; set forth a process for obtaining hardship cultivations; and define the operational aspects of RMDs.[7]

On August 2, 2013, DPH launched the first of two phases in the RMD request for proposal process.  During this initial phase, one hundred eighty-one applications were received by DPH with one hundred fifty-nine applicants moving on to the second phase.  Shortly thereafter, DPH issued the second phase of the proposal process, with one hundred organizations submitting applications for review.  These processes required applicants to manage local zoning requirements around leases for potential dispensaries, obtain support from their designated municipalities, adhere to state laws and regulations, facilitate suitability filings, and devise the necessary infrastructure to operate a sustainable RMD.  Earlier this year, DPH issued the results of the two-phase process, and selected twenty dispensaries for provisional status, invited eight dispensaries to seek alternative locations, and denied seventy-two applications outright. Upon selection of the twenty applicants for provisional status, DPH staff began conducting a “verification phase” of the selected organizations, whereby DPH verified the accuracy of each application’s contents, such as letters of support, meeting with municipalities to confirm siting and local support, reviewing each applicant’s operational and leadership plans, and having applicants attest to all submitted application materials (for more information on the overall DPH process for RMDs, please see Exhibit 1).[8]  On June 27, 2014, DPH announced that eleven of the twenty RMD applicants advanced to the “inspection phase” of the selection process while the remaining nine were not selected to move forward.  These eleven proposed dispensaries will bring ninety-seven percent of the Commonwealth’s population within thirty miles of a RMD, ensuring patient access to medical marijuana across the Commonwealth.  Additionally, DPH also announced that five highly-scored applicants that were not selected in the first two-part process of licensing were invited to reapply for a license in any of seven unrepresented counties: Berkshire, Hampden, Franklin, Bristol, Suffolk, Nantucket and Dukes.  Under a new timeline devised by DPH, these five applicants have until August 29, 2014 to submit their revised applications.


Local/Municipal Legal Issues

The most common difficulties faced by RMD applicants concern municipal and local legal issues, including meeting RMD siting requirements, obtaining local political and community support, ensuring that leadership can meet submitted timelines for opening, and complying with local zoning ordinances.  In September 2013, shortly after submission of the first round of applications, a State House News Service analysis found that nearly one-third of all Massachusetts’ municipalities had placed temporary moratoriums on the implementation of RMDs (which many cities and towns still refer to as MMTCs).[9]  Since that time, most of these communities, as well as many others, have enacted zoning ordinances governing the siting of RMDs.

RMD siting requirements are governed by 105 CMR 725.000: Implementation of an Act for the Humanitarian Medical Use of Marijuana (the Regulations).  The Regulations state that a RMD:

[S]hall comply with all local requirements regarding siting, provided however that if no local requirements exist, a RMD shall not be sited within a radius of five hundred feet of a school, daycare center, or any facility in which children commonly congregate.  The distance is measured in a straight line from the nearest point of the facility in question to the nearest point of the proposed RMD.[10]

The Regulations only control, however, when there is no local ordinance in place.  And many of the cities and towns that have adopted ordinances that address specific siting requirements are more stringent than the DPH Regulations.  For example, the City of Cambridge outlines, in Ordinance Number 1359, two overlay districts for RMDs.[11]  This ordinance also discusses appropriate dimensional requirements for a RMD building, parking and loading logistics, signage restrictions and special permit criteria.  These are all common requirements that most cities and towns have within their RMD zoning laws that are not mandated by the Commonwealth.

Another common issue for most RMDs involves the proximity of dispensaries to places where children commonly congregate.  In 2013, DPH issued its Guidance for Municipalities Regarding the Medical Use of Marijuana (updated December 13, 2013) (DPH Guidance).  In its Guidance, DPH specified that the “500 feet restriction around areas where children commonly congregate” that is addressed in the Regulations is measured from “building to building rather than property line to property line.”  However, DPH went on to say that:

[A] facility is not limited to a building.  For example, a playground outside a school would be considered a facility where children congregate, so in that case the line would be measured from the edge of the playground to the nearest point of the building that would house the potential RMD.  Also, a RMD may have a cultivation area, which would be considered a facility.  In that case, the line would be measured from the edge of the fence surrounding the cultivation area to the facility where children congregate.[12]

Some cities and towns take this a step further, measuring property line to property line without regard for whether the applicable structures are set back from property lines, making the standards for siting RMDs even more rigorous.

The DPH Guidance also defines a“facility in which children commonly congregate” as:

[D]ance schools, gymnastic schools, etc. if children commonly congregate there in a structured, scheduled manner.  It includes facilities where services or programs targeting children or youth take place.  It includes a private home housing a family day care center, but not a private home where children happen to live. It includes a city or town park, if the park includes play structures intended for use by children. It does not include other facilities, such as ice cream shops, where children may happen to congregate, but not in a structured, scheduled manner.[13]

For this specific issue, DPH has stated that an analysis around the common congregation of children should consider “whether children congregate at any specific place according to a schedule, how often they congregate, and whether the purpose of congregating is an activity designed for or targeted to children.”[14]  In addition to the DPH constraints, many cities and towns have added their own restrictions, prohibiting RMDs from locating within close proximity to public parks, conservation land, or establishments that offer play groups or youth activities.  To address this issue, most RMD applicants have reached out to local counsel within their city, town or district to ensure they understand specific siting requirements and are aware of any potential abutter issues.

RMDs also seek to garner community support and work with local municipalities to ensure access to appropriate public services, such as police, fire, and other emergency services – all of which are paid for, in part, by local taxes. Although RMDs are required to be nonprofit organizations under Massachusetts law[15], a nonprofit organization is not automatically a tax-exempt organization. Nonetheless, the MA Department of Revenue will decide whether these entities will be assessed a state tax and, if so, at what rate.  Consequently, RMDs are entering into agreements with local cities or towns to make payments that can be put toward municipal services, known as Good Will Contracts or Good Citizen Agreements.  These arrangements are similar to payment-in-lieu-of-taxes (PILOT) programs, and provide the municipality with appropriate monies for the dispensaries’ consumption of public services.  However, these agreements can be challenging, both to devise and negotiate.  For example, a RMD may want to be a “good neighbor” to its local city or town by providing the necessary monies needed to offset its utilization of local services, but this desire to work with local officials must be balanced against the need to run a sustainable organization.  Moreover, most municipalities are seeking Good Citizen Agreements or some other form of financial support in the first year of operations; however, this type of monetary commitment when an organization is young can impact both the capital and operational budgets of the RMD.  To help ensure an adequate response to a municipality that is also appropriate for the organization’s finances, applicants must devise realistic financial plans comprised of feasible budgets and rational implementation strategies.


State Legal Issues

RMDs also face various state compliance issues when opening a dispensary.  For most organizations, this means devising continuous quality initiatives to ensure compliance with state laws and regulations. Currently, the selected applicants are working to operationalize dispensaries. Prior to receiving full licensure via DPH, the RMDs will need to provide DPH staff with policies and procedures addressing the following areas:

  •  Storage of marijuana;
  • Descriptions of the various strains to be cultivated and dispensed;
  • Procedures for recordkeeping and inventory protocols;
  • Plans for quality assurance and appropriate product testing to eliminate contaminants;
  • Staffing plans and staffing record compliance;
  • Security plans;
  • Emergency procedures including disaster plans, substance-free workplaces policies;
  • A plan for the maintenance of confidential information;
  • A description of RMD patient education activities;
  • Standards and procedures to determine the price of marijuana including a sliding fee scale for patients with financial hardship;
  • Diversion plans;
  • Procedures for voluntary and mandatory recalls of marijuana;
  • Procedures for ensuring damaged or deteriorated marijuana is segregated from the rest of the inventory and destroyed;
  • Home delivery;
  • Transfers of marijuana between dispensaries;
  • Cultivation and distribution requirements; and
  • Waste disposal.

In total there are fourteen pages of regulations devoted to operationalizing a RMD.

Devising an overall operational framework and a complete set of operating policies and procedures for this type of organization can be daunting, especially when it is within a new and developing industry.  To help address this issue, many RMDs have formed relationships with dispensaries in other states that have been operating for many years, such as Maine or Rhode Island.  The existing out-of-state dispensaries provide those MA RMDs with baseline information around devising policies and procedures.  Other MA RMDs rely on consultants or previous experience to implement all the necessary steps to operate a dispensary.[16]  These compliance issues underscore the need for a strong leadership team at the RMD with healthcare and regulatory experience.  This team should also include at least one individual whose sole focus is on regulatory compliance.  Additionally (or alternatively), the RMD may want to contract with legal counsel to ensure that all local, state and federal laws are being met.

In addition to complying with the DPH Regulations, RMDs must also meet the legal requirements generally associated with running a state charitable organization.  RMDs must be incorporated under M.G.L. ch. 180, known as the public charities statute, and “must operate on a non-profit basis for the benefit of registered qualifying patients.”[17]  The RMD must also “ensure that revenue of the RMD is used solely in furtherance of its non-profit purpose.” [18]  To comply with these requirements, DPH expects that an RMD will be governed by a board of directors that will meet its duty of loyalty to the organization and its duty of care in carrying out their responsibilities.  Directors must act in compliance with the organization’s bylaws and for the purpose of furthering the organization’s mission – to provide access to marijuana for eligible patients and their caregivers.

Additionally, RMD management must develop and implement appropriate policies and procedures for suitability checks on all employees, including criminal offender record information (CORI) and other appropriate background checks.  All employees of a RMD are designated as dispensary agents, and as such, each RMD is required to adhere to these strict investigative procedures.  By having these appropriate safeguards in place, RMDs can ensure that there are no internal security issues for the organization.


Federal Legal Issues

In addition to state regulations, RMDs also face compliance issues on the federal level.  Federal law sometimes conflicts with state law, and what is permitted by the state may not be permitted by the federal government.  While the federal law seems to be evolving to become more favorable to the operation of a dispensary, significant concerns still exist.  For example, although many states have either de-criminalized or legalized marijuana, the cultivation, possession and distribution of marijuana for any purpose is still considered a federal crime.[19]  In August of 2013, in light of states passing legislation legalizing marijuana for medical use, the U.S. Department of Justice (DOJ) issued a memorandum to federal prosecutors providing guidance on the enforcement of marijuana laws under the Controlled Substances Act (CSA).  This memorandum states that Congress has determined marijuana is a dangerous drug and that the distribution and sale of marijuana is a serious crime “that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels.”[20]  Consequently, the DOJ remains committed to enforcing the marijuana laws under the CSA.  Furthermore, the memorandum goes on to say that state laws authorizing the production, distribution and possession of marijuana affect the traditional joint federal-state approach to narcotics enforcement.  Therefore, DOJ expects states to have established “strong and effective regulatory and enforcement systems that address the threat those [more lenient] state laws may pose to public safety.”[21]  Additionally, DOJ specifies that “in using their prosecutorial discretion, prosecutors should not consider the size or commercial nature of a marijuana operation alone as a proxy for assessing whether marijuana trafficking implicates the DOJ’s enforcement priorities.”[22]  Rather, marijuana cases should be reviewed on a “case-by-case basis and weigh all available information and evidence, including, but not limited to, whether the operation is demonstrably in compliance with a strong and effective state regulatory system.”[23]  Therefore it appears that the DOJ is seeking to enforce the CSA by ensuring that their enforcement priorities are met by state and local governments.

Similarly, many dispensaries are confronting additional issues posed by the U.S. Drug Enforcement Administration (DEA).  To help ensure clinical compliance and the implementation of rigorous quality control plans, some RMDs employ or contract with a medical director to provide patients with information regarding the medical purpose of various strains of medical marijuana, and to answer questions that patients and consumers may have concerning the medical use of marijuana in general.  However, the DEA has taken a position on clinicians involved with RMDs, specifically, physicians serving as medical directors.  In June of 2013, DEA agents notified a few physicians serving as medical directors at RMDs in Massachusetts that they must either sever their ties with the organizations or relinquish their federal licenses to prescribe certain medications.[24]  In response, U.S. Representative Dana Rohrabacher (R-CA) sponsored a measure approved by the House last month to restrict the DEA from using its funding to impede state medical marijuana laws.[25]  Representative Steve Cohen of Tennessee and Representative Michael Capuano of Massachusetts each supported Rohrabacher’s bill and said that the DEA needed a clear directive concerning the medical use of marijuana.[26]  Additional details about the DEA’s position, as well as other issues related to physicians and the medical use of marijuana, will appear in the next Health Law Reporter as the second part to this series.

A second but equally important challenge for many dispensaries is the inability to open bank accounts to conduct business activities.  In many states, including California, Colorado and Massachusetts, many larger banks have declined to work with dispensaries due to fears that various federal enforcement agencies will impose penalties for violating federal banking law.  In January, U.S. Attorney General Eric Holder announced that his staff would review current banking rules to try to ease the apprehension that many lenders were having about doing business with RMDs.[27]  On February 14, 2014, the Department of the Treasury’s Financial Crimes Enforcement Network issued a guidance to clarify the Department’s “expectations” under the Bank Secrecy Act (BSA) concerning financial institutions seeking to provide services to marijuana-related businesses (Treasury Expectations).[28]  The Treasury Expectations outline the need for increased due diligence by financial institutions when working with marijuana-related entities.  In its Expectations, the Treasury states the following:

In assessing the risk of providing services to a marijuana-related business, a financial institution should conduct customer due diligence that includes: (i) verifying with the appropriate state authorities whether the business is duly licensed and registered; (ii)reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business; (iii) requesting from state licensing and enforcement authorities available information about the business and related parties; (iv) developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers); (v) ongoing monitoring of publicly available sources for adverse information about the business and related parties; (vi) ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance;and (vii) refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.  With respect toinformation regardingstatelicensureobtained in connection with such customerduediligence,a financial institution mayreasonablyrelyon theaccuracyofinformation provided bystatelicensingauthorities, wherestates makesuch information available.[29]

Furthermore, the Treasury Expectations remind lending institutions of their on-going obligation to file suspicious activity reports (SARs) when the institution knows, suspects, or has reason to know that any customer, including a RMD, is engaged in illegal activity.[30]  The Treasury Expectations also outline red flags to distinguish priority SARS in RMDs.  The Department makes it clear that isolated lapses in technical compliance are not enforcement priorities for the agency.  Instead, the Treasury will take enforcement action when it identifies systemic or significant failures to comply with the BSA.

The aforementioned challenges are just a small number of the issues currently facing RMDs as they seek to operationalize all aspects of the dispensaries and open in the coming months. As discussed, the Fall issue of the Health Law Reporter will focus on physician-related issues and the implementation of RMDs.

Andrew S. Levine is a partner at Donoghue, Barrett & Singal, where he directs the firm’s Health Law Regulatory practice.  Andrew counsels a broad range of healthcare providers on a variety of state and federal regulatory matters including Department of Public Health (DPH) licensure and Medicare certification proceedings; Determination of Need approvals for the transfer of ownerships of hospitals and ambulatory surgery centers; Determinations of Need approvals for hospital and nursing home construction projects as well for the acquisition of innovative services and new technology; DPH clinic and nursing home change in ownership proceedings; DPH architectural, plan review and licensure filings; state and federal agency quality of care enforcement actions; Medicaid rate and provider contracting issues; drug diversions; state and federal registration; Medicaid fraud investigations; and Board of Registration actions. He has represented clients in front of such agencies as the Health Policy Commission, the Office of Medicaid, the Department of Mental Health, the Executive Office of Health and Human Services, the Office of the Attorney General, the Executive Office of Elder Affairs and the Centers for Medicare and Medicaid Services. 

Robert K. Blaisdell is a partner in Donoghue Barrett & Singal’s Health Law practice. He works with healthcare clients to provide general business and corporate legal services and guidance on a wide range of issues, such as regulatory and corporate compliance; vendor contracting; HIPAA; medical staff credentialing and peer review; healthcare fraud and abuse, including Anti-Kickback, Stark Physician self-referral and False Claims Act analysis; nursing home and assisted living facility representation (including MassHealth audit appeals, transfers/discharges, and evictions). He has also appeared before various oversight agencies, such as the Massachusetts Commission Against Discrimination, Board of Registration in Nursing and the Board of Registration in Medicine. Bob is experienced in general corporate law, employment law, and litigation.

Kathleen Harrell is a law clerk at Donoghue, Barrett & Singal within the firm’s Health Law practice.  Kathleen has an extensive background in program development, public policy and strategic planning.  She is a J.D. candidate at New England Law Boston (expected, 2015).  In addition to her law and policy background, Kathleen holds a Master of Public Health degree from Boston University with dual concentrations in Health Law and Bioethics. She has written on diverse topics for a wide range of audiences, including action plans, issue briefs, and advocacy publications. 



[1]Mass. Dep’t of Pub. Health, Guidance for Municipalities Regarding the Medical Use of Marijuana (2013).

[2] Currently, twenty-three states and the District of Columbia have approved the medical use of marijuana.

[3] Mass. Dep’t of Pub. Health, Guidance for Municipalities Regarding the Medical Use of Marijuana (2013).

[4] A “debilitating medical condition” is defined as “[c]ancer, glaucoma, positive status for human immunodeficiency virus, acquired immune deficiency syndrome (AIDS), hepatitis C, amyotrophic lateral sclerosis (ALS), Crohn’s disease, Parkinson’s disease, multiple sclerosis and other conditions as determined in writing by a qualifying patient’s physician.

[5] Id.

[6] Id. at 2.

[7] 105 Mass. Code Regs. 725.000 et seq. (2014).

[8] Mass. Dep’t of Pub. Health, From Provisional to Final: A Rigorous Process for Registered Marijuana Dispensaries (2014),

[9] Andy Metzger, Progress On Medical Marijuana Hits Local Hurdles Across Mass., State House News, Sept. 18, 2013, available at

[10] Id.

[11] City of Cambridge, Ordinance 1359 (2013) available at

[12] Mass. Dep’t of Pub. Health, Guidance for Municipalities Regarding the Medical Use of Marijuana (2013).

[13] Mass. Dep’t of Pub. Health, Frequently Asked Questions Regarding the Medical Use of Marijuana (2013).

[14] Id. at 5.

[15] RMDs will not be tax-exempt under federal law, however, and will still be subject to federal taxation.

[16] Mass. Dep’t of Pub. Health, Guidance for Municipalities Regarding the Medical Use of Marijuana (2013).

[17] 105 Mass Code of Regs. 725.100(A)(1) (2014).

[18] Id.

[19] 21 U.S.C. 13 (2014).

[20] Memorandum from the U.S. Dep’t of Justice on Guidance Regarding Marijuana Enforcement (August 29, 2013) (on file with author).

[21] Id. at 2.

[22] Id. at 3.

[23] Id.

[24] Kay Lazar and Shelley Murphy, Lawmakers Slam DEA For Targeting Mass. Doctors, Boston Globe, June 11, 2014,

[25] Id.

[26] Id.

[27] David Ingram, U.S. to Adjust Rules to Let Banks Handle Marijuana Money – Holder, Reuters, Jan. 23, 2014, available at

[28] Dep’t of Treasury. FIN-2014-G001. Bank Security Act Expectations Regarding Marijuana-Related Business (2014).

[29] Id. at 2-3.

[30] Id. at 3.

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