Authored By: Jason P. Tortorici
The U.S. is expected to see over $24 billion in sales of legal marijuana products by the end of 2021 despite being illegal federally but legal in a majority of states.[i] In comparison, in 2020, dietary supplements which are legal and can be bought in any store in any state nationwide, reported sales of $55.7 billion, its highest growth since 1995. [ii] By 2028, the U.S. cannabis market is expected to exceed $70 billion in annual sales. Nonetheless, in May of this year, to the shock and surprise of many around the nation, Alabama entered the legal cannabis market and joined 35 sister states becoming the 36th state to legalize medical marijuana with the passage of Senate Bill 46 known as The Darren Wesley “Ato” Hall Compassion Act.[iii] The aim and stated purpose of this legislation is to create a wholly intrastate apparatus for production and distribution of medical cannabis products to treat and alleviate a short list of specified conditions. [iv] The first substantive line of the act specifically states that, “[i]t is not the intent of this chapter to provide for or enable the recreational use of marijuana in the State of Alabama.” [v] In adopting the Compassion Act, the Legislature sought to create economic opportunities for Alabama farmers and entrepreneurs while also providing individuals in this state who are suffering from certain debilitating conditions with access “cannabis derivatives” that may help them achieve a “better quality of life.” The findings set forth in the Act clearly suggest that the overriding concern of the legislature is the avoidance of outside influence descending upon the state and using the legalization of medical marijuana as a jumping off point to permit recreational use.
What Products Are Permitted
The Act defines “medical cannabis” as a “medical grade product” that contains a “derivative of cannabis for medical use.”[vi] Though not legal federally and subject to FDA oversight and regulation, the reference to “medical grade” products and derivatives suggests that medical marijuana products produced in Alabama must be made in facilities that adhere to and comply with the current Good Manufacturing Practices (cGMP) for drugs and pharmaceuticals set forth under Title 21 of the Code of Federal Regulations, Part 111 et seq. Adopted by the FDA in 2007, cGMP’s are quality standards that ensure products such as drugs and dietary supplements are manufactured, labeled and packaged in a consistent and reproducible manner so as to avoid misleading and/or harming U.S. consumers. The FDA is responsible for inspecting and certifying manufacturing facilities for cGMP compliance. However, without federal oversight, the state of Alabama or the industry itself will be responsible for policing and enforcing such standards.
The Act prohibits the sale of raw cannabis flower and smokable products including oils and waxes that are typically consumed by vaping. [vii] Edibles including, cakes and candies, are also prohibited.[viii] The prohibition of these products cuts off Alabama’s fledging cannabis industry from the producing and selling the products responsible for the bulk of sales in 2020 and 2020. Nonetheless, the Act does permit the following products to be produced and distributed within the state:
- Gels, oils, and creams for topical use
- Transdermal patches
- Liquids or oils for use in an inhaler[ix]
Critics may argue that prohibiting smokable products while allowing cannabis to be distributed as an inhalant in other forms is illogical and unnecessary. However, while the delivery system of both nebulizers and vaporizers is similar, they do two totally different things. Unlike vaporizers which use a heating element to combust the raw material or oil and convert it to an inhalable gas form, nebulizers convert liquid or oils into a mist that is then inhaled and absorbed in the lungs. The Act’s prohibition of vaporizers and smokable products is therefore more of a safeguard aimed at preventing recreational use of marijuana than anything else.
The Act provides that the maximum daily dose of any particular product is 50mg and may be increased to 75mg per day under specified circumstances.[x] Each particular product will have specified upper limit of delta-9-tetrahydrocannabinol (THC), the psychoactive compound found in marijuana.[xi] The potency limits for marijuana products in Alabama have yet to be determined at this time.
Who Will Be Able to Purchase and Use Legal Marijuana Products in Alabama
To purchase, possess and use medical marijuana products in the state of Alabama, an individual must be at least 19 years old, have been issued a medical marijuana card, enrolled in the patient registry, and certified by a licensed and qualified physician under the Act has having one of the following conditions:[xii]
- Cancer-related weight loss or chronic pain
- Depression, epilepsy or condition causing seizures
- HIV/AIDS-related nausea or weight loss
- Panic disorder
- Persistent nausea not related to pregnancy
- Sickle Cell
- Spasticity associated with diseases including ALS, multiple sclerosis, and spinal cord injuries
- Terminal illnesses
- Chronic pain for which conventional therapies and opiates should not be used or are ineffective[xiii]
Qualified caregivers or parental guardians who are at least 21 years of age may purchase and administer medical marijuana products to individuals who are under 19 years of age but have been diagnosed and certified by a registered physician. The Act allows for the number of registered patients and caregivers to be limited but does not specify an upper limit.
Who Will Be Allowed to Produce and Sell Marijuana Products
The Act conveys authority to regulate medical cannabis production from “seed to sale.”[xiv] The state will issue a limited number of licenses to businesses that cultivate, process, test, transport, and dispense medical marijuana products as well as a limited number of licenses to fully integrated facilities. The number of licenses may be increased depending on population growth including the number of registered patients in the state, market demand, unemployment rate, the need for additional business and agricultural opportunities and social equity concerns.[xv] License applications may be submitted beginning September 1, 2022 unless all necessary regulations and requirements are agreed upon and published in advance of this date so that applications can be prepared and submitted sooner. [xvi] In light of the expected processing time for applications and the anticipated number of applications anticipated for the limited number of licenses to be issued, medical cannabis businesses are not expected to be up and running in Alabama before early 2023. The Act initially allows for 12 cultivation licenses to be issued.[xvii] There will be 4 processing licenses[xviii] available, 4 dispensary licenses,[xix] and 5 licenses for fully vertically integrated facilities.[xx]
The Act requires successful license applicants to demonstrate the knowledge, skill, and financial resources necessary to comply with the Act and all license requirements including seed to sale tracking and cross-referencing and updating the patient registry. All applicants, irrespective of license type, must fully disclose all equitable ownership in any business entity that will be involved in its operations, and each individual owner must successfully complete a moral character and fitness background investigation. Felony convictions within the 10-year period preceding the submission of the application, providing false information in support of the application, and denial of prior business license in any field will be grounds for denial of the license, among other criteria. The Act specifically provides that this requirement is to be interpreted and applied as broadly as possible. All applicants must pay a non-refundable $2500 application fee which is intended to offset the costs of the background investigation of the individual owners.[xxi] Each and every individual that has any contact with cannabis plants or products or access to a licensed cannabis facility, including low level employees, will also be subject to criminal and civil background checks.[xxii] Any costs related to the investigation over and above the non-refundable application fee will be charged to and paid by the applicant. Deficiencies in any application may be cured within 60 days of written notice of the same. Assuming the applicant successfully satisfies all moral character and fitness requirements and financial requirements of the Act and possesses the requisite experience and skill to be awarded a license, there is a final 30-day public comment period that must be cleared before the license is actually issued. Once the license is issued, the new licensee must pay an annual fee ranging between $10,000 and $50,000. The license may be renewed beginning 60 days prior to the expiration date, and renewal requires payment of the annual license fee.
The cultivation license will allow the licensee to grow marijuana and sell to a processor or sell processed medical cannabis products to a distributor.[xxiii] To be eligible for a cultivation license, the applicant must “demonstrate” an ability to begin growing within 60 days of the license being awarded as well as the ability to destroy or properly discard unused or non-compliant plant material and the financial ability to properly test harvested crops according to “lots and batches.” [xxiv] Cultivation facilities will also be required to have video surveillance, keypad entry and related security measures in place and a third party seed to sale inventory tracking system in place capable of interfacing with the state seed to sale tracking system.
Licensed processors will also be required to demonstrate compliance with facility security and inventory tracking regulations similar to those applicable to dispensaries and cultivation facilities. Processors are also responsible for proper labeling of the medical cannabis products including the lot number, batch number, licensee number, QR code, cannabinoid content and potency, and various warnings required by the Act and any related rules or regulations.[xxv] Licensed processing facilities must be cGMP compliant and able to produce medical grade medical marijuana products which confirm with yet to be determined levels of purity and reliably free of contaminants, toxins and anything other than medical grade additives. To meet these standards licensees face design and set up costs of approximately $20,000 to $25,000 and annual maintenance costs between $50,000 and $200,000 in addition to the acquisition and installation of processing equipment needed for the extraction process which range between $1.5 million and $2 million.
Licensed dispensaries are prohibited from being located within 1,000 feet of a school, day care or childcare facility and must be equipped with video surveillance maintained for 60 days prior. [xxvi] The dispensary must have access to not only the seed to sale inventory tracking system and must be able to input sales information to the system but also be able to cross reference the patient registry to confirm that products are sold and dispensed only to registered patients or care givers. Each dispensary employee will also be required to complete a state administered and certified training program and continuing education on a regular basis.[xxvii] Licensed dispensaries may only be located in counties and municipalities that have adopted ordinances permitting the operation of a medical cannabis dispensary and may operate up to 3 separate locations in different counties depending on the population of registered patients in each such location.[xxviii]
Vertically Integrated Facilities
Licensed vertically integrated facilities will be permitted to cultivate, process, transport and dispense but not test medical cannabis products. Fully integrated licensees must present a letter of commitment from a surety insurance company for performance bond of $2,000,000 and must obtain the bond at the time the license is issued.[xxix] The licensee must also provide proof of $250,000 of liquid assets and proof of the licensee’s ability to cover operating expenses for at least 2 years in addition to meeting the other requirements for licensure. [xxx]
Licensed testing laboratories must be independently accredited and compliant with international standard ISO/IEC 17025 and demonstrate the ability to test for cannabinoids, pesticides, toxins, metals, and microbiological bacteria.[xxxi] License applicants are also prohibited from holding any other medical marijuana license or owning an investment in a licensee.[xxxii] Licensed labs will have to develop protocols that demonstrate consistency between batches of medical cannabis products within less than .5% variability.[xxxiii] Those protocols will also demonstrate cannabinoid content and potency for the following:
- Total THC
- Total CBD
- CBD:THC ratio
- Percentage of THC to original plant material
- Terpene profile
- Heavy metals
- Chemical contamination
- Residual solvents
- Insecticides, pesticides, herbicides and fungicides[xxxiv]
Transportation licensees will have access to the seed to sale tracking system and will be required to log their route and manifest as well as transport all product in sealed containers.[xxxv] Transportation licensees will also be denied licensure if they have any felony conviction or misdemeanor controlled substance conviction within 5 years of application for a license.[xxxvi]
Who Will Oversee Enforcement and Licensing
To achieve its stated intent and implement the medical marijuana program created by the Legislature, the Article 2 of the Act creates the Alabama Medical Cannabis Commission.[xxxvii] The Commission is comprised of 14 members – 3 appointed by the Governor, 3 appointed by the Lt. Governor, 2 appointed by the President Pro Tem of the Senate, 2 appointed by the Speaker of the House, and 1 each appointed by the Commissioner of Agriculture & Industries (ADAI), the State Health Officer, the Attorney General, and the Secretary of the Alabama Law Enforcement Agency (ALEA).[xxxviii] The appointees must each be over the age of 30, have no economic interest in a marijuana business or hold another political office and must possess specified background qualifications so as to provide a diverse commission representative of the race, gender, and ethnicity of the State of Alabama. [xxxix] The initial members must be approved by the Senate and will serve specified staggered terms until a successor is appointed. As of July 1 of this year, the following individuals were appointed and approved by the Senate to serve on the Commission.
Appointed by Gov. Ivey-
- William Saliski Jr., a pulmonologist from Montgomery, for an initial term of 4 years;
- Sam Blakemore, a pharmacist at Children’s of Alabama hospital in Birmingham, for an initial term of 3 years; and
- Dwight Gamble, a bank executive from Headland, for an initial term of 2 years.[xl]
Appointed by Lt. Gov. Ainsworth-
- Angela Martin, a pediatrician from Anniston, for a term of 1 year;
- Loree Skelton, a healthcare lawyer from Birmingham, for a term of 4 years; and
- Eric Jensen, a biochemist from Brownsboro, for a term of 3 years.[xli]
Appointed by Senate President Pro Tempore Greg Reed-
- Steven Stokes, a radiation oncologist from Dothan, for a term of 2 years; and
- Taylor Hatchett of Boozer Farms in Chilton County, based on his agricultural and crop development experience, in compliance with the Act, for a term of 1 year.[xlii]
Appointed by House Speaker Mac McCutcheon-
- Charles Price, a retired circuit judge from Montgomery, who satisfies the requirement of having a background and experience with mental health or substance abuse counselling and treatment, for a term of 4 years; and
- Rex Vaughn, a Madison County farmer and north region vice president for the Alabama Farmers Federation based on his professional experience in agricultural systems management. Mr. Vaughn was elected as vice chair of the Commission and will serve a 3 year term.[xliii]
Appointed by Agriculture Commissioner Rick Pate-
- James Harwell, former executive director of the Alabama Nursery and Landscape Association and president of Green Thumb Nursery in Montgomery, for a term of 2 years;[xliv]
Appointed by State Health Officer Dr. Scott Harris
- Jerzy Szaflarski, a Neurologist at UAB, for a term of 4 years;[xlv]
Appointed by Attorney General Steve Marshall-
- Katherine Robertson, chief counsel for the AG’s office, one of two non-voting members, for a 3 year term; [xlvi]
Appointed by Alabama Law Enforcement Agency Secretary Hal Taylor
- Dion Robinson, special agent with the Alabama Law Enforcement Agency, the other non-voting member, for a 1 year term.[xlvii]
The Commission is required to meet at least six times annually.[xlviii] The Commission and ADAI are also charged with hiring staff, including a Director to chair and oversee the work of the Commission and an Assistant Director. [xlix] The Commission is also responsible for promulgating regulations and rules to implement the Act including establishing criteria for certifying doctors, registering patients and licensing and operating cultivation and processing operations as well as dispensaries.[l] The Commission has met three times – first to hire staff and then to focus on finding work arounds for any conflicts between the provisions of the Act and other laws and regulations.
The Commission hired Alabama State Treasurer John McMillian appointed as executive director and chairman. McMillan resigned effective September 30, 2021. Deputy Treasurer Daniel Autrey was also hired as the Assistant Director. Autrey will also serve as an administrative hearing officer for the Commission with respect to any dispute that fall within the Commission’s jurisdiction.[li]
At its last meeting of the year on October 14, 2021, The Commission published proposed rules for licensing and approval of physicians to diagnose and certify patients with one of the select qualifying conditions, issue medial marijuana cards, and prescribe. Those rules are open for comment through January 4, 2022.
The Commission was supposed to meet again on December 9, 2021, but this meeting has been cancelled. The next scheduled meeting is to take place January 13, 2022. The Commission has a great deal of work to complete by the September 1, 2022 deadline for issuing licenses. The bulk of this work will likely focus on establishing quality control standards for cultivation, processing, inspection, testing, packaging, marketing, distribution, confiscation and destruction of non-compliant products and materials. The Commission must also establish a process for review and investigation of applications and completing the background investigations of owners and employees. The Commission must also identify, acquire, integrate and implement a statewide seed to sale tracking system that can be accessed and interfaced with internal third-party inventory systems utilized by each licensee.
The Commission will look to other states including Minnesota and Ohio notably, according to the last meeting minutes. California is in the process of developing standards and protocols for testing, and Colorado has developed the gold standard for quality control and Good Manufacturing Practice for the legal cannabis industry. In light of the condensed timeline within which the Commission must establish and adopt these comprehensive regulations, it may be necessary to duplicate what these states have done.
What Does the Future Hold
The Alabama Legislature may still be called upon to enact further legislation. House Speaker McCutcheon was quoted December 14, 2021 on local news in Madison County stating that the legislature would be open to considering and passing additional bills needed to implement the Compassion Act. The U.S. House of Representatives and the Senate are also considering multiple bipartisan bills, including one recently presented by South Carolina Republican Representative Nancy Mace. These bills would each remove marijuana from Schedule 1 of the Controlled Substances Act and regulate in a manner consistent with the regulation of alcoholic beverages. The passage of any one of these measures is also expected to open up the banking system and traditional financial institutions to the cannabis industry which is viewed as vital to the survival of many if not all small-scale cannabis businesses. Absent the availability of access to traditional banking, lending and insurance, the legal cannabis industry may see a continued wave of mergers and acquisitions and the entry of Big Pharma and Big Tobacco into the legal cannabis space. Canadian cannabis companies have been active in mergers and acquisitions of U.S. companies in 2020 and 2021 and that trend is expected to continue.
Should any of the foregoing come to fruition, those developments could change the landscape for medical marijuana and possibly recreational use in Alabama. There is still a widely held belief by some in Alabama that recreational marijuana poses a public danger despite the revenues and economic prosperity experienced in the 22 states where recreational use of marijuana is legal. Despite these concerns, however, the legislative findings of the Compassion Act do not close the door to recreational use. The Commission is required to publish an annual progress report beginning January 1, 2022. The Commission’s annual report that addresses among other things the current status of scientific research regarding the safety and efficacy of use of marijuana for recreational and medical purposes and any changes in federal law which impact or necessitate changes in state law. These provisions leave the door open for Commission to recommend additional legislation to permit smokable and recreational use of cannabis and to regulate it like alcohol. There are considerably high start up costs and annualized costs and risks for marijuana businesses. Patients will likely bear cost of compliance with state law and the inability of medical cannabis licensees to write off ordinary business expenses in the form of higher prices leaving many without access to the medicine that Alabama law makers hope to make available.
About the Author:
Jason P. Tortorici is the co-founder of Schilleci & Tortorici, P.C., a boutique law firm with offices in Alabama and California. The firm has combined experience of over 40 years representing numerous dietary supplement, food/beverage, Cannabis, and CBD/Hemp, manufacturers, producers, and distributors, and other clients in a broad-range of industries related to health and fitness, across the United States, as well as internationally. Jason’s practice includes development of regulatory compliance strategies and review of product labeling, advertising, GMPs, and formulation, claims review and substantiation, product recalls and other federal and state enforcement actions, among other things, and providing substantive legal opinions and analysis related to the same. Jason also handles the defense and trial of civil products liability litigation as well as enforcement actions involving the FDA and the FTC in relation to the representation of members of the dietary supplement, cannabis and CBD industries. The firm was recently named Nutrition Product Regulatory Compliance Specialists of the Year for 2021, as well as having been named 2020 and 2021 Legal Awards winner for Best Food & Nutrition Product Regulatory Compliance Specialists – USA. Jason currently serves as General Counsel for the Alabama Cannabis Industry Association and the Alabama Hemp Industry Trade Association.
For additional information visit www.TheMillennialLawyer.com,
 The substance and results of the investigation of any license applicant is confidential and not subject to discovery in any subsequent civil, criminal or administrative proceeding.
[i] CNBC, “Cannabis is projected to be a $70 Billion market by 2028,” July 1, 2021.
[ii] Nutrition Business Journal,” Supplements Time to Shine,” April 2021
[iv] § 20-2A-2, Ala. Code 1975
[v] Id. at § 20-2A-2(1).
[vi] Id. at § 20-2A-3(14)
[vii] Id. at § 20-2A-3(14)(b)
[ix] Id. at § 20-2A-3(14)(a)
[x] Id. at § 20-2A-33(f)(2)
[xi] Id. at § 20-2A-33(f)(1)
[xii] Id. at § 20-2A-30
[xiii] Id. at § 20-2A-3(21)
[xiv] Id. at § 20-2A-50(a)
[xv] Id. at § 20-2A-51(a)
[xvi] Id. at § 20-2A-55
[xvii] Id. at § 20-2A-62(b)
[xviii] Id. at § 20-2A-63(b)
[xix] Id. at § 20-2A-64(b)
[xx] Id. at § 20-2A-67(b)
[xxi] Id. at § 20-2A-55(f)
[xxii] Id. at § 20-2A-59
[xxiii] Id. at § 20-2A-62(a)
[xxiv] Id. at § 20-2A-62(c)
[xxv] Id. at § 20-2A-63(e)-(i)
[xxvi] Id. at § 20-2A-64(d)
[xxvii] Id. at § 20-2A-64(e)(2)
[xxviii] Id. at § 20-2A-64(f)
[xxix] Id. at § 20-2A-67(d)(1) and (e)
[xxx] Id. at § 20-2A-67(d)(2)-(3)
[xxxi] Id. at § 20-2A-66(d)
[xxxii] Id. at § 20-2A-66(e)
[xxxiii] Id. at § 20-2A-66(b)
[xxxiv] Id. at § 20-2A-66(b)(1)-(8)
[xxxv] Id. at § 20-2A-65(b)(2)-(3)
[xxxvi] Id. at § 20-2A-65(b)(1)
[xxxvii] Id. at § 20-2A-20 et seq.
[xxxviii] Id. at § 20-2A-20(a)(1)-(8).
[xxxix] Id. at § 20-2A-20(c)-(d)
[xl] Id. at § 20-2A-20(a)(1)
[xli] Id. at § 20-2A-20(a)(2)
[xlii] Id. at § 20-2A-20(a)(3)
[xliii] Id. at § 20-2A-20(a)(4)
[xliv] Id. at § 20-2A-20(a)(5)
[xlv] Id. at § 20-2A-20(a)(6)
[xlvi] Id. at § 20-2A-20(a)(7)
[xlvii] Id. at § 20-2A-20(a)(8)
[xlviii] Id. at § 20-2A-20(h)
[xlix] Id. at § 20-2A-20(i)
[l] Id. at § 20-2A-22
[li] Id. at § 20-2A-20(j)