BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  July 7, 2015


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                Susan Bonilla, Chair


                      SB 643(McGuire) - As Amended June 3, 2015


          SENATE VOTE:  26-13


          SUBJECT:  Medical marijuana


          SUMMARY:  Establishes a comprehensive licensing and regulatory  
          framework for the cultivation, manufacture, transportation,  
          storage, distribution, and sale of medical marijuana to be  
          administered by the Office of Medical Marijuana Regulation  
          within the Business, Consumer Services, and Housing Agency.   


          EXISTING LAW:   


          1)Recognizes the authority of cities and counties to make and  
            enforce, within their borders, all local, police, sanitary,  
            and other ordinances and regulations not in conflict with  
            general interest laws.  (Cal. Const. Article XI sec. 7)


          2)Prohibits the possession, possession with intent to sell,  
            cultivation, sale, transportation, importation, or furnishing  
            of marijuana, except as otherwise provided by law.  (Health  
            and Safety Code (HSC) Sections 11357, 11358, 11359, and 11360)
          3)Prohibits prosecution of a patient or a patient's primary  








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            caregiver, under the Compassionate Use Act of 1996 (CUA), an  
            initiative measure, for possessing or cultivating marijuana  
            for personal medical purposes of the patient upon the written  
            or oral recommendation or approval of a physician.  (HSC  
            Section 11362.5)


          4)Licenses and regulates physicians and surgeons, including  
            osteopathic physicians, under the Medical Practice Act (Act)  
            by the Medical Board of California (MBC) within the DCA.   
            (Business and Professions Code (BPC) Section 2000 et seq.)


          5)Defines "attending physician" as an individual who possesses a  
            license in good standing to practice medicine or osteopathy  
            issued by the Medical Board of California (MBC) or the  
            Osteopathic Medical Board of California (OMB) and who has  
            taken responsibility for an aspect of the medical care,  
            treatment, diagnosis, counseling, or referral of a patient and  
            who has conducted a medical examination of that patient before  
            recording in the patient's medical record the physician's  
            assessment of whether the patient has a serious medical  
            condition and whether the medical use of marijuana is  
            appropriate.  (HSC Section 11362.7(a))


          6)Defines "primary caregiver," for purposes of the CUA, as the  
            individual designated by a patient who has consistently  
            assumed responsibility for the housing, health, or safety of  
            that person.  (HSC Section 11362.7(d))


          7)Requires the California Department of Public Health to  
            establish and maintain a voluntary Medical Marijuana Program  
            for qualified patients to apply for identification cards, and  
            county health departments to issue identification cards to  
            qualified patients and their caregivers.  (HSC Section 11362.7  
            et seq.)









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          8)Provides that qualified patients, persons with valid  
            identification cards, and their designated primary caregivers  
            who associate in order to collectively or cooperatively to  
            cultivate marijuana, are not subject to criminal liability  
            solely on that basis.  (HSC Section 11362.775)


          THIS BILL: 


          Administrative Provisions 


          1)Defines the following terms:


             a)   "Licensed cultivation site" as a facility that plants,  
               grows, cultivates, harvests, dries, or processes medical  
               marijuana and that is issued a conditional license.
             b)   "Licensed dispensing facility" as a dispensary or other  
               facility that provides MM, MM products, or devices for the  
               use of medical marijuana or medical marijuana products that  
               is issued a conditional license.


             c)   "Licensed manufacturer" as a person who extracts,  
               prepares, derives, products, compounds, or repackages  
               medical marijuana or medical marijuana products into  
               consumable and nonconsumable forms and that is issued a  
               conditional license.


             d)   "Licensed transporter" as an individual or entity issued  
               a conditional license to transport medical marijuana to and  
               from facilities that have been issued conditional licenses  
               or medical marijuana products above a quantity limit, as  
               specified.  









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          2)Establishes the Office of Medical Marijuana Regulation  
            (Office) in the Business, Consumer Affairs, and Housing  
            Agency, under the supervision and control of the Chief of the  
            Office. 
             a)   Provides the Office with the authority to issue,  
               suspend, or revoke conditional licenses for the  
               cultivation, manufacture, transportation, storage,  
               distribution, and sale of medical marijuana in the state  
               and to collect fees in connection with these actions, and  
               to create, issue, suspend, or revoke other licenses in  
               order to protect patient health and the public and to  
               facilitate the regulation of medical marijuana.
             b)   Requires the Chief to be appointed by the Governor,  
               subject to Senate confirmation.


             c)   Requires funds for the establishment and support of the  
               Office to be advanced as a loan from the General Fund, to  
               be repaid by the initial proceeds from fees collected  
               pursuant to this bill or any regulations adopted by this  
               bill. 


          3)Provides the Office with the authority to implement this bill,  
            including the authority to:
             a)   Establish necessary rules and regulations, in accordance  
               with the Administrative Procedure Act, and subject to local  
               control, as specified.
             b)   Set application, licensing, and renewal fees for  
               conditional license.


             c)   Establish standards for the cultivation, manufacturing,  
               transportation, storage, distribution, provision, donation,  
               and sale of medical marijuana and medical marijuana  
               products.










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             d)   Establish procedures for the issuance, renewal,  
               suspension, denial, and revocation of conditional licenses.  



             e)   Enforcing the licensing and regulatory requirements of  
               this bill, subject to provisions of the bill specifying  
               enforcement. 


             f)   Imposing a penalty authorized by these provisions or any  
               regulations adopted pursuant to these provisions. 


             g)   Taking action with respect to an application for a  
               commercial license, as specified.


             h)   Overseeing the operation of the Medical Marijuana  
               Regulation Fund and the Special Account for Environmental  
               Enforcement, as specified. 


             i)   Consulting with other state or local agencies,  
               departments, representatives of the medical marijuana  
               community, or public or private entities for the purposes  
               of establishing statewide standards and regulations. 


          4)Requires the Office, on or before January 1, 2018, to  
            promulgate regulations for implementation and enforcement,  
            including: 
             a)   Procedures for the issuance, renewal, suspension,  
               denial, and revocation of conditional licenses.
             b)   Procedures for the appeal of fines and the appeal of  
               denial, suspension, or revocation of conditional licenses.


             c)   Application, licensing, and renewal forms and fees.








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             d)   A time period in which the Office shall approve or deny  
               an application for a conditional license.


             e)   Qualifications for licensees.  


          5)Requires the Office, in consultation with the Division of  
            Labor Standards Enforcement, to adopt regulations establishing  
            worker safety standards for licensed entities.
          6)Prohibits the Office from issuing a conditional license unless  
            the applicant meets all application requirements, as  
            specified, and has demonstrated compliance with all applicable  
            agricultural, consumer protection, food and product safety,  
            and environmental requirements, including applicable water  
            quality standards. 


          7)Requires the Chief to keep a complete record of all facilities  
            issued a conditional license, which shall be made available on  
            the Office's website. 


             a)   Prohibits the Office from disclosing sensitive  
               information, including the address or location of  
               cultivation sites. 
             b)   Requires the Office to provide summary information on  
               all licensees including the name, the date the license was  
               issued, the status of the license, and the licensee's  
               mailing address.


             c)   Requires the Office to establish procedures to provide  
               state and local law enforcement, upon their request, with  
               24-hour access to information to verify a conditional  
               license, track transportation manifests, and track the  
               inventories of facilities issued a conditional license. 








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          Immunity and Exemptions 


          8)Provides that these provisions do not supersede the provisions  
            of Measure D, approved by the voters of the City of Los  
            Angeles on the May, 21, 2013, ballot for the city, or any  
            similar measure in other jurisdictions, which grants medical  
            marijuana businesses and dispensaries qualified immunity  
            consistent with the terms of the measure and local ordinances,  
            as specified. 


          9)Exempts from these provisions: 


             a)   Patients who cultivate, possess, store, manufacture, or  
               transport marijuana exclusively for his or her personal  
               medical use and who do not sell, distribute, donate, or  
               provide marijuana to another person or entity. 
             b)   Primary caregivers who cultivate, possess, store,  
               manufacture, or transport marijuana exclusively for the  
               personal medical use of no more than five qualified  
               patients and who do not receive renumeration for these  
               activities, except as specified.


          10)After July 1, 2017, no longer exempts patients and primary  
            caregivers who engage in medical marijuana activities  
            collectively or cooperatively from criminal prosecution, and  
            instead extends that criminal immunity to an individual  
            employee, officer, or board member of a facility issued a  
            conditional license, as specified. 
          Conditional Licensing Provisions


          11)Prohibits the sale or provision of medical marijuana to a  
            patient or caregiver other than through a licensed dispensing  








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            facility or delivery from a licensed dispensing facility; the  
            growth of medical marijuana other than at a licensed  
            cultivation site; the manufacturing of medical marijuana or  
            medical marijuana products other than by a licensed  
            manufacturer; and the transportation of medical marijuana  
            other than from one licensed facility to another.  Authorizes  
            a licensed manufacturer to obtain medical marijuana from a  
            licensed cultivator, and to furnish medical marijuana to a  
            licensed dispensary. 


          12)Requires the Office, no later than July 1, 2018, to provide  
            for and issue conditional licenses, which are required for all  
            activities, including cultivation, processing, storage,  
            transport, and dispensing of medical marijuana.


          13)Provides that the issuance of a conditional license does not  
            authorize a recipient to begin business operations, and  
            instead only certifies that the applicant has paid the state  
            license fee, successfully passed a criminal background check,  
            and met the state residency requirements.


          14)Prohibits a conditionally licensed facility from commencing  
            activities until the applicant also obtained a license or  
            permit from a local jurisdiction in which he or she proposed  
            to operate, following the requirements of local ordinances. 


          15)Requires an applicant to do the following: 


             a)   Pay the fee and register on forms prescribed by the  
               Chief, and provide the following information: 
               i)     Name of all persons or entities having an ownership  
                 interest, as specified, and the name, address, and date  
                 of birth of each principal officer and board member. 
               ii)Address and telephone number of the facility, and for  








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                 cultivation sites, the GPS coordinates.


             b)   Describe the scope of business.
             c)   Provide evidence that the applicant and the owner have  
               been legal full-time residents of the state for not less  
               than 12 months. 


             d)   Provide detailed operating procedures, including  
               procedures for facility and operational security;  
               prevention of diversion; employee screening; storage of MM;  
               personnel policies; and recordkeeping procedures. 


             e)   Provide evidence that the applicant has received all  
               required environmental permits, including compliance with  
               the California Environmental Quality Act and wastewater  
               discharge permits. 


             f)   Provide the applicant's fingerprint images, as  
               specified. 


             g)   Provide a statement signed under penalty of perjury that  
               the information provided is true. 


          16)Requires each location and discrete use of a single location  
            to obtain a conditional license, and provides that each  
            application for a conditional license is separate and  
            distinct. 
          17)Provides that a conditional license is valid for 12 months,  
            and after the initial 12-month period, may be renewed for a  
            period of 36 months. 


          18)Prohibits the Office from issuing a conditional license to a  








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            person or entity against whom there is a pending enforcement  
            case under a local ordinance, or who has been determined to  
            have violated an applicable local ordinance, as specified. 


          19)Authorizes a facility or entity that is operating in  
            conformance with local zoning ordinances and other  
            requirements on the effective date of this bill to continue  
            its operations until its application for conditional licensure  
            is approved or denied. 


          20)Authorizes the Office to issue a conditional license and send  
            proof of issuance to an applicant, provided the applicant has  
            not committed an act or crime constituting grounds for the  
            denial of licensure.  Requires the Chief, by regulation, to  
            prescribe conditions upon which a person, whose conditional  
            license has previously been denied, suspended, or revoked, may  
            be issued a conditional license.


          21)Requires an application for a conditional license to be  
            denied, and a conditional license suspended or revoked, for a  
            past felony conviction for the possession for sale, sale,  
            manufacture, transportation, or cultivation of a controlled  
            substance, a felony criminal conviction for drug trafficking,  
            a felony conviction for embezzlement, a felony conviction  
            involving fraud or deceit, or any violent or serious felony  
            conviction, as specified. 


          22)Provides that a conditional license shall not be denied  
            solely on the basis of a prior conviction for a felony that  
            was committed after the CUA, but which would not be a felony  
            after the enactment of this bill. 


          23)Authorizes the Chief to deny, suspend, or revoke a  
            conditional license when a conditional licensee, applicant, or  








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            employee, partner, officer, or member of an entity  
            conditionally licensed for specified reasons such as: making  
            untrue or misleading statements; engaging in conduct that  
            constitutes fraud or gross negligence; failing to comply with  
            these provisions or any rule or regulations adopted pursuant  
            to these provisions; or conduct that constitutes grounds for  
            denial of a license pursuant to the Business and Professions  
            Code, as specified. 


          24)Sets the following as reasons a conditional license shall not  
            be approved:


             a)   The applicant fails to meet requirements of this bill or  
               has had an applicable permit or license revoked or denied  
               by an applicable city, county, or city and county agency.   
               States that if a local government adopts an ordinance or  
               resolution authorizing MM to be cultivated, manufactured,  
               stored, distributed, or sold within its jurisdiction, it  
               shall submit to the Office documentation detailing their  
               renewal requirements.
             b)   The applicant, or any of its officers, directors,  
               owners, members, or shareholders, is a minor.


             c)   The applicant has knowingly answered a question or  
               request for information falsely on the application form or  
               failed to provide information requested.


             d)   The applicant, or any of its officers, directors,  
               owners, members, or shareholders has been sanctioned by the  
               Office, a city, county, or city and county, for MM  
               activities conducted in violation of this part or any  
               applicable local ordinance or has had a license revoked in  
               the previous five years.










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             e)   The proposed cultivation, processing, possession,  
               storage, manufacturing, testing, transporting,  
               distribution, provision, or sale of medical marijuana will  
               violate any applicable local law or ordinance.


             f)   The applicant or the owner is unable to establish that  
               he or she has been a resident of the state for at least 12  
               months.


          25)Specifies that a conditional license is subject to the  
            restrictions of the local jurisdiction in which the facility  
            operates or proposes to operate.  Clarifies that even if a  
            conditional license has been granted pursuant to this part, a  
            facility shall not operate in a local jurisdiction that  
            prohibits the establishment of that type of business.   
            Specifies that local jurisdictions retain the power to assess  
            fees and taxes, as applicable, on facilities that are  
            conditionally licensed and the business activities of those  
            licensees.
          26)Authorizes the Office to adopt regulations to limit the  
            number of conditional licenses issued upon a finding that the  
            otherwise unrestricted issuance of conditional licenses is  
            dangerous to the public health and safety.


          Fee Provisions 


          27)Sets the conditional licensing fee at a level sufficient to  
            fund the Office's administrative costs (in overseeing the  
            licensing program, in establishing health and safety standards  
            and in certifying testing laboratories), costs incurred by the  
            Office, the Department of Justice, law enforcement, and other  
            public safety entities for enforcing these provisions.  


          28)Requires a cultivation facility fee to be assessed, in  








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            addition to a conditional licensing fee, set at an amount  
            sufficient to cover the reasonable regulatory costs of  
            enforcing environmental impact provisions of cultivation  
            facilities.  Requires this fee to be distributed between the  
            State Water Resources Control Board, Department of Fish and  
            Wildlife, Department of Forestry and Fire Protection,  
            Department of Pesticide Regulation, Department of Food and  
            Agriculture, and local law enforcement, as specified.


          29)Establishes the Medical Marijuana Regulation Fund (Fund) in  
            the State Treasury and states that all fees collected pursuant  
            to the Act shall be deposited into the Fund.  Provides that  
            all moneys in the fund are available, upon appropriation, to  
            the Office solely for the purposes of fully funding and  
            administering the Act.


          30)Creates the Special Account for Environmental Enforcement as  
            an account within the Fund and provides that the moneys in the  
            account are available, upon appropriation, to the Office to  
            distribute monies to the entities listed above to be used to  
            enforce the environmental regulation of licensed cultivation  
            sites.


          31)Requires all penalties collected to be deposited directly  
            into the General Fund, to be available upon appropriation.


          32)Authorizes the Office to establish and administer a grant  
            program to allocate monies from the Fund to state and local  
            entities for the purpose of assisting with medical marijuana  
            regulation and enforcement of this part.


          Transportation Provisions 










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          33)Specifies requirements for a licensed transporter to include  
            requirements that it: ship only to facilities issued a  
            conditional license and only in response to a request for a  
            specific quantity and variety; complete a shipping manifest  
            form prescribed by the Office prior to transporting medical  
            marijuana products; securely transmit a copy of the manifest  
            to the licensee that will receive the medical marijuana  
            product as well as to the Office prior to transport; and that  
            both transporters and licensed facilities maintain each  
            shipping manifest and make it available to local code  
            enforcement officers, any other locally designated enforcement  
            entity as well as the Office upon request.


          34)Specifies transported medical marijuana products be  
            transported only in a locked, safe and secure storage  
            compartment that is securely affixed to the interior of the  
            transporting vehicle and not visible from outside the vehicle.  
             Prohibits the vehicle from having external markings that it  
            is transporting medical marijuana.  Requires the vehicle  
            travel directly from one licensed facility to another licensed  
            facility authorized to receive the shipment.  


          35)Requires transport vehicles carrying more than $10,000 retail  
            value of medical marijuana to be staffed with a minimum of two  
            employees, one of whom must remain with the vehicle at all  
            times when the vehicle contains medical marijuana.  Requires  
            each transport team member to have access to a secure form of  
            communication by which to communicate with personnel at the  
            licensed facility at all times when the vehicle contains  
            medical marijuana.  Requires each transport team member to  
            possess documentation of licensing and a government-issued  
            identification card at all times when transporting or  
            delivering medical marijuana, and to produce it to the Office  
            or law enforcement upon request.  Clarifies that these  
            provisions do not authorize or permit a licensee to transport  
            medical marijuana or medical marijuana products outside the  
            state.








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          36)Provides that these transportation provisions only apply to  
            licensed transporters. 


          37)Prohibits a local jurisdiction from preventing transportation  
            through or to a facility issued a conditional license by a  
            conditionally licensed transporter acting in compliance with  
            the Act.


          Enforcement Provisions 


          38)Clarifies that a state agency is not required to enforce  
            local laws regarding the site or operation of a facility  
            issued a conditional license.


          39)Authorizes the Office to assist state taxation authorities in  
            the development of uniform policies for the state taxation of  
            licensees.


          40)Authorizes the Office to enforce all of the requirements of  
            this part, including any regulations adopted pursuant to this  
            part. 


          41)Requires the Office to delegate the authority to enforce the  
            requirements of this part, including any regulations, to a  
            local government upon request of that entity. 


          42)Provides that nothing in this part shall be interpreted to  
            supersede or limit local authority, or interpreted to require  
            the Office to undertake local enforcement.  









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          43)Establishes a fine of up to $35,000 for each willful  
            violation of conditional license application provisions of the  
            Act, and a fine of up to $10,000 for each technical violation,  
            as specified.


          44)Authorizes a District Attorney, County Counsel, City Attorney  
            or City Prosecutor to bring an action to enjoin a violation or  
            the threatened violation of the Act.  Provides that the action  
            be brought in the county in which the violation occurred or is  
            threatened to occur and that a local government's authority to  
            take requisite enforcement actions pertaining to its own  
            ordinances or regulations is not diminished.  Clarifies that  
            an action under the MMPA may still be taken.  Clarifies that  
            the Act shall not be construed to limit a law enforcement  
            agency's ability to investigate unlawful activity in relation  
            to a facility issued a conditional license.


          Cultivation Provisions 


          45)Requires the Office to notify local law enforcement of all  
            conditional licenses issued for cultivation sites in that  
            jurisdiction.


          46)Requires a licensed cultivation site to display the state  
            license in an available and easy to read manner at the  
            location.


          47)Requires that no later than January 1, 2022, all medical  
            marijuana grown, produced, distributed and sold in the state  
            meet the certified organic standards.  Requires the Office to  
            establish appellations of origin for marijuana grown in  
            California and work with county agricultural commissioners to  
            provide all the information and forms required for conditional  








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            licensure as a cultivation site in a single location,  
            including state licensure, local requirements in that  
            jurisdiction, and environmental requirements.


          Security, Recordkeeping, and Other Regulatory Provisions 


          48)Requires conditionally licensed facilities to implement  
            safety security measures to both deter and prevent  
            unauthorized entrance into areas containing marijuana and  
            theft of marijuana at those facilities to be implemented by a  
            facility issued a conditional license.  Requires security  
            measures to include: preventing individuals from remaining on  
            the premises of the facility if they are not engaging in  
            activity expressly related to the operations of the facility;  
            establishing limited access areas accessible only to  
            authorized facility personnel: and storing all finished  
            marijuana in a secured and locked room, safe, or vault, and in  
            a manner as to prevent diversion, theft, and loss, except  
            small amounts used for display, samples, or immediate sale. 


          49)Requires a facility issued a conditional license to notify  
            appropriate law enforcement authorities within 24 hours after  
            discovering significant discrepancies identified during  
            inventory, as determined by the Office; diversion, theft,  
            loss, or any criminal activity involving the facility or a  
            facility agent; the loss or unauthorized alteration of records  
            related to marijuana, registered qualifying patients, personal  
            caregivers, or facility agents; and any other breach of  
            security.


          50)Requires a licensed cultivation site to weigh, inventory, and  
            account for on video, all medical marijuana to be transported  
            prior to its leaving its origination location.  Requires that,  
            within eight hours after arrival at the destination, the  
            licensed dispensing facility shall reweigh, reinventory, and  








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            account for on video, all transported marijuana.


          51)Requires the Office to maintain confidentiality for  
            information identifying the names of patients, their medical  
            conditions, or the names of their primary caregivers received  
            and contained in records kept by the Office for the purposes  
            of administering the Act and exempts this information from the  
            California Public Records Act.  States that this information  
            is not subject to disclosure to an individual or private  
            entity, except as necessary for authorized employees of the  
            state to perform official duties pursuant to the Act.  


          52)Specifies that these provisions do not preclude the Office  
            from notifying state or local agencies about information  
            submitted to the Office that the employee suspects is  
            falsified or fraudulent; notifications from the Office to  
            state or local agencies of apparent violations of this Act or  
            an applicable local ordinance; verification of requests by  
            state or local agencies to confirm licenses and certificates  
            issued by the Office or another state agency; or providing  
            information requested pursuant to a court order or subpoena  
            issued by a court, an administrative agency, or local  
            governing body authorized by law to issue subpoenas.


          53)Specifies that information shall not be disclosed beyond what  
            is necessary to achieve the goals of a specific investigation  
            or notification or the parameters of a specific court order or  
            subpoena.


          54)Provides that the actions of a licensee, its employees, and  
            its agents, that are permitted pursuant to a conditional  
            license and that are conducted in accordance with the  
            requirements of the Act and regulations adopted pursuant to  
            the Act, are not unlawful under state law and shall not be an  
            offense subject to arrest or prosecution.








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          55)Provides that the actions of a person who, in good faith and  
            upon investigation, allows his or her property to be used by a  
            licensee, its employees, and its agents, as permitted pursuant  
            to a conditional license, are not unlawful under state law and  
            shall not be an offense subject to arrest or prosecution.


          56)Sets forth requirements for record keeping by a licensee,  
            specifically that a licensee shall not cultivate, process,  
            store, manufacture, transport, or sell medical marijuana in  
            the state unless accurate records are kept at the licensed  
            premises of the growing, processing, storing, manufacturing,  
            transporting, or selling by the licensee in the state.  


             a)   States that the records shall include the name and  
               address of the supplier of marijuana received or possessed  
               by the licensee, the location at which the marijuana was  
               cultivated, the amount of marijuana received, the form in  
               which it is received, the name of the employee receiving  
               it, and the date of receipt.  States that these records  
               shall also include receipts for all expenditures incurred  
               by the licensee and banking records, if any, for all funds  
               obtained or expended in the performance of any activity  
               under the authority of the conditional license.  
             b)   Authorizes a licensee who has a conditional license for  
               more than one premises to keep all records at one of the  
               conditionally licensed premises, and requires records to be  
               kept for a period of seven years from the date of the  
               transaction.  


          57)Authorizes the Office or a local agency delegated the  
            authority to enforce the licensing requirements of this Act to  
            examine the books and records of a conditional licensee and  
            visit and inspect the premises.  Requires books or records  
            requested by the Office or that local agency to be provided by  








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            the conditional licensee no later than five business days  
            after the request is made.
          58)Authorizes the Office or a local agency delegated the  
            authority to enforce the licensing requirements of this Act to  
            enter and inspect the premises of a facility issued a  
            conditional license between the hours of 8 a.m. and 8 p.m. on  
            any day that the facility is open, or at any reasonable time,  
            to ensure compliance and enforcement of the provisions of the  
            Act or a local ordinance.  Provides that if a licensee or an  
            employee of a licensee refuses, impedes, obstructs, or  
            interferes with an inspection, the conditional license may be  
            summarily suspended and the Office shall directly commence  
            proceedings for the revocation of the conditional license.


          59)Provides that if a licensee fails to maintain or provide the  
            books and records required, the licensee shall be subject to a  
            civil fine of $15,000 per individual violation.


          60)Authorizes the Office or a local agency delegated the  
            authority to enforce the licensing requirements of this Act to  
            require a licensee to contract for an independent audit of the  
            records required under these provisions, and that the licensee  
            shall be liable for all costs associated with the audit. 


          Taxation Provisions 


          61)Authorizes a city, county, or city and county to impose a tax  
            on the privilege of cultivating, dispensing, producing,  
            processing, preparing, storing, providing, donating, selling,  
            or distributing marijuana by a licensee operating under the  
            Act.  


          62)Requires the Board of Supervisors or City Council to specify  
            in the ordinance the activities subject to the tax, the  








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            applicable rate or rates, the method of apportionment, and the  
            manner of collection of the tax.  Provides that the tax may be  
            imposed for general governmental purposes or for purposes  
            specified in the ordinance. 


          63)Specifies that the tax authorized may be imposed upon any or  
            all of the activities outlined above, regardless of whether  
            the activity is undertaken individually, collectively, or  
            cooperatively, and regardless of whether the activity is for  
            compensation or gratuitously, as determined by the Board of  
            Supervisors or City Council.  Specifies that a tax for these  
            purposes is applicable voter approval requirements imposed by  
            law. 


          64)Specifies that these provisions do not limit or prohibit the  
            levy or collection or any other fee, charge, or tax, or a  
            license or service fee or charge upon, or related to, the  
            activities outlined above, and shall not be construed as  
            limiting the tax authority of a city, county, or city and  
            county as provided by law. 


          65)Requires, on or before July 1, 2016, the State Board of  
            Equalization (BOE) to complete a report and submit it to the  
            Legislature and Governor's Office on the estimated tax  
            collected on the sale of medical marijuana, using the most  
            current data available.  States that the report should also  
            include expected tax revenues, under the existing tax  
            structure, for the years 2016 to 2021, inclusive.


          Health, Safety, and Labeling Provisions 


          66)Defines the following terms in the Sherman Food, Drug and  
            Cosmetics Law:\









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             a)   "Edible medical marijuana product" as medical marijuana  
               or a medical marijuana-derived product that is ingested or  
               meant to be ingested through the mouth and into the  
               digestive system.
             b)   "Labor peace agreement" means an agreement between an  
               entity and a bona fide labor organization that, at a  
               minimum, protects the state's proprietary interests by  
               prohibiting labor organizations and members from engaging  
               in picketing, work stoppages, boycotts, and any other  
               economic interference with the applicant's business. This  
               agreement means that the applicant has agreed not to  
               disrupt efforts by the bona fide labor organization to  
               communicate with, and attempt to organize and represent,  
               the applicant's employees.


             c)   "Representative samples" as samples taken from each  
               batch or shipment of medical marijuana received from a  
               licensed cultivation site or any other source if intended  
               for sale.  


          67)Requires the Office, by July 1, 2017, to report to the  
            Legislature on the feasibility of developing a program to  
            certify laboratories for the testing of medical marijuana and  
            related products and the feasibility of a labeling requirement  
            for edible marijuana products that incorporates information on  
            the cannabinoid content. 
          68)Requires a facility issued a conditional license to bear the  
            responsibility for: 


             a)   Maintaining supplier information in order for recall  
               procedures to be implemented, if and when necessary; and 
             b)   Labeling of all medical marijuana and medical marijuana  
               products that shall, at a minimum, include the following: 










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               i)     A list of pharmacologically active ingredients,  
                 including, but not limited to, tetrahydrocannabinol (THC)  
                 and cannabidiol (CBD) content, clear recommended dosage,  
                 and the size or volume of the recommended dose.
               ii)Clear indication, in bold font, that the product  
                 contains medical marijuana.


               iii)The statement "FOR MEDICAL USE ONLY. KEEP OUT OF REACH  
                 OF CHILDREN AND ANIMALS" in bold print.


               iv)Identification of the source and date of cultivation and  
                 manufacture.


               v)     The name and location of the dispensary providing  
                 the product, and the date of sale.


               vi)Any other requirements set by the Office.


          69)Provides that for purposes of these provisions, edible  
            medical marijuana products are deemed to be unadulterated food  
            products.  Authorizes baked edible medical marijuana products,  
            including but not limited to, brownies, bars, cookies and  
            cakes, tinctures and other edible medical marijuana products  
            that do not require refrigeration or hot holding to be  
            manufactured, sold or otherwise distributed at facilities  
            issued a conditional license under the Act.
          70)Requires a facility issued a conditional license to have an  
            owner or employee who has successfully passed an approved and  
            accredited food safety certification examination prior to  
            selling, manufacturing or distributing edible medical  
            marijuana products requiring refrigeration or hot holding.   
            Requires individuals manufacturing or selling edible medical  
            marijuana products to thoroughly wash their hands before  
            commencing production and before handling finished edible  








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            medical marijuana products.


          71)States that all edible medical marijuana products sold for  
            direct consumption and infused with marijuana concentrate  
            shall be individual wrapped at the original point of  
            preparation.


          72)Requires products containing THC to be prepared in compliance  
            with maximum potency standards for THC and THC concentrates  
            set forth in the Office's regulations.


          73)Sets forth requirements for labeling of edible medical  
            marijuana products.  Requires, prior to sale or distribution  
            at a licensed dispensing facility, edible medical marijuana  
            products shall be labeled and in an opaque and tamper evident  
            package.  Labels and packages of edible medical marijuana  
            products shall not be made to be attractive to children.   
            Prohibits the use of photos or images of food on products or  
            labels, and only authorizes the use of generic food names to  
            describe the products.  


          74)All edible medical marijuana product labels shall include the  
            information listed above, prominently displayed and in a clear  
            and legible font, and also the net weight of medical marijuana  
            in package and a warning if nuts or other known allergens are  
            used and shall include the total weight, in ounces or grams,  
            of medical marijuana in the package.


          Physician Provisions


          75)Requires the MBC to prioritize cases involving physicians who  
            recommend marijuana to patients for medical purposes without a  
            good faith prior examination of the patient and medical reason  








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            therefor.
          76)Makes it a misdemeanor for a physician and surgeon who  
            recommends medical marijuana to a patient to accept, solicit,  
            or offer any form of remuneration from or to a facility issued  
            a conditional license to engage in medical marijuana  
            activities if the physician and surgeon or his or her  
            immediately family have a financial interest in that facility.  



          77)Requires the MBC to consult with the California Marijuana  
            Research Program, known as the Center for Medicinal Cannabis  
            Research, on developing and adopting medical guidelines for  
            the appropriate administration and use of medical marijuana.


          78)Prohibits a physician and surgeon from recommending medical  
            marijuana to a patient unless that person is the patient's  
            attending physician, as defined under existing law. 


          79)Requires advertising for physician recommendations for  
            medical marijuana to meet all requirements to bear a  
            prescribed notice for consumers and comply with false  
            advertising prohibitions for healing arts practitioners, as  
            specified, and prohibits price advertising that is fraudulent,  
            deceitful, or misleading.  





          FISCAL EFFECT:  According to the Senate Appropriations Committee  
          analysis dated May 28, 2015: 


           Ongoing costs, likely over $20 million per year to license  
            medical marijuana cultivators, transporters, and dispensaries  
            by the new Office of Medical Marijuana Regulation (special  








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            fund). For comparison, the California State Board of Pharmacy,  
            which licenses and regulates pharmacists and pharmacies, has  
            an annual budget of about $20 million per year.
            The bill would create a new Office dedicated to licensing and  
            enforcing licensing requirements on the medical marijuana  
            industry. The annual costs to operate the new Office are  
            highly uncertain. For example, the number of medical marijuana  
            cultivators, transporters, and dispensaries that would apply  
            for licensure under the bill is not known, in part because it  
            is difficult to know how the licensing and regulatory  
            requirements in the bill will change current practices in the  
            medical marijuana industry. 


           Unknown costs for enforcement of the bill's requirements by  
            local governments (local funds and special funds). The bill  
            requires the Office to enforce its provisions, but requires  
            the Office to delegate enforcement authority to requesting  
            local agencies. How those responsibilities will be divided  
            between levels of government and how much funding the state  
            will make available to local governments for enforcement  
            activity is unknown at this time. 
           Unknown fee revenues to offset the costs to implement the bill  
            (special fund). The bill gives the new Office broad authority  
            to set licensing fees sufficient to pay for the Office's costs  
            to operate the licensing program, costs incurred by the Office  
            or the Department of Justice to enforce the bill, costs  
            incurred by local law enforcement agencies to enforce the  
            bill, and costs incurred by state and local environmental  
            agencies for enforcement costs relating to cultivation  
            facilities. The fee revenues generated under the bill would  
            depend both on the allowed costs that are incurred at the  
                                                                             state and local level as well as the feasibility of collecting  
            sufficient fees from the medical marijuana industry. 


           Unknown costs for the Department of Justice to conduct  
            criminal background checks of licensees (special fund). Under  
            current practice, applicants for a criminal background check  








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            are required to pay the $65 cost to conduct a criminal  
            background check using fingerprint databases.


           Ongoing costs of about $1 million per year for enforcement of  
            food and drug safety requirements on medical marijuana  
            products by the Department of Public Health (General Fund or  
            fee revenues from licensees).


          COMMENTS:  


          Purpose.  This bill is author sponsored.  According to the  
          author, "SB 643 seeks to resolve many of the issues created by  
          the enactment of the Compassionate Use Act and subsequent  
          legislation.  Our bill creates a statewide comprehensive program  
          overseeing the medical marijuana industry, from planting to  
          consumption, and all the steps in between.  California voters  
          made it clear that they wanted medical marijuana to be  
          legalized, but issues and concerns for growers, doctors,  
          dispensaries, law enforcement, district attorneys, cities,  
          counties and others have only become more complicated.


          I represent the primary growing region for medical marijuana in  
          the western United States, specifically remote expanses of  
          Mendocino, Humboldt and Trinity counties, which are responsible  
          for up to 70% of the marijuana grown in the west.  Much of this  
          area of the state has come to rely on the economic benefits of  
          marijuana cultivation, but also suffers from the negative  
          environmental, public safety and public health effects that can  
          arise from rogue cultivators and lack of regulation.   Trespass  
          grows have become an environmental disaster in this region,  
          illegally diverting millions of gallons of water from rivers and  
          streams, creating a dumping ground for pesticides, insecticides,  
          rodenticides and fertilizers, and depositing huge amounts of  
          sediment into our waterways from crop runoff.   









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          Since the voters of California passed Proposition 215 in 1996,  
          it has become clear that there needs to be a comprehensive  
          regulation bill from the Legislature that oversees the  
          cultivating, processing, manufacturing, transportation,  
          prescribing and sale of medical marijuana.  The Legislature has  
          worked hard over the last couple of years to enact a regulatory  
          program that will recognize the voter's mandate, streamline the  
          ability of the industry to grow and sell a legal product and  
          that this bill contains much of that hard work as well as  
          reflects the efforts of many groups, individuals who have spent  
          years working in this industry.  


          Currently, there are virtually no rules and regulations on the  
          cultivation side of the medical marijuana industry, and it is  
          important that we bring this legal crop into the regulatory  
          framework expected for other commodities.  The severe drought  
          California is now experiencing has only made the need for this  
          legislation all the more urgent."


          The Compassionate Use Act (CUA) and SB 420.  In 1996, voters  
          approved the CUA, which allowed patients and primary caregivers  
          to obtain and use medical marijuana, as recommended by a  
          physician, and prohibited physicians from being punished or  
          denied any right or privilege for making a medical marijuana  
          recommendation to a patient.  In 2003, SB 420 (Vasconcellos),  
          Chapter 875, Statutes of 2003, established the Medical Marijuana  
          Program (MMP), which allowed patients and primary caregivers to  
          collectively and cooperatively cultivate medical marijuana, and  
          established a medical marijuana card program for patients to use  
          on a voluntary basis.  The card can be used to verify that a  
          patient has authorization to possess, grow, transport, or use  
          medical marijuana in California, and that a caregiver has  
          authorization to possess, grow, and transport medical marijuana  
          in California.  The MMP facilitates the registration of  
          qualified patients and their caregivers through a statewide  
          identification system, and qualified patients and their  








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          caregivers may apply for and be issued an identification card  
          through their county of residence.  Upon issuance of the card,  
          it is registered with an online database which law enforcement  
          can use to verify whether a card is valid.



          Under the MPP, a person is required to get a recommendation for  
          medical marijuana from an attending physician, which is defined  
          to mean someone who, " ?has taken responsibility for an aspect  
          of the medical care, treatment, diagnosis, counseling, or  
          referral of a patient and who has conducted a medical  
          examination of that patient before recording in the patient's  
          medical record the physician's assessment of whether the patient  
          has a serious medical condition and whether the medical use of  
          marijuana is appropriate."  Written documentation of this  
          recommendation is required to be submitted to the county in  
          order to receive a medical marijuana card.  However, since the  
          passage of Proposition 215 and SB 420, the state has not adopted  
          a framework to provide for appropriate licensure and regulation  
          of medical marijuana.  As a result, in the nearly 20 years since  
          the passage of Proposition 215, there has been an explosion of  
          medical marijuana collectives and cooperatives that are largely  
          left to the enforcement of local governments, resulting in the  
          creation of a patchwork of local regulations for these  
          industries and with little statewide involvement.    

          The California Attorney General's Compassionate Use Guidelines.   
          SB 420 required the California Attorney General to "?develop and  
          adopt appropriate guidelines to ensure the security and  
          non-diversion of marijuana grown for medical use by patients  
          qualified under the Compassionate Use Act of 1996."  In 2008,  
          the Attorney General issued guidelines to: 1) ensure that  
          marijuana grown for medical purposes remains secure and does not  
          find its way to non-patients or illicit markets, 2) help law  
          enforcement agencies perform their duties effectively and in  
          accordance with California law, and 3) help patients and primary  
          caregivers understand how they may cultivate, transport,  
          possess, and use medical marijuana under California law.   








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          According to a 2011 letter, after a series of meeting with  
          stakeholders to assess whether to clarify the 2008 guidelines to  
          stop the exploitation of California's medical marijuana laws by  
          gangs, criminal enterprises, and others, the Attorney General  
          decided to postpone the issuance of new guidelines because of  
          pending litigation and to urge the Legislature to amend the law  
          to establish clear rules governing access to medical marijuana.   


          California Supreme Court Affirms Local Control Over Medical  
          Marijuana.  By exempting qualified patients and caregivers from  
          prosecution for using or from collectively or cooperatively  
          cultivating medical marijuana, the CUA and the MPP essentially  
          authorized the cultivation and use of medical marijuana.  These  
          laws have triggered the growth of medical marijuana dispensaries  
          in many localities, and in response, local governments have  
          sought to exercise their police powers to regulate or ban  
          activities relating to medical marijuana.  After numerous court  
          cases and years of uncertainty relating to the ability of local  
          governments to control medical marijuana activities,  
          particularly relating to the ability to control the zoning,  
          operation, and existence of medical marijuana dispensaries, the  
          California Supreme Court, in City of Riverside v. Inland Empire  
          Patients (2013) 56 Cal. 4th 729, held that California's medical  
          marijuana statutes do not preempt a local ban on facilities that  
          distribute medical marijuana.  The court held that nothing in  
          the CUA or the MMP expressly or impliedly limited the inherent  
          authority of a local jurisdiction, by its own ordinances, to  
          regulate the use of its land, including the authority to provide  
          that facilities for the distribution of medical marijuana will  
          not be permitted to operate within its borders.

          Federal Controlled Substances Act.  Despite the CUA and SB 420,  
          marijuana is still illegal under state and federal law.  Under  
          California law, marijuana is listed as a hallucinogenic  
          substance in Schedule I of the California Uniform Controlled  
          Substances Act.  Yet, the CUA prohibits prosecution for  
          obtaining, distributing, or using marijuana for medical  
          purposes.  However, under the federal Controlled Substances Act,  








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          it is unlawful for any person to manufacture, distribute,  
          dispense or possess a controlled substance, including marijuana,  
          whether or not it is for a medical purpose.  As a result,  
          patients, caregivers, and dispensary operators, who engage in  
          activities relating to medical marijuana, may still vulnerable  
          to federal arrest and prosecution.  According to the California  
          Attorney General's guidelines, the difference between state and  
          federal law gives rise to confusion.  However, California has  
          tried to avoid this conflict by deciding not to use the state's  
          powers to punish certain marijuana offenses under state law when  
          a physician has recommended its use to treat a serious medical  
          condition.  

          U.S. Department of Justice (USDOJ) Guidance Regarding Marijuana  
          Enforcement.  On August 29, 2013, the USDOJ issued a memorandum  
          that updated its guidance to all U.S. Attorneys in light of  
          state ballot initiatives to legalize under state law the  
          possession of small amounts of marijuana and provide for the  
          regulation of marijuana production, processing, and sale.  While  
          the memorandum noted that illegal distribution and sale of  
          marijuana is a serious crime that provides a significant source  
          of revenue to large-scale criminal enterprises, gangs, and  
          cartels, it also noted that USDOJ is committed to using its  
          limited investigative and prosecutorial resources to address the  
          most significant threats, which include: preventing distribution  
          to minors; preventing revenue from marijuana from going to  
          criminal enterprises; preventing diversion to other states where  
          marijuana is not legal under state law; preventing  
          state-authorized marijuana from being a cover for trafficking in  
          other illegal drugs or illegal activity; preventing violence in  
          cultivating and distributing marijuana; preventing drugged  
          driving and other public health problems from marijuana use; and  
          preventing growing, possessing or using marijuana on public  
          lands or on federal property.  

          According to the USDOJ, "In jurisdictions that have enacted laws  
          legalizing marijuana in some form and that have also implemented  
          strong and effective regulatory and enforcement systems to  
          control the cultivation, distribution, sale, and possession of  








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          marijuana, conduct in compliance with those laws and regulations  
          is less likely to threaten the federal priorities set forth  
          above?In those circumstances, consistent with the traditional  
          allocation of federal-state efforts in this area, enforcement of  
          state law by state and local law enforcement and regulatory  
          bodies should remain the primary means of addressing  
          marijuana-related activity."  
          Marijuana Frameworks Established in Other States.   There are  
          currently 23 states, plus the District of Columbia, that allow  
          for medical marijuana and have some level of regulation.   
          California is the only state that permits medical marijuana in  
          the absence of a robust state-wide regulatory system. The  
          following states have statewide medical marijuana regulatory  
          systems: Alaska, Arizona, Colorado, Connecticut, Washington DC,  
          Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts,  
          Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey,  
          New Mexico, New York, Oregon, Rhode Island, Vermont and  
          Washington.  In addition, Alaska, Colorado, Oregon, Washington,  
          and the District of Columbia have legalized the use of  
          recreational marijuana.  


          According to the Brookings Institute, since the early 1990s,  
          U.S. public opinion has trended in favor of marijuana  
          legalization.  Currently, a majority of Americans support  
          legalization by a margin of seven points-52 percent to 45  
          percent, according to findings from a Pew Research Center survey  
          in March 2013.  Support for marijuana legalization has risen  
          sharply since 2010, by 11 percentage points.  


          This increasing support for marijuana legalization is present in  
          California as well, with recent polls showing that a majority of  
          Californians support marijuana legalization.  Currently, there  
          are an estimated four different marijuana initiatives attempting  
          to qualify for the 2016 ballot.  In order for any marijuana  
          scheme to be effective, it should address all parts of the  
          industry, including establishing a robust licensing and  
          regulatory scheme, a taxation scheme, and incorporate health and  








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          safety standards, in addition to ensuring that the public is  
          protected; however, if the measure is too prescriptive, it may  
          hamper the ability to address any unintended consequences or  
          fill in any policy gaps without having to go back to the ballot.  
           As a result, if the State is able to create a comprehensive  
          framework for medical marijuana, it may also serve a dual role  
          by serving as a basis for a recreational marijuana scheme.  


          Medical Marijuana Industry in California.  According to the  
          author's Sunrise Questionnaire, submitted to the Committee  
          pursuant to Government Code Section 9148 et seq., by law  
          enforcement estimates, over 60% of all marijuana in the country  
          is grown in the Emerald Triangle counties of Humboldt, Mendocino  
          and Trinity, all of which are in the author's district, and once  
          the industry is regulated, and the medical marijuana products  
          are certified as safe, the market is expected to open up  
          substantially.  In addition, once the industry is regulated, the  
          author believes that physicians who do not recommend or even  
          discuss medical marijuana due to its quasi-legal nature and  
          outright ban from the federal government may be more willing to  
          discuss and recommend medical marijuana to their patients.   


          Since 1996 when the Compassionate Use Act (CUA) was passed,  
          individuals, patients and organizations from all sides have been  
          asking the Legislature to enact a regulatory framework that will  
          settle many of the open ended questions and legal status of the  
          medical marijuana.  According to the author, the Legislature has  
          enacted several bills over the years clarifying CUA, but nearly  
          everyone agrees that a complete regulatory framework needs to be  
          enacted as soon as possible.  The author asserts that the harm  
          starts at the environmental side of things, and simply expands  
          from there.  Right now, with virtually no standards for  
          cultivation, the state is seeing the worst damage to watersheds,  
          forests and rivers than ever before on the North Coast.  The  
          regional and State Water Boards, along with California  
          Department of Fish and Wildlife, are doing what they can, but  
          without legislation, their hands are largely tied.  This leads  








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          to streams and rivers literally running dry (even before the  
          current drought) and to huge loads of sediments and toxic wastes  
          being dumped into the watersheds.  The lack of regulation  
          complicates water supply for millions of legal residential and  
          commercial water users throughout the state-- entire tracts of  
          forests are being mowed down by rogue growers and planted with  
          marijuana with no permits, oversight, or regard for the  
          environment. 


          The author believes that the lack of regulation on the  
          processing, manufacturing, testing, transportation and resale  
          needs to be fixed as well.  Without statewide standards produced  
          by specific health and safety testing, ingredient lists, and  
          dosage listings on all marijuana products, people are put at  
          risk. Of significant concern is the "edibles" and "oils" market,  
          which are relatively new to consumers and have the potential to  
          expand beyond the typical cigarette style that most people are  
          used to.  And with no standards for dosages or active ingredient  
          lists, for example, the danger is very real.  According to the  
          author, it is well past time we treat this product like a real  
          medication and give it the same scrutiny and oversight that all  
          other legal drugs have.


          Cities and counties that have medical marijuana ordinances take  
          the first step in protecting consumers and the public, but  
          without a strong state-wide regulatory body overseeing all  
          aspects of the product chain, consumers have very little control  
          over the risk unless they have personal knowledge of the  
          product.  There simply is no cohesive strategy for protecting  
          consumers in the industry, and as a very loose and only  
          quasi-legal, it is very difficult for the industry to  
          self-police.  Clear guidelines from the state and or the local  
          jurisdiction, backed up by the state, is the only way to ensure  
          protection of consumers and the public.


          According to the author, nearly every provision of the SB 643 is  








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          designed to preclude consumer injury, from the cultivation  
          standards all the way to the resale of the final product, and by  
          taking a multi-billion dollar industry with virtually no  
          regulations and placing the entire product chain into a  
          regulated environment.  All aspects of the product chain need to  
          be regulated, from "Seed to Sale".  This would include creating  
          licensures and regulatory framework for all aspects of the  
          industry, including cultivation, processing, manufacturing,  
          prescribing, testing, transporting, and selling. The health and  
          safety of the product must be of top concern for the state and  
          other jurisdictions, and making sure no diversions occur for  
          non-medical marijuana purposes.  


          Every aspect of this current quasi-legal product includes  
          dangers at this time, from law enforcement to cultivator  
          neighbors, to transportation, manufacturing and beyond. Creating  
          a uniform policy toward all aspects of medical marijuana will be  
          a giant step in protecting consumers, but the public at large,  
          as well as our water and environment. However, according to the  
          author, the one danger in this process is making it so onerous  
          and laborious to become legitimate that people simply refuse to  
          participate and stay in the black/grey market.  The author  
          asserts this bill is designed to limit that as much as possible,  
          while accepting that some in the industry simply will not be  
          able to participate. 


          SB 643 Licensing and Regulatory Framework.  According to the  
          author, this bill will address many of these concerns by doing  
          all of the following: 


            Creates the Office of Medical Marijuana Regulation, under the  
            Secretary of Business, Consumer Services and Housing  .   
            According to the author, the Secretary oversees the ABC and  
            the Dept. of Consumer Services and can draw on the expertise  
            of both agencies to help the Office get set up and running. 
            Requires that all medical marijuana grown, produced,  








                                                                     SB 643


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            distributed, prescribed, and sold in the state meet the  
            California certified organic standards by January 1, 2022.   
            According to the author, this is in effort to guard against  
            consumption of harmful and damaging products, and to help  
            protect the cultivating watersheds and environment from  
            toxics. 


            Creates "Appellations of Origin" for medical marijuana  .  
            According to the author, similar to the wine grapes grown in  
            the southern part of his district, this will help establish  
            and perpetuate authenticity in the industry. 


            Allows local governments to impose a tax or fee on  
            cultivation, above the ultimate sales tax, to help defray the  
            expense of regulating the cultivation and processing of the  
            commodity in their jurisdiction.  This is designed to make sure  
            local authorities can afford to pay for the implementation of  
            the regulations allowed under this legislation or any other.   
            Local authorities would have to abide by Prop. 218  
            regulations.


            Licenses would only be valid if both the state and the local  
            jurisdiction approved the applications  . The author's goal is  
            to allow as much local control as possible.


            All licensed location and license information would be given  
            to local law enforcement  .  In an effort to prevent wasted  
            resources and limit dangerous circumstances, the author  
            believes that local law enforcement should know when and where  
            all licensees are operating.


            A conditional license issued pursuant to this section shall be  
            valid for 12 months after the date of issuance, after which it  
            may be renewed for a period of 36 months  .  This is a departure  








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            from previous bills that only give 12-month renewals.  Once  
            licensees have established themselves, the author does not  
            believe they should have to go through the process of renewal  
            every year. 


          Current Related Legislation.  AB 26 (Jones-Sawyer) of the  
          current legislative session, would enact the Medical Cannabis  
          Regulation and Control Act to license and regulate medical  
          cannabis, and would create the Division of Medical Cannabis  
          Regulation and Enforcement within the Department of Alcoholic  
          Beverage Control to administer the act.  STATUS: This bill is in  
          the Assembly Business and Professions Committee. 



          AB 34 (Bonta) of the current legislation, session would enact  
          the Medical Cannabis Regulation and Control Act to license and  
          regulate medical cannabis, and would establish the Division of  
          Medical Cannabis Regulation and Enforcement within the  
          Department of Alcoholic Beverage Control to administer the act.   
          STATUS: This bill was held in the Assembly Appropriations  
          Committee. 
          AB 243 (Wood) of the current legislation session, would require  
          all medical marijuana cultivation (MMC) to be conducted in  
          accordance with state and local laws and best practices, as  
          specified, and would require state agencies to address  
          environmental impacts of MMC and coordinate with local  
          governments in enforcement efforts, and establishes a MMC  
          permitting system.  STATUS: This bill is scheduled to be heard  
          in the Senate Governance and Finance Committee.


          AB 266 (Bonta, Cooley, Jones-Sawyer, and Lackey), establishes a  
          licensing and regulatory framework for medical cannabis under  
          the Medical Cannabis Regulation and Control Act (Act), and would  
          establish the Office of Medical Cannabis Regulation within the  
          Office of the Governor, the Division of Medical Cannabis  
          Regulation within the State Board of Equalization, the Division  








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          of Medical Cannabis Manufacturing and Testing within the  
          California Department of Public Health, and the Division of  
          Medical Cannabis Cultivation within the California Department of  
          Food and Agriculture, and would set forth the duties of the  
          respective regulatory authorities.  STATUS:  This bill is  
          scheduled to be heard in the Senate Health Committee.   


          Prior Related Legislation.  AB 1262 (Correa) of 2014, would have  
          established a licensing and regulatory framework for the  
          cultivation, processing, transportation, testing, recommendation  
          and sale of medical marijuana to be administered by the  
          Department of Consumer Affairs (DCA) and enforced primarily at  
          the local level.  NOTE: This bill was held in the Assembly  
          Appropriations Committee.



          AB 1894 (Ammiano) of 2014, would have enacted the Medical  
          Cannabis Regulation and Control Act to license and regulate the  
          cultivation, manufacture, testing, transportation, storage,  
          distribution, and sale of medical cannabis, and would create the  
          Division of Medical Cannabis Regulation and Enforcement within  
          the Department of Alcoholic Beverage Control.  NOTE: This bill  
          was held on the Assembly Floor. 

          AB 473 (Ammiano) of 2013, would have enacted the Medical  
          Marijuana Regulation and Control Act to license and regulate the  
          cultivation, manufacturing, testing, transportation,  
          distribution, and sales of medical marijuana and medical  
          marijuana products, and would create the Division of Medical  
          Marijuana Regulation and Enforcement within the Department of  
          Alcoholic Beverage Control.  NOTE: This bill was held on the  
          Assembly Floor. 
          AB 604 (Ammiano) of 2013, would have enacted the Medical  
          Cannabis Regulation and Control Act to license and regulate the  
          cultivation, manufacture, testing, transportation, storage,  
          distribution, and sale of medical cannabis, and would create the  
          Division of Medical Cannabis Regulation and Enforcement within  








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          ABC.  NOTE: This bill was held in the Senate Public Safety  
          Committee.



          AB 2312 (Ammiano) of 2012, would have established the Medical  
          Marijuana Regulation and Control Act, authorizing local taxes on  
          medical cannabis and creating a board to regulate the medical  
          cannabis industry.  NOTE: This bill was held in the Senate  
          Committee on Business, Professions and Economic Development.
          SB 1182 (Leno) of 2012, would have provided that a cooperative  
          or collective that operates within the Attorney General's (AG)  
          guidelines shall not be subject to prosecution for marijuana  
          possession or commerce, as specified.  NOTE: This bill was held  
          on the Senate Floor.  



          AB 1300 (Blumenfield), Chapter 196, Statutes of 2011, provided  
          that a local government entity may enact an ordinance regulating  
          the location, operation or establishment of a medical marijuana  
          cooperative or collective; authorizes local government entities  
          to enforce such ordinances through civil or criminal remedies  
          and actions; and authorizes a local government entity to enact  
          any ordinance that is consistent with the Medical Marijuana  
          Program.  

          SB 626 (Calderon) of 2011, would have required the Board of  
          Equalization (BOE) to establish a nine-member task force to  
          conduct a study to determine ways to enhance collections of  
          sales and use taxes on retail sales of marijuana and ensure  
          proper regulation of the cultivation, transportation, and  
          distribution of marijuana and marijuana products.  NOTE: This  
          bill was held in the Senate Appropriations Committee.

          AB 390 (Ammiano) of 2009, would have legalized the possession,  
          sale, cultivation and other conduct relating to marijuana and  
          required the Department of Alcoholic Beverage Control to  
          administer and enforce the terms of legalized marijuana.  NOTE:  








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          This bill was held in the Assembly Health Committee.

          SB 420 (Vasconcellos), Chapter 875, Statutes of 2003,  
          established the Medical Marijuana Program Act, a statewide,  
          voluntary program for the issuance of identification cards to  
          identify persons authorized to engage in the medical use of  
          marijuana under the Compassionate Use Act.

          Proposition 215, of the November 1996 General Election,  
          prohibits prosecution for the possession and cultivation of  
          cannabis by a patient or a patient's primary caregiver with a  
          physician's written or oral recommendation.



          POLICY ISSUE(S):


          This bill would establish a novel licensing and regulatory  
          scheme for medical marijuana, which covers every aspect of the  
          medical marijuana industry, from seed to sale.  In addition to  
          tasking the newly-created Office with myriad duties involved in  
          this new scheme, the bill also places enforcement  
          responsibilities primarily on the State, as well as establish a  
          dual licensure scheme, which would require a close partnership  
          between the Office and local governments.  In addition, the bill  
          seeks to establish a comprehensive regulatory scheme for medical  
          marijuana, and would require the establishment of a  
          comprehensive set of health and safety standards for medical  
          marijuana and medical marijuana products.  As would be expected  
          for any new regulatory program of this scale and scope, a number  
          of outstanding issues and questions will need to be addressed in  
          order to ensure that the program has the greatest chance of  
          success.    


          Establishing a new Office within the Business, Consumer  
          Services, Housing Agency (BCSH).  The BSCH oversees various  
          departments, boards and commissions, including: 1) California  








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          Housing Finance Agency, 2) Department of Alcoholic Beverage  
          Control; 3) Department of Business Oversight; 4) Department of  
          Consumer Affairs; 5) Department of Fair Employment and Housing;  
          6) Department of Housing and Community Development; 7) Seismic  
          Safety Commission; 8) Alcoholic Beverage Control Appeals Board;  
          and 9) Horse Racing Board.  As a result of its varied  
          jursidiction, the BCSH's mission is to: license and regulate  
          professionals and businesses in California, so as to protect  
          consumers; to preserve, expand and fund safe and affordable  
          housing opportunities; to investigate and research earthquake  
          related issues to advise on ways to reduce earthquake risk; and  
          to protect the civil rights of all Californians from acts of  
          hate violence and unlawful discrimination in employment, housing  
          and public accommodations.  


          While many of the entities within BCSH may adopt complex  
          regulations relating to their specified areas, the type of  
          expertise required to establish and implement, at wholesale,  
          such a comprehensive program that covers all aspects of medical  
          marijuana activities, will pose great challenge to any state  
          entity, especially one that is completely new.  Not only will a  
          newly-established Office of Medical Marijuana Regulation have to  
          deal with overcoming all of the administrative obstacles that  
          exist to establishing a brand new government entity, such as  
          establishing a budget, hiring new staff, developing business  
          practices, and establishing an information technology system  
          that will meet all of these needs under the bill, it will also  
          have to take on an issue that is novel, complex, and requires  
          much expertise.  Successful implementation of any medical  
          marijuana program will require strong leadership and involvement  
          from the Administration to prioritize implementation so that it  
          meets federal guidance and prevents the potential for  
          illegitimate activities, to determine whether it is appropriate  
          to coordinate efforts among all affected entities that will play  
          a role in establishing a robust and effective licensing and  
          regulatory framework, all of which the Office's success will  
          rely heavily on, in addition to having sufficient resources to  
          ensure that all staffing and other needs will be met.  








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          Office's Ability to Absorb New Responsibilities.  This bill  
          would require the Office to adopt regulations for implementation  
          and enforcement, including specific procedures for the issuance  
          and revocation of licenses, the application forms and fees, by  
          January 1, 2018.  This bill also requires the Office to adopt  
          regulations that establish standards for cultivation,  
          manufacturing, transportation, storage, distribution, provision,  
          donation, and sale of medical marijuana and medical marijuana  
          products, as specified.  These regulations are thereby required  
          to cover everything from licensure, to comprehensive health and  
          safety standards for medical marijuana, including establishing  
          the maximum potency standards for THC.  This bill would delay  
          implementation, thereby giving the Office 24 months to adopt  
          regulations.  In addition, the bill authorizes the Office to  
          consult with other state and local agencies, industry, and  
          public and private entities to establish these regulations.  


          Due to the extensive number and type of regulations required to  
          be adopted, in addition to the level of outside expertise the  
          Office will need to rely on, the author may wish to consider  
          whether 24 months will be enough time to establish all of these  
          standards, or if the Office should be given more time to adopt  
          these standards, or be authorized to adopt temporary emergency  
          regulations.  


          The author may also wish to consider the benefits of spreading  
          out duties among existing agencies that already have expertise  
          in issues like adopting, implementing, and enforcing cultivation  
          and health and safety standards, such as the Department of Food  
          and Agriculture and the Department of Public Health.  At a  
          minimum, the author should strongly consider requiring the  
          Office to consult with other agencies, instead of merely  
          authorizing such consultation, and requiring the Office to  
          establish an advisory taskforce with the requisite expertise to  
          assist the newly-established Office during this rulemaking  








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          process and to clarify the appropriate roles of each state  
          entity that is, or would be, affected by medical marijuana  
          activities.  Such an advisory taskforce should include  
          representatives from the Department of Public Health, California  
          Department of Food and Agriculture, State Water Resources  
          Control Board and other environmental departments, such as the  
          Department of Fish and Wildlife, the Attorney General's Office  
          (especially critical to help navigate the federal and changing  
          legal landscape), local governments, medical marijuana experts,  
          and industry representatives.  


          In addition, while the bill authorizes the Office to assist  
          state taxation authorities in the development of uniform  
          policies for the state taxation of licensees and requires the  
          State Board of Equalization (BOE) to complete a report on the  
          estimated tax collected on the sale of medical marijuana and  
          expected tax revenues, the author should consider requiring the  
          Offie to work with the BOE on establishing clear policies for  
          the state taxation of licensees, and include the BOE in any  
          taskforce activities.   


          The author should also consider working with the BSCH to  
          determine the feasibility, timeline, and cost to establish a  
          database system that would meet these new requirements to assist  
          in tracking licensees', shipments, and other information to help  
          and product, i.e."seed to sale" tracking, based on the State's  
          troubled history with implementing new information technology  
          projects.  


          Implementation of the Act through Rulemaking.  The bill leaves  
          much of the administration of the Act to the rulemaking process  
          by requiring the Office to promulgate myriad regulations,  
          instead of providing a clear, statutory framework.  This process  
          can take years, given requirements for notification, public  
          comment and additional delays that arise whenever amendments to  
          proposed regulations are made, and the regulatory process in  








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          general has been criticized for lacking transparency and robust  
          stakeholder input that the Legislative process allows for.


          For example, this bill was recently amended to remove provisions  
          directing the Office to certify laboratories for the testing of  
          medical marijuana, and deleted language specifying health and  
          safety requirements for medical marijuana and medical marijuana  
          products.  Now, the bill merely requires the Office to  
          "establish standards for the cultivation, manufacturing,  
          transportation, storage, distribution, provision, donation, and  
          sale" of medical marijuana," and requires applicants to  
          demonstrate compliance with "all applicable agricultural,  
          consumer protection, food product and safety, and environmental  
          requirements," with little other guidance.  In addition, the  
          bill requires the Office to report to the Legislature on the  
          "feasibility" of developing a program to certify laboratories,  
          by July 1, 2017, and only specifies limited health and safety  
          standards. 



          While the author has indicated that the bill is designed to  
          limit a regulatory process that is not too onerous and laborious  
          for market participants, the author may wish to consider whether  
          it is appropriate to delegate too much discretion to the Office  
          and other regulatory agencies, which would leave policy  
          decisions to be made at the agency level, rather than through  
          the legislative process.  In addition, the role for many  
          agencies is to implement policies, rather than determine what  
          those policies should be; as a result, it might be beneficial to  
          provide greater guidance to the Office to help the Office  
          understand the intent of the Legislature and narrow the scope of  
          the Office's rulemaking authority. 
          Clarifying Licensure Provisions.  The bill requires a dual  
          licensure framework, thereby requiring both a conditional state  
          license and a local license or permit in order to operate.  The  
          author may wish to clarify that such licensed facilities must be  
          dually licensed in order to conduct business with one another by  








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          amending the definitions for licensees to specify that licensees  
          must hold both a conditional license and a local license or  
          permit.  In addition, the author may wish to specify that the  
          application process clearly require a licensee to verify that  
          they are not located near schools, which would be a violation of  
          existing law, in order to quickly weed out ineligible licensees.  



          Tiered Licensing Schemes.  Washington and Colorado have both  
          created comprehensive systems of legal production and sale,  
          subject to licensing, regulation and taxation.  However, the  
          laws require different industry structures and build on their  
          existing medical systems in different ways.  Colorado allows  
          entrepreneurs to produce cannabis and sell it at retail, and  
          such businesses were, at least initially, required to produce  
          the majority of the marijuana they sell (vertical integration),  
          while Washington state maintains clear separation between  
          marijuana growers, processors and retailers (horizontal  
          integration or "tiered" licensing).  Both models seek to,  
          however, reduce diversion and increase accountability.  In  
          addition, the commercial market in Washington is supervised by  
          the Washington State Liquor Control Board, while Colorado's law  
          vests authority to regulate the commercial market in the newly  
          created Marijuana Enforcement Division of the Department of  
          Revenue.  Colorado's medical marijuana program is also under  
          that Division - prior to the recreational initiative, the  
          Medical Marijuana Enforcement Division was regulating that part  
          of the market.  


          According to proponents of a tier licensing system, a horizontal  
          or tiered system of licensing (requiring separate licenses for  
          cultivators, manufacturers/wholesalers, and retailers, and  
          limiting a licensee from holding more than one license type) is  
          modeled after alcohol distribution, and acts to prevent the  
          ability for large firms to dominate local markets by keeping the  
          categories separate and distinct, which prevents one group from  
          controlling too much of the market.  Proponents also believe  








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          that a tiered licensing system based on the alcohol distribution  
          system, which requires distributors to be responsible for  
          collecting and remitting taxes, would make it easier for the  
          state to keep track of industry transactions and to collect  
          taxes, and would provide checks and balances that would make it  
          harder to allow for diversion, contraband, or "cooking the  
          books."  


          However, some believe that requiring licensees to be involved in  
          all phases of medical marijuana activities would serve to keep  
          these licensees smaller, as it would take more capital to engage  
          in all parts of the industry.  In addition, some believe that  
          larger businesses are not problematic because those larger  
          businesses may be better positioned to have the resources  
          available to ensure that they are following all regulatory  
          requirements, for example, by hiring compliance managers. In  
          addition, some believe that requiring a horizontal licensure  
          scheme would pose undue hardship on many existing businesses who  
          may engaged in multiple aspects of the industry, some at the  
          request of the localities in which they operate that require  
          vertical licensure.  


          This bill adopts an open approach by allow licensees to hold  
          more than one type of license type, but provides no additional  
          clarification.  However, the author may wish to consider the  
          benefits of the different licensing schemes, including the  
          ability of each scheme to prevent diversion and prevent just a  
          few players from dominating the market.  If multiple license  
          types are able to be held by a single licensee, the author may  
          also consider whether it may be appropriate to limit multiple  
          license types based on the size of the operation, for example,  
          by only allowing retailers to engage in cultivation if they are  
          cultivating a small amount.  The author may also wish to  
          consider establishing different levels of license types to  
          accommodate businesses of various sizes, and to clearly  
          establish a sliding scale for fees to preserve the small  
          businesses that are currently engaged in medical marijuana  








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          activities, for example, small farmers. 


          Dual Licensure and Enforcement.  The bill requires facilities,  
          manufacturers, cultivation sites, and transporters to be  
          licensed by the Office, and requires enforcement of these  
          provisions and health, safety, and other standards to be carried  
          out by the State, unless a local entity has requested the  
          authority to enforce these provisions at the local level.  In  
          addition, this bill enacts a dual licensure scheme that requires  
          a licensee to obtain both a state conditional license and a  
          local license or permit prior to engaging in any medical  
          marijuana activities.  As a result, there may be some inevitable  
          confusion between the Office and local governments in their  
          enforcement roles, which may be further complicated by the fact  
          that licensure depends on having both approvals, and that an  
          enforcement action taken by a state or local government will  
          inevitably affect their equivalent state or local license, and  
          trigger enforcement.  The author may wish to require the Office  
          to consult with local governments and develop a framework that  
          clarifies enforcement roles, regardless of whether a local  
          entity specifically requests to be delegated enforcement  
          authority or not, and require the Office to ensure open  
          communication and collaboration with local governments.  


          Patient Access to Care.  This bill delays implementation of many  
          of these provisions, including promulgating regulations for  
          licensing and enforcement until January 1, 2018, and for issuing  
          and requiring conditional licenses until July 1, 2018.  However,  
          the bill would delete the provisions authorizing patients and  
          caregivers to be exempt from state criminal sanctions for  
          "collectively or cooperatively" cultivating medical marijuana on  
          July 1, 2017.  As a result, the author may consider similarly  
          delaying the implementation of that provision until the Office  
            begins issuing conditional licenses, or until July 1, 2018, or  
          longer, in order to provide time for applicants to go through  
          the licensure process.  









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          The bill also limits exemptions for patients who do not sell,  
          distribute, donate, or provide marijuana to any other person or  
          entity, and limits the exemption for patient caregivers who  
          serve five or less qualified patients for whom he or she is a  
          caregiver.  The author may wish to consider whether patients  
          should be exempt for distributing marijuana without  
          compensation, and whether limiting the number of patients a  
          primary caregiver may serve might limit access to care for  
          certain patients, for example, those in rural areas. The author  
          may wish to consider specifically authorizing a facility that is  
          operating in accordance with local regulations, and who submits  
          an application for state conditional licensure, to continue to  
          operate until its application is approved or denied by the  
          Office.  


          In addition, the bill currently authorizes the Office to adopt  
          regulations to limit the number of conditional licenses issued  
          upon a finding that the otherwise unrestricted issuance of  
          conditional licenses is dangerous to the public health and  
          safety.  Because this licensure scheme relies upon dual license,  
          the author may wish to consider whether it is necessary to  
          empower the Office to restrict the number of licenses issued  
          when the local government would have the last say on whether a  
          business would receive necessary local approval to operate or  
          not. 


          Labeling of Edible Marijuana Products.  The bill would require,  
          among other things, that medical marijuana products, including  
          edibles, be labeled and include specified information, such as a  
          list of THC and CBD content and clear recommended dosage.   
          Because medicinal marijuana varies in terms of the levels and  
          types of active ingredient, THC or CBD, for example, and what it  
          is used for varies among patients, it may be difficult to  
          develop a standard "dosage" for products.  As a result, the  
          author may wish to consider clarifying labeling standards in  
          regards to medical marijuana products and requiring products to  








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          instead state the amount of THC per milligrams in each serving,  
          and the total amount of THC in a package.  In addition, the  
          author should consider striking provisions that requires edible  
          products to be in opaque packaging and prohibit any packaging  
          from containing photos or images of food, which may cause  
          confusion for consumers and employees.  The author should also  
          include a warning to let consumers know that the intoxicating  
          effects of edible medical marijuana products may be delayed to  
          prevent consumers from consuming more than is necessary to  
          alleviate symptoms.  


          REGISTERED SUPPORT:


          None on file. 


          REGISTERED OPPOSITION:


          None on file. 


          Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301