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Pennsylvania revises confidentiality rules regarding medical marijuana program licensing process: What applicants need to know

Posted: 05/30/2018
Industries: Cannabis Law

Companies seeking approval from Pennsylvania to grow, process, and dispense medical marijuana have fought to maintain the confidentiality of information in their applications. On May 12, 2018, the Pennsylvania Department of Health published temporary regulations that dictate what information will be exempt from public disclosure. This alert provides a framework for companies to consider when submitting information in support of an application to grow/process or dispense medical marijuana in Pennsylvania in order to protect their confidential business information.

Pennsylvania is in the process of implementing Phase II of its medical marijuana program. As part of that process, it has been accepting applications from entities to grow/process and dispense medical marijuana. As is typical in a competitive (and high profile) application process, Pennsylvania government (through the Pennsylvania Department of Health (DOH), the agency responsible for administering the program) has been bombarded with requests to release information contained in applications. Many of these requests resulted in litigation, requiring the DOH to defend its release of partially redacted documents, and requiring applicants to fight to maintain the confidentiality of their proprietary information. Many of these legal disputes remain pending.

On May 12, 2018, DOH published amended temporary regulations to take into account the need for changes it asserts have arisen since the previous temporary regulations were implemented.

Among other things, the amendments clarify the type of information that will (and will not) be exempt from public disclosure under Pennsylvania’s Right-to-Know Law, and importantly, the process for applicants to follow to redact protected information. Specifically, the amendments add the following items to the list of confidential information that is not subject to public disclosure:

  • Information maintained in the electronic tracking system of an approved laboratory;
  • The names and any other information relating to persons reviewing permit applications, including a reviewer’s individual permit application reviews and notes; and
  • Information relating to an applicant’s diversity plan that is marked confidential proprietary or trade secret.

Procedurally, the amendments make clear that an applicant must mark information as proprietary or a trade secret prior to the submission of a permit application to DOH. Failure to do so will result in disclosure of that information in response to a Right-to-Know Law request, according to the amended regulations. The amended rules also require an applicant to be responsible for defending its own redactions in any administrative or court proceeding, and warn that any information not adequately defended by the applicant may result in full disclosure of the information in un-redacted form. The temporary regulations went into effect on May 17, 2018 and are available in the Pennsylvania Bulletin here.

Framework to protect information

The only way to protect confidential information is by redaction. Because DOH does not have authority to redact proprietary or trade secret information on behalf on an applicant, the new rules highlight the importance of redacting confidential information prior to submitting documents to the Department of Health, because there will be no opportunity to make additional redactions at a later point, such as when addressing a Right-to-Know Law request. This requires a clear understanding of how the confidential proprietary information and trade secret exemptions are applied under the Pennsylvania Right-to-Know Law. Because these exemptions relate, in part, to the economic value attributed to the contended information not being publicly known, it is important for applicants to consider what information in their application competitors may want to obtain. For example, what information, if made publicly available, could result in an applicant losing a competitive advantage? This may require broad consideration of factors beyond Pennsylvania’s medical marijuana program, particularly if an applicant seeks to do business in other states that have different scoring criteria for awarding permits.

The amended temporary regulations are unlikely to change anytime soon. The Commonwealth’s authority to enact temporary regulations for the medical marijuana program expired shortly after DOH published the amended regulations on May 12, 2018. Any future rulemaking will be subject to the formal rulemaking process in Pennsylvania, which can take up to two years to finalize.

For applicants that submitted information prior to the May 17, 2018 effective date, DOH’s prior regulations arguably apply, although the DOH instructions associated with the Phase II application process instructed applicants to follow a process similar to DOH’s amended regulations now in effect. However, in interpreting the prior regulations, DOH provided applicants an opportunity to submit a privilege log in support of their redactions when responding to a Right-to-Know Law request.

For more information on Pennsylvania’s medical marijuana program, please contact the authors or the attorney at the firm with whom you are regularly in contact.

Members of Saul Ewing Arnstein & Lehr’s Cannabis Law practice counsel state cannabis license applicants and awardees, ancillary service and product providers, investors, management companies, and various other entities that are affected by federal and state marijuana laws, such as continuing care facilities and higher education institutions.

DISCLAIMER: Per federal law, marijuana is a Schedule I controlled substance. This means that it is a federal crime to sell, distribute, possess, and/or use marijuana or marijuana-derived products, regardless of any state law that may authorize certain marijuana activity. Although federal policy may, at times, recommend enforcement discretion when a business or individual is in compliance with state marijuana law that is deemed to comply with federal enforcement priorities, it is important to understand that compliance with state law does not equal compliance with federal law, and that federal marijuana policy may change at any time. No legal advice we give regarding marijuana law or policy is ever intended to guide or assist clients in violating federal law.