By Dan Shwartz / Santa Fe New Mexican

Published on August 17, 2016

By Peter St. Cyr / Santa Fe Reporter

Published on August 17, 2016

Economist Kelly O’Donnell, former New Mexico Regulation and Licensing Department secretary under Gov. Bill Richardson, and Duke Rodriguez, president of Ultra Health, a state licensed cannabis producer, recently discussed their views on cannabis program regulations that they say could lead to a 7-ton shortage and a new lawsuit aimed at improving patients’ access to the drug.

SFR: New Mexico already ranks low for several health and well-being indicators. Do cannabis shortages create more disparities?
O’Donnell: The burden of poor health is far heavier on some New Mexicans than it is on others. Low income people, rural residents, recent immigrants, and certain racial groups, most notably Native Americans, are at a real disadvantage when it comes to healthcare, resources for disease prevention and healthy living, and a number of debilitating diseases and conditions including diabetes and chronic pain.

Do the plant caps have other side effects?
Yes. It prevents suppliers from innovating and offering the broader array of products that better target certain health conditions or the needs of different kinds of patients. With such a limited supply of plant material, suppliers are going to play it safe and limit production to the one sure thing—higher-THC cannabis flower, which is great if that’s what you’re into, but not so great if your medical issues require a more nuanced or sophisticated treatment.

Are unreasonable regulations creating other market barriers?
Let me start off by saying that, as a former regulator and a member of the general public, regulation is a very good thing, particularly when it comes to the substances that we put in our bodies and the protection of people who are sick and suffering. But to be beneficial, regulations need to thoughtfully constructed with active input from experts who know the topic inside and out. Cannabis regulation is complicated. It involves aspects of agriculture, economics, state revenue collection, public safety and health. If you don’t think through all of these aspects carefully, you end up with unintended consequences like we have now. Supply limits that force some people who are legally entitled to purchase medical cannabis to buy it from illicit suppliers because they can’t get what they need, when they need it, at a price they can afford in the regulated market.

What’s needed to create a well-functioning market here?
Regulators need to focus on public safety and consumer protection, making sure high standards of quality and purity are sustained and that consumers are adequately and honestly informed about the products they are purchasing. Done well, regulation benefits the highest-caliber licensees and levels the playing field by ensuring that everyone is playing by the same rules and held to the same standards. Bad regulation telegraphs to business that either the regulator doesn’t really understand what they or regulating or they have other objectives, not related to public health and well-being. Either way, the message that gets sent to the market is one of uncertainty, and uncertainty is the last thing you want if you’re trying to build a business or create jobs.

Can a well-supported medical cannabis program displace black market dealers?
In states where adults can buy recreational cannabis legally, a primary objective of regulation is to drive the black market out of business with better quality and lower prices. This is a much more efficient strategy than continuing to wage the war on drugs—telling dealers not to engage in a business that our own laws have made very profitable and then locking them up on the rare occasions that they get caught. A medical cannabis market like New Mexico’s obviously can’t crowd out the black market, but it can at least shrink it by preventing medical cannabis cardholders from having to buy from illegal, unregulated sources.

You discuss the benefits of allowing producers to capitalize on economies of scale in your report. Will you explain what that means exactly?
Economies of scale are present when average production costs drop as production increases. In other words, the 110th widget costs a little less to produce than the 109th—and the more widgets you produce, the less each subsequent one costs. Economies of scale are present, up to a point, in many agricultural and manufacturing processes. Cannabis production is no exception. Growing more plants enables workers to specialize in certain tasks, increasing their efficiency. It allows certain commodities, including soil, nutrients and light bulbs to be purchased cheaper in bulk. It also spreads capital costs, like building a greenhouse or setting up irrigation systems to handle bigger production volume. Maximizing economies of scale minimizes cost. So far, lack of competition does not appear to be a problem in states that allow large-scale production like Oregon and Colorado.

Even if some of the businesses are allowed to scale up, do you think that there will still be room in the market for boutique dispensaries?
There is ample evidence in other states and other markets that large producers don’t crowd out smaller, more specialized suppliers. Right now I can go to Walmart and buy tomatoes for 99 cents a pound, or I can go to Whole Foods and drop $6 on a purple heirloom the size of a golf ball, and I wouldn’t be the only one.

In your view, are public health officials in a position to effectively regulate essentially agricultural crops?
Not without actively soliciting, listening to, and acting upon the advice of experts in agriculture.

Do you think that the state’s regulation and licensing department may be better positioned to manage the medical cannabis industry?
It’s hard to say. A lot would depend upon the underlying state statute and how the board was structured. If the board included subject matter experts, was representative of the broad range of stakeholders, and had rule making and disciplinary authority, it could potentially do a very good job of protecting consumers while at the same time fostering a robust market.

Duke, why did you commission a New Mexico cannabis market report?

Rodriguez: If ‘adequate supply’ is the question, then ‘adequate information’ has to be a huge part of the answer. Anecdotal information will only get you so far. If you are serious about a topic you have to subject it to serious scrutiny. In this case, we thought a valid demand model/analysis would be the most effective way to prove beyond any reasonable doubt the dire situation the NMDOH has placed patients’ wellness. It’s hard to believe we have a $45 million program with no meaningful modeling, projections, or vision from NMDOH on how this program should be operated. We took on the burden of doing the heavy lifting of securing the expert analysis needed to make the best informed decision for patients. This study is long overdue and hopefully the NMDOH, the Legislature, the Governor’s Office, the courts and most importantly the patients will have something so indisputable that folks will set aside their personal or political beliefs and make decisions focused first on patient well-being.

Without collecting this kind of market data, has the health department put patients at risk?

The evidence is clear: Current demand greatly exceeds any allowed cultivation to ensure adequate supply under current regulation. The department has continuously underestimated patient needs, whether it be timely issuance of cards, appropriate regulation and, now, ensuring adequate supply. This is so important because you can’t be making decisions based upon ‘guesstimates’, especially when it involves the well-being of over 30,000 vulnerable New Mexicans.

The health department hasn’t seemed willing to engage in dialog with program stakeholders. Why do you think they’ve been unwilling to discuss these issues outside of formal public hearings?

We have tried to exercise every form of diplomacy in dealing with the NMDOH, but there is clearly a hidden agenda or a belief system that precludes them from seeing the reality of what is at stake here. The entire issue at stake here is guaranteeing what is already provided by law to New Mexicans, the continuous “uninterrupted availability of cannabis for a period of three months.”

The legal right of adequate supply is due every single qualified patient statewide, for whatever cannabis medicine or dosage needed. The ongoing availability of medicine is a legal obligation to make certain we never run out of medicine for any patient, ever. It should not matter if you are in Albuquerque or Silver City, or whether you are nine days old or 99 years old.

Do you think the study and lawsuit will help regulators shift their thinking about the way they regulate the program?

They may not be able to fully make the shift on their own. To move from being the agency that advocated against the use of cannabis in any form for so long to now being the agency that is charged to promote wellness and health through the proper use of cannabis, may be too great of a policy pivot. Ultimately, the truth of this needed policy shift may be too great a challenge for the Department.

Mother, producer sue health department over ‘arbitrary’ plant limits

By Peter St. Cyr / Santa Fe Reporter

Published on August 17, 2016

A top economist spent the summer collecting information about the state’s medical cannabis market and says her study proves the health department’s strict 450-plant cap is responsible for an endless shortage of medication.

Current demand for cannabis exceeds supply by 2.26 tons, and the deficiency is forecast to grow to 6.8 tons by the first quarter in 2018, according to Kelly O’Donnell, a former regulation and licensing department secretary under then-Gov. Bill Richardson.

“Having a very limited supply of plant material prevents suppliers from innovating and offering the broader array of products like edibles, patches and lozenges, or products with different concentrations of specific cannabinoids—CBD, for example—that better target certain health conditions or the needs of different kinds of patients,” says O’Donnell.

Officials at the New Mexico Department of Health admit they haven’t done a good job predicting rapid growth in the program. Instead, rules are based on Secretary-Designate Lynn Gallagher’s concerns for potential Drug Enforcement Agency intervention. She also worries that increased inventories could be diverted to the black market, create producer monopolies or up the potential for large crop disease.

Shortages are a huge problem for thousands of patients and caregivers, including Nicole Nuñez, the mother of 8-month-old Amylea Nuñez. Amylea suffers from life-threatening seizures, and Nuñez often has to travel to Colorado to buy the cannabis-derived oil that helps her infant, even though a producer says he can make enough here if the state gave the green light.

On Tuesday, local attorney Brian Egolf filed a complaint in state district court in Santa Fe on behalf of Nuñez (using her legal name, Nichole Sena) and licensed producer New Mexico Top Organics–Ultra Health, Inc.

In part, the lawsuit states that “the program is still managed and governed by an arbitrary and capricious production limitation that ensures there will never be an adequate supply of cannabis in New Mexico.”

Egolf argues the health agency and Gallagher are ignoring a legally mandated duty to ensure an uninterrupted 90-day supply of cannabis medication for qualified patients.

“In this case, we thought a valid demand model/analysis would be the most effective way to prove beyond any reasonable doubt the dire situation the NMDOH has placed patients’ wellness,” says Duke Rodriguez, Ultra Health’s president. “It’s hard to believe we have a $45 million program with no meaningful modeling, projections or vision from NMDOH on how this program should be operated.”

The department could license more producers rather than increase plant counts, but O’Donnell says that would only solve the problem for two years and would not set up growers to benefit from economies of scale or have enough material to develop specialty medications like Haley’s Hope, which costs Nuñez and her husband Ernie $175 for a single 2-ounce bottle. To extract the cannabinoids needed to make the drug requires lots of flowering buds—generally more than New Mexico producers are willing to set aside to manufacture the specialty medication.

The lack of scientific modeling and avoidable staffing deficits have already ensnarled program staff as patient enrollments has rocketed up 81 percent since June 2015, from 15,265 patients to 26,568 patients at last count in July 2016. Staffers spent the entire summer catching up on a backlog of applications that is still not resolved.

The plaintiffs claim the department’s restrictive plant cap makes it impossible to keep up with patient growth, and they want a judge to order Gallagher to lift the agency’s “arbitrary” cap before patients’ health is negatively impacted.

Rodriguez hired O’Donnell to produce the data-driven market report. She determined that about 1.2 percent of the state’s population is currently registered in the program, but another 630,000 residents, or about 30 percent of the state’s population, suffer from at least one of the program’s qualifying medical conditions. O’Donnell expects many of them will begin to enroll in the program.

To support a robust medical cannabis market in New Mexico as demand for medication increases, O’Donnell suggests the state’s 35 current growers will have to increase harvest yields up to 600 percent by early 2018 and be allowed to grow between 27,000 and 37,000 additional plants—more than double the 13,800 plants producers paid to grow between now and August 2017. This is still significantly less than the 320,000 or more plants being cultivated in Colorado each month.

As New Mexico’s aging population increases to 33 percent of the state’s total population by 2030, supply could be further constrained as even more residents will qualify for the program. Other epidemiological trends will also affect the upward demand, O’Donnell says, including the number of patients suffering from PTSD, chronic pain and those with opiate use disorder who plan to petition the department to allow cannabis to be used as way to treat addiction to prescription painkillers.

For now, Rodriguez and others are left to question why the department imposed plant caps since the enabling act in 2007 doesn’t specify a limit. They also wonder why Gallagher is ignoring New Mexico State University scientists’ view that smaller crops are more likely to be affected by various diseases than larger grows.

O’Donnell tells SFR that the health department may not be the best agency to oversee the program. While they do, market penetration or monopolization isn’t something the health department should be concerned about.

“They’re already in over their heads trying to regulate essentially an agricultural crop,” she says.

Nuñez is aware that the DEA, like her daughter’s own doctors, refuses to recognize the drug’s medicinal value—but Nuñez insists it’s a life-saver.

She’d like more places to access it in New Mexico. Better yet, Nuñez would like to have her insurance plan pay for her daughter’s cannabis. But that, she knows, is a different battle for a different day.

By Christopher Ortiz / Albuquerque Business First

Published on August 17, 2016

One of the state’s medical marijuana producers and a New Mexico mother whose infant daughter has a rare form of epilepsy filed a lawsuit against the New Mexico Department of Health Tuesday claiming a shortage in plants is causing direct and immediate harm to patients.

The mother, Nicole Sena, and Ultra Health Inc. are suing over the state’s Medical Cannabis Program’s 450-plant count limit for producers. The plaintiffs claim that because of the state’s restrictive plant count, producers are unable to supply Sena with medicine her daughter needs.

As of last month, the state had 26,568 medical marijuana patients, according to the Santa Fe Reporter.

Ultra Health, a regional medical cannabis company with six locations in New Mexico, has made headlines over the past few months. The company said it was denied a sponsorship at the Albuquerque International Balloon Fiesta this year, but later announced it was going to be the title sponsor of the Gathering of Nations Powwow for the next five years. Ultra Health also said it was denied the right to use the New Mexico True certification on its products by the New Mexico Tourism Department.

According to the New Mexico Department of Health, medical cannabis producers in the state brought in almost $9.9 million in total receipts in the first quarter. The Santa Fe Reporter says Ultra Health brought in about $727,000 of that money.

By Danny Udero / Silver City Sun-News

Published on August 3, 2016

ltra Health was approved for a business license to operate in Silver City and is waiting for an approval from the Department of Health before it can operate in Silver City.

“They have met all the standards for the town so they were issued a license,” Town of Silver City town manager Alex Brown said. “This was done about a month ago.”

According to Phillip Bryson of the Ultra Health corporate office in Arizona, they applied for a permit to the Department of Health to be legally open in Silver City more than a month ago but have received no response.

“It’s been taking upward of 60 days or more for the state to get back to us on anything,” Bryson said. “Even to approve a patient card. As soon as we get an approval back from the state we will know what’s going on.”

Ultra Health is a medical cannabis company who was just denied participation to the New Mexico True Certification program. The program brings national attention to the quality, care and craftsmanship behind products that are uniquely New Mexican. Syzygy Tile in Silver City was just put on the program. Plant-based products must use plants or non-meat agricultural products originating from New Mexico with proper traceable documentation. According to a news release, Ultra Health claims all medical grade cannabis products sold in New Mexico are produced in the state therefore should fully meet the criteria to be considered for the program.

“We are the fastest growing sector in New Mexico’s economy,” Duke Rodriguez, CEO and President of Ultra Health, said. “The medical cannabis industry is the most significant opportunity for the state to diversify its economy and become less reliant on federal government. In comparison, it will create more jobs and more of an economic impact than two of our other favorite industries such as chile and craft microbreweries.”

Aimee Barabe of the New Mexico Tourism Department told Ultra Health in an email, “Cannabis is still illegal under federal law and New Mexico limits consumption for medical purposes only with a prescription. The Tourism Department primarily advertises or markets outside of New Mexico, including the New Mexico True Certified program, and therefore, couldn’t accept the application for participation in the program.”

According to Ultra Health, there are nearly 30,000 New Mexico residents with medical cannabis cards. New Mexico cardholders can legally buy state-approved products in Nevada and soon Hawaii through a program of reciprocity. Ultra Health further stated that the New Mexico cannabis industry is estimated to reach more than $45 million in sales in 2016. The expectation in gross receipts to the New Mexico general fund in 2016 is estimated at $3.5 million by Ultra Health. An additional $3 million should also be contributed due to licensing.

Ultra Health has facilities in Arizona, New Mexico and Nevada.

By Marissa Higdon / Albuquerque Business First

Published on July 29, 2016

Ultra Health has been denied the right to use the New Mexico True certification on its products by the New Mexico Tourism Department.

The certification program allows producers approved by the Tourism Department to use New Mexico True branding on their products. The goal, according to the organization’s website, is to improve the marketing for products that are 100 percent New Mexico made. Qualifying businesses must produce something 100 percent made in New Mexico, or can sell animal products from livestock 100 percent born and raised in New Mexico or market agricultural products 100 percent grown in the state.

Duke Rodriguez, president and CEO of Ultra Health, says his product is 100 percent locally grown and so it should qualify for the program.

The New Mexico Department of Tourism disagrees.

“This program helps place a national spotlight on some of the state’s finest products that are made, grown, and born and raised in New Mexico,” the tourism department told Albuquerque Business First in an email. “For example, handcrafted wool blankets, New Mexico raised beef and chile-infused mustards. These are products that can be enjoyed on vacation and taken back home. As you know, a medical cannabis card is required to purchase that product in New Mexico. Therefore, it’s not available to people outside of the state.”

Rodriguez says, while it’s true that out-of-state visitors can’t buy New Mexican cannabis, he expects that to change in the future. In a few states already, like Nevada, patients with a medical cannabis card can purchase medical cannabis, even if they’re from another state. This practice, called reciprocity, is common with prescriptions. You can go to a pharmacy anywhere in the nation and get your prescription filled.

“Moving forward, patients will have more options because of reciprocity,” Rodriguez said.

He says the company applied for the certification to encourage patients to buy local.

“We wanted the New Mexico True certification to align our product with the quality name of New Mexico,” he said.

Ultra Health will be the title sponsor for the Gathering of Nations Powwow, but the organization was recently denied a sponsorship at the Albuquerque International Balloon Fiesta.

According to the New Mexico Department of Health, medical cannabis producers in the state brought in almost $9.9 million in total receipts in the first quarter. The Santa Fe Reporter reports that Ultra Health brought in about $727,000 of that money.

Ultra Health is the sixth-highest-grossing medical cannabis producer in the state, according to reports obtained by the Santa Fe Reporter.

By Associated Press

Published on July 29, 2016

SANTA FE, N.M. (AP) – State officials say no matter where marijuana is grown it is not eligible for New Mexico True certification.

The Santa Fe New Mexican reports that Ultra Health President Duke Rodriguez says he has been denied the chance to participate in the New Mexico Tourism Department initiative despite the fact that his product – medical marijuana – meets the requirements.

The program is aimed at promoting products made, raised or grown in New Mexico.

Rodriguez, who used to be the Human Services Department Secretary, says he applied for entry into the True program earlier this year.

Tourism Department spokeswoman Heather Briganti says the program was designed for products like wool blankets or raised beef that can be enjoyed and taken home and medical marijuana does not fall in that category.

By Sandra Ramirez / KOAT Action News

Published on July 29, 2016

ALBUQUERQUE —The state Tourism Department said there’s nothing “New Mexico True” about medical marijuana.

The campaign rejected Ultra Health’s application for the coveted certification. Ultra Health is New Mexico’s largest medical marijuana grower.

“Because of its illegal nature, I guess you could say, it was denied,” Ultra Health Vice President Leonard Salgado said.

In a statement, a spokesperson for the Tourism Department said the company helps spotlight projects that are made or grown in New Mexico.

“For example, handcrafted wool blankets, New Mexico-raised beef and chile-infused mustards,” said Heather Briganti, communications director for the Tourism Department.

One popular homegrown crop that is New Mexico True is green chile.

Salgado said his homegrown medical cannabis meets the requirements and is having just as much of an impact.

“Certainly from an economic standpoint, we’re bigger than green chile. The industry alone will do $45 million this year, and when you compare that to green chile, I believe their numbers came in at $41 million,” Salgado said.

Briganti said the goal of the New Mexico True campaign is to attract people from out of state by promoting items that they can enjoy on vacation, and take back home. The problem with medical cannabis is that a medical marijuana card is needed in New Mexico, and is not available to people who live outside the state.

Ultra Health also applied for sponsorship at Balloon Fiesta, but was also denied. The company will be the sponsor of Gathering of Nations for the next five years.