Understanding the business of medical marijuana

Medical marijuana allows Ajay Suman, MD’s cancer patients a safer alternative to opioids for chronic pain. It can be an effective treatment for his terminally ill patients, says Suman, a New York-based anesthesiologist and a professor of anesthesiology and pain medicine at Weill Cornell Medicine, who is qualified to evaluate patients in New York State who want to use marijuana for medical reasons.

As of April 2018, medical marijuana was legal in 30 states as well as the District of Columbia, Guam, and Puerto Rico, according to the National Conference of State Legislators’ website.

Meanwhile, medical associations such as the American Medical Association and the American College of Physicians are calling for more scientific research and trials regarding how medical marijuana actually benefits patients. Many also believe physicians and patients shouldn’t face federal penalties for its use in states where cannabis use is legal.

For physicians who want to include medical marijuana in their practices, knowing their state laws is crucial. Federal law deems marijuana a Schedule 1 substance under the Controlled Substances Act, putting it in the same category as heroin, LSD, and Ecstasy for its potential for abuse and addiction. This makes it a federal offense to distribute marijuana.

Marijuana is used to treat assorted medical conditions including chronic pain, side effects related to cancer, Alzheimer’s disease, and nausea, among others. Marijuana is not covered by medical insurance so patients pay out of pocket for products, which can include marijuana in different concentrations as well as different forms, including edibles, tinctures, and oils. 

Here’s what doctors need to know if they want to prescribe marijuana to patients.

Marijuana and the law

Unlike a medical practice that offers ancillary services, generally a medical practice cannot partner with or incorporate an on-site marijuana dispensary due to marijuana’s federal classification as a Schedule I drug, says Michael F. Schaff, JD, an attorney with Woodbridge, N.J.-based law firm Wilentz, Goldman & Spitzer.

“As of today, any medical practice relationship with a dispensary puts the physician in a position to risk losing their federal Drug Enforcement Agency (DEA) license,” he says.

Angelo J. Cifaldi, JD, RPh, who co-chairs Wilentz, Goldman & Spitzer’s cannabis law group with Schaff, urges physicians to learn about their state’s marijuana laws, suggesting that physicians look at their state’s medical society and understand how to work with medical marijuana following state and federal laws.

For example, notes Cifaldi, some states follow a corporate practice of medicine, which is a doctrine that may limit the practice of medicine to restrict non-licensed entities from practicing medicine; so a physician cannot be hired by a non-physician. A physician, therefore, needs to know state law if working for a dispensary as a medical director or is hired by a dispensary to train the staff, he says.

Cifaldi also points out that physicians may not agree on making medical marijuana available to treat specific conditions, despite state laws identifying which diagnoses might benefit from its use.

Physicians need to learn the proper terms used in their state. Because of marijuana’s status under federal law, physicians cannot write a prescription for a dose of medical marijuana. Instead, physicians write “recommendations” or “orders” (depending on state terminology, and comparable to writing a prescription while complying with state laws) for a medical marijuana card, which the patient then fills at a marijuana dispensary. “Clarify whether you are writing an order or a recommendation,” says Cifaldi. “If you use the wrong term on the wrong form, you may be violating the law.”

Physicians can earn extra income for evaluating a patient’s eligibility for medical marijuana use by charging a fee for the visit, but “a medical practice should not just be charging for writing marijuana prescriptions to qualified patients,” says Schaff. He notes an evaluation should be conducted to determine a recommendation or order first versus simply for a visit to gain access to medical marijuana.

Other ways physicians can earn income from medical marijuana, Schaff says, include working at a dispensary, if state laws permit it, or consulting with a dispensary or one of the growing number of marijuana-related companies. Physicians who evaluate patients for medical marijuana cards may see patient volume increase as new patients come into the office for evaluations.

There are other things physicians must follow to maintain compliance with state laws. This can include things like checking with the landlord to determine if working with medical marijuana violates the terms of the practice’s lease or speaking to the practice’s medical partners to ensure that one physician’s views regarding marijuana are consistent with others in the same practice, because there may be limitations on the forms of treatment in company documents, says Schaff.
 

Banking and taxation

It can be tough for companies that work with medical marijuana to remain compliant with all the financial considerations by and between financial institutions, state licensing agencies, and licensees, particularly as they cross state lines. Since the law varies from state to state, banking options can be challenging, which physicians should keep in mind if they are considering working with marijuana as a way to increase business to an existing medical practice.

Nathaniel Gurien, the founder and CEO of FINCANN, the Cannabis Banking Financial Network, helps businesses in the marijuana industry find banks that are comfortable providing checking accounts and/or MasterCard/Visa credit care processing to marijuana-related businesses.
Often, Gurien says, banks refuse to open checking accounts or provide merchant processing for marijuana-related businesses because of marijuana’s stigmatized reputation. The few banks that do will charge relatively high fees to cover the additional risk and compliance-related costs of providing service to these customers, he says.

Gurien notes, however, that there are more cannabis-friendly banks around the country today than in prior years and that access to such banks is improving as medical marijuana becomes more mainstream. A bank could potentially notice if a medical practice is now advertising medical marijuana evaluations through the practice’s website, and a bank’s representative may reach out to its physician customer and terminate the banking relationship if the bank has a problem with marijuana-related businesses.

With any kind of marijuana business, even if it’s illegal, the federal government taxes it, says Eric Foster, director of strategy for the Banks & Company Cannabis Practice Group. “The federal government wants to minimize the tax write-offs of being in that business because cannabis is still a Schedule 1 drug.”

As a result, those who grow, process, or sell marijuana products cannot deduct or write off many expenses related to the business, which reduces the potential return of running the business, says Foster. (Expenses related to the cost of cannabis can be written off, he notes.) However, this law doesn’t apply to physicians who are qualified to evaluate patients for medical marijuana cards, as they are an ancillary service for the industry, Foster notes. Physicians should still check with their practice’s tax advisor just to be sure, he adds.

Ultimately, those who believe that medical marijuana is a valid form of treatment can decide how to best get involved with it. Some physicians may restrict their practice to patients with a specific condition. Others may decide to evaluate patients with any of the multiple diagnoses approved by state laws for medical marijuana treatment, despite its current federal legal status. And while some states have approved the use of medical marijuana, that might change in the future.

“I’m prescribing medical marijuana to patients with terminal cancer,” says Suman. If new legislation makes medical marijuana illegal in New York State in the future, Suman says he isn’t worried about prosecution. “In three or four years, if my charts are audited, I have no question that I am covered. I don’t think people will come after someone prescribing it for terminal cancer patients.”