Oregon Marijuana Deja Vu

An applicant for one of the state’s nine medical marijuana pharmacy permits has filed suit against the state Board of Pharmacy over its decision to pick the fourth-place finisher for the license in the New Orleans region.

Rx Greenhouse, run by pharmacist and medical marijuana dispensary owner Sajal Roy, of Maryland, filed suit in Baton Rouge court arguing the board “improperly” issued the New Orleans region license.

Roy is asking the court to vacate the board’s decision awarding the medical marijuana license for the region to H&W Drug Store, the fourth-place finisher in a competitive selection process. The application review committee that ranked H&W fourth recommended the board pick Roy’s firm for the region’s license. According to the suit, the head of the committee told Rx Greenhouse it was the highest-ranked applicant in the state.

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"You don’t see boards going against the recommendations of subcommittees, unless there’s something major," Roy said, adding he's served on boards of pharmacy elsewhere. "You just don’t see it. It doesn’t happen. It's usually a formality to bring it before the board for a vote."

The director of the pharmacy board said he could not comment on pending litigation. The chairman of the Pharmacy Board hearing panel that voted to hand out the nine licenses, Morris Rabb, said he was not aware of the lawsuit and declined to comment.

The Pharmacy Board created an application review committee to rank the dozens of pharmacists, business owners, marijuana consultants and others who applied for the nine exclusive licenses. Earlier this year, the committee made recommendations to the board by ranking each applicant in each region based upon criteria laid out by the board. At hearings in April, the board — aside from those on the selection committee, who were recused — bucked the committee's recommendations several times.

The board’s move to award H&W the license was “arbitrary and capricious,” the lawsuit said, and ignored the recommendations of the board’s own experts. The suit also argued the board  did not cite “any piece of evidence” to justify its decision.

Roy also is asking the court to expedite the proceedings. He said he does not intend to delay the process and prevent patients from accessing the medication, which is why he is asking for expedited action in court.

Ruston Henry, the owner of H&W Drug Store in New Orleans, made an impassioned speech on the day of the board vote last month, asking board members to reject the three applicants ranked ahead of him and award him the license for the region. Henry pitched his company as the longest continuously-operating African-American-owned pharmacy in New Orleans. The speech apparently won over the hearing panel, which picked H&W for the region's exclusive permit.

Henry's application was far smaller than Rx Greenhouse's, and didn't measure up based on the board's criteria outlined in the application, Roy said.

Reached by phone, Henry declined to comment.

During hearings that day and the following day, the Pharmacy Board handed out all nine of the initial licenses for marijuana pharmacies.

Louisiana pharmacy board issues marijuana pharmacy license for Baton Rouge region

In all, the board members rejected the review committee’s recommendations in five of the nine regions. The votes shocked several of the applicants, many of whom saw the final hearings as a formality after the rankings were set.

Peter Prevot’s Bayou Therapeutic Pharmacy was ranked first by the selection committee in the Houma region, but the board passed over his company in favor of the third-place firm.

“We were completely blindsided,” Prevot, a New Orleans-based CPA who has worked with medical marijuana firms elsewhere, said.

Prevot raised many of the same questions that Rx Greenhouse’s lawsuit raised, including the biggest underlying question of why the board passed over the higher-ranked applicants. Prevot said he decided not to take legal action against the board because he didn’t want to delay the process, and indicated a desire to potentially operate in the medical marijuana space in Louisiana in the future. Still, he suggested he believes he would have a case.

“We do respect the board’s authority in its decision, however we do see major flaws in their decision-making process,” he said. “We’re not happy. We don’t agree with this. We feel like there were serious issues in the process.”

Board members pointed generally to new information received after the selection committee recused itself from the proceedings. Several applicants submitted additional documents as evidence after the rankings, and some made lengthy presentations the day of the vote. 

Losing out on the possibility of opening a pharmacy, at least initially, was not the only downside to those passed over.

The board sent letters to each applicant after the ranking process, telling each how they fared in the selection ranking and explaining that only one pharmacy would be picked for each region. The other applicants that stayed in the running would be rejected, the letters said, and the denial would be reported as an “adverse action” to the National Practitioner Data Bank. The letters told applicants they could withdraw by Feb. 16 to prevent the report.

That demerit also rankled those placed first, who figured they had no reason to drop out of the running to protect their professional status.

A 10th license is expected to come later in a high-demand area of the state, under current law.

Follow Sam Karlin on Twitter, @samkarlin.