Pa. court dismisses another challenge to medical marijuana program

A Pennsylvania appellate court has passed up another opportunity to judge the fairness of the state Department of Health's medical marijuana permitting process.

The Commonwealth Court on Friday dismissed a lawsuit filed by Elemental Health Group LLC against the Health Department and permit winner Terrapin Investment Fund 1 LLC.

Elemental Health, of Conshohocken, last year applied unsuccessfully for a permit to operate a growing and processing facility in central Pennsylvania. But Elemental claimed it should have earned a higher score than one of the regional permit winners, Terrapin, because the Health Department's evaluation committee allegedly awarded Terrapin points for misrepresenting where Terrapin planned to open its Clinton County facility.

Applicants were awarded points for choosing facility locations in financially distressed municipalities as defined by a state law called Act 47. According to its application and court records, Terrapin said it was opening a facility in a financially distressed municipality even though the community in question, Pine Creek Township, is not considered a financially distressed municipality under Act 47.

The Health Department awarded 12 grower/processor permits and 27 dispensary permits in June 2017. Within two weeks, Elemental Health (among 140 other unsuccessful applicants) filed an administrative appeal with the Health Department disputing the denial of its permit application. It argued that Terrapin's application should have been disqualified for application inaccuracies — leaving Elemental Health, the next highest scorer in the region, with the permit.

Like Bethlehem-based Keystone ReLeaf, Elemental Health argues that the Health Department has not provided an adequate administrative appeal process. Hearing officers overseeing administrative appeals have prohibited unsuccessful applicants from focusing on content in competitors' applications; each unsuccessful applicant must convince hearing officers that the evaluation committee misscored its particular application, not competitors'.

Consequently, Elemental Health was "precluded from presenting the thrust of its argument" related to the misstatement in Terrapin's application, its attorneys argued, giving Elemental Health justification to take its case to the Pennsylvania Commonwealth Court.

The Court already dismissed Keystone ReLeaf's case in April on the grounds that Keystone needs to actually complete the administrative appeals process before it can challenge its ineffectiveness before the Court. In his opinion Friday, Judge P. Kevin Brobson said Elemental Health's case is "indistinguishable" from Keystone ReLeaf's.

As it told the Bethlehem firm, "this Court finds itself concerned regarding the troubling allegations cast by Elemental, particularly those that, if true, might later prove to have unreasonably hindered Elemental's ability to develop fully a record to support its challenge to its non-selection," Brobson wrote. "We nonetheless conclude that judicial intervention is unnecessary until such a time that Elemental has exhausted its avenues of administrative relief."

Despite the unresolved legal issues, the Health Department in November gave Terrapin the green light to begin growing marijuana at its Pine Creek facility. Most of the companies issued permits last year, including dispensaries Keystone Canna Remedies of Bethlehem and Mission Pennsylvania of Allentown, have begun operations.

The Health Department has also moved forward with the second round of permitting. Earlier this month, the department released logs of the 167 dispensary permit applications and the 91 grower/processor permit applications. Thirteen more grower/processor permits and 23 dispensary permits are at stake.

Representatives of the Health Department, Elemental Health and Terrapin were not immediately available to comment Friday.

awagaman@mcall.com

Twitter @andrewwagaman