For Medical Marijuana Companies, financial assistance during COVID-19 Crisis is a Cure they can’t get

By Justin Vellucci
Pittsburgh Current Contributing Writer

Chris Kohan is staring down some tough economic decisions.

His business, which boasts three Pittsburgh-area locations, is doing well, all things considered, but he continues to dole out “COVID pay” to a handful of employees worried about coming to work due to health concerns. Pennsylvania has deemed his business “essential” during the pandemic but he is not eligible for Small Business Administration (SBA) or Paycheck Protection Program (PPP) funding from the federal government. And his tax situation is so complicated, he’s hoping Harrisburg and Washington, D.C. help resolve it.

“In this time, the one thing we’ve learned is we are an essential business,” Kohan said. “The fact that we’re not treated like an essential business is troubling.”

Kohan doesn’t run a health clinic or a manufacturing line dedicated to churning out PPE. He is part of Pennsylvania’s fastest-growing industry, one that has generated more than $520 million in sales in the past two years. 

Kohan dispenses medical cannabis and, like many in the industry in the age of COVID-19, he needs help.

Kohan, who previously worked in media sales, is the CEO and co-founder of The Healing Center, which runs dispensaries in Monroeville, Washington and Cranberry. He doesn’t prefer to talk about The Healing Center in dollars and cents.

“Our business has grown – I’ll tell you that,” he laughed.

On March 20, the state Department of Health announced temporary suspension of some restrictions on medical cannabis, including the waiving of purchase limits, the elimination of caregiver background checks, and allowing for remote consultations for renewal of medical cannabis ID cards.

Since then, The Healing Center locations have been operating on a different level, Kohan said. They were some of the first businesses in the region to install customer-separating Plexiglass dividers and use electrostatic fogging to clean overnight. They only allow a maximum of 10 people, including staff, in their buildings at once. People with special needs can pick up their medical cannabis curb-side. Security is jacked up.

But because marijuana, federally, is listed as a Schedule I drug – the same as heroin and LSD – businesses directly or indirectly related to the sale of it are not eligible for federal loans from the SBA. Janet Heyl, a spokesperson of the SBA’s Western Pennsylvania District Office, declined the Current’s request to interview the head of the district office.

“Since SBA doesn’t provide federal loans to that industry, we would not be able to comment,” Heyl wrote in an email to the paper.

But, in Pennsylvania, medical cannabis is no small industry. 

Nearly 300,000 Pennsylvanians – a group roughly the size of the population of the state’s second-largest city – are registered for the medical marijuana program, health department spokesman Nate Wardle told the Current recently. More than 295,000 patients have been certified for the program and more than 183,000 patients have active certifications.

There is a growing industry that serves that population – more than 1,300 certifying practitioners, 80 operational dispensaries and 23 growers and processes, Wardle said.

“In the midst of COVID-19, we need to ensure medical marijuana patients have access to medication,” state Secretary of Health Dr. Rachel Levine said in a press release. “We want to be sure card-holders in the medical marijuana program can receive medication for one of 23 serious medical conditions during this difficult time.”

The nation’s medical marijuana market employs 240,000 – making it nearly five times the size of the U.S. coal industry in terms of manpower – and is estimated to reach nearly $8 billion in sales in 2020 with annual growth of around 17 percent. 

Nearly four in every five U.S. states currently have some type of medical marijuana program. An estimated 3 million Americans legally use medical cannabis.

“The cannabis industry, like all the essential businesses, is suffering but they’re not able to access the same resources,” said Michael Sampson, a partner at Leech Tishman Fuscaldo & Lampl and co-chair of that firm’s cannabis practice group. “On one hand, you have the cannabis industry deemed essential and, on the other hand, they can’t get an SBA loan.”

Industry advocates in the nation’s capitol take that criticism even a step further.

“The cannabis industry employs nearly a quarter of a million Americans and has been deemed essential in state after state, yet many businesses will not survive the pandemic without help,” said Morgan Fox, a National Cannabis Industry Association spokesperson. “They already face disproportionate financial burdens during normal conditions, and the pressures created by the coronavirus response are putting them at an even greater disadvantage and jeopardizing their ability to provide vital healthcare services, or to recover at the same pace as other industries.”

Some people in Washington, D.C. are paying attention. Last year, the U.S. House of Representatives passed the Secure And Fair Enforcement (SAFE) Banking Act of 2019. If signed into law, the act “prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate marijuana-related business.” The matter was referred to the U.S. Senate’s committee on banking, housing and urban affairs in September.

U.S. Rep. Mike Doyle, PA-18, doesn’t mince words about the SAFE Act, which he co-sponsored.

“I believe that cannabis-related businesses should be eligible for SBA assistance like the Paycheck Protection Program,” Doyle recently told the Current. ”I would support legislation to change the SBA policy that prevents these businesses from receiving federal loans and other financial support.”

“On a broader level,” Doyle added, “I believe that the federal laws regulating cannabis as a Schedule 1 drug are outdated and need to be changed. The same goes for our criminal justice system, which has filled our prisons with too many individuals – disproportionately minorities – for low-level non-violent offenses linked to marijuana.”

There also is movement in Harrisburg to address the unequal treatment.

State Sen. Daylin Leach, D-Montgomery, has introduced a measure to separate IRS Tax Code 280E – which places restrictions on banking for medical cannabis businesses – from state law, so Pennsylvania-approved medical marijuana businesses could at least make certain deductions on their state taxes. He hopes the bill, which may appeal to tax-cutting conservatives and social liberals, gains traction when legislators return to Harrisburg in person.

“It would be helpful if the federal government would repeal 280E,” Leach told the Current. “In the absence of action, we can only do what we can do.”

Patrick Nightingale of the advocacy group Pittsburgh NORML feels there are big-idea issues at play here. 

“The cannabis industry does not have adequate access to bankruptcy relief or to normal rates of banking,” said Nightingale, a criminal attorney in private practice. “It doesn’t surprise me that compromises for SBA could exclude the cannabis industry. There are plenty of conservatives in Congress who would turn a blind eye to this nation’s fastest-growing business.”

Kohan, the southwestern Pennsylvania dispensary co-founder, is not holding his breath.

“Our business can’t get loans – all these things that are struggles for other businesses get heaped onto the patient,” Kohan told the Current. “It just drives the price of the medicine higher. The only person who gets punished is the person with cancer, the person with epilepsy.”

One Comment

  • John Clark says:

    If this company receives any federal aid, then every other drug dealer working a corner or alley would qualify. Marijuana remains a prohibited drug under federal law, and by that standard, Kohan is a drug dealer.

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