To:  Hon. Terry E. Branstad and staff
From:  Threase Harms, Dane Schumann & Emily Hockins on behalf of MedPharm Holdings
Date:  May 1, 2017
Re:  Line Item Veto Justification and Requests for HF 524

Item Veto Justification

This memo explains the justification for why House File 524 should be subject to the governor’s line item veto.  It also explains which portions of the bill the governor should line item veto.

I.  Process for HF 524

House File 524 was approved by the House Public Safety Committee and the Senate Judiciary Committee.  It does not contain the words “making an appropriation” in the bill’s title, but the bill does impact the Governor’s ability to budget.  It does so in at least three ways:

II.  Precedent for Item Veto

In 2013, Governor Branstad used the item veto to strike provisions from Senate File 396.  That bill did not go through either Appropriations Committee nor did it have “making an appropriation” in the title.  The Governor believed that it impacted his ability to budget.  Here is the item veto message: https://governor.iowa.gov/sites/default/files/wp-content/uploads/2013/06/SF396.pdf

III.  Portions Requested to be Item Vetoed and Justification

A.  Sections 16, 17 and 18:

These sections contain provisions that contemplate Iowa residents obtaining medical cannabis from out-of-state sources.  The governor should line-item veto these provisions because they will likely trigger federal enforcement of The Controlled Substances Act and implicate the U.S. Constitution’s restrictions on states regulating interstate commerce.

The federal government has, somewhat haphazardly, given states the ability to implement medical cannabis programs without fear of federal enforcement of The Controlled Substances Act (CSA) and other federal laws that restrict possession, manufacture and sale of cannabis.  The U.S. Department of Justice “Cole Memo” from August of 2013 provides the first mechanism for affording this era of CSA leniency.  Congress has also intervened, providing a rider in appropriations bills that bar the federal government from using federal funds to enforce federal laws that would prevent states from implementing their own medical cannabis programs.[1]

i.  The Cole Memo

HF 524 places Iowa patients and Iowa’s medical cannabidiol program outside the protections of the Cole Memo, exposing Iowans to federal prosecution of the CSA and possibly disintegrating the state’s entire medical cannabidiol enterprise.  The Cole Memo articulates the federal government’s eight enforcement priorities in light of various states’ independent policy decisions to establish medical cannabis programs.[2]

In jurisdictions that have enacted laws legalizing marijuana in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of marijuana, conduct in compliance with those laws and regulations is less likely to threaten the federal priorities set forth above.  Indeed, a robust system may affirmatively address those priorities by, for example, implementing effective measures to prevent diversion of marijuana outside of the regulated system and to other states, prohibiting access to marijuana by minors, and replacing an illicit marijuana trade that funds criminal enterprises with a tightly regulated market in which revenues are tracked and accounted for.
[. . .]
If state enforcement efforts are not sufficiently robust to protect against the harms set forth above, the federal government may seek to challenge the regulatory structure itself in addition to continuing to bring individual enforcement actions, including criminal prosecutions, focused on those harms.

Memorandum from James M.  Cole, Deputy Attorney General, U.S. Dept. of Justice, to all U.S. Attorneys (August 29, 2013) (https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf)

The memo draws a bright line on state borders, and HF 524’s contemplation of out-of-state acquisition and cross-state transport of medical cannabis threatens to cross those lines with reckless and repeated disregard of the leniency afforded to states in this arena.

Sections 16, 17 and 18 are directly contrary to the third enforcement priority — preventing diversion of marijuana between states.  Section 16 commands that medical cannabidiol “shall be obtained from an out-of-state source” or a “bordering state” if it is unavailable in Iowa.  Section 18 allows patients and their caregivers to register in Minnesota “as a visiting qualified patient or primary caregiver and may register with one or more medical cannabis manufacturers registered under the laws of Minnesota.” These sections, if acted upon, would clearly place any patient, caregiver, medical cannabis manufacturer or dispensary squarely within the sites of the DOJ, as they would be diverting marijuana to other states.  It is also easy to imagine such activity being used as a pretext for trafficking other illegal drugs across state lines, violating the Cole Memo’s fourth enforcement priority.

Section 17 makes the problem worse, as it requires the Department of Public Health to select “up to two out-of-state medical cannabidiol dispensaries from a bordering state to sell and dispense medical cannabidiol to a patient or primary caregiver  . . . .”  It is difficult to imagine how Iowa could even arguably maintain it has a “strong and effective regulatory and enforcement system to control the cultivation, distribution, sale and possession of marijuana” when two of the entities responsible for cultivating, distributing and selling medical cannabis lie safely outside of the state’s border and, in many important ways, its legal jurisdiction.[3]  Even if the state can muster some level of out-of-state regulatory oversight and enforcement for dispensaries and manufacturers, it is very likely insufficient by Cole Memo standards.

ii.  Rohrabacher-Farr Amendment

The Rohrabacher-Farr Amendment would likely provide no protection from federal prosecution for Iowans receiving medical cannabis and bringing it across state lines.  The amendment reads:

None of the funds made available in this Act to the Department of Justice may be used, with respect to the [states with medical cannabis or cannabidiol programs, including Iowa], to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.

Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, § 542, 129 Stat. 2242, 2332-33 (2015)

The Ninth Circuit Court of Appeals used this language to stop a federal CSA prosecution in California last year.[4]  In doing so, it held the rider “prohibits DOJ from spending funds from relevant appropriations acts from the prosecution of individuals who engaged in conduct permitted by the State Medical Marijuana Laws and who fully complied with such laws.” The rider clearly contemplates, as the Ninth Circuit did, that actors must strictly obey state law to enjoy the protection it affords.

Section 17 requires the DPH to select up to two out-of-state medical cannabidiol dispensaries to sell and dispense cannabis to Iowa patients, and sections 16 and 18 ensure Iowans will likely go out of state to get their medicine.  It is impossible for those dispensaries to sell medical cannabis to Iowans without violating their state’s law.  Minnesota’s medical cannabis program provides a “patient” with the ability to receive and use medical cannabis.  It defines a “patient” as “a Minnesota resident who has been diagnosed with a qualifying medical condition . . . .”  A Minnesota — or any other out-of-state dispensary — risks putting themselves and Iowa patients in federal legal jeopardy if they follow the prescriptions of sections 16, 17 and 18.[5]  For those reasons, the governor should remove these sections from the bill with his line-item veto power.

iii.  Interstate Commerce / Dormant Commerce Clause

Congress regulates marijuana throughout the country with its ability to regulate and harmonize interstate commerce.  Suspending for the moment — as Sections 16, 17 and 18 of the bill do — the fact that Congress still forbids interstate commerce of marijuana products, it is important to consider how the bill nevertheless manages to run afoul of federal law in other ways.  Unless a state is itself a market participant, the U.S. Constitution prohibits them from discriminating against interstate commerce.[6]  When a statute facially discriminates against interstate commerce it is often a constitutionally fatal defect, triggering federal courts to examine the discrimination with the strictest of scrutiny for any legitimate local purpose and the absence of nondiscriminatory alternatives.  A state’s policy goals cannot be attained by “depriving competitors, including out-of-state firms, or access to a local market . . . .”[7]  Section 18 allows Iowans to register in Minnesota as a “qualified patient or primary care giver” to obtain medical cannabis in Minnesota but nowhere else.  Section 17 requires DPH to issue dispensary licenses to dispensaries from within a “bordering state”[8] but from nowhere else.

The bill facially discriminates against in-state cannabidiol dispensaries by establishing licenses for out-of-state dispensaries to sell first.  It then provides that cannabis can be obtained from an out-of-state source but only if it’s unavailable in Iowa or its border states.  Of course, the bill provides that Iowa patients can register only in Minnesota — which effectively limits out-of-state sources to those found in Minnesota.  Not only does the bill facially discriminate against interstate commerce and, by extension, the Dormant Commerce Clause, its own wording reveals no justification for doing so.  Iowans may register only in Minnesota (a border state), but the bill clearly contemplates Iowans obtaining cannabis from other states: “if not legally available in this state or from any other bordering state, [medical cannabis] shall be obtained from an out-of-state source.”

Any policy considerations outside of the bill also fail to reveal any justification for the discrimination.  HF 524 limits the medical cannabis THC levels to three percent or less, but Minnesota, and Illinois have no THC cap for cannabis distributed under their program.[9]  Any Iowa patient with medical cannabis from Minnesota or Illinois containing more than three percent THC would possess a product that fails to comply with Section 5’s definition of medical cannabis, depriving them of the bill’s affirmative defenses under Section 15.  That section repeatedly isolates from prosecution or provides affirmative defenses for manufacturers, distributors, patients and caregivers that interact with “medical cannabidiol pursuant to this chapter” — cannabidiol that is very different from what is available in Minnesota and Illinois.

The only imaginable justification for the out-of-state and in-state discrimination under the bill would be a legislative desire to bar the cultivation and availability of high-THC marijuana in Iowa while allowing patients to receive it elsewhere.  But the legislation fails to accommodate that justification, as it identifies only medical cannabidiol as identified within the bill — with three percent or less THC — as eligible for the privileges and protections within the legislation.  And it identifies Minnesota as the exclusive state where an Iowan may register to obtain medical cannabis outside of Iowa.[10]  Another logical justification could have been the legislature’s desire to limit access to medical cannabis to only those states with similar THC limits.  But it also makes no provision for that, instead setting a tiered priority order among Iowa cannabidiol, border-state products and out-of-state products without any regard for the product THC levels available in the latter two groups of states.

In the final analysis, sections 16, 17 and 18 facially discriminate against interstate commerce and likely violate the Dormant Commerce Clause doctrine of the U.S. Constitution while providing no coherent policy objective in doing so.  These severe weaknesses within the bill make it susceptible to challenge from medical cannabis manufacturers and dispensaries from other states that may choose to exploit it and selfishly pursue their own agenda.  The governor should veto these provisions to stem those risks and ensure a harmonious program that matches the approach taken in every state with comprehensive medical cannabis legislation.

iv.  Conclusion

Focusing on the Cole Memo, Rohrabacher-Farr Amendment and Constitutional Law detracts from perhaps the most important element to consider: no state has authorized out-of-state residents to obtain medical marijuana within their borders.  And no state is likely to do so.   Minnesota and Illinois have taken no steps to that end.  New Mexico’s governor recently vetoed an expansion of her state’s medical cannabis legislation that contemplated reciprocity with patients from other states.  In doing so, Governor Martinez wrote:

The third concern is the allowance for reciprocity with patients from other states.  About 28 states have a medical cannabis program, and each of them has different standards.  Therefore, the bill allows reciprocity based on standards set in another state.  It also fails to specify a time limit for reciprocity.  Additionally, currently, producers are unable to sell to an individual without a New Mexico registry identification card, which creates a challenge for selling to a patient from another state.  Not all states issue identification cards, making the verification of enrollment in another state almost impossible to do.  Together, these factors may erode program integrity.

House Executive Message No. 59, Letter to Hon. Brian Egolf, Jr. from Gov . Susana Martinez (April 7, 2017) (https://www.nmlegis.gov/Sessions/17%20Regular/ExecMessages/house/HB0527GovMsg.pdf)

Iowa should heed the advice of 27 other states and not start down the uncertain, treacherous and wholly unnecessary path of interstate medical marijuana.  For those reasons and all of those posited above, the governor should item-veto sections 16, 17 and 18.

B.  Section 5, definition of “Debilitating Medical Condition”, subsection 2, part b: strike the words “with severe and persistent muscle spasms” following “Multiple sclerosis”.

It is unnecessary, illogical and an undue intrusion on a physician’s medical judgment to require multiple sclerosis patients to manifest symptoms of their disease while those with HIV/AIDS, Crohn’s disease, amyotrophic lateral sclerosis and Parkinson’s Disease need not manifest symptoms as a prerequisite to obtain medical cannabis.

C.  Section 5, definition of “Medical Cannabidiol”, subsection 6: strike the words “ that has a tetrahydrocannabinol level of no more than three percent and that is delivered in a form recommended by the medical cannabidiol board, approved by the board of medicine, and adopted by the department pursuant to rule.”

The legislation identifies medical conditions and diseases that cannot be treated with medical cannabis that falls below three percent THC.   Untreatable pain, for example, often requires products with THC dosages exceeding five percent.  Treatment for multiple sclerosis often requires THC dosages above three percent.  Treatments for some epileptic seizers require THC-CBD ratios that vary widely, depending on the type of epilepsy a patient has and their metabolism.  Removing the THC cap will ensure greater patient utilization and access, which ultimately will ensure an economically viable program.

Removing the cap also ensures the legislature’s chosen panel of experts makes the medical decisions they want them to make.  Section 14, subsection 2, part c gives the DPH the ability to regulate the “form and quantity of medical cannabidiol allowed to be dispensed to a patient or primary caregiver.”  The DPH regulates in consultation with the new Medical Cannabidiol board, made up of specialists in the fields identified in the legislation.  If the Legislature feels the board and the DPH have allowed THC levels to reach an unacceptable level, the Administrative Rules Review Committee can intervene and provide an opportunity for legislators to formally object.

Removing the recommendations, approvals and adoptions contemplated by the three state entities is recommended because it is repetitive, as seen by the reference to Section 14 in the paragraph above.[11]

D.  Section 7, federally approved clinical trials, subsection 7: strike the subsection.  It is a physician’s role to ensure that patients are receiving proper, and if necessary, non-simultaneous treatment under a clinical trial.  It is not the legislature’s role.  The subsection would also preclude researchers from learning about what side effects, if any, medical cannabidiol has when consumed simultaneously with drugs that undergo a federally approved clinical trial.

E.  Section 8, medical cannabidiol board duties, subsection 1, part a: strike “and one representative from law enforcement.”  A law enforcement representative will provide no meaningful input to the board’s decisions required under subsection 3 of section 8, which contemplate a series of medical and pharmacological decisions that no law enforcement officer can be reasonably expected to have training in.

Strike part d, which defines “representative from law enforcement”.

F.  Section 8, subsection 4: strike the subsection.  This provision relates back to part C of this memo.  Inserting the Board of Medicine into decisions about medical cannabis is unnecessary given that HF 524 establishes a medical cannabidiol board that, along with the DPH, will perform the most important regulatory and decision making functions of the program.  The Board of Medicine’s involvement introduces another unnecessary layer of bureaucracy for the program to adapt and serve the needs of Iowans.  The medical cannabidiol board will be filled with experts specializing in treating the patient population contemplated by HF 524.  The DPH will rely on its expertise in consultation with the new board to effectively govern the program.

The Board of Medicine was established in 1886 and regulates the practice of medicine, surgery and acupuncture under the authority of Iowa Code chapter 17A, 147, 147B, 148, 148E, 272C and Chapter 653 of the Iowa Administrative Code.  It is charged with enforcing these laws and rules to protect the public from licensees who do not practice medicine and acupuncture within prevailing and acceptable standards of care.  Making recommendations on access to medical cannabis is not within the scope of the board’s duties as a licensing and disciplinary board.

G.  Section 8, subsection 6: strike the subsection.  This subsection is unnecessary given the desired line-item veto described in part C.

H.  Section 9, subsection 3, part b: strike “’s employees”, to instruct the department to consider only the qualifications of the medical cannabidiol manufacturer generally.  Many, if not all, applicants will likely not have sufficient employees for the DPH to consider.  Making the identified strike will allow the department to nevertheless consider the manufacturer’s qualifications.  A similar strike should be made to section 11, subsection 2, part 2 pertaining to dispensary employees.  The same circumstances are likely to apply for dispensaries, and the department will find this requirement difficult to comply with.

I.  Section 9, subsection 3, part e: strike the part.  As mentioned above, THC levels beneath three percent cannot adequately treat most of the disease conditions identified in HF 524.  In fact, it will be illegal for an Iowan or an Iowa entity to have medical cannabis product exceeding three percent THC.  Therefore, section 9(3)(e) command that the DPH consider a manufacturer’s ability to provide cannabis at the recommended dosages for each condition and demonstrate a range of chemical compositions that will be medically beneficial all but guarantees an out-of-state entity will be selected for the RFP.  Minnesota or Illinois manufacturers can legally grow product in their state with THC levels they deem medically appropriate.  Iowa manufacturers will be unable to.  Unless this part is removed, any Iowa manufacturer bound by HF 524 would face a competitive handicap.

J.  Section 10, subsection 12, part c: strike the part.  It is unnecessary to impose legislation that would ban production of “edible medical cannabidiol products”.  First, the phrase is vague as many products are consumed orally, and it is unclear whether those products would fall within this ban.  Second, Section 14, subsection 2, part c gives the DPH the ability to regulate the “form and quantity of medical cannabidiol allowed to be dispensed to a patient or primary caregiver”.  Because the wording is vague and the DPH retains the ability to provide a more nuanced and educated definition that can balance medical necessity against the concerns of products becoming attractive to children or teenagers, the part should be stricken.

K.  Section 13, fees: following “cannabidiol manufacturer and medical cannabidiol dispensaries,” strike the words “for the cost of salaries for two agents of the division of criminal investigation of the department of public safety to inspect medical cannabidiol manufacturers and medical cannabidiol dispensaries.”

The fees charged to manufacturers and dispensaries to pay DCI agent salaries will be passed along to consumers, needlessly raising costs for consumers.  It is also a poor practice for public safety officials to be paid from the proceeds of the very entities they’re supposed to regulate.  If an agent whose salary depends upon the existence of cannabidiol manufacturers and distributors detects a violation that could terminate those entities, and therefore, his salary, how likely would he be to prosecute that violation?

L.  Section 14, subsection 2, part c: strike “and approved by the board of medicine”.  As mentioned above in part C and F, it is unnecessary to involve the Board of Medicine in this program.

M.  Section 14, subsection 2, part h: strike the part.  Establishing a real-time, statewide medical cannabidiol registry management sale tracking system is very expensive.  It will require state funding for startup costs for which there was no appropriation provided.  The cost of the program will ultimately be passed onto consumers and unnecessarily raise the price of medical cannabidiol.  Part h was likely inserted to ensure patients do not “shop” for doctors or dispensaries to provide them with more cannabis than would otherwise be allowed.  The DPH could, however, address this problem through rule by requiring a patient to receive cannabis only through one dispensary.

IV:  Conclusion

Thank you for your time and thoughtful attention to this memo and your support of HF 524.  Please contact our office with any questions or comments you may have.  Our contact information is below.

Threase Harms
Threase at advocacyiowa dot com

Dane Schumann
dane at advocacyiowa dot com

Emily Hockins
emily at advocacyiowa dot com

Footnotes

[1]  The budget rider is called the "Rohrabacher-Farr amendment", and it has bound the DOJ since it was originally passed in 2014.  It is poised for re-approval as Congress completes its work to pass appropriations legislation.  See U.S. v. McIntosh, No. 15-10117, 2016 (U.S. 9th Cir. 2016) (available at https://cdn.ca9.uscourts.gov/datastore/opinions/2016/08/16/15-10117.pdf)

[2]  The Cole Memo’s eight enforcement priorities are:

  • Preventing the distribution of marijuana to minors;
  • Preventing the revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;
  • Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
  • Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
  • Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
  • Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
  • Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
  • Preventing marijuana possession or use on federal property.

(Emphasis added)

[3]  Even if an out-of-state manufacturer could be held legally accountable in Iowa for sales conducted outside of Iowa’s borders, the DPH would have an expensive and difficult time executing its regulatory and enforcement priorities established in sections 9, 10, 11, 12 and 14 of the bill.  Indeed, it is unclear whether those sections even pertain to out-of-state manufacturers or dispensaries as provisions for selecting in-state manufacturers and dispensaries preface them.

[4]  See U.S. v. McIntosh, No. 15-10117, 2016 (U.S. 9th Cir. 2016) (available at https://cdn.ca9.uscourts.gov/datastore/opinions/2016/08/16/15-10117.pdf)

[5]  Indeed, Section 16 and 17 require Iowans to receive medical cannabis from across state lines and require an out-of-state dispensary to provide it.  Section 16 prescribes that if cannabis is not available in Iowa, it shall be obtained from an out-of-state source.  Section 17 requires the DPH to issue requests for proposal from out-of-state dispensaries with the hope of selecting and licensing them by December 1, 2017.  In-state dispensaries licensed pursuant to Section 11 would be selected and licensed by April 1, 2018 and must agree to supply cannabis to patients by December 1, 2018.  The bill’s drafters fully contemplated out-of-state sales and interstate transit of cannabis as the exclusive means for Iowans to obtain the product.

[6]  Hughes v. Oklahoma, 441 U.S. 322 (1979).

[7]  C & A Carbone, Inc. v. Town of Clarkstown, New York, 511 U.S. 383 (1994).

[8]  The bills refer to § 331.910 to define bordering state, which includes only the states sharing a physical border with Iowa.

[9]  HF 524, §5, definition of "medical cannabidiol"

Minnesota Code § 152.22(5) (defining medical cannabis by simply identifying the species of plant, specifying the delivery method and providing no THC limit).

Illinois Code 410 ILCS 130 (defining "usable cannabis" as "the seeds, leaves, buds, and flowers of the cannabis plant and any mixture or preparation thereof, but does not include the stalks, and roots of the plant.").

[10]  The legislation also ignores the fact that no state, including Minnesota and Illinois, has authorized out-of-state residents to obtain medical cannabis within their borders.

[11]  The THC cap is also problematic because two of Iowa’s bordering states have programs without THC caps, but the bill contemplates Iowa patients obtaining medical cannabis from those states.

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