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Jennifer Benda, a Partner in Fox’s Denver, CO office, is an experienced tax attorney who handles tax controversy and income tax planning and compliance matters. She has significant experience assisting companies in the cannabis industry with tax planning, transactional matters, IRS examinations, and other tax compliance matters. Over at Fox Rothschild’s Tax Controversy and Financial Crimes Report Blog, Jennifer provides analysis on a recent decision from the Tenth Circuit Court of Appeals concerning the type of evidence cannabis businesses need to substantiate their “costs of goods sold” under the tax code, and the limits court will apply to these calculations.

In Feinberg v. Comm’r, T.C. Memo 2017-211, the U.S. Tax Court previously ruled that the taxpayer failed to substantiate its cost of goods sold when instead of submitting documentary evidence, the taxpayer provided an expert report, asking the court to make a determination of cost of goods sold based on industry averages. The Tenth Circuit Court of Appeals affirmed this decision in a February 26, 2019 ruling.

As Jennifer explains, this opinion also has important implications for cannabis businesses who may seek to assert the Fifth Amendment privilege against self-incrimination in response to discovery requests in audits or tax court matters. For more analysis and takeaways from the Tenth Circuit’s decision, check out Jennifer’s post.

Richard L. Holzworth writes:

Medical cannabis research
Copyright: thommorrisphotography / 123RF Stock Photo

Despite Pennsylvania’s medical marijuana industry being in its infancy, more than 17,000 patients have registered for the program, and more than 4,000 already have received their medical marijuana card from the Department of Health. Now that cannabis products have burst onto the scene, hospitals and other residential healthcare facilities are struggling with what to do when patients present medical marijuana cards and attempt to use marijuana in the facilities. Indeed, it is high time for the healthcare providers to update their policies and procedures to address these growing concerns.

Policy Considerations

In developing a medical marijuana policy, it is important for healthcare administrators to remember that medical marijuana, although legal in most states, is still classified by the federal government as a Schedule I Controlled Substance. With medical marijuana laws varying from state to state, hospitals, healthcare associations, and other stakeholders have developed and implemented a wide range of policies addressing the use and possession of medical marijuana products. These policies range from strict, categorical prohibitions to sanctioned self-therapy during hospital admission. Regardless of a healthcare facility’s philosophy (either from a political or medicinal perspective) on medical marijuana, it is important for each institution to develop and implement a comprehensive set of policies and procedures to address the inevitable circumstance of a patient presenting with a medical marijuana ID card or cannabis products in hand.

Each healthcare facility should consider a number of factors to ensure that policies and procedures align with the facility’s individualized needs:

  • Does the facility treat a population or particular demographic with a higher rate of medical marijuana use?
  • Does the facility specialize in treating one or more of the 17 “serious medical conditions” that qualify a patient for medical marijuana use?
  • Does the institution receive federal funding that could be impacted by permitting the use of medical marijuana?
  • What is the facility’s existing human resources policy on a drug free workplace, and does this policy address use of medical marijuana by employees?
  • What is the facility’s controlled substance diversion prevention protocol?
  • What is the facility’s current policy for medications brought into the facility by the patient?
  • What is the facility’s intake procedure, and how does it address medical marijuana use?

In Pennsylvania, neither the Medical Marijuana Act nor the applicable regulations specifically address these issues. However, guidance can be found in the regulations regarding employer-employee relations, the Department of Health suggestions for schools, and the policies in place at facilities in states with more mature medical marijuana programs.

Employer Regulations

Under the Pennsylvania Medical Marijuana Act, it is unlawful for an employer to “discharge, threaten, refuse to hire, or otherwise discriminate or retaliate against an employee […] solely on the basis of such employee’s status as an individual who is certified to use medical marijuana.” § 10231.2103(b)(1). However, nothing the law prevents an employer from disciplining an employee who is under the influence of marijuana (regardless of the source of the marijuana) or for working while under the influence of marijuana when the employee’s conduct falls below the standard normally accepted for that position. § 10231.2103(b)(2). In other words, employers cannot take an “adverse employment action” simply because an employee has been certified by a physician to use marijuana products, but employers are not obligated to tolerate use of marijuana or substandard performance because of marijuana. Moreover, employers are not required to accommodate the use of marijuana products in the workplace.

For hospitals and other residential healthcare facilities, these employer-employee provisions in the Medical Marijuana Act suggest that the Pennsylvania lawmakers did not intend to require healthcare providers to tolerate or accommodate the use of medical marijuana by patients (or anyone else) on the premises. Importantly, Pennsylvania’s Medical Marijuana Act does not “require an employer to commit any act that would put the employer or any person acting on its behalf in violation of federal law.” § 10231.2103(b)(3). Accordingly, it is unlikely that healthcare facilities or their employees will be required to take any action that is prohibited under federal law, e.g. possession of marijuana products or facilitation of marijuana use.

School Guidelines

The Pennsylvania Medical Marijuana Act directs the Department of Education to promulgate regulations for the use of medical marijuana on school district property. Although those regulations have not been issued, the Department of Health has provided temporary guidelines for schools. According to Department of Health, students should be prohibited from bringing medical marijuana products on school property or storing products at the school. Neither the students nor school personnel should be permitted to administer medical marijuana.

In order for a student to use medical marijuana during the school day, the Department of Health recommends that a parent, legal guardian, or registered caregiver bring the medical marijuana product to school, administer the product, and then remove the unused product from the premises. These arrangements should be made with school administration in advance and in accordance with all visitor protocols.

Even though these temporary guidelines are not mandatory and are not specifically designed for hospitals and other residential healthcare facilities, the concept could be implemented in a healthcare setting. The Medical Marijuana Act enables qualified patients to designate a “caregiver” who is registered with the Department of Health and permitted to purchase, transport, and administer medical marijuana products. With this in mind, hospitals and other residential facilities could permit a caregiver to possess and administer medical marijuana products to a patient, and then remove the unused product from the premises.

Examples from Other States

The Washington Health Care Association has published a sample medical marijuana policy for use by long-term care facilities. This policy outlines a protocol that is very similar to the Pennsylvania Department of Health’s guidance for school districts. The Washington policy requires each patient to designate a “provider” who will bring medical marijuana product into the facility, administer the medication, and then remove the unused product. The policy also states that staff will not assist patients in obtaining or using medical marijuana, store medical marijuana, or ensure that medical marijuana is being used appropriately. Staff involvement is to be limited to confirming a patient’s status as a qualified medical marijuana user and ensuring that the use of medical marijuana does not impact any other patients. Should a designated provider or patient fail to follow the policy, the facility reserves the right to enforce appropriate consequences, including discharge from the facility.

The Minnesota Hospital Association has published three different policy templates for medical marijuana use, which offer healthcare providers a range of options for handling medical marijuana issues. The first template completely bans medical marijuana from hospital property. If a patient is found to be using or in possession of marijuana products, this policy directs hospital personnel to first determine whether the patient is a qualified and certified to use medical marijuana under state law. Qualified patients will be asked to remove medical marijuana products from the facility, or the products will be secured with the patient’s other personal belongings. For patients who are not qualified users, the hospital will dispose of the marijuana in accordance with hospital policy for handling other illicit drugs.

Generally, the second and third policy templates offered by the Minnesota Hospital Association suggest that qualified patients should be permitted to continue use of medical marijuana in accordance with state regulations. These policy options include suggested protocols for incorporating medical marijuana as either a “self-directed therapy” or as part of the hospital’s medication process. Importantly, these policy templates include provisions that require patients to verify that they are enrolled in the state’s medical marijuana program, and state that the hospitals are not required to certify a patient as eligible for medical marijuana or to permit the continued use of medical marijuana during an in-patient stay.

Takeaways

Drafting comprehensive medical marijuana policies and procedures is an imperative for Pennsylvania healthcare facilities, including hospitals, long-term care facilities, nursing homes, and others. However, the specifics of these policies and procedures must be tailored to each facility’s individualized interests and needs. These policies also must balance patient rights and interests, compliance with divergent state and federal law, and the facilities’ own financial, operational, and political circumstances. This can be accomplished with the careful evaluation of existing facility policies, practices, and operations, and with the assistance of experienced counsel.

Richard L. Holzworth is an associate in the firm’s Litigation Department, based in its Pittsburgh office.