The Arizona Department of Health Services (the “Department”) is the agency to award Medical Marijuana Dispensary Registration Certificates (“DRCs”), which are required to operate a Medical Marijuana Dispensary (a “Dispensary”). The Department is required to follow the Arizona Medical Marijuana Act (“AMMA”) and its own Rules in awarding DRCs. There are a few critical components of the AMMA and the Rules that anyone considering applying for a DRC must be aware of. 

On December 16, 2022, the Department will begin accepting applications for DRCs for the first time since 2016 (“2022 Allocation Period”). The fee to apply for a DRC is $4,000. R9-17-102(A)(1). Many people and property owners are interested in applying, however, an understanding of the Rules is critical in order to not waste your time, money, or efforts in applying for DRCs that are largely already determined where they will be awarded. The 2022 Application Period is only for Medical Marijuana Dispensary Applications.

First, the Department is restricted in the number of DRCs it awards. By statute, the Department is limited to awarding one DRC for every ten medical pharmacies that are in operation in the state of Arizona. A.R.S. § 36-2804(C). There are currently 131 active DRCs and 1,340 open pharmacies in the state. See 2022 Nonprofit Medical Marijuana Dispensary Allocation (available at https://www.azdhs.gov/licensing/medical-marijuana/index.php#dispensary-certificate-allocation). This would mean there are three DRCs to be awarded in the 2022 Allocation Period. However, the Department is permitted to exceed this 1:10 ratio if an Arizona county does not have a DRC. A.R.S.  36-2804(C), see also Saguaro Health Center, LLC v. Ariz. Dep't. of Health Services. There are currently six (6) counties without a DRC, which are: Apache; Cochise; Gila; Graham; Greenlee; and Santa Cruz. Therefore, the Department is going to award one (1) DRC to one (1) location in each of these counties and no additional DRCs.

The key question then becomes, how will the Department award each of these DRCs and is my property location a winner? For this answer, we turn to the Department's Rules, which explain exactly how the Department will award these DRCs.

Rule 303 details the DRC Allocation Process. R9-17-303 (available at https://www.azdhs.gov/documents/licensing/medical-marijuana/az-medical-marijuana-rules.pdf?v=20220908, at 45). “If more than one dispensary registration certificate application is received for a proposed dispensary in a geographic area in the county, at a location that is at least 25 miles from another dispensary and from which another dispensary has moved, the Department shall: (i) Prioritize and allocate a dispensary registration certificate to an applicant based on which proposed dispensary location will provide dispensary services to the most qualifying patients within five miles of the proposed dispensary location, as determined from the number of registry identification cards issued to qualifying patients; . . . .” R9-17-303(B)(2)(b)(i). This is key. The key component is that the Department will first look to applicants that are applying at a location that is 25 miles from another DRC and is at a previously awarded location. If the location you are applying at was previously awarded a DRC, then your application is the first to be evaluated. The 2022 Allocation is only for Medical Marijuana DRCs and therefore recreational and adult-use dispensary locations do not qualify as a former dispensary location. 

If you are applying for a DRC in the 2022 Application Period at a location that has not been previously awarded a DRC, to be successful no other application could apply at a location that is a former dispensary location. This may seem confusing, but a Dispensary is permitted to move after it has operated in a location for three years and may move to another location. R9-17-306(B)(1)(b)(ii); see also A.R.S. § 36-2803.01(D).

Based on previously released data, each of the counties has had Dispensaries located at the following addresses:

This data is what I have currently. This data may be incorrect, and I strongly urge you to conduct your own research prior to making any decisions related to the 2022 Allocation Period, which also includes engaging an attorney of your choice that is well-versed in the AMMA and the Department's Rules. This post is not legal advice and does not create any attorney-client relationship. Further, this post is for informational purposes only and is not intended to be relied upon.

At Meyer & Partners, we advise clients on the ins and outs of the Department's Rules, the AMMA, and the 2022 Allocation Process. If you would like to hire Meyer & Partners to review and assist in your DRC Application, please get in touch with us at [email protected].