Marijuana dispensary rules spur concerns
October 21, 2013
Xochitl Peña, The Desert Sun
Critics: Mandates in Palm Springs ordinance may be illegal.
Medical marijuana users in Palm Springs don’t have to register with the state, but their information is entered into a local dispensary database that can be reviewed by city officials, a requirement some privacy experts say goes too far.
Patient records, including a physician’s referral, must be maintained by each dispensary and made available upon demand, according to the city's ordinance.
Some dispensary owners wonder if the request violates HIPAA, the American Health Insurance Portability and Accountability Act. The law protects individual medical records and other personal health information.
City Attorney Doug Holland said access to patient records is needed to verify physician certificates.
“It’s not to view ... what their symptoms are or what their medical condition is but to ensure they are, in fact, bonafide patients,” he said.
Joseph Rhea, a criminal defense attorney who represents dispensaries in the Coachella Valley, was surprised to see that in a city ordinance because of the legal ramifications.
“They shouldn’t be reviewing patient records. If they actually tried to do it, the dispensaries would probably sue the city,” he said. “I have never heard of a dispensary voluntarily turning over patient records without a court order.”
Holland said City Manager David Ready has already instructed city staff to review patient records.
“He’s delegated people to do that, and we’re in the process of doing it again. We’ve done it on two previous occasions,” Holland said.
The city ordinance, which requires dispensaries to follow a lengthy list of rules, was preceded by about two years of discussion and research, he said. There was a lot of debate about whether the requirement was an “unwarranted invasion” on patients.
“We did an entire evaluation, and we had a number of people who were active in the trade, and it was all agreed to. Everybody was on board,” Holland said.
Lanny Swerdlow, a marijuana advocate and former Riverside dispensary operator who was involved in creating the ordinance, said he doesn’t recall that part of it.
“I think that’s a HIPAA violation — the city manager has enough common sense not to do it,” he said. “The patient’s records and ailments is nobody’s business but the doctors’ and patients.’”
Dale Sky Jones, executive chancellor of for-profit Oaksterdam University in Oakland and Chairwoman for Coalition for Cannabis Policy Reform agrees.
“It’s sketchy. It is without question a violation,” she said.
Even if the city officials are only looking at the doctor certifications, she said some doctors might add a patient’s diagnosis to the certification.
“There are some diagnoses you don’t want everyone to know about,” she said.
There are more privacy-friendly ways to go about verifying patients that should be considered, such as using a third-party verifier, she said.
Close scrutiny sought
The city’s ordinance also requires providing security camera recordings to the city manager upon verbal request with no subpoena or search warrant, plus allowing him to enter any dispensary unannounced to observe operations.
Though not specifically mentioned in the ordinance, the city hoped to regularly audit the dispensaries. Two have been, but C.A.P.S., the most recent dispensary to receive a permit, has yet to be, said Councilwoman Ginny Foat.
Holland said the audits are to ensure they are in compliance with city code.
“It’s, in essence, a performance review to ensure they are doing everything they have agreed to do and is required under the code,” he said. “We’re monitoring all their business records, all of their incorporation records, all of their minutes of their meetings as a non-profit.”
The city will review their revenues and revenue handling practices, as well, which will become especially important if Measure B passes, he said.
The Measure B ordinance on the Nov. 5 ballot in Palm Springs says that up to $15 will be charged for every $100 in proceeds from the dispensaries, though the council could decide on a lesser amount.
If there are problems, the dispensaries will be required to fix them “rather quickly,” he said.
Desert Organic Solutions and Organic Solutions of the Desert have been reviewed. Neither owner wanted to go into detail about the audit, but said they were forthcoming with city officials.
“We have nothing to hide,” said Jim Camper, president at Organic Solutions of the Desert.
Holland said the city is gearing up to review all three dispensaries.
“I think it should be done on an annual basis, but it is time-consuming and it is costly,” he said. “If we can get Measure B it will help with some of those issues.”
Based on past reviews, each site visit can take three to four hours. The review of documents is done piecemeal.
“We don’t have the resources to do it non-stop. We do bits and pieces as we go through it. Everybody has stuff to do,” he said.
Kris Hermes, spokesman with Americans For Safe Access, questions the city’s need to conduct regular audits of dispensaries, saying they should only be done if there is concern over a dispensary not complying with law or not operating as a non-profit.
Though Hermes understands it is hard to know if a dispensary is truly operating as a “not-for-profit” business without reviewing gross receipts and expenditures, he said such reviews can also make dispensaries susceptible to self-incrimination and criminal prosecution because medical marijuana is still illegal under the federal government.
“What would work better, in our view, is to only allow this type of scrutiny or audit if there is a suspicion… then those records should only be allowed to local governments by subpoena,” he said.
Though the dispensaries are supposed to operate as a “non-profit” Swerdlow said they can become lucrative businesses.
“The idea is that nobody can pocket the money that is above the expense. .. (but) they can pay themselves a nice big fat salary,” he said.
Swerdlow said he used to get a handful of calls each week from people seeking advice on opening a collective even though they had never been involved prior in medical marijuana advancement or patient compassion issues.
“There’s a lot of money to be made. For most collective operators, it’s all about making money,” he said.
Unique testing rule
In addition to maintaining regular reviews of the dispensaries, the city plans to require quality testing of the cannabis to ensure the medicine is good and not laced or tainted with pesticides or illicit drugs.
Holland said he is working on an amendment to the city’s medical marijuana ordinance that would require cannabis quality testing before the pot is dispensed to patients. The amendment would have to be approved by the City Council.
“Because of the nature of the product, there are shortcuts that are made by some of the growers. There are certain kinds of chemicals that are being applied to the product during the growing cycles that may be dangerous to patients or people that use the product,” he said.
The mandate could make Palm Springs the only California city to have such a requirement, say city leaders and medical marijuana advocates.
Hermes said he believes Los Angeles required such testing until voters passed Proposition D in May, which capped the number of clinics to 135, increased taxes on the dispensaries and eliminated that mandate.
He said there are some dispensaries that already test their marijuana, but most don’t. His fear is that such a mandate could result in higher prices passed on to the consumer and an additional layer in getting the cannabis to patients.
Camper said all the licensed collectives in Palm Springs have been lab testing their marijuana for more than a year so the patients know their medicine is clean.
It’s not cheap, but is done “to ensure no tainted meds reach our patients,” Camper said.
C.A.P.S. has two separate laboratories test its products.
Still, Holland said the city wants to ensure there is a uniform process in place. The mandate is not typical at the local level.
“Colorado and Washington have both allowed for marijuana in their jurisdictions, and they are looking at having comprehensive regulatory programs, and we are monitoring their programs…in addition to looking at some FDA practices and procedures,” he said.
Mark Silver, an edibles chef and owner of The 420 Kitchen is a member of the California Association for the Promotion of Safe Cannibas Infused Edibles.
He provides edibles to dispensaries across Southern California, including ones in Palm Springs.
He supports quality testing and thinks it helps set him apart from other edible companies.
“I’ve been doing this for four years. I’ve seen edible companies come and go, because they’ve been inconsistent. One thing I do, I have my product tested, which a lot of people don’t. That way I know the potency of all my products.”