WA House FIN - Committee Meeting
(February 22, 2022) - SB 5004 - Public Hearing

Don't Tax Medicine - DOH Compliant Cannabis Products

Testimony on a bill to exempt registered medical cannabis patients from the excise tax on DOH compliant products was supportive and elicited several questions from lawmakers.

Here are some observations from the Tuesday February 22nd Washington State House Finance Committee (WA House FIN) Committee Meeting.

My top 4 takeaways:

  • Senator Karen Keiser’s testimony covered the utility of medical cannabis and the need to mitigate the “gray market," after which colleagues asked about taxing medicine, the accompanying audit, and eligible products.
    • Keiser called her "little modest tax cut bill" a chance to “do some good for patients” using cannabis “to deal with some of their conditions.” She explained how they’d been paying the 37% excise tax on “all products in that store” whereas SB 5004 would remove the tax on the “special products” such as “salves and oils” used by patients (audio - 3m, video).
      • “Seniors are the largest growing customers of these products,” claimed Keiser, but the excise tax was leading some patients “to what I’d call a gray market” where there wasn’t testing for pesticides “or other contaminants.” Illicit products were “escaping regulation," she asserted, as well as “undercutting” the regulated market and oversight “we really do need” in the cannabis sector. Keiser understood that endorsed cannabis retailers carried few compliant medical items “because they have so few customers [for them] anymore.”
      • She brought up the “sunset clause” and mandated study to evaluate the impact of adding the exemption “and indeed, if there is some kind of impact on our budget that would be tracked as well."
      • Illustrating her conviction about the efficacy of the plant, Keiser added that a friend had suggested that she use a cannabidiol (CBD) topical to relax a neck spasm she’d experienced. She praised the results, stating, “I don’t have a neck spasm anymore.”
    • Representative Kirsten Harris-Talley said “one of the big concerns" when cannabis was legalized for adult use in Washington “were considerations of the increased costs of medications.” She asked Keiser for “a sense of what you’re hearing directly from neighbors about…what that cost margin has looked like?” Keiser replied that the state had no excise tax on “any other over-the-counter or prescription drug” and that there shouldn’t be one for medical cannabis, calling the situation “totally inequitable for people who need to deal with their arthritis or with any other medical issue." As a senator, she’d heard “heartfelt testimony from hundreds of people who were using the gray market” about the plant’s medical effects, concluding cannabis “does have great benefit for some" (audio - 2m, video).
    • Ranking Minority Member Ed Orcutt mentioned he was on “the JLARC Executive Committee” and knew there could be disagreements about “what is being asked of us.” He wondered how well “consumer behavior [was] defined in what you’re asking JLARC to study,” and whether staff from that committee had indicated the bill criteria would produce data that was “audit quality.” Keiser answered that the study had been added to the legislation in 2021 by Washington State Senate Ways and Means Committee (WA Senate WM) Chair Christine Rolfes due to her concern over tracking “changes in [consumer] behavior.” Keiser admitted she wasn’t certain the study was necessary, and was amenable to changing it. WA House FIN Chair Noel Frame suggested JLARC staff look into the definitions, with Orcutt clarifying he wasn’t opposed to a study, but wanted JLARC to be able to “do a professional grade audit" (audio - 2m, video).
    • Representative Melanie Morgan wondered about eligible products, remarking that the Fairwinds CBD topical mentioned by Keiser was sold “over-the-counter in a recreational store to those with a prescription.” Keiser made clear cannabis patients didn’t have “a medical prescription…but you do have to” register with DOH through an endorsed retailer in order to gain the existing sales tax exemption (audio - 1m, video).
    • Representative Larry Springer sought to understand what registered patients would be able to buy, asking if he were a patient, could “I go to a recreational store and buy any product"? Keiser said he couldn’t, that the excise tax would only be removed for medically compliant items. Springer followed up, saying there’d been some “pretty compelling testimony...about the impact of CBD in forms that we don't consider medical” in treating some conditions. Keiser agreed there was an evolving understanding of the medical utility of the plant, but felt cannabis products with DOH certification sold through the licensed system would likely be more “safe and pure.” She suggested most compliant products “don’t have the [tetrahydrocannabinol] THC levels that create impairing impacts on people” (audio - 3m, video).
  • Public testimony was in firm support of the legislation and more than two thirds of the 40 people signed in were also in favor.
    • Lara Kaminsky, The Cannabis Alliance Government Affairs Liaison (audio - 2m, video)
      • Kaminsky testified that, because all consumers were paying “an almost 40% excise tax,” her organization had witnessed “a continued and growing percentage of patients who are staying out of the regulated market entirely…because it does not serve their needs.” She argued the “very small fiscal note” was indicative of the low level of patient engagement with the registry and regulated market.
      • Kaminsky had heard core patient complaints were “the cost, the fear of inadequate testing, and the lack of medical grade products.” DOH compliant items met most patient needs, she believed, but there weren't enough products, and their cost was “far out of the range of chronically ill patients who are disproportionately poor, and whose need is generally greater.” She said the proposed “change on a small segment of the market goes a long way to address the top three reasons patients are not accessing the regulated market.”
      • Kaminsky noted that the bill had been presented to legislators for the past several years and “it is time to get it over the finish line, our patients cannot afford to wait another year.” She closed by asking the committee to pass the bill - as they had in March 2021.
    • Danielle Rosellison, Trail Blazin' Productions Co-Owner and Cannabis Alliance Adjunct Board Member (audio - 2m, video)
      • Rosellison reported that 100% of her company’s products were certified by DOH, but “out of 1,500 producer/processors in Washington State” her company was “one of only four that certify any product” - “less than .3% of licensed growers.” She felt production was low, in part, because “patients and veterans are often on fixed incomes, but they need the best quality products for their health” so removing taxes on their medicine would help. Medical grade cannabis “is expensive to grow, and it’s expensive to test,” Rosellison told the committee, costing her firm “$200,000 a year” in testing expenses. She pointed out there’d been “no real education behind the DOH program…and the logo is not self-explanatory.”
      • Furthermore, Rosellison said “the burden is such” that retailers she knew removed sales tax on purchases by “anybody who says they’re a patient,” a discount on non-compliant cannabis products “which may, or may not, be in the best interest of the patient.” She suggested that endorsed retailers weren’t required to carry compliant products and the bill would help encourage endorsed retailers to, “at a very minimum, know about medical marijuana and carry it.”
      • WSLCB staff had been engaged in a rulemaking project on quality control and product requirements since 2018 intended to require some form of pesticide testing for cannabis products. The move was expected to impact both testing costs and the testing services offered by accredited labs. On February 2nd, the board hosted a public hearing on proposed rules but next steps on the project were unclear at publication time.
    • Hana Keefe-Guerrero, Medical cannabis patient (audio - 2m, video)
      • Keefe-Guerrero shared her experience fighting brain cancer which led to her needing regular Magnetic Resonance Imaging (MRI) “for the rest of my life, I’m now 30 years old.” She described a variety of lingering symptoms and problems, in addition to “lasting physical side effects resulting from” chemotherapy treatments that resulted in her being unable to work. Though using several social service programs, Keefe-Guerrero conveyed that she barely had enough money “for monthly rent and utilities, let alone the cost of medical cannabis.”
      • She’d eventually been able to participate in “support programs” at the Advanced Integrative Medical Science (AIMS) Institute, and found medical cannabis microdosing “significantly helps manage my mental and physical symptoms.” She urged passage of SB 5004 to reduce the “financial strain” she faced securing medicine which improved “the quality and longevity of my life.”
      • Keefe-Guerrero also testified when the committee first heard the bill in 2021. Frame thanked Keefe-Guerrero for returning to the committee to share her story, asserting “it does make a difference” to lawmakers (audio - <1m, video).
    • Chris Thompson, WSLCB Director of Legislative Affairs (audio - 2m, video)
      • Thompson established that the need to “strengthen the medical market” had been a board priority for years, and the bill represented “probably the most powerful tool before you this session” to change it. He said problems agency staff had heard “for years” were that there was “insufficient production" of compliant products leading to “a lack of inventory on the shelves” and other concerns like “inadequate knowledge about these products among budtenders.”
      • Thompson portrayed SB 5004 as having potential positive outcomes on compliant cannabis production, and potentially motivating additional cannabis testing labs to support pesticide and heavy metals testing, areas where “we’re pretty limited.”
      • He said the fiscal note presumed “a steady state of product volume,” though “there’s a lot we don’t know” about possible changes in patient behavior. In any event, “we think the fiscal impact is modest," Thompson stated.
    • Signed in “pro” but not testifying (29):
    • Signed in “con” but not testifying (11):
      • Cory Aeschliman
      • Melissa Bauska
      • Charles Bauska
      • William Bauska
      • Rachel Boyes 
      • Nancy Churchill
      • Lorilyn Rogers
      • Mark Jungck
      • Bobbie Piety
      • Robert Rogers
      • Lydia Zibin
  • The bill was subsequently amended and recommended by committee members during an executive session on February 24th, continuing its progress past the opposite house policy committee cutoff.
    • The amendment, offered by Orcutt, would require WSLCB to consult with JLARC staff “on relevant reporting information needed for JLARC review.”
    • The bill was subsequently sent to the Washington State House Rules Committee (WA House RUL) which can calendar it for a second and third reading on the chamber floor. The WA House would then have until March 4th to pass the bill. The WA Senate would need to concur on the amended bill language before the end of the regular session on March 10th for the measure to be enrolled for executive action by the governor.

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