California, Cannabis and Telehealth

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The ancillary companies that provide goods and services to the cannabis industry are legion. From equipment, real estate, legal services, and technology to packaging, labeling, intellectual property, hardware, and apparel, the list is basically endless for the opportunities that abound in the cannabis ancillary sector. One of the cooler ancillary areas that hasn’t gotten a ton of play is the cross-section of telehealth and medical cannabis, especially where medical cannabis has overwhelmingly been deemed an essential service during COVID.

Just like state cannabis regulations, telehealth regulations vary by state. Telehealth (also known as telemedicine) is “. . . the distribution of  health-related services and information via electronic information and telecommunication technologies.” The use of telehealth has seen a considerable uptick during the pandemic. And securing cannabis recommendations from physicians via telehealth apps or platforms is no exception. Of course, giving and securing a recommendation in this manner comes with some caveats.

California’s Relationship with Telehealth and Cannabis

Telehealth compliance in California is governed by, among other things, Business & Professions Code, Section 2290.5. The Medical Board of California (“MBC”) also provides comprehensive guidance regarding telehealth as well as guidance on physicians recommending cannabis for their patients. Specifically, MBC guidance on cannabis and telehealth provides that “[t]he use of telehealth in compliance with B&P Code section 2290.5, and used in a manner consistent with the standard of care is permissible.” Does this mean then that California physicians can start using telehealth to virtually dole out cannabis recommendation after recommendation? Definitely not. Let’s start with the cannabis side of things.

Proposition 215 (aka Health and Safety Code Section 11362.5), passed in 1996, permits qualified patients to acquire and use cannabis for specific medical needs via recommendations from their treating physician (cannabis cannot be prescribed because it is a federally illegal, Schedule I controlled substance). According to the MBC:

physicians should document that an appropriate physician-patient relationship has been established, prior to providing a recommendation, attestation, or authorization for cannabis to the patient. Consistent with the prevailing standard of care, physicians should not recommend, attest, or otherwise authorize cannabis for themselves or family members.

Further, pursuant to Business and Professions Code section 2525.2, a physician can’t recommend cannabis for medical purposes to a patient unless the physician is the patient’s attending physician, and “attending physician” means a “physician who has taken responsibility for an aspect of the medical care, treatment, diagnosis, counseling, or referral of a patient.”

The physician must also conduct and document a medical examination of the patient before deciding whether or not medical cannabis is appropriate for a recommendation. At a minimum, per the MBC, that physical exam (which maybe could be done now remotely because of COVID) should include:

the patient’s history of present illness; social history; past medical and surgical history; alcohol and substance use history; family history with emphasis on addiction, psychotic disorders, or mental illness; documentation of therapies with inadequate response; and diagnosis requiring the cannabis recommendation.

Business and Professions Code section 2525.3 states that physicians recommending cannabis to a patient for a medical purpose without an appropriate prior examination and a medical indication constitutes unprofessional conduct. And all of this is in the context of a physician exercising the appropriate standard of care, which also includes, among other things, maintaining a treatment plan, ongoing monitoring of the patient, and compliant recordkeeping.

So, how can a cannabis telehealth business take advantage of Prop. 215?

There are two types of telehealth business models in play. Synchronous (use of video conferencing or a telemedicine app or platform to recreate an in-person experience) and asynchronous (where there’s no virtual interaction between physician and patient, but the patient provides all of their medical information via an app or tech platform to be reviewed later by their treating physician). Typically, a third-party company (made up of non-physicians) provides the app or tech platform while the physicians that utilize the platform treat patients accordingly. When we get inquiries from telehealth companies around cannabis recommendations in California, they want to know whether it can be done in the first place (“yes”), and whether they can have a financial relationship with a dispensary or other cannabis licensee that will provide cannabis to those patients accessing their app or tech platform.

And that is where things get interesting. In my next post, I’ll analyze whether a telehealth company can lawfully have such a set up in California. So, stay tuned.

Can a Telehealth Company Lawfully have a Setup in California?

Can the telehealth company (and not the physicians on the platform) have some kind of financial relationship with a medical cannabis dispensary here in California? The answer is “probably not” unless you want to incur the wrath of the medical board and see very serious fines and penalties, some of which are criminal. Why? Because a cannabis clinic or dispensary may not directly or indirectly employ physicians to provide cannabis recommendations. A financial tie-in likely comes dangerously close to indirect employment, and there is likely too much influence over physicians to not only keep recommending medical cannabis but to also send their patients to select cannabis vendors.

As you may know, there are two types of telehealth business models in existence, synchronous (real-time) and asynchronous (“store-and-forward”) platforms and apps usually owned and run by third-party non-physicians. Per my last post, the top question we get in this arena is how the telehealth platform can have a financial or referral relationship with a medical cannabis business — typically a dispensary — so that patients using the platform have a credible and consistent source from which to purchase their medical cannabis in compliance with state cannabis laws. The answer here is multi-layered and complex.

Physicians in California are barred from both providing cannabis to their patients and from helping them acquire it.  Pursuant to Conant v. Walters, physicians have a protected first amendment right (rooted in the doctor-patient relationship) to discuss the use of medical cannabis with their patients. That discussion and/or eventual recommendation is not grounds for the Drug Enforcement Administration to revoke or investigate revoking the physician’s licensure on the basis of aiding, abetting, and/or criminal conspiracy (since cannabis is still federally illegal). At the same time, that case makes clear that:

[a] doctor would aid and abet by acting with the specific intent to provide a patient with the means to acquire marijuana . . . Similarly, a conspiracy would require that a doctor have knowledge that a patient intends to acquire marijuana, agree to help the patient acquire marijuana, and intend to help the patient acquire marijuana.

Further, pursuant to state law and medical board guidance, it is unlawful for a physician who recommends medical cannabis to accept, solicit, or offer any form of remuneration from or to a cannabis business if the physician or his or her immediate family has a financial interest in that facility. “Financial Interest” includes, but is not limited to:

any type of ownership interest, debt, loan, lease, compensation, remuneration, discount, rebate, refund, dividend, distribution, subsidy, or other form of direct or indirect payment, whether in money or otherwise, between a physician and a person or entity to whom the physician refers a person for a good or service.

Further, physicians in California absolutely cannot be employed by a medical cannabis dispensary in order to recommend cannabis to medical cannabis consumers that frequent the store (and don’t even think about having a medical cannabis “doc-in-the-box” as a next-door neighbor either). In the end, physicians need to steer clear of any financial or referral relationship with any cannabis company when it comes to patient recommendations.

Now, the relationship between the telehealth platform and the physicians is governed by, among other laws and regulations, the corporate practice of medicine (“CPOM”) bar here in California, which is extremely strict (we wrote here about the CPOM issues created by the third party, non-physicians engaging in ketamine business ventures with doctors, and the same issues apply in the telehealth context, too). In providing services to patients and physicians in California who use the tech, the telehealth company needs to be very careful not to engage in illegal fee-splitting, kickbacks, and referrals, and it cannot exercise any medical decision-making or undue influence over the physicians regarding the same– including things like patient volume, frequency of medical visits, and how to clinically treat patients.

The main point of these restrictions in California is to ensure that a physician maintains independent medical judgment and acts in the best interest of their patients. Among other issues, if a telehealth platform is promoting — or has a financial interest in or with — a dispensary, and its goal is to drive platform users to that dispensary, it’s not a stretch that physicians on the platform will be financially motivated to render as many cannabis recommendations as possible. After all, most telehealth physicians are paid per consult/visit. If a physician is working to ensure that patients return to the platform for their services and that they also go to the dispensary promoted by the platform, this scenario violates cannabis laws, telehealth laws, and CPOM laws.

In the end, telehealth and cannabis is only so lucrative in California mainly because of the CPOM restrictions and because cannabis laws in general prohibit physicians from doing much more than legitimate cannabis recommendations. This certainly doesn’t mean that telehealth companies don’t have other robust opportunities in the cannabis space (like education and intellectual property). But they definitely don’t revolve around referrals and kickbacks from cannabis companies in exchange for increased numbers of medical customers created by the telehealth tech.