Feds say Utah can dispense medical cannabis without losing grant money. But worries over legal consequences persist.

Earlier this month, the U.S. Department of Health and Human Services assured Gov. Gary Herbert that Utah is not at risk of losing federal health grants because of its unique plan for state distribution of medical cannabis.

"Utah's Medical Marijuana law will not affect the State's eligibility to apply for HHS grants nor will it affect the outcome of the State's application," stated the letter signed by Jennifer Moughalian, acting assistant secretary for financial resources at HHS.

The correspondence came in response to an inquiry from Herbert, amid simmering concerns over whether local health departments could be placing their federal aid at risk by transporting and selling a federally illegal substance.

Officials and advocates have been working behind the scenes for weeks to address questions and skepticism about the state’s central fill pharmacy — a system that would make Utah’s medical cannabis program one-of-a-kind in the nation. But the issue came to a head this week as two county prosecutors went public with their reservations; Salt Lake County District Attorney Sim Gill even declared that asking the local health department to dispense cannabis “puts us in direct conflict with federal law.”

Also as an attorney, “we cannot knowingly advise a client to violate the law,” Gill added.

Davis County Attorney Troy Rawlings also expressed his concerns about asking local health workers to dispense marijuana products.

And Connor Boyack, founder of the libertarian Libertas Institute and one of the architects of the Utah Medical Cannabis Act, said this month’s letter from HHS isn’t enough to allay the fears of local health department officials.

“While it’s great to have a reassurance from the federal government, the letter is nonbinding and subject to change at any time,” Boyack said. “So counties have felt like that’s an insufficient reassurance that they will be forever legally protected and have access to federal funding if they were to be involved in distributing a federally illegal substance.”

Boyack said another snag in the system has emerged over the proposed cannabis pickup locations. Lawmakers had inserted the state dispensing system into the cannabis program partly so patients in rural areas could access medical marijuana at local health department offices, without having to travel long distances to a private pharmacy.

But local health departments have signaled that they wouldn’t want to dispense cannabis from satellite offices and would plan on centralizing distribution at their county headquarters, where there’s more staff and better security, he said. That could mean many patients are still without a nearby pickup site, Boyack said.

Officials with the Salt Lake County Health Department indicated they are hopeful that lawmakers will adjust HB3001, the medical cannabis act that the Legislature passed in December.

“That said, if HB3001 remains unchanged, right now we plan to follow the recommendation of our legal counsel,” Nicholas Rupp, a spokesman for the county health department, wrote in an email.

A spokeswoman for the Utah County Health Department said the agency is unsure how distributing cannabis might impact its federal funding. Because it hasn’t yet received state funding, the county’s health department hasn’t taken steps to hire additional staff or make any changes to buildings in order to accommodate cannabis distribution, spokeswoman Aislynn Tolman-Hill wrote.

Tom Hudachko, a spokesman for the Utah Department of Health, said the state has done little so far to ramp up its public cannabis distribution system and has largely focused on crafting rules for the overall marijuana program and preparing to license private pharmacies.

The Utah Medical Cannabis Act currently allows for seven privately owned “cannabis pharmacies” in addition to the state distribution system.

Senate Majority Leader Evan Vickers, R-Cedar City, said Tuesday that state leaders have been hearing concerns about the state-run model for months so they have been exploring alternatives — and may seek a special session of the Legislature to enact changes. He said because officials are still discussing several options and ideas are fluid, he is not yet ready to talk about them publicly.

On Wednesday, Herbert’s office released a statement saying that he is determined not to fall behind on the state’s cannabis program timeline, which calls for making marijuana treatments available to patients early next year.

Herbert will meet with legislative leaders in mid-August to "provide and receive updates on a number of critical policy items" and will work with them to decide if a special session on cannabis is necessary, the statement said.

Until any legislative changes are made, health departments should continue treating the state’s medical cannabis act as the law of the land, the governor’s office said.

“Any suggestion that the current law would require county employees to be ‘drug dealers’ is unprofessional and inappropriate,” the statement concluded.

The state is already close to issuing licenses for marijuana farmers. On Wednesday, officials announced they had turned down appeals from six companies that applied to grow medical cannabis in Utah but failed to make the cut in the scramble over the limited number of cultivation licenses.

The businesses that protested the state’s selection process were among the 81 that vied for a license to produce marijuana for Utah’s emerging medical cannabis program. The state was authorized by law to name up to 10 cultivators, but earlier this month announced that it would initially only award eight licenses to prevent an oversupply of cannabis. Agriculture officials are currently working to finalize the licensing with the eight winning companies.

Six of the losing applicants — Pure UT, North Star Holdings, Total Health Sciences, Wild West Holding, JLPR and Tintic United Bioscience — lodged complaints about the state’s decision, claiming scoring inconsistencies and bias, among other things.

The state’s director of purchasing and general services, Christopher Hughes, on Wednesday announced his decision to dismiss the protests. The six companies can appeal his decision to the Utah Procurement Policy Board, he said.

Hudachko said his agency is hoping to open bidding for private pharmacy licenses sometime next month.