Pharmacann Va., LLC v. Va. Bd. of Pharmacy
| Docket Number | Record No. 0616-22-2 |
| Decision Date | 04 April 2023 |
| Citation | 77 Va.App. 208,884 S.E.2d 852 |
| Parties | PHARMACANN VIRGINIA, LLC v. VIRGINIA BOARD OF PHARMACY |
| Court | Virginia Court of Appeals |
John C. Ivins, Jr. (Mihir V. Elchuri ; Hirschler Fleischer, P.C., on briefs), for appellant.
James E. Rutkowski, Assistant Attorney General (Jason S. Miyares, Attorney General; Coke Morgan Stewart, Deputy Attorney General; Allyson K. Tysinger, Senior Assistant Attorney General, on brief), for appellee.
Present: Judges Athey, Chaney and Lorish
OPINION BY JUDGE LISA M. LORISH
The Virginia Board of Pharmacy granted PharmaCann Virginia, LLC conditional approval to operate a pharmaceutical processor to grow cannabis plants, manufacture and package cannabis-based products, and dispense the products to patients. Board regulations and the conditional approval order required PharmaCann to complete many requirements necessary for the operation of a pharmaceutical processor within one year. At the end of that year, PharmaCann had not yet started construction. Ultimately the Board rejected PharmaCann's proposal for additional time and denied the permit application. We consider whether the Board abused its discretion by rescinding PharmaCann's conditional approval or by treating PharmaCann differently from other applicants who received conditional approval and additional time to complete the permit requirements. Finding no error in the trial court's review of the same questions, we affirm.
The Board may issue one pharmaceutical processing facility permit for each of the five Health Service Areas (HSAs) in Virginia. Code § 54.1-3442.6. Out of a field of nine applicants, the Board conditionally approved PharmaCann's application to operate a new pharmaceutical processor in HSA I in December 2018. The Board's conditional approval order stated that PharmaCann "will have one year from the date of this Order" to complete all regulatory requirements for the acquisition of a permit. The Board's regulations likewise required all applicants to complete the requirements within a year. 18 VAC 110-60-120(E) ().
PharmaCann then bought about seven acres of land to build the new facility. PharmaCann knew that a gas line was running through the middle of the property when it purchased the land, but did not realize the gas line would prevent construction. The gas line was finally relocated in October 2019, but PharmaCann still did not start construction. Instead, internal documents show PharmaCann decided in September 2019 to not take any further steps on the project without "additional direction" from the Board.
In November 2019, the Board notified PharmaCann that December 21, 2019, was the deadline for PharmaCann to submit an "initial permit" application and that the Board had to also conduct an inspection of the site by that date. This email said that "if deficiencies are identified during the inspection, a written response must be submitted within 14 days of the inspection date that either summarizes the corrective actions taken or provides a date, to be approved by the Board, by which the deficiencies will be corrected." The email also stated that "[t]he Board will review the submission for approval" and that the Board may conduct a reinspection before issuing a permit.
PharmaCann submitted the permit application with a $60,000 fee, and the Board conducted the inspection. But as there was "nothing to inspect" because PharmaCann had not yet started construction, the Board's inspection found that PharmaCann was not compliant with any of the requirements for a processing facility permit.
In a December 2019 letter, the Board sent a copy of the inspection summary to PharmaCann attached to a letter that stated, "For any cited deficiencies, complete the Corrective Steps Taken section and return to the Board of Pharmacy no later than January 9, 2020." The letter also said that the "written response must either summarize the corrective actions taken or provide a date, to be approved by the Board, by which the deficiencies will be corrected" and that "[t]he Board will review the submission for approval."
PharmaCann submitted a timely corrective action plan, requesting re-inspection in November 2020. The plan contained an updated construction schedule, estimating that the company would complete construction in October 2020 and would complete all required audits and state inspections by December 2020. PharmaCann followed up with the Board in February 2020, asking whether the Board had any feedback on the proposed action plan. The Board responded the next day, stating that it was waiting on advice from the Attorney General's office before responding to any applicant about their pending inspections. Shortly after that, the Board notified PharmaCann that it intended to review their plan at the next full Board meeting, in March 2020. The Board stated that it would allow for a "public comment period during which you may provide information to the Board for consideration in making a determination to accept the plan or deny the pharmaceutical processor application."
The Board could not hold its March meeting, however, because of public health concerns related to COVID-19. After the General Assembly authorized public bodies to meet virtually, see Va. Acts ch. 1283, § 4-0.01 (April 2020), the Board advised PharmaCann in May that it would review its corrective action plan during a virtual meeting in June 2020. Again, the Board stated that it would allow for a "public comment period during which you may provide information to the Board for consideration in making a determination to accept the plan or deny the pharmaceutical processor application." Leading up to the meeting, PharmaCann sent a letter to the Board requesting a new re-inspection date of June 30, 2021.
Following the June meeting, the Board denied PharmaCann's request for an extension of time to comply with the necessary permit requirements, rescinded conditional approval, and denied the pending permit application. In its written order explaining its decision, the Board made factual findings including that (1) conditional approval was granted on December 21, 2018, by a Board order that "required PharmaCann to complete all of the requirements for the issuance of a permit, including the requirements of 18 VAC 110-60-130(A) through (E), within one year from the date of the Order"; (2) PharmaCann applied for issuance of a pharmaceutical processor permit on December 2, 2019; (3) on December 13, 2019, "an inspector for the Virginia Department of Health Professions found that PharmaCann had failed to complete any of the requirements for the issuance of a permit," specifically citing the fact PharmaCann "had not started construction on a pharmaceutical processor facility"; (4) PharmaCann requested an extension of time on January 9, 2020; (5) "As of June 16, 2020, PharmaCann had not started construction on a pharmaceutical processor facility"; and (6) "PharmaCann asked the Board for an extension until, and a reinspection date of, June 30, 2021." The order then concluded that PharmaCann had not met the requirements of 18 VAC 110-60-120(E) or the Board's conditional approval order.
The Board granted conditional approval to four other applicants to build facilities in the other four HSAs in December 2018 and also conducted initial inspections of their facilities in December 2019. While one applicant passed the first inspection, three others did not fully pass and, like PharmaCann, had to submit plans of corrective action. Unlike PharmaCann, however, each of these applicants met many of the applicable requirements and had made substantial progress in constructing their facilities. In February 2020, the Board notified these applicants that they must complete all the corrective actions identified in their plans and request a reinspection by the spring or summer of 2020. The Board granted permits to the three other applicants in April, May, and August 2020.
PharmaCann appealed the Board's decision to the circuit court, raising several alleged errors: (1) that the Board failed to follow required procedure under Code § 2.2-4027 and derogated PharmaCann's "rights," (2) that the Board failed to afford PharmaCann procedural due process, (3) that the Board failed to adequately articulate the rationale for its decision, (4) that the Board exceeded its statutory authority, and (5) that the Board unjustifiably treated PharmaCann differently from similarly situated applicants.
Before a hearing on the merits, PharmaCann moved to expand the record to include "those documents evidencing how the Board handled the issuance of Permits to and the corrective action plans submitted by the other" applicants with conditional approval. PharmaCann argued that the court could, and should, expand the record to investigate an allegedly arbitrary and capricious action.
The Board opposed this motion, arguing that it was an improper discovery request, and that PharmaCann had not sufficiently proffered that the additional materials would reveal any arbitrary and capricious action. Nevertheless, the Board offered to submit into the record the inspection reports of the three other applicants who also did not pass the initial inspection, as well as the proposed corrective action plans and the corresponding Board approval letters. The court agreed to expand the record to include the materials voluntarily provided by the Board, as well as the exhibits attached to PharmaCann's motion to expand and the documents attached to its notice of appeal. But the court denied PharmaCann's motion as to any other documents.
After a hearing on the merits, the trial court found that the Board did not act contrary to law or otherwise abuse its discretion in revoking PharmaCann's...
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