Arizona adopted medical marijuana use pursuant to the 2010 Arizona Medical Marijuana Act: Ariz.Rev.Stats. §§ 36-2801 et seq., as amended; and Regulations: 9 A.A.C. 17 (Ariz. Admin. Code §§ R9-17-101 et seq.) (the AMMA). The Arizona Department of Health Services (AZDHS) interprets and enforces the AMMA. It has authority to issue dispensary licenses and inspect dispensaries for noncompliance with the AMMA, with revocation of the license being the ultimate penalty through an administrative process, subject to judicial appeal. A dispensary exclusively owns, produces, cultivates, manufactures, and sells medical marijuana; thus, it is a vertically integrated regime. Although a dispensary may contract with businesses to cultivate plants or extract product, for example, each such business must be appointed by the dispensary and supervised by the dispensary.
Dispensary licenses (130) have been issued in two tranches: 2011 and 2016. Additional allotments may occur from time to time if the number of licensed pharmacies has increased statewide (licenses are issued on a ratio of ten pharmacies to one dispensary). It is likely that any such new licenses will be targeted for dispensary locations in underserved rural areas.
A dispensary must be operated on a nonprofit basis; thus, it pays no distributions or profits and typically has no members or owners, although it is often controlled and managed by a board of directors and/or officers or affiliated entities. A dispensary may only have one onsite and one offsite cultivation facility, and this is typically where production and extraction of edibles, tinctures, ointments, and other cannabis products occur. The dispensary is responsible for all activities of its cultivation, production, manufacturing, and kitchen facilities.
Dispensary licenses are nontransferable. However, the managing or controlling affiliated entities (or even their owners) may transfer their interests in a change of control transaction. There have been numerous such transactions in