In an affront to Rick Scott-era rules that have cost the state years in court battles, an appellate court issued a ruling Tuesday that the current medical marijuana regulatory system is unconstitutional and inconsistent with Amendment 2, the ballot proposal that legalized medical marijuana.
A 1st District Court of Appeal decision in Tallahassee called the current, vertically integrated system unconstitutional for the way it caps licenses and charges companies with essentially being one-man bands — they must grow, process, package and sell medical marijuana without bringing in businesses to handle different parts of the process.
Critics say licensees may not have the technical or business skills to be effective in all areas, making it an inefficient model for a burgeoning industry.
Tampa-based Florigrown originally sued the Department of Health, which regulates medical marijuana under its Office of Medical Marijuana Use, after being denied approval of a license. The system currently caps the number of facilities — a statute the court called “unreasonable” in its ruling.
The three-judge panel’s ruling upheld in part a 2018 decision by Leon County Circuit Judge Charles Dodson, who sided with Florigrown in a lawsuit alleging the law did not properly carry out the amendment.
Dodson issued a temporary injunction requiring state health officials to begin registering Florigrown and other medical-marijuana firms to do business, but the judge’s order was put on hold while the state appealed.
In 2016, 71 percent of Floridians voted to legalize medical marijuana on a constitutional amendment largely bankrolled by Orlando attorney and political booster John Morgan.
The amendment defines “medical marijuana treatment centers” as “an entity that acquires, cultivates, possesses, processes … transfers, transports, sells, distributes, dispenses, or administers marijuana, products containing marijuana, related supplies, or educational materials” to qualifying patients or their caregivers, and is registered by the Department of Health.
But the 2017 bill signed into law by then-governor Scott says “a licensed medical marijuana treatment center shall cultivate, process, transport and dispense marijuana for medical use.”
The statute “creates a vertically integrated business model which amends the constitutional definition of [medical marijuana treatment center] … by requiring an entity to undertake several of the activities described in the amendment before the department can license it,” Judges Scott Makar, James Wolf and T. Kent Wetherell wrote in the majority opinion. Makar and Wetherell also wrote separate opinions. “Our ruling that the vertically integrated system conflicts with the constitutional amendment thus renders the statutory cap on the number of facilities … unreasonable.”
At the very start of his administration, Gov. Ron DeSantis, flanked by Congressman Matt Gaetz and state Sen. Jeff Brandes, called vertical integration a “cartel” that needed to be broken up in order to honor the will of the people. During his early promise to drop Scott-era appeals and legalize smokeable medical marijuana, he said he also plans to drop appeals in other marijuana-related cases regarding limited licensing and vertical integration.
“This gives us great opportunity to talk about breaking up the cartel,” Brandes said Tuesday. “Clearly vertical integration isn’t what’s best for the patients … it’s ripe for abuse.”
Brandes, a St. Petersburg Republican who wrote the bill to lift the smoking ban and was instrumental in the original 2017 law, pointed out that a limited licensing structure creates shortages in the market and inflated prices for people who want to treat their illnesses with the drug. The senator, who has been in close contact with DeSantis and his legal team, suggested the department mirror the licensing structure to that of liquor licenses and focus on what’s best for the patients.
Agriculture Commissioner Nicole “Nikki” Fried said Tuesday that the ruling is “a victory for openness and the future of medical marijuana.” She pointed out that when voters supported a ballot measure to access the medicine, they didn’t expect legislation that would be restrictive to an open market.
Fried, a former cannabis lobbyist and attorney who ran a campaign largely on a promise to expanded access to medical marijuana, said the vertically integrated system “hinders smaller farms, people of color, and others from participating in this vital new economic opportunity.”
“We stand ready to lend the Department of Agriculture and Consumer Services’ expertise to the Department of Health as it moves forward,” she said in a statement.
Taylor Biehl, a lobbyist for the Medical Marijuana Business Association of Florida, said in an ideal world, companies could optionally decouple from the vertical integration model and the department could license other businesses to cultivate, process, test or sell. Licensees should be the only entity to grow the marijuana, Biehl said.
He also suggested that independent dispensaries be allowed to sell products from multiple licensees to provide for more patient choice and product diversity.
“Without a doubt, this opinion throws a wrench into the regulatory works and the current marketplace,” Biehl said. “It may be too soon to suggest that vertical integration may not be required or how many licenses will be made available.”
The appellate judges stated Tuesday that it is not in the public interest to require the department to immediately begin registering applicants at this stage of the proceedings. The court directed the department to come up with a different regulatory structure that allows for a “reasonable number of licenses.”
It is not clear if the department or governor will appeal this ruling, or if the Legislature may rewrite the law.
In an interview with the News Service of Florida, Florigrown CEO Adam Elend called the ruling a “game-changer.”
“It drops a bomb on the current licensing scheme. It’s just changing the whole regime,” Elend said. “People are not getting medicine. The dispensaries are out of stock all the time. The products are limited, and the prices are high. That’s what happens in an oligopoly and that’s what we have.”
The Florida Department of Health did not respond to multiple requests for comment.