Battle of the Weedwork Stars, Episode 2

Florida and medical marijuana just aren’t quite meshing right  now, but we’re working on getting it all straight soon:

“A Florida appellate court ruled that the state’s medical cannabis licensing system is unconstitutional, setting the stage for greatly expanded business opportunities in one of the country’s fastest-growing markets. Found unconstitutional were legislative measures that imposed license caps and vertical integration.

The takeaway here is that while the decision will most likely be appealed to the Florida Supreme Court, this opens the door to the possibility of the Florida market opening up to more players, with the barriers to entry being lowered,states Sally Peebles, a cannabis attorney with Vicente Sederberg LLP in Florida and member of the Florida Medical Marijuana Advisory Committee.

Peebles wrote the following in her recent email to Marijuana Business Daily:

If vertical integration is eliminated, it will be less expensive to enter the market, allowing more mom-and-pops to enter the market. In addition, more licenses will be issued if the cap is lifted, before continuing that would create a ‘more competitive environment,’ leading to more innovative products and, eventually, lower prices.”

According to the 2019 Marijuana Factbook, as of July 5, 2019, six vertically integrated MMJ businesses operated 120 of the state’s 142 dispensaries, with a projection:

“MMJ sales in Florida will reach $425 million-$525 million this year, up from $225 million-$300 million in 2018.”

On July 11, 2019, Leanne Winkels elaborated further on the issue of  Florida appeals court rules marijuana regulation unconstitutional:

The court found that Florigrown adequately meets the requirements to obtain a temporary injunction as granted by the lower court. Florigrown established irreparable harm and inadequate remedy at law based on their being unconstitutionally excluded from the process to obtain a MMTC license. The court affirmed the injunction to the extent that it ‘precludes the Department from enforcing the unconstitutional provisions’ of the regulatory framework, but also provides for a ‘reasonable period of time’ for the Department to ‘exercise its duties.'”

On July 16, 2019, Bobby Caina Calvan reported further on the court ruling in Florida Medical Marijuana Regulations Are Unconstitutional: “A Florida appellate court ruled that the state’s approach to regulating marijuana is unconstitutional, possibly allowing more providers to jump into a market positioned to become one of the country’s most lucrative.

If the ruling stands, it could force the appropriate state officials to lift existing caps on how many medical marijuana treatment centers can operate in Florida.

The July 9 ruling by the 1st District Court of Appeal in Tallahassee was another setback for Florida officials trying to regulate the burgeoning marijuana industry more tightly. It mostly affirmed a lower court’s ruling that the caps and operational requirements violated the voter-approved constitutional amendment legalizing medical marijuana in 2016. Ever since, the law has been a subject of debate in the legislature and courts. It was unclear whether Florida officials would appeal the ruling.

Florida now has more than 240,000 people registered with the state to legally use medicinal marijuana, according to the Office of Medical Marijuana Use. They are served by 142 dispensaries across the state, the majority operated by about a half-dozen medical marijuana treatment centers that grow their own crop, process it and sell it – a business model known as vertical integration.”

Even Florida Commissioner of Agriculture Nikki Fried, the lone Democrat in Florida’s various statewide offices, hailed the ruling:

A victory for openness and the future of medical marijuana in Florida. When 71 percent of Floridians voted for access to this life-changing medicine, they didn’t expect restrictive legislation that stood in the way of progress and open markets.

Florida Courts Rule Medical Marijuana Scheme Unconstitutional, Blaise Gainey acknowledged, but then What’s Next for Florida? The state’s medical marijuana distribution system is unconstitutional, and that could soon force the legislature and the industry to make changes, an issue that was highlighted earlier in 2019 by Florida News Service correspondent Dara Kam.

In Medical marijuana: Florida law creates ‘oligopoly’ for pot businesses, court decides, Kam observed:

Florida’s law requiring to grow, process and distribute cannabis and related products created an ‘oligopoly’ and runs afoul of a constitutional amendment that broadly legalized medical marijuana in the Sunshine State, an appellate court has ruled, with the 1st District Court of Appeal’s decision sending shockwaves through the state’s rapidly growing medical marijuana industry, in which licenses are routinely selling for upwards of $50 million.

The three-judge panel’s ruling upheld in part a decision issued last year by Leon Circuit Judge Charles Dodson, who sided with Tampa-based Florigrown in a lawsuit alleging a state law, passed during a 2017 special legislative session, did not properly carry out the amendment.”

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. 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.”

This is an opinion shared by many throughout the state, across the country, and around the world. One of those such individuals, State Senator Stacy Rudolph agreed in his opinion piece on Why Florida’s Marijuana Business is Unfair. Even international news source Cannabis Law Report published Florida Medical Marijuana: It’s Time To Get Rid of Vertical Integration by Dionne Kellier, Counsel to Hoban Law Group.

Florida’s governor Ron DeSantis Defends Florida’s Medical Marijuana Law, as reported by Shawn Mulcahy: “Gov. DeSantis says he supports the Florida Legislature’s efforts to defend the state medical marijuana law” and he “thinks the legislature acted within its authority when enacting the medical marijuana implementing bill.”

DeSantis says he backs lawmakers, who are continuing to fight the ruling, all the way to  the state Supreme Court, where it currently remains under advisement, and has been quoted as stating, “I have said the way the legislature did it was not exactly consistent with a competitive market. From a constitutional perspective, I think they had the right to set those standards, and I know that a lot of people have relied on that licensing regime.”

As previously discussed in my Florida column over the last few months, the governor has previously expressed concern about the legislature’s ban on smoking medical marijuana, and successfully secured a change to that part of the law this past legislative session.

But Florida One Medical Marijuana Case Goes to State’s Supreme Court: a lawsuit brought by Florigrown to dispute the state’s licensing process will be heard by the Florida Supreme Court “after a split appeals court refused to grant the state’s request for a new hearing,” reported Melissa Schiller on August 30, 2019:

Five judges on the appeals court recused themselves from deciding whether the case should get a hearing by the full court, the South Florida Sun-Sentinel reported, although the judges did not explain the reasons behind their recusals.

In July, an appellate court sided with Florigrown, one of Florida’s medical cannabis businesses, after the Tampa-based company sued the state upon being denied a business license. Florigrown’s lawsuit underscores the tension between a 2016 voter-approved medical cannabis legalization measure and state legislators’ attempts to implement that measure.

Florida lawmakers have instituted a vertical integration requirement and capped the total number of medical cannabis business licenses in the state.

However, crucial language in the ballot initiative approved by voters includes the word “or,” as in a medical cannabis business in the state—called a ‘Medical Marijuana Treatment Center’ (MMTC)—’acquires, cultivates, possesses, processes (including development of related products such as food, tinctures, aerosols, oils, or ointments), 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.’

After five judge recusals on Tuesday, the remaining judges split 4-4, the regulatory landscape in the state thus remains the same for the time being, the South Florida Sun-Sentinel reported. Now, all eyes are on the Supreme Court to have the final say in the issue.”

What might be Florida’s next move after the impending Supreme Court final ruling on the whole vertical integration issue? Let’s rewind to last year to Jason Perlow on November 16, 2018 to see How the marijuana industry is organized in legal states:

 “State programs can be classified as either horizontally or vertically integrated marijuana industries. The horizontally integrated states are more business-friendly than the vertically integrated ones due to the restrictions typically imposed on marijuana businesses.

In a horizontally integrated program, manufacturing, testing, dispensing, distribution, and transportation are all considered separate business activities. With the exception of testing, a marijuana business can engage in any or all of those. So, a dispensary might carry products from many different growers, as strictly a reseller. Also: For CBD products, legal questions linger.

By contrast, a vertically integrated marijuana program is regulated and licensed by a State Health Department or similar governing agency, which must control all aspects of operation: Cultivation, manufacturing, transportation, distribution, and dispensary, and in many cases, testing. The capital expenditure required to set up shop as a marijuana firm in a vertical integrated state is massive, on the order of tens of millions of dollars.

For example, California is a horizontally integrated marijuana state, whereas Florida is a vertically integrated marijuaa state. Illinois and Washington, like California, prohibit vertical integration.”

In Marijuana Business Daily’s March 2019 article Jack of All Trades or Master of One, Joey Peña argues that:

Vertical integration can give marijuana businesses tight control over their supply chain and the ability to leverage economies of scale—but is it the only formula for success?

State license types and tax laws also play critical roles in the decision to vertically integrate. Consider Oregon, for example: The state has temporarily suspended approvals for new cultivation licenses because of oversupply. But there’s no cap on the number of licenses the state can award.

If the state lifts its suspension and begins approving new licenses, it could create an even more tenuous environment for a nonvertically integrated cultivation business that doesn’t control its retail destiny.

The ability to leverage economies of scale in a vertically integrated business model is a clear advantage—but experts largely agreed that vertical integration isn’t the model for a business to succeed. A diverse number of successful models exist.”

Vertically Integrated Cannabis Companies on Tour: A New Era of Confidence as Regulations Change as evidenced by Globe Newswire. Either way, vertical or horizontal alike must consider the diagonal shift in The New Generation of Cannabis Consumers [Demographics Research] as pointedly noted on March 26, 2019:

Things are ever changing in this age and at this stage of the cannabis movement. We have watched laws change, industries develop and – perhaps most importantly – attitudes about the cannabis plant itself change.

As the stigma surrounding this plant is slowly lifted, more and more research surrounding the plant and the people who consume it is coming to light. People are increasingly more receptive to the idea that many cannabis consumers are very functional, productive members of society, and now we have some numbers to prove it. Upscale purchasers of brand name cannabis products are breaking stereotypes and changing the marijuana marketplace.”

WeedBlog’s original story from November 30, 2016 astutely pointed out three years ago: A new class of Cannabis Consumers is reshaping marijuana culture. These individuals break the ‘out of it’ stoner stereotype in favor of feeling more ‘present’ and ‘mindful’ while they consume cannabis. They also actively seek out cannabis products that are high quality, high-end and often artfully branded and packaged.”

Yet here we sit three years later, halfway through 2019, and the fact that Trump Administration Wants More Public Input On International Marijuana Rescheduling was reported as recently as August 28, 2019 by seasoned cannabis correspondent Kyle Jaeger.

In more promising news, on September 10, 2019, Marijuana Moment reported that Former FDA Head Hints Feds Should Regulate Marijuana To Protect Public Health:

“The former head of the Food and Drug Administration (FDA) said this week that conflicting state and federal marijuana laws have created an oversight gap that is exacerbating an outbreak of vaping-related lung injuries, and he indicated that federal regulations may be necessary to resolve the issue.

Scott Gottlieb said in a series of tweets over the weekend and in a TV appearance on Monday that he is concerned about permissive state policies that allow for the use of cannabis by adults but at the same time pointed out that current restrictive federal laws are inhibiting regulators’ ability to oversee manufacturing of marijuana products. It remains to be seen what the former FDA commissioner would specifically propose to address the problem legislatively, however.”

September 10, 2019 brought the most eye-opening article yet: Mike Adams prescient Hey, Congress: Marijuana Banking Won’t Stop Americans From Dying Due To Illegal Cannabis Vapes:

There is a bill, however, currently building momentum in the U.S. House of Representatives known as the Secure and Fair Enforcement (SAFE) Act that stands to turn the situation around. The only problem is it has zero chance of going the distance in 2019, and it will do absolutely nothing to remedy the real problem the pot trade is facing right now: Illegal vape cartridges that are putting Americans in an early grave.”

Ultimately, according to Kevin Murphy, CEO of Acreage Holdings, and Charlie Bachtell, CEO of Cresco labs, and former Canopy Growth CEO Bruce Linton on June 8, 2019, these remain the three biggest threats to the medical cannabis industry:

>Black Market, >Regulations and Public Policy, >Consistency and Execution.

– and these are threats for both public policymakers and administrators in the sector and the cannabis industry at large, statewide and federally. .

There’s a common thread between, I think, the three of our answers,” Charlie Bachtell said of his, Kevin Murphy’s and Bruce Linton’s responses. It is incumbent upon cannabis operators to make sure products meet expectations of national and international industry of packaged goods so that we can have quality in the legal market. In addition, there must be safe execution, consistency of products, and availability or access that works for patients without risk. 

If we fail to execute, if there’s not consistency, you’ll have public policy issues,” Linton said in closing.

To sum it all up from a patient’s perspective, if there is not quality and accessibility, then you have public policy issues on a state and federal level. Concerning illicit v. legal markets: the more quickly that states can enact regulated tax frameworks, the sooner the U.S. can convert people from an illicit, black market to a legal market, but this involves legislators and administrators doing their jobs to enact public policy.

Safety, consistency, and access improvements and standardization must result in actionable public policy that is directly reflective of the needs of the cannabis industry, the public, the various Departments of Health, and each individual state’s legal cannabis program framework.

But the weak link in this equation is the lack of consensus between these divided groups. These gaps in cannabis consensus need to be filled, however, and a workable compromise reached between these divisions.

All are key players with key roles, but someone threw the script out ages ago when the nation’s cannabis prohibition was in its nascent and formative years. We are still struggling to piece together a national medical cannabis plan that is acceptable to each individual state.

We need for states to enact legal tax frameworks for the cannabis industry so that public policy can be made by legislators that equals market security and safe, consistent access can occur legally and regulated.

We need to have a testing standard globally and for hemp internationally resulting in improved cannabis safety, as agreeable industry-wide standards would result in better market execution.

And finally, we need public policy enacted and executed that works for patients to have access without risk.

For Florida, this remains a complex task and a tall order indeed, if the state wants to proceed lawsuit free in 2020. Hey, that should be Florida’s new medical cannabis slogan for the coming year:

I can see it now: “FLORIDA: LAWSUIT FREE IN 2020!”

Catchy, isn’t it? Let’s hope Congress also “catches” on, before it’s too late and the window for real medical cannabis change closes.

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