On May 27th, 2021, the Florida Supreme Court issued its long-awaited decision in Florida Department of Health v. Florigrown. Florigrown applied to become a medical marijuana treatment center (“MMTC”) in 2017 but was denied. In court, Florigrown alleged that Florida’s 2017 legislation contradicted the 2016 Florida constitutional medical marijuana ballot initiative (“Amendment”) (Florida Constitution, Article X, section 29).
The challenged provisions were:
(1) A mandate that MMTC’s use a vertically integrated supply chain
(2) The statutory cap on the number of MMTC licenses available to entities seeking to participate in the medical marijuana industry, and
(3) Florigrown’s claim that the legislature creates a “special law” granting privileges to private corporations are unconstitutionally
On the above issues, the Florida Supreme Court held:
(1) The Amendment leaves the enactment of licensure standards to the Legislature and that Florida lawmakers are permitted to include the standard of vertical integration,
(2) That the statutory cap does not make medical marijuana inaccessible, and the Amendment does not preclude a limit on the number of MMTCs that can be licensed, and
(3) The Legislature didn’t create a special law, that the 2017 legislation is instead “general law” because a law that addresses state interest and operates to protect those interests using valid classifications is permitted so long as the limited application bears a reasonable relationship to its statewide purpose.
Several impacts on current licensees, individuals who may be seeking to enter the cannabis industry, and consumers result from the courts holding in Florida Department of Health v. Florigrown:
• Vertical integration: can be prohibitive because it requires the licensee to “acquire, cultivate, possess, process, transfer, transport, sell, distribute, dispense” marijuana products to qualifying patients. Thus, access into the Florida cannabis industry is limited to those with significant resources and capital to create a vertically integrated business which, unfortunately, means that traditionally disadvantaged communities with fewer resources are less likely to participate.
As a business attorney helping entrepreneurs achieve their dreams of running a cannabis business, this requirement is sincerely disheartening for Florida patients and would be cannabis entrepreneurs as it specifically shuts out anyone from entering the market without millions of dollars behind them. From the perspective of existing licensees, vertical integration can be a good thing since it may allow businesses to reap higher profit margins. For a discussion on the pros and cons of vertical integration in the cannabis industry, read here:
• The statutory cap has caused patients to have difficulty finding the medical cannabis products they need and pay unreasonably high prices due to the lack of MMTC’s. Additionally, like the issues associated with vertical integration, a statutory cap has lead to the exclusion of disadvantaged groups attempting to enter the cannabis industry. For those already in the Florida cannabis industry, the statutory cap is welcome because it maintains the current regulatory scheme that investors and participants have built their business models around.
There are several recommended actions that we encourage readers to take:
Continue to exercise your voice – multiple ballot initiatives relevant to cannabis legalization and regulation may appear in Florida and around the country. And take note of the actions of state legislatures – they directly impact what the cannabis industry looks like in each market.
If you are currently a member of or interested in entering the cannabis space in Colorado, Florida, or New Jersey and seeking legal advice, please contact us for a consultation and assistance in navigating the ins and outs of this industry.
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