Medical marijuana firms weed through regulatory maze | Crain's Orlando

Medical marijuana firms weed through regulatory maze

Winter Garden's Knox Medical is one of six licensed to cultivate and dispense medical marijuana in Florida. | Photo by Hope Winsborough for Crain’s Orlando

Winter Garden’s Knox Medical received one of five licenses awarded by the state to cultivate, process and dispense medical marijuana last November. Since then, the family-owned Knox Nursery's medical cannabis venture has been authorized to begin production and set up storefront dispensaries.

Knox and two other licensed growers recently received approval from the city of Orlando to operate a total of three medical cannabis dispensaries, and Knox plans additional storefront locations in Jacksonville, Tallahassee, Gainesville and Lake Worth. None are yet open for business, however.

So what’s the holdup?

“Growing a medical cannabis business is a prolonged process,” said Knox spokesperson Adam Sharon. Cannabis entrepreneurship in the state of Florida requires patience and practical judgment, he explains, not to mention the ability to weigh multiple unknowns while hitting crucial regulatory benchmarks and dealing with legislative delays.

Some of those unknowns will come into view soon when Florida voters weigh in on the proposed Florida Medical Marijuana Legalization amendment, commonly known as Amendment 2. Polls indicate the Nov. 8 measure is likely to exceed the 60 percent yes-vote threshold. (A similar proposal failed by just a few percentage points in 2014.)

The amendment would guide new legislation that expands covered conditions. Floridians suffering from glaucoma, HIV/AIDS, post-traumatic stress disorder (PTSD), amyotrophic lateral sclerosis (ALS), Crohn's disease, Parkinson's disease, and multiple sclerosis, among others, would be eligible for high-THC medical cannabis, as would patients with “other debilitating medical conditions of the same kind or class as or comparable to those enumerated.”

What the amendment won’t do is give the go-ahead to the three local dispensaries to immediately open for business. Even when, or if, they open, it’s difficult to predict their economic impact. Statewide revenue estimates range from $500 million to $1.5 billion by 2020. Attorney Richard Blau, who heads GrayRobinson’s regulatory products practice, cautions that any estimates are highly speculative since they depend on numerous variables, including approved medical conditions, implementation timeline, taxes and rates.

Further clouding the issue is that economic predictions are often calculated using statistics from states where recreational marijuana is legal in certain amounts. (To view the current status of marijuana laws nationwide, click here.) One benefit of the amendment’s passage, Blau says, is it will give added impetus to the Florida Legislature to move forward on an issue that’s been divisive. “It is highly likely to be a catalyst to galvanize support.”

Qualified doctors are already authorized to order low-THC medical cannabis for epilepsy and cancer patients under the 2014 Compassionate Medical Cannabis Act. New legislation passed in March allows terminally ill patients to use medical cannabis of any strength during their final days. Yet medical cannabis only became available to Florida patients in recent months, mainly due to legal and administrative delays. With just two dispensaries up and running in Florida, in Tallahassee and Clearwater (both operated by the grower Trulieve), many doctors are directing patients to the state Office of Compassionate Use for assistance in contacting a licensed grower.

So many annoying delays are a good thing, some argue, because they give the Legislature, government agencies and growers enough time to work out the kinks and ensure a streamlined system.

“Remember we’re talking about the implementation of a product that hasn’t been lawful in decades,” Blau said. Imagine applying the same hurdles involved in getting an alcohol license to a product that’s been illegal for years. “The challenge is how to create an industry from ground zero, including a regulatory scheme to oversee all the various mechanisms.”

As a result, licensed growers like Knox must address a range of regulatory issues. They have to set up security, modify facilities, and conduct background checks on staff while adhering to strict schedules put in place by the Office of Compassionate Use. The Florida Department of Health requires doctors wanting to write orders for cannabis oil to complete eight hours of training and pass an examination. Approximately 22 physicians in Central Florida have met these requirements.

Another potential delay is the state-dictated vertical business structure, which makes growers responsible for each step, from seed to storefront. That includes cultivating, harvesting, processing, marketing and dispensing the end product. The 24 nurseries that applied for five state licenses each had to meet a stringent list of requirements including a $60,000 application fee, the ability to grow at least 400,000 plants, a 30-year history of continuous operation, and posting a $5 million bond.

After the highly coveted licenses were awarded in fall 2015, a few runners-up immediately challenged the results in administrative court, complaining about improper scoring and accusing winners of falsifying applications, missing deadlines, and having pest-infested plants. One additional license was awarded as a result, for a grand total of six licensed dispensing organizations in the state. At least one legal challenge is still in dispute.

At the same time, going vertical is a massive undertaking. Knox Nursery sought a partner early in the process and teamed up with Cansortium Holdings LLC to form Knox Medical. According to Knox's Sharon, Cansortium provided the scalability, capabilities, and infrastructure to take on branding, marketing, vertical integration and more while also handling tasks such as opening dispensaries, dealing with properties and local governments, zoning, and coordinating with physicians.

Louis Rotundo, a Central Florida lobbyist who has represented the Florida Medical Cannabis Association, believes the amendment result is largely superfluous. While acknowledging it expands eligibility and may hasten bill proposals, he believes the Legislature will continue to err on the side of caution when it comes to implementation.

“That’s what they’ve tried to do since the beginning, to ensure a safe, regulated product is grown and dispensed in a controlled situation.” In his view, the biggest delays have come from the state’s limiting licenses to just a few of 15-to-20 highly qualified applicants.

“It defies the laws of free enterprise,” said Rotundo, who would like to see them all licensed by the state. “Anything the [health] department can do to bring lawsuits to a close will save time and money."

October 20, 2016 - 6:07pm