Florida finally adopts new rules for awarding medical marijuana licenses

After the better part of a decade, the Florida Department of Health’s rules on how businesses can enter the state’s medical marijuana industry are finally here.

Sort of.

The Department of Health, which regulates the state’s multibillion-dollar medical marijuana industry, released two emergency rules on Monday that indicate, in broad strokes, the application process for companies seeking a medical marijuana treatment center license, which permits them to cultivate, process and dispense medical marijuana.

One of the rules released Monday says the state will hand out the licenses by “batching” them — meaning not all of the new licenses will be available at once. But the new rule did not specify when the application window will open or exactly how many licenses will be up for grabs with each batch. It’s also not clear how far apart the batches will open.

In an email, a spokesperson for the Department of Health said the new rules also incorporate the “citrus preference,” which gives preference to applicants who own at least one facility used to process citrus and who will use that facility to process marijuana.

Because of protracted litigation and regulatory inaction on the part of the state, just 22 companies are currently licensed to operate in Florida’s medical marijuana industry. Just 19 medical marijuana providers have set up a store.

State law requires regulators to create four new treatment center licenses for every 100,000 new patients that enter the market. But the state has awarded just one new license through the application process since 2015. With the state reporting more than 776,000 patients as of last week, the state is required to bring 22 additional operators online.

One new license in 2022

The state awarded a license earlier this year to Gwinn Brothers Medicinals as a part of the state’s application process for Black farmers. A 2017 bill passed by the Legislature required the state to set aside one license for Black farmers who alleged in class-action lawsuits known as the “Pigford” cases that they were discriminated against by the U.S. Department of Agriculture.

But like seemingly every other marijuana license awarded by Florida, that decision has already been subject to litigation. The business that scored the highest on the application, Hatchett Creek Farms, was not awarded the license because its majority stakeholder died in the middle of the application process, a lawsuit alleges. Now the man’s family is suing, arguing it should have been awarded the so-called “Pigford” license.

Sally Kent Peebles, a cannabis law attorney, said the state’s “batching” of licenses may be an attempt by the state to avoid the heavy litigation that came with the application cycles of years past.

For applicants who spent thousands of dollars putting together a team and carefully curating an application only to be denied, the new rules could assuage them to know they have another opportunity, Peebles said.

”It kind of takes the wind out of the sails of their argument if they can just apply in the next batch,” Peebles said.

Most applications, even if they are resubmitted, will require a non-refundable $146,000 fee. (This is not the case for the businesses who were denied the “Pigford” license.) Once awarded, medical marijuana licenses can be resold for tens of millions of dollars.

Nikki Fried critical of new rule

Agriculture Commissioner Nikki Fried, who has long advocated for a more open marijuana market, said she expects the state’s new rules to further hinder businesses from entering the market. Her office does not oversee the state’s medical marijuana program.

Fried, a Democrat, said she expects the application process will be based on the idea of “need,” and that the state will determine there is none. Before being elected, Fried was a lobbyist and lawyer specializing in cannabis. Her term in office expires Jan. 2.

“If that is their end game, to not hand out new licenses, then they’re going to work backwards to figure out what is the equation necessary,” Fried said.

Josephine Cannella-Krehl, a member of the Florida Cannabis Action Network’s Legislative Leadership team, said the opening of a new application process is “long overdue.” The last time the state opened up applications was in 2015.

Cannella-Krehl said more applications mean more competition, which makes for better patient access.

But she’s concerned that smaller farmers may be priced out because of the application fee.

”I kind of wish that it was more open to the general public because you really have to have a lot of money to be able to even qualify for the license,” she said.

Sen. Joe Gruters, R-Sarasota, who sponsored a bill during the 2022 legislative session that would have enacted a number of reforms to the medical marijuana industry, said he would like to see the entire application process reformed.

With just a couple dozen companies serving the needs of so many patients, there’s not enough competition in the marketplace, he said.

“There should be as many players in the market as possible,” Gruters said.

The second newly published rule makes it more expensive for marijuana businesses to renew licenses every two years, raising the cost from about $60,000 to more than $1 million.

Information from the News Service of Florida was used in this report.