Archives for May, 2014

How Much Will it Cost to Open a Dispensary in Florida?

With the November 4th vote on Amendment 2 approaching, people around the State of Florida are eagerly anticipating the same type of robust cannabis-based economies that have popped up in states like Colorado and California.  But, as with any business start-up, there will be costs involved in launching such endeavors and if Florida follows the lead of more restrictive states then those costs may be very substantial.

If there is one lesson that the recent Charlotte’s Web law has taught us, it is that Florida lawmakers have shown a desire to put extremely tight restrictions on organizations that dispense medical cannabis.  If this trend continues after Amendment 2 is approved, then it is possible that Florida’s cannabis entrepreneurs may face a challenging licensing procedure that will no doubt include hefty expenses and costs.

One example of a state which has placed the economic bar very high for those entering the medical marijuana field is Illinois.  The Land of Lincoln has recently approved the establishment of 60 dispensaries, but has proposed a daunting set of regulations and requirements for obtaining licensure.

One way Illinois has sought to limit who may become a dispensary operator is by imposing measures that will weed out those applicants who do not have access to sufficient capital.  For instance, Illinois will be charging $5,000.00 just to submit an application, with another $30,000 being due if the applicant is selected.  In order to be selected, the applicant must show that it has at least $400,000.00 in liquid assets.  So, to even be in contention for an Illinois dispensary license will require that an applicant have access to a significant amount of money and they must be able to prove that to the state.

If Florida adopts a similar requirement, you can expect the herd of potential investors interested in the dispensary business to dwindle considerably.  This is especially true when you figure in all the other expenses that will necessarily go into opening a dispensary, including:  location rental/purchase, equipment and inventory, staffing and training costs, inventory tracking systems, legal and consulting fees,  bond posting expenses, ADA compliance, enhanced security measures and alarm systems, marketing, and a number of other overhead expenses that accompany the opening of any new business.

Considering all of these expenses, along with the necessary licensing fees, a conservative estimate for the cost of opening a dispensary in a restrictive state such as Illinois is in the neighborhood of $750,000.00 to $1 million dollars.  While it is still too soon to say that Florida will adopt rules with similar costs of entry, the example of Illinois should provide us with some idea of what to expect and plan for.

Less Than 1% Qualify To Dispense Cannabis Under Florida’s Charlotte’s Web Law

In a previously published article, I explained how restrictive Florida’s new Charlotte’s Web law is when it comes to who will be permitted to dispense medical marijuana.

The Florida Department of Agriculture and Consumer Services has compiled a list of nurseries that preliminarily satisfy the requirements set out in §381.986 for dispensing organizations.  Of the 7,001 registered nurseries in the state, only 39 have been found to meet the requirements to apply as dispensing organizations.  That means less than 1% of the nurseries in Florida can even apply for a license.  And then, only five of the 39 can be awarded those licenses.

While the Charlotte’s Web law contains a number of hurdles for potential licensees, the two factors that eliminate most possible applicants are the requirements that the applicant has operated as a nursery continuously in the state for 30 or more years and that they are licensed to sell at least 400,000 plants.

The law is so restrictive that the Department itself initially had a difficult time determining who met the 30 year requirement because the Department’s own records only went back 26 years.

As I have explained before, the Charlotte’s Web law is not going to present the opportunities that many thought medical marijuana would bring to Florida.  Whether the same hyper-restrictive approach is applied to Amendment 2’s implementation, remains to be seen.

Dissecting Florida’s Charlotte’s Web Law – The Good, The Bad & The Ugly

The very first step towards Floridians having legal access to medical marijuana was taken when the Florida Legislature approved §381.986, better known as the “Charlotte’s Web” law.  The final bill now heads to the desk of Florida Governor, Rick Scott, who has indicated that he will sign it into law.  While this legislative action marks a much needed step towards recognition of the medical benefits of cannabis, it is far from a total victory.  As this article will explain, the “Charlotte’s Web” law still leaves a number of obstacles and impediments which will prevent the full realization of medical marijuana use and distribution in Florida.

One crucial point that must be made clear up front is that this new law only applies to “Low-THC Cannabis”.  This is defined as cannabis that contains .08% or less of tetrahydrocannabinol (the part of the cannabis plant that causes a euphoric effect) and more than 10% of cannabidiol.  Essentially, this is a strain of cannabis that has been engineered to remove the chemicals that get people high, while leaving in place the chemicals that help certain physical ailments.  The central problem with this limitation is that people suffering from medical conditions that would benefit from the use of cannabis with higher levels of THC will be unable to receive effective medication under the new law.

Below, I will explain how the new legislation will impact three crucial areas:  the patients, the doctors, and the distributors.  As you will see, while some will stand to benefit under the new law, the majority will be left out in the cold.

The Patients:

With all the talk of cannabis businesses and entrepreneurs, sometimes people lose sight of the most important aspect of allowing legal access to medical marijuana:  namely, that people suffering from serious medical conditions can receive their needed medication without being threatened with criminal penalties.  The “Charlotte’s Web” law provides the first chance for Florida patients to get that access.

The new law provides that patients must meet the following qualifications in order to receive cannabis:

1)      Patients must be Florida Residents;

2)      Patients must suffer from cancer or a physical medical condition that chronically produces symptoms of seizures or severe or persistent muscle spasms and no other satisfactory alternative treatment options exist; and

3)      Patients must be added to the “compassionate use registry” by a properly licensed physician.  (If a patient is under the age of 18, two physicians must concur on the use of cannabis).

If a patient meets the requirements, then that patient will be put on a plan to receive “Low THC Cannabis” and can begin treatment.  As you can see, the number of medical conditions included are not as broad as those contemplated by Amendment 2, and therefore a large number of patients who could potentially benefit from the medical use of cannabis will be left out under the “Charlotte’s Web” law.

The law also provides a criminal penalty for persons who fraudulently represent their medical condition in order to obtain a prescription for cannabis.  Thus, patients who do not suffer from cancer or a medical condition that produces seizures, but who seek to receive medical cannabis under this law, risk being charged with a 1st degree misdemeanor and would be facing up to a year in jail.

The Doctors:

The new legislation provides a number of rules and regulations that govern the Doctors who can recommend “Low THC Cannabis” for their patients, and more importantly, it provides for criminal penalties against Doctors who fail to adhere to those rules.

Patients will not be able to simply go to their family doctor or general practitioner to get a cannabis recommendation.  Rather, physicians must qualify under the law by completing a special 8-hour course and passing an examination on the appropriate use and administration of medical cannabis.

After completing the course and examination, a doctor can then provide for the provision of low-THC cannabis to patients.  To do this, the doctor will place the patient on the “compassionate use registry”, which is a statewide computer database that the Department of Health will establish that will aid in the prescription and distribution of low-THC cannabis.  That database will include each patient’s information, as well as information concerning the treatment recommended for that patient, and it will be accessible by dispensing organizations and law enforcement officers.  The doctors are required to enter information about the dosage amount to be provided to the patient and the duration of the patient’s treatment.  A patient will be removed from the registry by his or her doctor once the doctor believes that treatment with low-THC cannabis is no longer needed.

As with patients who fraudulently report their medical condition, the new law also imposes criminal penalties for doctors if they recommend cannabis without a proper basis to do so.  The law makes it a first degree misdemeanor for a doctor to prescribe low-THC cannabis where there is not a reasonable belief that it is necessary to treat the conditions described by the law.  This provision is troubling because it foreshadows a situation where police officers and prosecutors could be second-guessing the opinions of trained medical professionals and imposing arrest and criminal prosecution if they disagree with those opinions.  Not only does this create the possibility of prosecutorial abuse but it also will likely lead to a chilling effect where doctors avoid recommending cannabis due to fear of prosecution.

The Distributors:

Finally, we turn to the reason many of you are reading this article.  Most of you are here because you have an interest in entering the Medical Cannabis business in some capacity, whether it be as a dispensary operator, a grower, an edible maker, or some other area.  Unfortunately, the “Charlotte’s Web” law has very little to offer for people looking to get into the cannabis business.  It presents very few opportunities and those that it does present have very high barriers to entry.

The law creates “dispensing organizations”, which are charged with the responsibility of providing cannabis to patients who have been entered into the compassionate use registry.  The problem is that the law only allows for the creation of only five dispensing organizations in the entire state.  The state will be divided into five areas (northwest, northeast, central, southwest, and southeast) and each area will be permitted only one dispensing organization.  By severely restricting the number of dispensing organization, the law has effectively shut out all but a very small number of people from entering into the business of providing medical cannabis.

So, the next question you are sure to ask is:  “How does someone become one of the five dispensing organizations?”   The unfortunate answer to that question is found in a long and incredibly limiting list of qualifications that the new law lays out that will certainly eliminate the vast majority of people who are interested.

The law imposes the following requirements for those wishing to apply to be dispensing organizations:

  1. Technical and technological capability to cultivate and produce low-THC cannabis.
  2. A valid certificate of registration from the Department of Agriculture and Consumer Services for the cultivation of more than 400,000 plants.
  3. Thirty continuous years of experience operating a nursery in the State of Florida.
  4. The ability to secure the premises, resources and personnel necessary to operate a dispensing organization.
  5. The ability to maintain accountability of all raw materials, finished products and byproducts, and to prevent unlawful access to those materials.
  6. The infrastructure necessary to distribute to patients statewide or regionally.
  7. The financial ability to maintain operations during the 2 year approval cycle, including providing the Department of Health with financial records as proof.
  8. The posting of a five million dollar performance bond.
  9. All owners and managers must pass a level 2 criminal background check.
  10. The organization must employ a medical director who is a licensed physician and who has completed specialized training.

To say these requirements are daunting is an understatement.  While some of them are attainable by a fair number of those interested in applying, there are some which will undoubtedly exclude all but a few applicants.  For instance, how many applicants will be able to show that they have 30 continuous years operating a nursery within the state?  How many carry a license to cultivate 400,000 plants?

The simple fact is that the “Charlotte’s Web” law will offer very few opportunities for those interested in entering the medical cannabis business, at least to the extent that the business involves the distribution or manufacture of cannabis or cannabis products.

But, what is even more concerning is the impact that this law may have down the road.  Assuming Amendment 2 passes, and the State is then charged with setting up a cannabis dispensing system under that amendment, what is to stop the regulators from simply using the system that is already in place for the Charlotte’s Web strain?  The new law could be the writing on the wall that cannabis entrepreneurs may face a very uncertain future in Florida.

Miami-Dade Commission Orders Marijuana Farming Report

As Amendment 2 looms on the horizon, more and more people are preparing for the likely approval of medical marijuana in the State of Florida.  And that preparation isn’t limited to patients and entrepreneurs.  Local governments can see the writing on the wall too, and some are starting to prepare for the eventual passage of medical cannabis.

A case in point is the Miami-Dade County Commission, which just passed a resolution asking its staff to prepare a report on the impact medical marijuana would have on that county’s numerous and fertile agricultural areas.  The County staff has been directed to provide this report to the Mayor’s office within 60 days.

It should come as no surprise that this measure was introduced by a Commissioner from a heavily agricultural district that stands to benefit greatly from an influx of legal cannabis crops.  It is also refreshing to see that only one commissioner, Javier Soto, opposed the measure.

The Miami Herald has more on this story.  Read the article here.

New Poll Shows Overwhelming Support for Medical Marijuana in Florida

A newly released poll conducted by Quinnipiac University has shown an approval rating of 88% for medical marijuana in Florida.

In order for Florida to approve the medical use of cannabis, the ballot measure must pass by 60% (not just a simple majority of 50%).  While that hurdle is a steep one, the new polling can give us cause to be optimistic about the chances of success.