New wrinkles in Florida’s medical marijuana implementation raise doubts, concerns

I’ve not been shy about expressing my concerns about the implementation of Amendment 2, many of which stem from the fact that I’m the father of a young daughter. From that perspective, it’s imperative to me that Florida exercises necessary prudence and caution while putting in place the mandate from voters on medical marijuana.

I’m not ashamed to say: “Surely, not in my backyard!”

Call me NIMBY. Call me old fashioned. Just don’t call me Shirley.

The existing seven licenses to grow marijuana in Florida have, for the most part, taken a similar stance as I have on a responsible roll out of the new law. They have good reason to do so: a cautious, slowly phased-in, expansion of medical marijuana in Florida is good for their bottom lines.

That may seem greedy or cynical to some, but I don’t think it is. The intersection of philosophy and self-interest tends to be a strong impetus for the creation of public policy, and that’s a good thing.

But self-interest being self-interest you also can’t expect that intersection to remain static on a big piece of public policy, with big dollars at stake, like medical marijuana.

Certain recent events have given me a reason to take a step back on some of these issues and evaluate the philosophical honesty of the approach of Florida’s current Dispensing Organizations, soon to be reregistered as MMTCs under Amendment 2.

Let me start by saying that I accept the basic premise put forward by these DO’s and legislators that they’ve built businesses by a foregone conclusion that our nascent medical marijuana system would expand dramatically – either under Amendment 2’s passage or legislative action. And they have done so at significant expense, without much in the way of return, thus far.

Now, that investment alone doesn’t necessarily justify a policy of abject protectionism in implementing the constitution, but again, as it intersects with the notion of caution and public safety, the case gets stronger to do so.

Except for some new wrinkles.

This week, Canadian mega-marijuana corporation, Aphria Inc., announced a deal to essentially buy CHT Medical outright, one of the seven licensed DOs. They’re doing so with $25 million cash, while launching a $35 million raise, valuing the company at $177 million (!!!). CHT only began selling low-THC marijuana to patients in January, mind you.

As I outlined in my last piece on this subject, there was an intense and rigorous application process to select those current license holders. Particularly in the case of CHT’s apparent wholesale unloading of their license to Aphria, would essentially circumvent that entire vetting process. These investors could be great news for Florida, we just don’t know, since they didn’t go through the process like everyone else.

Second, it strikes me as a tad intellectually inconsistent to argue for sympathy over their investment in the Florida market in one breath, while raising big foreign investment dollars in the next. (And CHT isn’t alone in its fundraising, just the most public. As the Miami Herald has reported, almost all of the licensees are currently raising capital from investors.)

Finally, let’s think about the pitch these companies naturally would have to make to secure these sorts of massive capital infusions. Legal marijuana is big business, to be sure, but it’s also an industry in its infancy that is handcuffed in many ways by the glaring conflicts between state laws and federal law, where marijuana remains a DEA Schedule 1 substance. That’s why you still don’t see traditional money players like Goldman and Citi and their ilk playing in this space.

So why the big investments and insane valuations? The answer lies more in the licenses granted by Florida, and less in the P&Ls of the companies in question.

Under current law, after having gone through the rigorous application process, posting a $5 million bond, building growing, processing and retail facilities, and receiving DOH approvals to cultivate and then distribute medical marijuana, licensees can pretty much do whatever they want.

Most states with some form of legal marijuana require separate applications and licenses for each individual business operation. A grow has its own license, retail dispensaries are individually licensed, etc. Other states with vertical integration, like Florida, allow multiple operations under a single license. In those states, the maximum number of retail facilities that can be operated under a license is limited to 3 or less (except for New York, which allows 4).

In Florida? There is no limit.

That’s right, folks.

What the press corps and I have likewise been derelict in reporting on, is that our present cohort of marijuana growers in Florida can open unlimited retail facilities – “pot shops” in the parlance of this issue – across the state. And that’s precisely what they are planning to do with all of this new capital they are raising by the truckload.

A pot shop on every corner? Without action to fix this glaring loophole (heh), that’s where we’re headed.

Not in my backyard.