For the past few years, the medical marijuana industry in Florida has been held back by legislation that puts an immense amount of pressure on sellers. State legislation requires that the medical marijuana industry be vertically integrated. Facilities that sell marijuana on a retail level must also cultivate, process, and transport the product.
There have been plenty of complaints about the state’s vertically integrated system. It caps licenses and essentially requires anyone who wants to opt in to be a one-man army, and critics say most players aren’t skilled enough to handle everything from growing, processing to selling.
In 2016, 71% of Florida residents voted to legalize marijuana on a constitutional amendment. It defined medical marijuana treatment centers as ‘an entity that acquires, cultivates, possesses or transfers, transports, sells, distributes, dispenses or administers marijuana, products containing marijuana, related supplies, or educational materials’ to qualifying patients or their caregivers and is registered by the Department of Health.’
However, a bill signed into law in 2017 by then-Governor Scott says that a ‘licensed medical marijuana treatment center shall cultivate, process, transport and dispense marijuana for medical use,’ thus creating a vertically integrated system. Opponents have said the law doesn’t align with the constitutional amendment, with Florida Governor Ron Desantis likening vertical integration to a cartel.
It prevents small companies from entering the industry by creating a high monetary barrier and it makes specialization of one specific aspect like growing or processing almost impossible.
The issue came to a head when a Tampa-based company was denied a medical marijuana license since it did not have a vertically integrated system of growing, processing and selling marijuana and sued the Department of Health. Florigrown says the vertical integration system is unconstitutional and goes against the constitutional amendment that legalized marijuana and gave licensed companies permission to sell.
According to Florigrown, the amendment was intended to create an open industry where people can specialize in different aspects of the supply chain. By using the word ‘or’ the amendment wasn’t arguing for a vertically integrated system but a ‘horizontal’ structure where firms can perform different aspects of the business.
Joe Jacquot, Governor Ron DeSantis’ general counsel represented the Department of Health. He argues that the 2017 law does not conflict with a “proper, textual interpretation” of the constitutional amendment.
“Nothing in the amendment prescribes a horizontal marker model, nor does the amendment elbow out the legislature’s vertical integration,” he told court justices.
Florigrown’s lawyer Katherine Giddings, on the other hand, argues that the Legislature’ cannot “under the guise of public policy come in and change the plain text of the Constitution.”
“There’s something wrong with a system that keeps competition out, products scarce and prices outrageously high, that is harming Florida’s critically and terminally ill patients from getting medical marijuana at reasonable prices. And it is totally contrary to fair market principles.” This case is before the state Supreme Court and analysts say the entire cannabis industry, including Champignon Brands Inc. (CSE: SHRM) (OTCQB: SHRMF) (FWB: 496), will be watching how the highest court will rule on this dispute that may shake the cannabis program to its core.
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