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The roadmap to a successful statewide medical cannabis system and successful cannabis business

By MICHAEL C. PATTERSON

I speak to groups all over the country about legal cannabis. One of the most common misconceptions that I encounter is the idea that a legal cannabis system automatically equates to financial success of individuals who operate legal cannabis businesses. As you are aware, Florida passed a constitutional amendment legalizing medical marijuana. Within minutes of the law passing on November 8, 2016, I received four texts from friends which all read, "Are you a millionaire yet?" My first reaction was "Are these people serious?" Yes, they were all serious. Millions of people believe the cannabis business is the "golden ticket" to money and riches. While that can be true for some, it is important to understand how laws and regulations affect your ability to succeed as a cannabis related business.

Since the legal cannabis industry is so new, most people who are entering the industry have no experience in cannabis whatsoever. They want to understand how to get a license to grow, process, dispense, or transport cannabis. It is imperative to understand the state medical cannabis law and how it can determine your success or failure as a business owner. State medical cannabis laws must have balance of three areas or "pillars" in order to be successful. These pillars are public safety, patient access, and commerce.

Public Safety - The policies, laws, and rules that prevent diversion of cannabis and ensure medication is produced safely, proper state government oversight of providers, as well as education of law enforcement and education/outreach to the general public.

Patient Access - How hard is it to access the medication? How costly is a doctor visit and how many times a year must a patient see a physician to maintain their medical cannabis card? How long does a patient have to wait to access medicine after being seen by an approved physician who has recommended cannabis? How much does the medication cost?

Commerce - Can the dispensaries or stores make money? Does the law allow enough patients to receive the medicine to support the stores? Are there enough licensed operators to drive a free market to maintain competitive pricing and propel industry innovation?

If these three pillars do not balance, the system does not function properly, and the entire legal framework can fail. For example, in New York State public safety is extremely strict because the MMJ law does not allow many qualifying conditions (which limits patient access). It does not allow physicians to advertise to the public that they provide medical cannabis referrals (which limits patient access). The law initially allowed only 20 dispensaries in the entire state which limits patient access and the ability for (commerce) dispensaries to make money. Over the last three years in New York the legislature has gone back and modified the law five times because it was setup for failure. Public safety is too strict, which caused few patients to have access to the medicine and caused commerce (dispensaries) to charge $700 to $1000 per month for product to break even (which no operator has done as of 2017). Unless changes were made, the system would have failed.

Another example of imbalanced pillars is California. Prior to 2018, California had poor public safety and laws, which created too much patient access and too much commerce. This unbalanced system has put licensed operators in jail because of ambiguous laws and regulations allowing for local law enforcement to interpret the law. A new recreational cannabis law went into effect in January 2018 but will take years to fix the problems of a poorly planned legal cannabis system.

So, how does the Florida Medical Marijuana law stack up? Overall the three pillars are fairly balanced. The law dictates that Medical Marijuana licenses be vertically integrated, which means each licensee, called a Medical Marijuana Treatment Center (MMTC) must cultivate, process, dispense, and transport medical marijuana (MMJ) throughout the state. Furthermore, each MMTC can open up to 25 dispensaries, but after 2020 each MMTC can open an unlimited number of dispensaries. As of August 2018, there are 14 licensed MMTCs in the state and approximately 50 dispensary locations currently open. The law mandates that for every 100,000 active patients, the state must issue 4 new MMTC licenses in order to keep up with demand.

Recently, a judge in Lee County ruled certain parts of the MMJ law have been ruled unconstitutional, specifically the number of licenses issued being too limited, and the mandate that each MMTC license be vertically integrated. However, this ruling will be appealed by the State Department of Health Office of Medical Marijuana Use (OMMU), and is by no means binding as of now.

Physicians are required to take a 2-hour CME course on MMJ to be allowed to certify patients to use MMJ. As of August 2018, there are approximately 1600 Physicians who have been approved to write MMJ certifications. Current patient counts are around 140,000 and increasing 3,000 patients per week.

So, on the surface the FL MMJ system seems to be balanced allowing for good public safety by requiring strict oversight of MMTCs, ability for physicians to recommend MMJ and many qualifying diagnoses, and numbers of stores increasing as well as the ability to deliver MMJ anywhere in the state is allowing for good patient access and ability for dispensaries to make money.

Challenges to the Florida MMJ system - The glaring problems with the current MMJ are zero tax revenue and funding for public education. The Florida legislature wanted to help MMJ patients by not taxing the medicine. However, the problem with that decision is that it doesn't provide any money to fund the enforcement division of the MMJ system which is the FL Department of Health Office of Medical Marijuana Use (OMMU). Without its own funding source, the OMMU must rely on the state legislature for approving funding annually. The concern is the state legislature may disagree with the MMJ system and choose not to fund the OMMU or limit funding for political or ideological reasons. If you don't think that is possible, it has already happened in West Virginia where the legislature passed a new MMJ law in 2017 but refused to fund the Department of Health to oversee the program, which has killed the new law for now.

Regarding education, the law authorized $500,000 to be spent on educating the public. That money has been given to the University of Florida to study the effects of the new MMJ law on the state, but not to provide any real-world education to the citizens the Florida. This creates a lot of problems for all of us. If you don't educate a population on something that used to be illegal but is now legal then you are asking for problems. The general public and most healthcare workers do not know how the law works, who qualifies, what is now legal, what is still illegal, etc. This is causing persons to be arrested for something they assumed was legal and causing patients to suffer who otherwise could be benefitting from this new legal medication.

Overall, the Florida MMJ system is balanced but will still be modified for years to come in order to help the most patients possible. It is up to all of us as healthcare workers to educate ourselves about this law in order to help our qualified patients benefit from this natural medicine. The more we know about the law and how it affects the success of the entire system, the better we can work together to ensure the systems success.

Michael C. Patterson, founder and CEO of U.S. Cannabis Pharmaceutical Research & Development of Melbourne, is a consultant for the development of the medical marijuana industry nationwide and in Florida. He serves as a consultant to Gerson Lehrman Group, New York and helps educate GLG partners on specific investment strategies and public policy regarding Medical Marijuana in the U.S. and Internationally.