By: Dustin Robinson and David Butter
Florida medical cannabis licenses have become known as “super” licenses for three reasons.
- First, Florida’s licensing structure is vertically integrated. Licensees are required to oversee the entire supply chain, including cultivating, processing, dispensing, and delivering. Vertical integration provides licensees with significant control from seed to sale. Vertical integration is unique—most states with cannabis programs have a horizontal licensing structure, which means licenses are specific to certain segments of the supply chain. For example, in Illinois, you could apply for a cultivation license or a transportation license.
- Second, there is a limited number of licenses. In 2014, the Florida legislature created the “super” licenses, originally issuing only five. Over the course of the past five to six years, more licenses have been issued. Today, only 22 licenses have been issued, 13 of which are actively operational. Operators who acquired a license in 2014 got a substantial head start over operators who received their license in later years.
- Third, licensees can open an unlimited amount of retail dispensary locations. Most states with cannabis programs place a cap on the size and number of facilities for growing, processing, and dispensing. Until this month, Florida allowed each licensee to open 25 dispensaries and an additional 5 dispensaries for every 100,000 patients who register for Florida’s cannabis program.
Recently, these Hulk-Hogan licensees received a new boost. Florida’s cap on dispensary locations (as mentioned in bullet point 3 above) expired on April 1, 2020. Previous to the expiration, licensees could open up to 35 dispensaries because there are over 300,000 registered patients in Florida’s registry. Since its expiration, licensees can now flex their muscle into an unlimited number of dispensaries.
But this isn’t their first dose. Along the way, the licensees have picked up juice. The repeal on the ban of smokable cannabis gave licensees a shot in the arm, prompting licensees to expand production, operations and retail footprints. This was effective—more than 22,000 pounds of smokable product were sold in less than six months. Now, with the expiration of the dispensary cap, the “super” licenses have an opportunity to expand business operations.
Even though gone, the dispensary cap left scars. It was the spark of much confusion and litigation, resulting in state health officials agreeing to allow two licensees—Trulieve and Surterra Wellness—to open more than 35 dispensaries, exceeding the state cap.
So why aren’t the licensees celebrating and heading to the gym with their new boost? After all, “super” license status is what attracted large multi-state operators to purchase Florida licenses for big bucks including, MedMen, Curaleaf, Surterra, Cansortium, iAnthus, Columbia Care, Acreage, Green Thumb Industries, Green Growth Brands, VidaCann, and AltMed.
Because most licensees are so strapped for cash, they cannot afford the syringe and needle to complete the injection. Production has been an ongoing problem for licensees as most of them are already having trouble keeping quality product on the shelves. Opening more dispensaries would kill cash flow and put an additional strain on these production issues. The coronavirus pandemic forced several licensees to pivot into a delivery model and put their dispensary model on the back burner.
The silver lining is these issues can be resolved if the Florida legislature implements a horizontally integrated structure. A horizontally integrated cannabis program would limit cash demands on operating these licenses; allow licensees the ability to be an expert on specific parts of the supply chain; foster innovation in production methods and product mix; and provide more access to patients.
On the surface, removing the cap would seem to put additional muscle on the individual licensees, but a more effective supplement for the market as a whole would be the implementation of a horizontally integrated program. Luckily, the Florida Supreme Court has an opportunity to weigh in on the constitutionality of vertical integration in the Florigrown case and potentially provide a clearer pathway for a fair and balanced marketplace.