Latest Rule Proposal Would Let Pot Growers Distribute Product Directly to Retailers

Pot growers could distribute the non-euphoric medical marijuana authorized by the Legislature at multiple retail locations away from their farms, under the latest proposal discussed by a panel handpicked by state health officials.

Patricia Nelson, director of the Florida Department of Health’s Office of Compassionate Use, said Wednesday at a rule-making workshop that she expects growers to be able to sell their product at storefronts, possibly in regions outside of where their nurseries exist. Under earlier proposals, growers would have been required to dispense from the farms where the product was grown and processed.

The latest iteration of the proposal, hashed out at a rare “negotiated rulemaking” workshop ordered by Nelson, would allow nurseries to grow the cannabis in one place, process it at another and sell it at multiple locations. Growers could also deliver the product directly to eligible patients’ homes.

“Here’s the deal: We’re very cognizant of the fact that … we need to have dispensing facilities,” Nelson told the 12-member panel near the start of a scheduled 14-hour meeting. “We still think that sprawl of these types of facilities is not a good thing.”

Under a marijuana law passed last spring, nurseries that have been in business for at least 30 continuous years in Florida and cultivate at least 400,000 plants are eligible to be one of five “vertically-integrated” entities that will grow, process and distribute strains of cannabis that are low in euphoria-inducing tetrahydrocannabinol, or THC, and high in cannabadiol, or CBD, for patients who suffer from severe spasms or cancer. Lawmakers and Gov. Rick Scott approved the law after hearing pleas that the strains could help children with severe forms of epilepsy.

An administrative law judge tossed out health officials’ first stab at a rule that was designed to create a regulatory framework, finding fault with the agency’s proposed use of a lottery to pick the five licensees, among other things.

The new panel, which includes several nurserymen and a Colorado marijuana grower, slogged Wednesday through a swath of issues ranging from minutiae such as trash collection to major sticking points like ownership.

Tallahassee lawyer Jason O’Steen, also selected by Nelson, mediated the process.

During more than 10 hours of discussion, the panel found little to disagree about regarding the department’s latest proposed rule.

But by late Wednesday afternoon, some of the most contentious issues remained unresolved, including who can own the entities selected to grow and distribute the low-THC product. In his Nov. 14 order, Administrative Law Judge W. David Wilkins found that the “plain language” of the law passed last spring required the owners to be nurseries that met the criteria laid out in the statute.

But nursery owners want to keep their current operations separate from the new low-THC entities because cannabis is still illegal under federal law and banks will not lend money to marijuana-related companies.

Panelist Pedro Freyre, vice president of Miami-based Costa Farms, insisted that the nurseries needed to have separate organizations to avoid jeopardizing their current operations. Costa Farms was one of the nurseries that filed the challenge to the original rule.

“Otherwise our businesses will not be able to exist and continue as nurseries if we don’t find a way around this,” he said.

“This is the elephant in the room,” agreed nursery owner George Hackney, also on the panel.

“This is the deal-breaker issue,” Freyre said.

About 100 Florida nurseries would be eligible to apply for the licenses, but they must also prove they can stay in business for the two years in which licenses would be active and show that they would be able to finance the start-up of the new pot-growing businesses. The law also requires growers to post a $5 million bond. Equipment for testing could cost at least $1 million, but still up in the air Wednesday evening was how to perform tests on the product, usually delivered in oil form and ingested as a paste or vaporized, to ensure that it meets the low-THC, high-CBD requirements of the law.

Allowing testing companies to analyze the product remains problematic because lawmakers did not authorize third parties, such as labs, to possess the low-THC cannabis or the final product. Advocates are hoping the Legislature will close that loophole during the session that begins next month. The panel on Wednesday discussed having a single laboratory contract with the growers to avoid requiring the nurseries to invest in the expensive equipment.

During a brief break near 6 p.m. Wednesday, Nelson said she was pleased with the progress the panel had made. The panel also is expected to meet Thursday.

“I think it’s going very well. I’m overall very positive, and I think that we’ll come out with a rule,” she said.

Under the law, regulations for the industry were supposed to go into effect by Jan. 1. But, after the legal challenge, the earliest the new rule could go into effect would be nearly two months after the panel completes its work this week. Nelson also believes the Legislature must approve the rule because of the estimated costs to the nursery industry.

The delay frustrated panelist Holley Moseley, who was instrumental in pushing through the legislation last spring on behalf of her adopted daughter RayAnn. During Wednesday’s meeting, Moseley said she had been contacted by her daughter’s teacher, who told her that RayAnn, who suffers from a rare form of epilepsy, was “seizing and throwing up all over the place.

“It’s just hard being here and worrying about her back home. And when we started talking timeline it just all set in. I had honestly thought Jan. 1 she would have started this oil. And here we are talking about we may not even make it before legislative session’s over. I’m just feeling nervous,” Moseley told The News Service of Florida.

–Dara Kam, News Service of Florida