Florida officials defend higher medical marijuana fees despite challenge

A formula used to set a $1.33 million price-tag for medical-marijuana license renewals properly carries out state lawmakers’ policy choices, Florida health officials argued as they try to swat down a challenge to the fee.

The Florida Department of Health in December adopted a rule creating a formula for establishing the fee. In doing so, they made license-renewal costs for the state’s medical-marijuana operators more than 22 times the $60,000 biennial fee paid since the cannabis program started six years ago.
Sanctuary Cannabis, one of the state’s 24 licensed medical-marijuana operators, filed an administrative challenge last month arguing that the fee is “wholly without logic or reason” because it does not take into account tens of millions of dollars from patients who pay $75 a year for identification cards to participate in the program.

But state officials maintain the fee reflects charges required under Florida law, which says the health department must adopt rules “establishing a procedure for the issuance and biennial renewal of licenses, including initial application and biennial renewal fees sufficient to cover the costs of implementing and administering” the medical-marijuana program.

The administrative challenge “presents a pure legal question regarding the validity of the straightforward implementation of plain and unambiguous statutory language,” Ed Lombard, an attorney who represents the health department, wrote in a motion last week seeking dismissal of the case.

“The Legislature directed the department to adopt rules that implement a fee for initial license applications and for license renewal applications, together which must be sufficient to cover the costs of implementing and administering the medical marijuana program. The department executed the Legislature’s directive,” Lombard argued.

Administrative Law Judge William Horgan on Thursday, however, issued an order allowing the case to proceed, at least temporarily.

Horgan also granted an emergency motion filed by Sanctuary seeking to force health officials to provide information that was used to calculate the biennial fee. The formula bases the fee on the number of licensed operators and the cost to regulate the medical-marijuana program.

Health officials initially balked at providing the information, arguing that Sanctuary’s complaint “is devoid of any assertion that the renewal fee was improperly calculated when applying the formula laid out” in the rule.

“Instead, Sanctuary challenges the elements of the formula, alleging that the formula is itself invalid for neglecting to account for additional revenue collected by the department,” Lombard wrote in a document filed Thursday.

The “specific amounts of costs input into the formula have no bearing” on whether the rule is “invalid for failing to credit revenue,” he added.

But lawyers for Sanctuary argued that “this matter is not ripe” until they were able to “at least quickly review” the information about the fee.

Without the data, Sanctuary would be “left in the dark as to how its renewal fee was determined and whether there were any significant errors in or issues with that promulgated calculation,” attorneys Will Hall and Daniel Russell of the Dean Mead firm wrote.

Horgan gave the Department of Health until Friday morning to hand over the information to Sanctuary’s lawyers, who are slated to take a deposition from a health official Monday morning.

Horgan also gave the medical-marijuana operator’s attorneys until Monday to “file a supplemental response … which addresses new evidence, if any, gleaned from” the upcoming deposition and the information about the numbers used to calculate the fee.

Sanctuary’s petition for an administrative hearing relied heavily on a budget request the health department submitted to the Legislature for the 2024-2025 fiscal year, which will begin in July.

The request showed that the Department of Health collected $14.9 million in application and renewal fees for licenses and nearly $65 million from patients and caregivers during the 2022-2023 fiscal year, which ended in June. Currently, more than 854,000 patients are qualified for the program.

The agency, which also gets money from testing labs and fines, collected roughly $84 million that year, anticipates collecting the same amount this year and projects receiving $114 million in 2024-2025, according to the budget request.

The agency also reported having a $16.3 million surplus during the 2022-2023 fiscal year and projected surpluses of nearly $4 million this year and $61 million in 2024-2025.

“The petitioners (Sanctuary) take no issue with the department running a surplus or otherwise receiving any fee, fine, or cost that is necessary to support its operation. However, in light of the department’s own income and projections, the department cannot reasonably assert that this exponential renewal fee increase is necessary to keep its operations afloat,” the lawyers wrote in the Oct. 26 petition.

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