Judge backs increased license fees for Florida medical marijuana operators

A $1.33 million license-renewal fee “carries out to the letter” a legislative mandate for how much it should cost medical-marijuana companies to do business in Florida, an administrative law judge decided on Wednesday.

Florida Department of Health officials late last year adopted a rule creating a formula for establishing the fee. The rule boosted license-renewal costs for medical-marijuana operators to $1.33 million, more than 22 times the $60,000 biennial fee paid since the cannabis program began six years ago.

Sanctuary Cannabis, one of two-dozen licensed medical-marijuana operators, filed an administrative challenge arguing the new 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, siding with state health officials on Wednesday, Administrative Law Judge William Horgan found the fee reflects the “plain language” of lawmakers’ intent. A state law 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 law requires the health department to adopt rules setting license fees for operators “which alone are sufficient to cover the costs of implementing and administering this section” of the law, Horgan wrote in a 13-page order.

“No other fee is mentioned in that legislative directive,” he added.

The formula adopted by health officials last December based the license-renewal fee on the number of operators and the cost to regulate the medical-marijuana program, an amount that will fluctuate depending on the number of operators.

Attorneys for Sanctuary argued the rule establishing the renewal fee was “arbitrary and capricious” because it failed to take into consideration other types of revenue, such as patient identification-card costs and fines paid by operators, which are known as medical marijuana treatment centers, or MMTCs.

Repeatedly pointing to the law, Horgan disagreed.

“When given the legislative directive to adopt rules establishing ‘initial (MMTC) application and biennial renewal fees sufficient to cover the costs of implementing and administering this section,’ it is not arbitrary or capricious to publish” a rule “which does exactly that, and nothing more or less,” he wrote.

Lawmakers “of course knew the department would receive such other revenue, and yet directed the department to establish rules by which the cost to implement” the program “was covered solely by MMTC license fees,” Horgan’s order said.

Horgan concluded the rule “is not without thought, illogical, or irrational. It carries out to the letter the Legislature’s directive that the department adopt rules establishing MMTC license fees sufficient to cover the cost to implement” the medical-marijuana program.

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. 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.

Along with being able to set the renewal fee and charge patients for identification cards, state law allows the health department to levy fines against medical-marijuana operators. Sanctuary attorneys argued that all of the collections are “intermingled” in a trust fund.

The law doesn’t require operators to “bear the brunt” of the cost of regulating the industry, lawyers Will Hall and Daniel Russell of the Dean Mead firm wrote in a proposed final order filed last week.

Interpreting the law “as requiring the department to ignore identification card fees and MMTC (medical marijuana treatment center) fines in determining a sufficient license renewal fee amount does not reasonably comport with the totality of the statute,” they wrote.

Horgan, however, rejected the argument.

“The fact that MMTC license renewal fees are deposited into the same account as other medical marijuana-related fees does not amount to a legislative instruction on which of those fees must cover the cost to implement the statute. That instruction is found in” the part of the law that says the fees must cover the cost of implementing the program, the administrative law judge wrote.

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