Jeffrey Schweers

Democrat senior writer

About this report: Jeffrey Schweers pored over thousands of pages of public documents and corporate filings, including license applications that were mostly redacted to protect trade secrets and financial information. He also toured two cultivating/production operations, watched public hearings, and conducted dozens of interviews.

As the Florida Legislature gets ready to make rules to implement Amendment 2, the seven corporations exclusively licensed to grow and sell medical marijuana are raising and spending millions to expand their fledgling operations and protect their stake in what promises to be a lucrative industry.

Current licensees are concerned about protecting their share of the burgeoning market, while at the same time saying they want to make quality medical marijuana available to the people who need it most. All told they’ve hired close to 60 lobbyists to represent their interests before the Legislature, as it sets out to rewrite the rules governing medical marijuana in the state to accommodate what 70 percent of voters approved.

At the same time, patients and physicians depending on medical marijuana for relief from a host of ailments are clamoring for greater access, affordability and diversity of the cannabis curative.

Advocates behind Amendment 2 have employed their own fleet of lobbyists to see things go their way.

Patients and physicians tend to support a more competitive framework, as they’ve testified at rule-making hearings around the state held by the Department of Health. They complain that the vertical integration of the industry from seed to sale gives the seven licensees a monopoly that has created hurdles to access and affordability.

"Vertical integration harms veterans by limiting choice, limiting supply, and limiting competition which creates outrageous prices,” Bill Cody, a disabled veteran, said at one recent forum.

He and other patient advocates want availability as soon as possible. Several asked the state to eliminate the 90-day waiting period.

Millions of Florida voters in November approved an expansion of who can obtain medical marijuana and who can sell it — from a very limited base to hundreds of thousands of patients whose need for legal weed will feed a $1.6 billion industry within a few years.

More than 600 physicians and close to 4,000 patients were listed in the Compassionate Use registry. So far, six of the seven licensees were cleared to sell medical marijuana. The seventh was recently granted a license as the result of a court decision.

Two paths

The Legislature faces two paths — follow the status quo or start fresh.

Meanwhile, the state Department of Health has already begun its rule-making process to meet deadlines set by Amendment 2.

Sen. Rob Bradley of Jacksonville has offered a “status-quo-plus” that would chart a slow growth for expanding licensees.

Sen. Jeff Brandes of St. Petersburg would scrap the current regulatory scheme and open the market to hundreds of licensees at every level from grower to producer to distributor to seller.

"Both embrace the language of the amendment," said Ben Pollara, whose group Floridians for Care campaigned for Amendment 2's passage. The most important thing is that both respect the sacrosanct nature of the physician-patient relationship and provide a framework for safe, reasonable access to medical marijuana.

"There is enormous room for reasonable debate about those," Pollara said.

See a map of where medical marijuana doctors are in Florida. Search the list of doctors here.

But Bradley's bill doesn't go as far as Brandes's bill in providing access and diversity, he said.

Bradley’s bill embraces current regulations to some degree while allowing for some modest expansion of vendors over the next several years. It would ultimately allow 20 new vendors six months after the registered patient population hits 500,000.

Bradley's bill calls for eliminating a 90-day waiting period for patients seeking marijuana. His bill also doubles the supply a doctor can order for a patient from 45 to 90 days. It also would cut required training for doctors from 8 to 4 hours.

"The Bradley bill is a good starting point for discussions," Trulieve CEO Kim Rivers said.

Brandes wants to throw out the existing regulations along with its vertical integration of the business model and the cap on licenses. Currently, each licensee has control over growing, processing, distributing and selling medical marijuana — a seed-to-sale scenario.

Brandes wants to get rid of that vertical integration, creating a framework for people to come in as qualified licensees at any level — growers, distributors, and retailers who could do business with each other. He said his model better “encapsulates the will of the voters.”

Licensees fear that could lead to thousands of retail marijuana shops across the state. But patient advocates point out there is no limit to the number of stores those licensees can open.

“What the people decided is that individuals, not just the seven licensees, should be able to qualify to grow, process, dispense, deliver and administer medical marijuana,” said Dr. Mark Moore, the first physician in Tallahassee to be approved to recommend medical marijuana for his patients.

Doing so would increase access and bring costs down, Moore said. Some of his patients are paying $1,000 a month for medical marijuana, which isn’t covered by health insurance.

Amendment 2 introduces a new term to the state's medical marijuana lexicon: Medical Marijuana Treatment Centers, which by definition could be any entity that acquires, cultivates, processes, transports, sells or treats patients with marijuana or products containing marijuana.

Licensees interpret that to mean them. Brandes and patient advocates interpret that more broadly.

If Moore could become licensed as a Medical Marijuana Treatment Center he said, “It would simplify things for my patients. They could see their doctor and receive their medication at the same location.” And he could provide medical marijuana at half the cost patients currently pay.

Jodi Martinez was diagnosed with terminal kidney cancer three years ago. She started using medical marijuana in December to help her sleep and ease her discomfort. And her tumors have shrunk by 18 percent.

Martinez, a patient of Moore's, spends about $300 a month on her medical marijuana. That price tag will only increase over time.

“The more acclimated I get, the more expensive it’s going to cost,” she said.

Opening the door to more growers, producers, sellers and distributors would bring down the costs and give patients more options, she said.

“More people need to be able to grow it so there are more strains available,” Martinez said. “That would be the ultimate if we can grow our own.”

Huge investments

The seven licensees are protective of their investment. They've each spent millions just to gain the right to sell medical marijuana. They've raised and spent additional millions more buying land, building their indoor growing and production facilities, hiring people and putting them through background checks, creating a distribution network and opening dispensaries.

The exact amount they've spent is a mystery because most of their financial information has been redacted. Estimates based on what information is available put the investment dollars in the hundreds of millions bracket.

None has been at it long enough see a return on their investments and are burning through money each month to meet patient demand.

"We have not broken even," said Trulieve's Rivers.

Trulieve’s mothership is a 70,000-square-foot warehouse off U.S. 90 in Quincy that once stored tomatoes. Rivers said the company has created a duplicatable model for expansion and has already begun building on another site in Gadsden County, not far from the primary warehouse.

Trulieve was first to start dispensing medical marijuana in the state, from a storefront in Tallahassee. It has stores in Clearwater and Tampa; locations in Pensacola and Bradenton set to open in the coming months.

Surterra, which got the first license to cultivate, started dispensing about a week after Trulieve, said CEO Jake Bergmann. It has a "wellness center" in Tampa and is getting ready to open one in Tallahassee with other locations planned.

Its main facility is a 6,000-square-foot converted agricultural warehouse 15 miles east of Tallahassee in rural Capitola. A second growing and production facility in Ruskin, in Hillsborough County, is a backup in case of storms or other problems.

Surterra has raised about $25 million in equity for its current operations and expansion plans, he said. Plans are to build a high-tech, 100,000-square-foot "Dutch-style" greenhouse 30 feet tall with an all-glass ceiling.

McCrory Sunny Hills, doing business as GrowHealthy, has spent around $5 million buying and converting a mattress factory in Lake Wales into a state-of-the-art growing and production facility.

By contrast, Knox Medical spent millions building a high-tech operation in Winter Garden, CEO Jose Hidalgo said.

The first phase was to cultivate enough marijuana to make sure they had medicine, he said.

The second phase, almost completed is a 50,000-square-foot permanent cultivation and manufacturing facility.

"Ours was completely conceptualized from ground up to be a state of art medical cannabis facility," he said.

Knox got approval to dispense in December and already plans to open six stores in next 120 days, starting with Gainesville and Orlando. It has a permit to open a store in Tallahassee, too.

"We were not stressed about going to market," Hidalgo said. "We were sharply focused on executing our business strategy."

Friendly competition

The licensees are currently competing for a small group of potential clients — not nearly enough to bring in the cash flow to recoup their investments. And they are likely to have patient crossover.

But they are already prepared to meet future demand. One state estimate puts the number of patients who could qualify for medical marijuana under Amendment 2 at close to 500,000.

Trulieve has close to 1,400 customers, Rivers said. It has the capacity to supply about 67,000 people a year at an average dose of 20 milligrams a day.

Surterra has about 800 customers but could serve between 4,000 and 6,000 people a year at current capacity, Bergmann said.

Knox has a little over 300 customers, Hildalgo said. When fully operational it could meet the demand of 75,000 customers, Hidalgo said.

"This whole capacity thing is a highly subjective number," he added.

Modern Health Concepts in Miami has a current capacity of 17,000 patients per month, CEO Rick Young said and serves about 10 percent of the active patients on the registry.

"We’ve started an expansion project to serve up to 43,000 patients per month," he said, with room to expand to serve hundreds of thousands of patients per month.

The companies hold their growing processes and marketing plans close to their chests. And they try to portray their operation as unique and state-of-the-art to try to maintain an edge over their competitors.

Surterra stresses purity of product. Trulieve talks about its exceptional quality.

They all stress safety and quality control, too. The last thing they want is a product recall on their hands.

"We want a regulatory structure that protects patients," Surterra's Bergmann said. "If one person is harmed this whole industry goes away."

For that reason, they support legislation that ensures only the most qualified people enter the market.

"Unlimited licenses is irresponsible," Hidalgo said. "I don't want to get into a situation where we have more licenses than McDonald's. I don't think Floridians voted for that."

Contact Schweers at jschweers@tallahassee.com. Follow him on Twitter @jeffschweers.