An administrative law judge Friday struck down a rule proposed by health regulators as a framework for Florida's new medical-marijuana industry, finding multiple flaws in the controversial rule challenged by the state's largest nursery and other growers.
Administrative Law Judge W. David Watkins sided with Miami-based Costa Farms and others that objected to the Department of Health's use of a lottery to pick five licensees that will grow, process and distribute strains of non-euphoric marijuana authorized by the Legislature and approved by Gov. Rick Scott earlier this year.
The lottery process is invalid because it is "vague, fails to establish adequate standards for agency decisions and vests unbridled discretion in the agency," Watkins wrote in a 71-page ruling.
In addition, the rule is "arbitrary … in that the ultimate decision as to which applicant will be approved is left to chance, rather than logic and an evaluation of all necessary facts," he wrote.
"Assuring the dependable delivery of consistently high-quality, low-THC medicine is too important to be left to chance. Rather than minimally qualified applicants, citizens of the State of Florida, including sick and vulnerable children, deserve approval of the most qualified growers, processors and dispensers of low-THC cannabis," Watkins wrote.
Health officials claimed that using the lottery system would reduce potentially drawn-out litigation over the selection of the five dispensing organizations and refused to back down from the selection process despite protests from nursery owners at public hearings where the rule was vetted.
But Watkins said the Department of Health needs to pick the most-qualified applicants to grow and process marijuana low in euphoria-inducing tetrahydrocannabinol, or THC, and high in cannabadiol, or CBD. The Legislature intended for the low-THC cannabis to be "reasonably available and accessible to patients needing this medicine," Watkins wrote.
"The evidence adduced at hearing supports the common sense notion that this objective requires selecting the most dependable, most qualified dispensing organizations to cultivate, process, and dispense low-THC cannabis as prescribed by physicians. The proposed lottery rule to select these special franchises by chance creates risks that substantially reduce the likelihood of this objective being met," Watkins wrote.
Supporters of the low-THC, high-CBD strains of cannabis believe the substance can eliminate or dramatically reduce life-threatening seizures in children with severe forms of epilepsy. Under the new law, patients with other spasm-causing diseases or cancer would also be eligible for the strains of marijuana if their doctors order it, and if their doctors say they have exhausted all other treatments.
In his ruling, Watkins also rejected the department's argument that all applicants that made it as far as the lottery would be equally qualified to cultivate, process and dispense the low-THC cannabis. The criteria laid out in the law regarding applicants' security and safety plans, inventory-control plans, location and transportation plans and financial ability can be "compared on the merits using ordinary business judgment without special knowledge of technical methods of production or preference for any one technical approach," he wrote.
"While the department's present inexperience in technical program areas may make comparison more difficult, it can avail itself of expert assistance to determine which applicants have superior programs and the best chance of success," Watkins wrote. "There is no discernable reason why the exercise of the department’s reasonable discretion in applying the criteria should not determine which applicants are approved."
Watkins also rejected health officials' contention that it would be difficult or impossible to compare the applications because the applicants may use different methods to process the extract from the cannabis.
"Different proposals can be evaluated in the exercise of reasoned judgment as to which will best serve the need identified consistent with the statutory objectives and criteria," he wrote.
The judge agreed with Florida State University economics professor David Cooper who said that the lottery system would likely reduce competition between providers and could make the product more expensive for consumers, especially problematic because insurance won't cover the substance's cost.
The rule is also invalid because it imposes a vague " 'qualification' regime" not included in the statute that fails to create adequate standards for the health officials' decision-making process to determine which applicants get entered into the lottery, Watkins wrote.
Health officials did not immediately say whether they intend to appeal Watkins's ruling. The new law requires the health department to have the regulatory structure in place by Jan. 1.
"The Department of Health will consider all options that will most expeditiously get this product to market to help families facing serious illnesses," department spokesman Nathan Dunn said in an e-mail.
Watkins also decided that several other portions of the rule were invalid, including who can apply and when they must pay an application fee.
The law limited potential applicants to nurseries that have done business continuously in Florida for at least 30 years and are registered to grow at least 400,000 plants. About 75 nurseries meet the criteria.
But the rule would have allowed nurseries to pair with other entities to be eligible for the licenses. The rule would have restricted nurseries to a single application but would not have imposed any limit on the number of applications other businesses involved with the nurseries could make.
Watkins found that the agency "relaxed" the requirements in the law regarding applicants and that the plain interpretation of the statute means that only nurseries that meet the criteria are eligible to get one of the five licenses.
Costa Farms vice president Peter Freyre praised Watkins's decision.
“We feel today’s resolution is the right decision for the state’s sick and suffering patients who will be helped by the use of low-THC cannabis --- their medication should be produced by the best and most qualified applicants, not the luckiest. We look forward to working with DOH to craft a rule based on quality and we hope to get to work as soon as possible," Freyre said in a statement.