TALLAHASSEE — A Florida appeals court has upheld a state rule requiring medical marijuana companies to pay substantially increased fees to renew their operating licenses, rejecting a legal challenge from Sanctuary Cannabis.
The decision by the First District Court of Appeal affirms a 2023 ruling by an administrative law judge, siding with the Florida Department of Health on the controversial fee structure, according to the March 26 decision, authored by Chief Judge Timothy Osterhaus.
In a unanimous ruling, a three-judge panel determined that the Department of Health acted within its authority when it established the fee formula, which raised biennial license renewal costs for medical marijuana treatment centers (MMTCs) from $60,000 to approximately $1.3 million.
Judges Ross Bilbrey and Thomas Winokur joined Osterhaus in concluding that the increase complied with state law.
Sanctuary Cannabis, which operates 25 dispensaries across Florida, had argued that the fee formula was arbitrary and unreasonable because it did not account for other revenue sources, such as the $75 annual fee paid by medical marijuana patients for identification cards.
The company contended that those funds should offset regulatory costs, thereby reducing the financial burden on MMTCs.
However, the court found that the statutory language was clear in requiring that MMTC licensing fees alone cover the costs of the Department’s regulatory and administrative responsibilities.
“We see no arbitrariness or capriciousness in the rule’s formula because [the statute] explicitly conditions the Department’s licensing fee-setting authority on covering two specific costs with these fees,” the court stated in its ruling.
The opinion further noted that the law did not provide flexibility for the Department to factor in other revenue streams, such as card fees or fines collected from MMTCs.
The dispute originated from an emergency rule enacted by the Florida Department of Health in December 2022, which established a new formula for calculating MMTC license renewal fees.
The formula was based on the Department’s expenditures from the two most recent fiscal years, minus revenue from initial license applications, divided by the total number of licensed MMTCs. This resulted in a dramatic increase in the biennial renewal fee, prompting Sanctuary Cannabis to challenge the rule as an invalid exercise of legislative authority.
Sanctuary also argued that the Department’s formula imposed excessive regulatory costs that could have been reduced through alternative methods.
The appeals court dismissed this claim, asserting that the Department was bound by the statutory directive to set licensing fees sufficient to cover its regulatory expenses.
“The Department doesn’t have the discretion to alter the legislatively defined calculation requirements in favor of a methodology that shifts costs away from the MMTCs,” the ruling stated.
The decision is significant for Florida’s medical marijuana industry, which has seen rapid expansion despite ongoing regulatory disputes.
Recently, the state approved 22 additional medical marijuana operators, nearly doubling the number of licensed companies.
Analysts project the industry will generate $2.8 billion in sales this year, despite Florida voters rejecting a ballot measure to legalize recreational marijuana in 2024.
The increased licensing fees add to the financial pressures facing MMTCs, which are already dealing with declining product prices.
A recent market analysis found that medical marijuana prices in Florida fell by 30% in the last quarter of 2024 due to growing competition.
Industry stakeholders have warned that the higher fees could create barriers for smaller operators while reinforcing market dominance by larger, well-funded companies.
With the appeals court’s decision now final, medical marijuana operators in Florida will be required to comply with the increased renewal fees.
While some industry leaders have expressed frustration over the cost burden, the ruling solidifies the Department of Health’s authority to enforce its regulatory framework as the state’s cannabis market continues to evolve.
William Dean Hall, III of Jones Walker represented the appellant.
Eduardo S. Lombard, Angela D. Miles and Melissa Hedrick of Lombard Miles represented the appellee.
Attorneys declined to further comment on the case.
First District Court of Appeal, State of Florida case number: 1D2023-3333