If you haven’t heard, the patient numbers in Mississippi’s new medical cannabis program are not rising at the pace many hoped they would. This has caused quite a bit of concern across the industry down here. A healthy pool of patients is critical to keeping new cannabis businesses afloat due to the hefty initial expenses they incur. Indeed, new cannabis businesses are heavily front loaded with a variety of costs, without the benefit of traditional lending options. For those not as familiar with this concept, we have written on it several times. That means these new businesses rely on funding via private capital raises or other non-traditional options. And, while new cannabis businesses must pony up the same type of front-end expenses new ventures in other industries incur (i.e., property acquisition/leasing, insurance, legal expenses, etc.), new cannabis businesses face other significant initial costs to ever get off the ground. Those unique costs include application and license fees that can approach or exceed six figures, state-of-the-art security and video surveillance related costs, uniquely high insurance premiums, consultant costs, uniquely high equipment and construction costs, and, if a cultivator, for example, exorbitantly high utility costs. Even more, cannabis businesses face significantly higher taxes than businesses operating in other industries, mostly due to IRS Code Section 280e. These businesses, therefore, need a revenue stream badly – and soon.
Diagnosing the reason for the low patient numbers in Mississippi leads to a number of potential causes:
- Are patient applications being processed timely?
- Are there enough certified practitioners available to see potential patients?
- Are the qualifying conditions too restrictive?
- Is the certification process too burdensome?
- Patient hesitance due to external factors, such as employment concerns, Second Amendment concerns, or a general stigma against cannabis use?
The answer is almost certainly a combination of the issues listed above and others not on the list. And, as we wrote last month, the Mississippi Legislature recently addressed several of these issues by amending the Mississippi Medical Cannabis Act (since those changes were adopted, the patient numbers began increasing at a quicker pace than before).
One potential reason for the low patient numbers I have not yet mentioned, though, could be the most impactful. Does the portion of the Mississippi public that may qualify for a medical cannabis ID card have all the information it needs to even begin the process of pursuing a card and then to be properly educated on the products available once certified? The answer to this question is multi-layered, but one necessary consideration points to the draconian marketing and advertising restrictions that govern Mississippi cannabis businesses. In a country where citizens are inundated on a daily basis with billboards, TV commercials, and online advertisements for nearly every other type of medication available, medical cannabis is, for the most part, shunned. So, what can be done? As we explore below, the “free speech” provisions in the United States Constitution and Mississippi Constitution may provide some relief.
Overview of Commercial Speech Protection
The U.S. Constitution protects free speech pretty broadly. The First Amendment ensures that
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
The Mississippi Constitution also protects free speech. Specifically, Section 13 states that the “freedom of speech and of the press shall be held sacred.”
Not every kind of speech is protected, but many kinds are. In practice, the government doesn’t do much to actively “protect” free speech — outside of police officers protecting a parade route or peaceful protestors, maybe. Instead, free speech is typically “protected” when a court strikes down a law that invalidly limits protected speech.
For example, if a law limits speech based on a certain political view or if it outlaws all bad or “abusive” language, the law may be struck down on free speech grounds. But, again, this doesn’t mean that the government can’t regulate any speech. The government (at federal, state, and local levels) is allowed to regulate and limit commercial speech more strictly than other kinds of speech. According to the Supreme Court of the United States, commercial speech is any kind of “expression related solely to the economic interests of the speaker and its audience” that “propos[es] a commercial transaction.” Think advertising, marketing, product labeling, etc.
The threshold questions when regulating commercial speech are: (1) Does the speech regard unlawful activity, and (2) is this speech fraudulent or misleading? If the answer to either is “yes,” then the government can ban that speech. For example, you can’t offer an endangered Bengal tiger cub for sale, claiming it’s a housecat. That would be both illegal and misleading.
If a law tries to regulate speech that is legal and not misleading, then the government must show that (1) it has a substantial interest in regulating that speech, (2) that the regulation directly and materially advances that substantial interest, and (3) that the regulation is narrowly tailored.
If the law can pass all of those tests, then it is upheld. If not, it gets struck down.
Mississippi’s Regulations Significantly Restrict Medical Cannabis Business Advertising and Marketing
The Mississippi Medical Cannabis Act instructs the Mississippi Department of Health (DOH) and Department of Revenue (DOR) to create regulations governing
[r]estrictions on advertising, signage, and display of medical cannabis, provided that the restrictions may not prevent appropriate signs on the property of a dispensary, listings in business directories, including phone books, listings in cannabis-related or medical publications, display of cannabis in company logos and other branding activities, display on dispensary websites of pictures of products that the dispensary sells, or the sponsorship of health or not-for-profit charity or advocacy events.
The DOH, in turn, promulgated a set of advertising and marketing regulations in May 2022. Those regulations prohibit any form of marketing or advertising “in any media” by medical cannabis establishments (i.e., any business holding a license under Mississippi’s medical cannabis program). The term “media” is defined very broadly, but the regulations specify the following types of media as being off-limits to medical cannabis companies:
- Broadcast or electronic media, such as radio, television, unsolicited internet pop-up advertising;
- Print media, such as newspapers; and
- Other media forms, such as mass text/messaging communications or mass email communications.
The regulations further prohibit medical cannabis or medical cannabis products from being displayed in windows or public view; advertisements in any manner that can be viewable or otherwise perceived as a public space, including adopt-a-highway signs and electronic interstate signs; solicited/paid patient and/or caregiver reviews/testimonies/ endorsements; and solicited/paid practitioner reviews/testimonies/endorsements.
The DOH did, however, decide that certain “branding” activities were acceptable. The regulations define “branding” to mean “the process of giving a meaning to a specific medical cannabis establishment’s business by publicizing the business’s name and logo” and declare the following types of branding activities permissible:
- Establishment of a website and/or social media presence that provides general information on the licensed entity’s contact information, retail dispensing locations, and a list of available products;
- Listings in business directories (inclusive of phone books or cannabis-related or medical publications); and
- Sponsorships of health or not-for-profit charity or advocacy events.
Certain types of educational communications between cannabis businesses and qualified patients, caregivers, parents, or legal guardians are also acceptable.
Challenging the Regulations
Because advertising is at the heart of the issue here, any challenges to the Mississippi advertising regulations would require a case to be made under commercial speech protections. In a high-profile Mississippi commercial speech case, the Mississippi Supreme Court relied almost entirely on federal case law even though the claim was brought under Mississippi’s state constitution. So, even under the Mississippi Constitution, commercial speech analysis is the same as under the First Amendment.
While courts use the same analysis under either federal or state law, any challenge to the Mississippi regulations would still need to be brought under the Mississippi Constitution. Remember, marijuana is still a Schedule I drug under the Controlled Substances Act. Any claim for free speech protection brought under the U.S. Constitution would almost certainly be moot because the sale of medical cannabis (although legal under Mississippi law) is still federally illegal (see Montana Cannabis Indus. Ass’n v. State, 368 P. 3d 1131 (Mont. 2016); (“Because federal law governs the analysis of this issue, we conclude that an activity that is not permitted by federal law—even if permitted by state law—is not a “lawful activity” within the meaning of Central Hudson’s first factor.”)).
Under Mississippi law, activities related to the cultivation, processing, distribution, research, transportation, disposal, testing, and dispensing of medical cannabis are lawful, so long as they are, of course, licensed and otherwise compliant with state law. Speech related to those activities, such as advertising and marketing, therefore, is regarded as a lawful activity under Mississippi law. If we assume that a proposed ad or marketing campaign is also truthful and not misleading, the state would have to show:
- It has a substantial interest in regulating medical cannabis ads;
- That the regulations directly and materially advance that interest; and
- That the regulations are narrowly tailored.
Mississippi’s medical cannabis advertising regulations may not be the only reason for the state’s low patient numbers, but the flat ban on marketing or advertising medical cannabis products “in any media” certainly is not helping Mississippi’s patient numbers grow.
Indeed, Mississippi medical cannabis companies need better ways to increase the knowledge base of their current and potential patient-customers. Even if a court could find that the regulations at issue are constitutional as written, the categorical ban on marketing and advertising in “any media” may push the boundaries of how a government can regulate commercial speech.