German cannabis cultivation ‘far from sufficient to meet demand’: Q&A with Dentons lawyer Peter Homberg

(Editor’s note: This is the fifth in a series of Q&As with speakers at MJBizConINT’L, Sept. 4-6, in Toronto. Peter Homberg’s panel will discuss hemp and cannabis opportunities in Germany. To read the previous Q&A in this series, click here.)

The quantity of medical cannabis that Germany’s federal government approved for cultivation falls far short of actual demand, meaning the country is going to rely on imports for years to come.

That’s according to Peter Homberg, a partner in Dentons’ Berlin office and head of the law firm’s European Cannabis Group.

“The BfArM (German Federal Institute for Drugs and Medical Devices) granted permits to cultivate 10.4 metric tons over four years,” he said. “This will probably not change until the next tender. However, this quantity will be far from sufficient to meet the demand.

“The demand that cannot be met by domestic cultivation will continue to be covered by imports.”

Germany has so far relied on imports from Canada and the Netherlands to meet demand for medical marijuana.

But companies such as Alberta, Canada-based Atlas Biotechnologies are gearing up to supply the Germany market from Denmark.

“It is certain that the number of imports will continue to rise, especially as the number of countries that begin to grow cannabis for medical purposes is rising, and more and more companies apply for the required import licenses to Germany,” said Homberg, who spoke with Marijuana Business Daily about German supply and demand in advance of his panel discussion at MJBizConINT’L this week.

Why is Germany the fastest-growing, federally regulated Group of Seven marijuana market outside North America?

Germany was one of the first countries in Europe that made medical cannabis available upon ordinary prescription by any physician and is recording a rapid increase in the number of patients.

Moreover, Germany is a particularly attractive market, not only because of its central location in Europe but also because cannabis is allowed to be sold as (products that have not undergone clinical trials), via prescription, which makes market access for cannabis producers quite easy.

Why do pharmacies sell flower at about 20 euros per gram? How do you see price evolving?

The price is a simple result of the market forces of supply and demand. The supply is still far too low, while the market in Germany is growing very quickly, and therefore, there is a very high demand.

By December of last year, the number of patients was estimated at around 40.000, but this year it is expected to double by December. For this reason, the supply situation is simply very poor, which explains the high price.

At the beginning of next year, medical cannabis will start being cultivated for the first time in Germany, which however will only cover a small part of the German demand. Germany will therefore continue to depend on imports for a while.

Other countries are also on the way to liberalizing cannabis for medical purposes, which suggests that the price will remain high in the near future, as demand will increase in other jurisdictions.

Another factor that contributes to the determination of the price is that pharmacies are forced to charge additional surcharges on the purchase price.

For example, if they only fill and label a substance, they have to add 100% to the purchase price. If they process the substance, the calculation is somewhat more complicated.

Do you see Germany importing from Latin America within the next 12 months?

There are already R&D import licenses granted for the import from Colombia and Uruguay.

However, the requirements for imports for commercial purposes are much higher than for R&D purposes. Thus, it cannot be predicted with certainty that those companies will also receive an import permit for commercial purposes.

Uruguay was a leader in the legalization of cannabis for recreational use, which now becomes quite problematic when it comes to the export of medical cannabis.

Because Uruguay doesn’t comply with the 1961 Single Convention on Narcotic Drugs, it’s unlikely that it will be accepted as an exporting country to Germany.

Canada may not comply either after October 2018, but German authorities decided to continue importing from Canada. That doesn’t mean that they’d be willing to make the same exception with Uruguay.

Is there any unquestionably legal business opportunity to sell CBD in Germany without prescription and without having a “novel food” authorization?

No.

If the CBD product is sold as a pharmaceutical, it is only available upon prescription, even if it contains less than 0.2 % THC and is therefore not qualified as a narcotic.

If it is sold as a foodstuff, including food supplements, it falls within the scope of application of the EU novel food regulation with the consequence that it needs a respective authorization.

No company has obtained such an authorization so far.

How far out is recreational legalization in Germany?

The answer is not really predictable. The decision for the legalization of cannabis for recreational purposes highly depends on the future government, which cannot be predicted yet.

Even if the decision is made, the relevant laws would still have to be amended, which would take some time and discussion in the legislative process.

This interview has been edited for length and clarity.

Alfredo Pascual can be reached at [email protected]

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