Ups and Downs in the Canadian MMJ Industry

By Tony C. Dreibus

New regulations in Canada designed to improve access to higher quality medical cannabis have shaken up the market.

The rules have left some patients with few options to purchase and consume their medication, leading to several lawsuits. Meanwhile, the licensed cultivators and sellers who are now responsible for supplying safe, tested cannabis are laying down expansion plans amid optimistic growth forecasts.

Canada legalized medical marijuana on a federal level 15 years ago, and last year put in place new regulations that have smoothed the road for marijuana entrepreneurs. The path, however, has been a bumpy one, and further uncertainty looms on the horizon.

New Regulations Gives Boost to Licensed Operators

Health Canada, the agency tasked with overseeing the country’s medical cannabis program, implemented a set of rules last year known as Marihuana for Medical Purposes Regulations (MMPR) which outlined rules for growing, buying and selling MMJ in Canada. The rules replaced an earlier program under which patients could grow their own cannabis.

Under the new regulations, all marijuana is grown at one of 23 government-approved cultivation facilities and is tested for THC levels and microbial contaminants with inspection standards on par with those required of pharmaceutical companies, according to Health Canada. Seventeen of those cultivators are also licensed to sell finished product and ship it directly to consumers.

With the number of patients expected by Health Canada to reach 450,000 by 2024, the changes have been a benefit to large growers such as Tilray, owned by Privateer Holdings, a U.S.-based investment company that also owns the dispensary listing and strain review site Leafly.

Tilray said last month it received approval to add 16 new grow rooms in addition to the eight the company announced in January. The additions will nearly triple the grow space the company had in 2014, the company said on its website.

Broken Coast Cannabis, another operator with both a cultivation and sales license, sold a 49% share of its company earlier this month to Australia’s Capital Mining for $7 million in cash plus $25 million in stock options. The investment money will help Broken Coast more than double its production capacity, Capital Mining said.

Banking, Safety Successes

Marijuana’s legal status positively impacts the industry in an area where US business owners are stymied: Banking.

“We don’t have a roadblock in regards to banking,” Privateer’s Brendan Kennedy told the business network CNBC. “We don’t have a roadblock in terms of conflict between state and federal law.”

Another knock-on effect of the MMPR’s implementation has been increased scrutiny of the marijuana that’s being sent to patients. The government-approved marijuana growers must have their product tested to detect several impurities including carcinogens and mold, which has led to several product recalls.

While that may have short-term impacts on sellers, it also goes a long way to allay fears by anti-cannabis advocates that patients are receiving substandard marijuana, a common refrain in the US.

Limited Access Leads to Lawsuits

But not everyone is cheering the changes in the market.

Although the new program ostensibly provides better access to higher-quality cannabis, the new regulations don’t fully take into account patients’ needs, said Dieter MacPherson, the executive director of dispensary Victoria Cannabis Buyer’s Club. MacPherson is an adviser to the Canadian Association of Medical Cannabis Dispensaries (CAMCD) and the co-founder of software company Canlio Ltd.

The MMPR made growing cannabis at home illegal, leaving government-approved cultivators as the only lawful source for MMJ. Also illegal are dispensaries and any forms of MMJ other than dried flower. Because of these restrictions, the price patients pay has jumped almost tenfold and those who don’t enjoy smoking marijuana, rather than consuming it as an edible or elixir, have few alternatives.

“Diversity of choice and access is paramount to patients’ well-being,” MacPherson said. He said that on the government’s priority list, “secondary, or maybe even tertiary, concern is what’s right for patients.”

The access changes prompted a lawsuit heard in Canadian federal court last month pitting home growers against the new government regulations. In the meantime, patients are allowed to continue home cultivation under a temporary injunction order.

A separate lawsuit involving production of edibles is currently being considered by the nation’s Supreme Court.

In that case, a man was caught baking marijuana-infused cookies for members of the the Victoria Cannabis Buyer’s Club . The charges against Owen Smith were dropped as prosecutors entered no evidence, and Smith filed suit to challenge the constitutionality of the law – specifically, that people who are authorized to possess and use cannabis should not be forced into a particular consumption practice. Smith prevailed, and the federal government has appealed.

Other lawsuits have been filed against the government, including one spurred by a Health Canada mailing to registered patients informing them of the changes in the law. The flyers contained the program’s name, indicating that recipients were part of the MMJ program. The plaintiffs, who number in the hundreds, claim the federal government violated privacy laws and disclosed health information.

Reclassification of Cannabis?

While there are benefits, and the government is doing its best to regulate MMJ, declassifying or reclassifying cannabis so it’s not considered a controlled substance would go a long way in fixing the problems the industry faces, Victoria Buyer’s Club’s MacPherson said. By classifying it as a narcotic, any government regulation “is colored by the fact that they don’t support this as medicine,” he said.

“On one hand they say they want to treat marijuana as a controlled substance because it’s harmful to humans, so the government has a mandate to contribute to public safety,” he said. “But it’s a red herring that we need to protect patients looking after their health.”

Tony Dreibus can be reached at [email protected]

6 comments on “Ups and Downs in the Canadian MMJ Industry
  1. Mount Zion Collective on

    I guess Canada is betting on the big government big business mentality, low options high prices strategy. Nothing like the average joe getting bent over in yet another way by his “big brother…whats gonna be funny is in 10 to 20 years when them trade barriers drop….ooooooo…ooooo gonna get ugly when these fools realize government wont always be there to protect 🙂

    “ostensibly” better quality? Not so sure bout that, I was watching a documentary on a couple of those growing and processing operations and their really wasn’t anything too impressive in their techniques to justify their OUTRAGEOUS prices. Especially the curing… no joke they had bins half filled large batch curing like some hillbillies in the 90s growing illegal weed in the hills. But maybe I just dont quite understand the word Ostensibly?

    Reply
  2. PetePot on

    Canada has a Conservative majority Government which has rammed through many laws that have been overturned by the Courts.
    The Medical Marijuana law is another example where no input was sought, so affected Canadians have to hope the Lawsuit is won or
    else growing your own will again result in Criminal Charges. Coincidentally, the “tough on crime” Government increased penalties for growing Marijuana.
    There were promises that the price of Producer grown MMJ will be low, but not yet.
    Why can’t we grow a few plants for our own use??

    Reply
  3. Token on

    4 recalls in the first year. Better quality? NOT. I haven’t had a recall in 10 years of growing my own. This whole thing is a cash cow tax grab. Don’t believe the hype. It has been an epic FAIL. No one can afford 15g/day @ $10-12/g…do the math!

    Reply
  4. Sam Znaimer on

    The article’s assertion that ‘the price patients pay has jumped almost tenfold’ is way off the mark. The average price of cannabis sold by the Licensed Producers is about CDN$7 per gram (USD$5.60 per gram) with many strains selling for less, and many of the Licensed Producers offer discounted products to disabled patients or those on restricted incomes. These prices are substantially cheaper than those in most US locations and no more expensive than the price of cannabis at Canadian dispensaries. Dispensaries do offer extracts and edibles, which are not currently allowed under federal law from the Licensed Producers. Many people also prefer shopping at a retail location where they can interact with trusted staff members to the mail order experience which is mandated by the MMPR regulations. So there are good reasons to advocate bringing dispensaries into the fully legal fold, but pricing isn’t one of them.

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  5. Mount Zion collective on

    I found an average of 7-12, $7 is still $3200 a pound, and correct me if I’m wrong but aren’t they getting all the money now, as in no middlemen?

    Usually the grower HOPES to get half of that, so if they were operating even JUST as efficient as pseudo legal competitors they would be charging Half their current prices… no dispensaries doubling or tripling the whole price…and yet still the same price, it is still outrageous especially for a mass produced product

    What is acceptable profit for producing medicine? Because they are beyond 3 times cost at this point

    Reply
  6. Rydermgt on

    The new regulations favor Big Business (Big Pharma?) at the expense of the patient. Section 54 of the regs was amended recently to allow the use of any approved pesticide! Section 65 allows the LP’s to ship not less than 95% of net weight and no more than 101% of net weight! Furthermore, the regulations state that the only cannabinoids that to be disclosed are THC and CBD. Disclosing CBN would be helpful to patients to determine any deterioration in quality. THC and CBD are not the only cannabinoids. In Indica skunk we tested, there was no CBD but there were very high indications of CBG and THCV! When the injunction was announced last year, allowing growers previously approved to continue and the lawyer for Health Canada’s outrage was concern over lost profit for the new Licensed Producers (LP’s). Health Canada – Profits before Patients!

    Reply

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