C-45 – or the Cannabis Act, passed overwhelmingly in the Senate by a vote of 52-29. Canadian Prime Minister Justin Trudeau has subsequently announced that the legislation will pass into law on October 17. The intent behind the legalization effort was to cripple organized crime and protect minors.
Only one other country in the world has taken such a dramatic step – Uruguay.
The Medical Discussion Is Just Getting Underway
While legalization advocates and the increasingly corporate industry have everything to celebrate, this does not necessarily change the other conversation on the ground – in fact it only strengthens it.
Clearly this is a blow against prohibition still in force just south of the border in the U.S. This move alone is also likely to drive the debate in an environment where California and other states are clearly thumbing their noses at the federal government and proceeding apace with its own (and largest) U.S.-based marketplace.
However, there is another topic floating around this conversation. If cannabis is “harmless” enough for recreational use, its use for medical purposes has become the third rail that is now driving the conversation in other places – most certainly Europe.In the meantime, Canadian firms are in an unparalleled position to enter global markets (as they have already begun to do) and set the tone and debate.
Here, full legalization is absolutely off the table as policymakers and scientists begin to seriously contemplate integration of cannabinoids into comprehensive health systems. This week’s dramatic announcement in the UK to that effect, which came the same day as the Canadian vote, is one indication of that. Germany’s own cautious foray into medical use is another. The change in the law last year mandating public health insurance coverage of the same has created a population of 15,000 patients in the last year with many more lining up to obtain it. This population of patients will reliably use more cannabis every month than even the most dedicated recreational consumer.
What Comes Next?
Four and a half years after Colorado took the plunge, the world of cannabis acceptance has clearly changed – and for good.
But what is the next step? Clearly the pressure is now on in the U.S. to consider rescheduling to at least a Schedule II if not Schedule III drug. Marinol, the synthetic version of the drug, became a Schedule III drug in 2010. Epidiolex, GW Pharma’s drug derived from cannabis, just received FDA approval too. GW Pharma is the only British company allowed to develop cannabinoid medications. Let’s see how long that flag flies in the new commonwealth, with Canada fast behind the UK now as the two compete for the title of largest canna exporter. Globally.
The drug war, in other words, is finally coming to close for cannabisHowever full legalization – even in the United States and most certainly in Europe – is at least several years away.
In the meantime, Canadian firms are in an unparalleled position to enter global markets (as they have already begun to do) and set the tone and debate. How they will position themselves – as medical pharmaceutical or recreational companies – is another discussion that is still unfolding. Particularly because cannabis is a hybrid substance. And further, it is not entirely understood (nor has of course it been studied) where cannabis stops becoming a drug. If a consumer uses CBD, for example, as part of a wellness routine but also heads off a more serious condition, is the use of the plant “medical” or “recreational?”
These are all questions now on the table. But at least they are.
The drug war, in other words, is finally coming to close for cannabis. But the horizons beyond that, widely unexplored, promise blue ocean opportunities for decades to come. And not “just” in recreational use, but in the amazing worlds of science, technology and medicine that now lie within reach.
If anyone (read Auslanders) had any illusions that the German take on medical cannabis was going to be casual or unscientific if not painstakingly documented, think again.
Techniker Krankenkasse (or TK as it is referred to by the locals) is one of Germany’s largest public health insurance companies. In other words, it is a private company that is required to provide so called “statutory” health insurance which covers 90% of Germans.
As such, they are also on the front lines now of the medical cannabis debate. Approximately one year after the new law requiring public health insurance companies like TK to reimburse cannabis claims went into effect, the company has just issued what would surely be a best-seller if it were being sold.All of the medical cannabis now being prescribed and reimbursed is coming from abroad.
The Cannabis Report, as it is titled, produced with the help of professors at the University of Bremen, is also the first of its kind. In its pages, along with the corporate summary produced for the recent press conference in Berlin, are several fascinating snapshots of what is going on.
By the numbers.
The Cannabis Report
For those who cannot understand German, this summary by Business Insider is quite educational. Here are the major takeaways: There are now almost 16,000 German patients who are receiving some kind of medical cannabis by prescription. From a doctor. These patients are also paying about $12 for their monthly supplies – even if they have to wait for reimbursement. This is in contrast to the 1,100 patients who managed to obtain cannabis by prescription and pay for it themselves before the law changed last spring.
Do the math and that is a 1,450% uptick. Add in the additional 15,000 left out of this report who are getting cannabis prescribed but their claims turned down, and that is an even more amazing story.
Here is the next obvious fact: All of the medical cannabis now being prescribed and reimbursed is coming from abroad. A significant amount is still coming from Holland. The rest? Canada.
For that reason, the cost of medical cannabis is a major concern, along with the medical efficacy of cannabis and the authors’ frustrations about dosing.
The most interesting takeaway? Chronic pain and spasticity arehigh on the list of prescriptions (MS is currently the only condition which is “on label” for cannabis). So is Epilepsy and AIDS. Most interestingly are the high numbers for ADD. This is also highly significant in a country where amphetamine prescriptions for the same are almost unheard of.
TK, like the other health insurers who have started to provide numbers, also approved approximately two thirds of the requests they received. And it has cost them $2.7 million. That bill will begin to reduce as Germany cultivates medical cannabis domestically. However, the tender bid, which now apparently includes 11 contenders, is still undecided, with growing apparently pushed off now until (at the earliest) sometime next summer.
The bottom line, however, in the report from Socium, a university-based think tank that focuses on social inequality, is that cannabis is a drug that should also be treated like any other medication. Even though study authors conclude that so far, they do not find cannabis to be as “effective” as other drugs, they clearly state that the drug does help patients.
An Equally Interesting Industry Snapshot
Flip to page 20, however, and the authors also confirm something else. The top companies providing medical cannabis to German publicly insured patients who are getting reimbursed are Bedrocan, Aurora andCanopy. Aurora’s brands clock in at the highest percentage of THC, although their German importer Pedianos, clearly offers a range of products that start at less than 1% and increase to 22%. MedCann GmbH (renamed Spektrum last year) is essentially providing the rest, and ranges of THC at least, that go from 5.4%-16.5%. They also provide the products with the highest percentages of CBD.
Unlike the other companies, Canopy’s “brands” are also showing up in ostensibly both medical and government reports (Houndstooth, Penelope, Princeton and Argyle). This is interesting primarily because the German government (and regulatory requirements) tends to genericize medications as much as possible.
Dosing, Impact, Results
The next page of the report is also fascinating. Namely a snapshot of what kind of cannabis is being prescribed and at what doses. Patients who are obtaining cannabis flower are getting up to 3 grams a day. Dronabinol, in stark contrast (which is still the only form of the drug many German patients are able to get), is listed at 30mg.
Unlike any corporate report so far, the study also discusses consumption methods (including, charmingly, tea). It is impossible to forget, reading this, how German and structured this data collection has clearly been. There are several fairly stern referrals to the fact that cannabis should not just be prescribed for “vague” (read psychological) conditions but rather aspecific symptomology (muscle spasms and severe pain).
There is also great interest in how flower differs from pills. And how long the effects last (according to the authors, effects kick in about 2-15 minutes after dosing and last for 4 hours). This is, of course, an accurate picture of what happens to just about every patient, in every country. What is striking, particularly to anyone with an American perspective, is how (refreshingly) clinical much of this basic data collection and discussion is.
And no matter how much the authors call for more research, they clearly have observed that cannabis can have positive, and in many cases, dramatic impacts on patients. According to the handy graphs which are understandable to English speakers, study authors find significant evidence that the drug significantly helps patients with severe pain and or muscle spasms – see MS and Epilepsy, AIDS patients with wasting syndrome and paraplegics (wheelchair bound individuals). Authors list the “strong possibility” that the drug can help with Tourette’s and ADHD. Fascinatingly, however, so far, German researchers are not impressed with the efficacy of the drug for Glaucoma. “Psychological” and psychiatric conditions are also low on the list.
Regardless, this is an important line in the sand. As is the clear evidence that cannabis has efficacy as medication.
The great German cannabis science experiment, in other words, is well underway. And further, already starting to confirm that while many questions remain, and more research is required, this is a drug that is not only here to stay, but now within reach of the vast majority of the population.
With the summer season (and recreational reform) fast approaching and the continued growth of the European medical market, Canadian LP Aurora has continued to power forward with another corporate acquisition. This time, the firm is medical cannabis firm MedReleaf (TSE:LEAF). The price? $3.2 billion in stock.
Aurora shareholders will now own 61% of MedReleaf.
The firm has also, of course, solidified its place as a global leader in the cannabis space with production capacity of over 570,000 kilos of cannabis a year.This purchase will absolutely ensure that the company is in a strong position
According to a statement by chief executive Terry Booth, “Our complementary assets, strategic synergies and strong market positioning will provide us with critical mass and an excellent product portfolio in preparation for the adult consumer use market in Canada.”
It also does a bit more than that.
With the German cultivation bid in what appears to be at least a three to six month delay, exports, including from Canada, are the only real way into Europe’s largest cannabis market. And Aurora, with it’s on the ground partner, Pedianos, isright in the middle of it. This purchase will absolutely ensure that the company is in a strong position as the next level of cannabis reform begins to unfold particularly in Europe.
Cannabis Is SO Expensive!
In fact, per this report just produced by one of the leading German public health insurers, Aurora, via Pedianos, and MedCann (the company that became both Spektrum Cannabis and bought out by Canopy Canada), appear to be the two Canadian LPs supplying the vast majority of all reimbursed medical cannabis to German patients. Further the vast majority of product is still coming from Canada – not the satellite grow or production facilities now being built in Portugal (Tilray), Denmark (Aurora and Canopy), Spain (Canopy) or anywhere else in Europe where legal cultivations are being established.
However, this also makes for an expensive product here in Germany, land of the generic drug (and where most of them can be bought by consumers, with a prescription, at a regular pharmacy for about $12). In fact, this report was produced in part to underscore the still-evolving medical position on the use of medical cannabis and its efficacy. This highlights how much Germany’s import policy is now costing even public insurers.
What is even more intriguing about the TK report is that the Germans are clearly moving into new research territory. Sure AIDS, chronic pain and muscle spasms (in particular MS) are conditions for which the drug is increasingly being prescribed, but so is ADD. And research studies are now mushrooming around the country.
The Germans have engaged on the medical cannabis efficacy question. And while it is still unclear what doses and of what kind of cannabinoid, have yet to be standardized into protocols, such conversations are well on their way.
And Aurora is also, of course, right in the middle of them.
Another Aurora Acquisition
Given the importance and size of the German market, in particular, it is also no surprise to see another strategic Aurora acquisition coming less than a week after the announcement of this report in Berlin. Specifically, Aurora has also just sunk another 1 million in an investment in CTT– an Ontario-based firm leading the development of thin film wafers that can provide dose specific, smoke free delivery of medical cannabinoids.
The Teutonic cannabis market is clearly in the company’s sights. Not to mention absolutely driving investment and positioning strategy both at home and abroad.
It is old news that Canadian companies are entering the European market. And it is also no stop-the-presses flash that Germany is a big prize in all of this. But there are other Euro markets to watch right now. Switzerland is one of them.
Look for the Canadian influx here too.
One of the more interesting entrants this month? Green Relief – a Canadian LP with a really unique twist. They are the only company in the world to produce cannabis oil from flower grown with aquaponics. This unique method creates unbelievably “clean” cannabis with no pesticides – and no residue of them.
It also sets the company up for a really unique market opportunity on the ground outside Canada. Especially as they have now just announced a partnership with two Swiss companies– Ai Fame GmbH and Ai Lab Swiss AG. Both companies have been leading European pharmaceutical companies since the turn of the century. The idea is to leverage all three company’s intellectual capital with Green Relief’s additional and first international investment with an eye to the entire European cannabis market. Ai Fame specializes in cultivation, manufacturing, sales and distribution to both the food and medical sectors. Ai Lab Swiss AG operates as a laboratory and testing facility.Less than three weeks before Green Relief publicized their European announcement, there were also strategic developments afoot at home.
From this unique perch in the Swiss canton of St Gallen, the three companies are setting up to conquer Europe.
Why Is Switzerland So Strategic?
Switzerland has been on the legalization track since 2011. As of this date, the Swiss government began allowing adults to buy and use CBD-only cannabis. Shops were allowed to obtain licenses. A trickle of sales began. However, rather suddenly, as reform hit Europe, the craze took off. Last year, for the first time, the industry generated a significant amount of revenue (close to $100 million). That is $25 million for the government via taxes- just on CBD sales. Even more intriguing for those looking for market opportunity across borders? Less than a week ago, the German-based budget discount store Lidl just announced they were carrying smokeable CBD – in Swiss grocery stores. The leap across the border is imminent.
That has opened up other conversations, including the “legalize everything” push that makes an awful lot of sense to the ever tax-aware Swiss. This is a push afoot just about everywhere across the continent, including, of course, just across the border in Germany.
The cities of Zurich and the cantons of both Winterthur and St Gallen (home of the Swiss companies behind the new venture with Green Relief) have already indicated that they will not pursue possession fines for those busted with 10 grams or less– no matter what kind and even of the THC variety.
Read between the lines, and it is clear that the cannabinoid conversation locally has begun to attract the Canadians. And not just because of the many opportunities of the Swiss CBD market – but the huge medical and THC German and European opportunities now opening beyond that.
No matter which way Green Relief and their new partners slice it, they are now in the game – and across Europe – with a unique new play and product, and further one set to enter both the medical THC and “consumer,” albeit still CBD, market now burgeoning.
A Cross Market Play
Here is the truly interesting part about this new announcement. Less than three weeks before Green Relief publicized their European announcement, there were also strategic developments afoot at home. Cannabis Growth Opportunity Corporation also just announced an investment in Green Relief. The share purchase agreement netted Green Relief $750,000 in both cash and common shares.
With this, Green Relief seems to have set sail on its European expansion. Look for more interesting turns to this developing saga soon!
While the American cannabis industry deals with both unparalleled opportunity and new risks, Europe is setting itself up for a spring that is going to be verdant.
The ongoing drumbeat for reform in countries across the continent is bringing both money and high-grade medical product into the market. Even if volume is still really at a trickle, it will rapidly widen to a steady stream. It is also very clear that the next two to three quarters are going to deliver news that the cannabiz has arrived, and with authority.
The following is an overview of what is happening, where, and with an eye to informing foreign investors, in particular, about new opportunities in an awakening market.
Without a doubt, the country is priming itself for a medical market that is going to be large and partially government supported, driving regulation of medical use across the continent. On top of that, the idea of selling 28 grams (1 oz) of product to end consumers who only pay about $12 for their medication has gotten the attention of global producers. Opportunities here for those who did not submit a bid for federal cultivation (see the big Canadian LPs) are still unfolding.
However here is what is now on the table: an import market that cannot get enough cheap, GMP certified product. Producers from Australia to Uruguay are now actively hunting for a way in, even if cutting a supply deal for the next 18 – 24 months as the German green machine starts to kick into production-ready status. What a bad time for Israel to be so publicly out of the ex-im biz! In fact, Israeli entrepreneurs are scouring the country for opportunities into the market another way (and there are a few efforts afoot in a sleeping giant of a market waking up from a long snooze to find they cannot get enough product). Right now, however, the legal market is absolutely dominated by Canopy, Aurora, Aphria and Tilray along with Dutch Bedrocan.
The German parliament is clearly also going to do something about another piece of reform which will also drive market expansion – starting with announcement of additional cultivation possibilities (potentially this time even open to German firms). On Friday, the day after the British parliament wrangled over the same thing, the German Bundestag debated decriminalization along with a few other hot button topics (like abortion). With only the AfD (right wing) still in the “lock ‘em up camp,” and even the head of the police calling for reform, it is clear that decriminalization is on the legislative agenda this year.
Spain, Italy, Switzerland, Portugal, Denmark & Holland
While it may seem presumptuous to lump all these very different countries under one label, the reality is that the level of reform is generally in a similar state (transition to medical), and that drives potential political and market risk as well as evaluation of investment decisions.
In Spain, federal reform has not come yet, but medical deals involving pharmaceutical companies (both exclusively cannabinoid focussed and otherwise) are afoot. Plus of course there is Barcelona (the Colorado of the country in many ways).
Italy, Portugal and Denmark are all the battlegrounds for the big Canadian (and German) companies now set on having a country-by-country footprint in opening markets across the EU (see Canopy, Aurora, Aphria and their German counterparts of Spektrum Cannabis, Pedianos and Nuuvera). Licensing is political, happening at a high level, and only for those with the bank to back deals that come with high capex attached. That said, there are lucrative opportunities for those with local contacts and liquidity.
Holland is another animal altogether, but for the most part everyone is so confused about the state of reform domestically that the only people really in position to take advantage of it are the Dutch, at least for now. That said, Dutch-based plays (in part financed by Canadian backing) for other Euro markets are absolutely underway. Who else has so much experience here, let’s be honest? Regardless, investments in these canna markets, particularly for the Euro-focussed but North American investor, for now, will tend to be through public stock acquisitions of Canadian parents or direct investments in Dutch companies (see Bedrocan, but they are not the only game in town).
Switzerland, for the most part, is setting its own pace, but reform here means the CBD market, including for medical grade imports, is a place for the savvy medical investor to look for cultivation and ex-im opportunities. Including in the home-grown, Swiss pharma space.
The recent pronouncement of government officials that Greece was opening its doors to investment and a medical cannabis business means that there will be a federally legal, EU country that is promoting both investment and tourism opportunities just for domestic consumption, let alone export. Scouts from all the major canna companies are combing both the Greek mainland and its islands.
If there was ever such a thing as a “virgin” cannabis market, Poland might well qualify. For those distributors with cheap product that has not (yet) found a home, the country is poised to start to announce (at least) distribution deals to pharmacies with producers now establishing themselves in other markets. Medical legislation has just changed, in other words, but nothing else is in place. And with Polish patients now having, literally, to scour the continent for product not to mention foot the bill for the travel costs to get it, the next obvious step is a national pharmacy chain distribution deal or two with producers from all over the world now looking for Euro market entry possibilities. Domestic production is some time off.
The BalticsThe ongoing drumbeat for reform in countries across the continent is bringing both money and high-grade medical product into the market
If there were such a thing as the “Berlin” of the cannabis market in Europe (namely sexy but poor), it is probably going to be here. Cheap production markets and opening opportunities for export across the EU for high quality, low cost cannabis are not going unnoticed. Look for interesting plays and opportunities across the region. Scouts from the big international canna companies already are.
Britain comes last because of the political uncertainty in general, surrounding the island. However, last week Parliament appeared on the verge of being embarrassed into acting on at least medical reform. There will be a market here and of course, there is already one globally known cannabis company with a 19-year track record and a monopoly license on canna-medical research and production (GW Pharmaceuticals) that calls the British Isles home. This will be a no-brainer, particularly for foreign English-speaking investors still leery of continental Europe. However it will also be highly politically connected. Expect to see a few quick arranged marriages between such landed gentry and foreign capital – potentially even this year.
KIND Financial, a technology and compliance software solutions provider in the cannabis industry, is launching a new e-commerce and payment processing platform in Canada. According to the press release, they are partnering with a Canadian bank to launch the KIND Seed to Payment platform, which is essentially an e-commerce gateway integrated with their compliance software, KIND’s RegTech platform.
David Dinenberg, founder and CEO of KIND Financial, says this is an approach to help alleviate the cannabis industry’s banking woes. “We’ve been very focused on a global vision and taking a strategic approach towards solving the cannabis industry’s largest problem – banking,” says Dinenberg. “Not only have we built a broad portfolio of finance and compliance solutions with a high-level of technical sophistication, but we’ve made a strong commitment to security and compliance, which is evident through our partnership with Microsoft.” A little over a year ago, they entered a partnership with Microsoft to utilize their cloud-based solutions for government traceability software.
According to the press release, the software has regulatory and security features built in, such as age and identity verification, which can help companies comply with security and chain of custody regulations. “Our mission is to ensure business and technological growth for all constituencies within the cannabis industry while ensuring full compliance with evolving regulations, and that’s why we’re thrilled to make these services available to our great neighbors in the north,” says Dinenberg. “We understand compliance will be a critical issue for some time to come, but with our solution, all providers and their partners can focus on the job at hand while keeping in line with regulatory mandates.”
KIND Financial has not done much work in Canada previously, but this could be a sign of a greater push for international expansion. “We’re excited to be working in a new country to boost the Canadian cannabis industry in a safe and regulated manner, and we look forward to expanding into other markets overseas,” says Dinenberg. The press release says the new platform is designed to work with different languages and foreign currencies, including the euro and Australian dollar, which could help Canadian producers enter emerging markets.
In addition to their announcement of the KIND Seed to Payment platform, the company also announced they will be rolling out a mobile payment system called KIND Pay, a digital payment option for consumers that will accept Visa and MasterCard. They anticipate that KIND Pay will launch before the end of this year.
Germany is proceeding down the path to officially grow its own medical cannabis crops. Medical use became legal this year, along with a federal mandate for cheap access. That means that public health insurance companies, which cover 90% of Germans, are now firmly on the hook if not front line of the cannabis efficacy issue. As such, Germany’s medical market is potentially one of the most lucrative cannabis markets in the world, with a total dollar amount to at least challenge, if not rival, even California’s recreational market. Some say Canada’s too.
However, before “home grow” enthusiasts get too excited, this legislative move was an attempt to stymie everything but commercial, albeit medical production. Not to mention shut off the recreational discussion for at least another four years.
How successful that foray into legalization will be – especially given the chronic shortages now facing patients – are an open question. Not to mention other infrastructural issues – like doctor unfamiliarity with or resistance to prescribing cannabinoids. Or the public insurers’ so-far reluctance to cover it even though now federally mandated to do so.
Regardless, Germany decided to legalize medical use in 2017 and further to begin a sanctioned domestic cultivation for this market. The decision in the Bundestag to legalize the drug was unanimous. And the idea to follow UN regulations to establish this vertical is cautiously conservative but defendable. Very predictably German in other words.
Since then, however, the path has been far from smooth. Much less efficient.
Trouble in Germany’s Medical Cannabis Paradise
In April the government released its tender bid. And no matter how exciting it was to be in the middle of an industry who finally saw a crack of light, there were also clouds to this silver lining that promised early and frequent thunderstorms on the horizon.
By the time the tender bid application was due in June, it was already clear who the top firms were likely to beIn fact, by the end of the ICBC conference, which held its first annual gathering in Berlin at the same time the bid tender was announced, the controversy was already bubbling. The requirements of the bid, for a laughably small amount of cannabis (2,000 kg), mandated experience producing high qualities of medical marijuana in a federally legitimate market. By definition that excluded all German hopefuls, and set up Canada and Holland as the only countries who could provide such experience, capital and backlog of crop as the growing gets started.
The grumbling from Germans started then.
However, so did an amazingly public race to gain access to the German market directly – by acquisition or capital expenditures that are not refundable easily (like real estate or even buyouts). The common theme? They were large amounts of money being spent, and made by major Canadian Licensed Producers who had the right qualifications to meet the standards of the bid. In fact, by the time the tender bid application was due in June, it was already clear who the top firms were likely to be. They were the only ones who qualified under the judging qualifications.
And while nobody would commit publicly, news of the final decision was expected by August. Several Canadian LPs even issued press releases stating that they were finalists in the bid. But still no news was forthcoming about the official list.
Delay, Delay and More Delay
A month later, as of September, and there was still no official pronouncement. Nor was anybody talking. BfArM, the regulatory agency that is supervising this rollout as well as the regulation of all narcotic drugs (sort of like a German version of the FDA) has been issuing non-statement statements since the late summer. Aurora, however, one of the top contenders for cultivation here, was quietly issued an ex-im license by both Canadian and German authorities. Publicly, this has been described as an effort to help stem the now chronic cannabis shortage facing patients who attempt to go through legitimate, prescribed channels. On the German side, intriguingly, this appears to be a provisional license. Privately, some wondered if this was the beginning of a backdoor approval process for the top scoring bid applicants for cultivation. Although why that might be remains unclear.
Whispered rumours by industry sources that wish to remain anonymous, have suggested that the entire bid is still hanging in jeopardy. Late in the month, rumours began to fly that there were now lawsuits against the bid process. Nobody had much detail. Not to mention specifics. But CannabisIndustryJournal can now confirm in fact that there have been two lawsuits (so far).
The summary of the complaints? It appears that two parties, filing with the “Bundeskartellamt” (or regulatory office focusing on monopolies and unfair business practices) did not think the bid process or scoring system was fair. And both parties also lost.
But as of mid-October, there is still no public decision on the bids. What gives?
Whispered rumours by industry sources that wish to remain anonymous, have suggested that the entire bid is still hanging in jeopardy. Even though the plaintiffs failed, some have suggested that the German government might force a complete redo. Others hint that it will likely be slightly revised to be more inclusive but the regulatory standards must remain. If a redo is in the cards, will the German government decide to increase the total amount of yearly cannabis to be delivered? At this point, it is only calling for 2,000 kg per year by 2019. And that, as everyone knows, is far too little for a market that is exploding no matter the many other obstacles, like insurance companies refusing to compensate patients.
What Is Behind The Continued Delays?
There are several theories circulating the higher levels of the cannabis industry internationally right now even if no one is willing to be quoted. The first is that the total number of successful applicants, including the recent litigants, will be slightly expanded, but stay more or less the same. There is a high standard here for the import of medical cannabis that the Germans intend on duplicating domestically.
The Comprehensive Economic Trade Agreement (CETA – the often controversial free trade alliance between Europe and Canada) is still in the final stages of approval.The second is that the German government will take its time on announcing the final winners and just open the doors to more imported product. This will not be popular with German insurers, who are on the hook to pay the difference. However with Tilray now on track to open a processing facility in Portugal and Canopy now aligned with Alcaliber in Spain, cross-continent import might be one option the government is also weighing as a stop-gap provision. Tilray, who publicly denied in the German press that they were participating in the cultivation license during the summer, just issued a press release in October announcing a national distribution deal to pharmacies with a German partner – for cannabis oil.
But then there is another possibility behind the delay. The government might also be waiting for another issue to resolve – one that has nothing to do with cannabis specifically, but in fact is now right in the middle of the discussion.
The Comprehensive Economic Trade Agreement (CETA – the often controversial free trade alliance between Europe and Canada) is still in the final stages of approval. In fact, on September 19, a prominent German politician, Sigmar Gabriel of the Social Democrats (SPD) made a major statement about his party’s willingness to support Germany’s backing of the deal. It might be in fact, that the German government, which is supportive of CETA, got spooked about the cannabis lawsuits as test trials against not cannabis legalization, but a threat to the treaty itself.
Quality control, namely pesticides when it comes to plant matter, and the right of companies to sue governments are two of the most controversial aspects of this trade deal. And both appear to have risen, like old bong smoke, right at the final leg of closing the cannabis cultivation bid.
Will cannabis be seen as a flagship test for the seaworthiness of CETA? On a very interesting level, that answer may be yes. And will CETA in turn create a different discussion about regulatory compliance in an industry that has been, from the beginning of this year, decidedly Canadian-Deutsch? That is also on the table. And of great concern to those who follow the regulatory issues inherent in all. Not to mention, of course, the industry itself.
Right now, there are none to be had.
However at present, the German bid process is several months behind schedule as Canadian producers themselves face a new wrinkle at home – the regulation of the recreational crop in the provinces.
It is also clear that there are a lot of questions and not a whole lot of answers. Not to mention a timeline when the smoke will clear.
There is a great deal to be happy about with medical cannabis legalization in Germany. This is the first country that has mandated insurance coverage of the drug – at least at the federal legislative level.
However, as the government evaluates the finalists in the first tender bid for domestically grown and regulated cannabis, a real crisis is brewing for patients on the ground. And further one that the industry not only sees but is trying to respond to.
Spektrum Cannabis GmbH, formerly MedCann GmbH began trying to address this problem when they obtained the first import license for Canadian cannabis last year. They are also one of the apparent five finalists in the pending government bid to grow the plant domestically for medical purposes. According to Dr. Sebastian Schulz, head of communications for Spektrum, “Shortly after the new cannabis law was reformed we experienced a huge increase in demand from the side of patients. We had prepared for that. The German population is very curious about cannabis as a medicine and in general very open to natural remedies.”
People are curious here. But like other places, the law in Germany has evolved slowly. Much like Israel, the government has allowed a trickle of patients to have access to cannabis by jumping through multiple, time consuming hoops. The process of getting cannabis prescribed, much less getting a pharmacy to stock it, was difficult. Patients had to pay out of pocket – a monthly cost of about $1,700. While that is expensive by American standards, to Germans, this is unheard of. The vast majority of the population – 90% – is on public health insurance. That means that most Germans get medications for $12 a month, no matter what they are. Allegedly, German patients were supposed to get about 5oz a month for this price. At least that is what the law says.
People are curious here. But like other places, the law in Germany has evolved slowlyAs in other countries, no matter what Germans think about recreational reform, the clear majority of them at this point support medical use. And at this point, both legislatively and via the courts, the government has said and been required to provide the drug to Germans patients at low cost.
Unintended Effects & Consequences
Since the law went into effect in March of this year however, things have suddenly turned very dire for patients.
The handful of people who had the right to grow at home – established under lawsuits several years ago – were suddenly told they could no longer do so. They had to go to a doctor and regular pharmacy. Even regular patients in the system found that their insurance companies, allegedly now required to pay, are refusing to reimburse claims. Doctors who prescribed the drug were abruptly informed that they would be financially responsible for every patient’s drug cost for the next two years (about $50,000 per patient).
To add a final blow to an already dire situation, German pharmacies that carried the drug, then announced an additional fee. It is about $9 extra per gram, added at the pharmacy, pushing the price of legitimate cannabis north of $20 dollars per gram. This is justified as a “preparation fee.” Cannabis bud is technically marked as an “unprocessed drug.” This means the pharmacies can charge extra for “processing” the same. In reality this might be a little bud trimming. If that. The current distributors in the market already prep and pre-package the drug.
What this bodes for a future dominated by infused products, oils and concentrates is unclear. However the impact now is large, immediate and expensive in a country where patients also must still go to the pharmacy in person for all prescription drugs.
There is no mail order here, by federal law. Online pharmacies are a luxury for Auslanders.
At minimum, this could mean that without some relief, German patients will go right back into the black market and home grow.While nobody has challenged this situation yet en masse, it is already a sore point not only for patients but across the industry. It means that an already expensive drug has gotten even more expensive. It also means that the government regulations are not working as planned.
At least not yet. For the large Canadian companies now coming into the market with multimillion-dollar investments already sunk in hard costs, Germany will be a loss-leader until the system sorts itself out.
According to Schulz, whose company is now in the thick of it, the new law is very vague. “Currently, there are almost no cannabis flowers available in German pharmacies because companies like us are not allowed to sell them,” says Schulz. “Various different regulatory demands come up that seemed to change on a monthly basis. We are ready to deliver even large amounts of cannabis for a market that might well explode soon – but we first need to overcome the regulatory nightmare that leads to the suffering of so many patients here these days.”
At minimum, this could mean that without some relief, German patients will go right back into the black market and home grow. Black market costs for cannabis are about $10-15 a gram. In other words, exactly the situation the government was hoping to avoid.
What Is Causing The Situation?
The intended effect of the legislation was twofold, according to industry insiders: To legalize cannabis in such a way to meet a rising public demand and, in the face of a court decision, to limit the home grow movement. The latter of which, despite federal regulations, is thriving here. Germans like to grow things, and cannabis is a rewarding plant to nurture.
High attendance at the Mary Jane Grow Expo in Berlin in June is just one sign that the genie is out of this particular bottle. BfArM – the federal agency in charge of regulating narcotics and medical devices – cannot stuff it back.Patients are going back to the way things were
However home grow does not build a professional, high volume cannabis market, much less a highly regulated medical one make. The government also made clear that it is going to have strict inspections and quality controls, and will technically buy all the cannabis produced, per the terms of the bid application process.
However, it is not entirely clear when the government will start actually doing the buying. And why the buying has not started yet. If insurance companies are refusing to pay, this means the government is not reimbursing them. The same government, which has also agreed to do so, as of March 2017.
What Gives On Good Old German Efficiency?
On the streets, patients are going back to the way things were. Many are used to fighting for the only drug that makes them feel better. The euphoria in May, for example, has been replaced with weary acceptance that things might get a bit worse before they really improve.
That said, there is also a realization that more activism and lobbying are required on just about every front. If an extrapolation of data from say Colorado or California is applied to Germany, there are already at least a million eligible patients here, based on the qualifying conditions. The government is planning for an annual increase in medical patients of about 5-10,000 a year, including in the amount of cannabis they are planning on buying from the licensed producers they choose. The numbers, however, are already not matching.Even existing patients are literally being forced into the black market again.
Added to this wrinkle is the other reality that is also looming, particularly now.
With one exception, all of the firms now apparently in contention as finalists for the German government bid will also be supplying a domestic market in Canada that is going rec next summer. One year, in other words, before the German companies even begin producing.
What Is The Upshot For Patients?
Guenther Weiglein is one of the five patients who sued for home grow rights in 2014. He is now suing again for the right to extend home grow privileges until the government figures out its process. He is not the only one. Earlier this year he was told he had to stop his home grow and integrate into the “mainstream” system. So far, he, along with other patients who are suing, including for insurance coverage, have not been able to get cannabis easily through the system, although they are starting to make progress.
Weiglein’s situation is made even more frustrating by the fluidity of the situation. As of late July, he had finally gotten agreement from his insurance company to cover the drug. But now he cannot find a doctor willing to accept the financial risk of prescribing it to him. And in the meantime he has no access to medication.
Talk to any group of advocates right now, and there is one ongoing story. Even existing patients are literally being forced into the black market again.
And those that can’t afford it? They are out of luck. Some patients say a tragedy like someone dying will create the impetus to move this into public eye. A hunger strike here by a leading cannabis doctor earlier this summer has so far not had much impact on policy. There is a great deal of pessimism here, as promised change earlier this year has turned into a long and drawn out multiyear question mark.
If this sounds like a bubbling and untenable situation, especially before a national election, it is. The prospect of another four years of Angela Merkel does not bode well for fast cannabis reform.
That said, the German government is now in an interesting situation. The law has now clearly changed to say that sick Germans are allowed to use cannabis as a drug of choice for chronic diseases when all else fails. Further, the national government has bound the insurance industry to cover it. So far, every patient who has sued for coverage has won. That has not, however, moved the insurance industry altogether. Nor has it solved the problem with doctors prescribing the drug.
Many now ask what will? It is clear, however, that it will change. The question is when, how fast, and in what situations.
The problem will undoubtedly ease by 2019, when the first German crops are finally ready, although it will be far from completely solved.
The government of Canada published a press release on April 13th proposing a piece of legislation, the Cannabis Act, which would regulate the industry by July of 2018. The press release puts a heavy emphasis on keeping cannabis away from children, curbing impaired driving and reducing criminal and organized crime profits.
The press release says the legislation would set up a regulatory framework “for controlling the production, distribution, sale and possession of cannabis in Canada.” It would set the minimum age to purchase cannabis at 18, but provinces can increase that minimum age how they see fit. Health Canada, the Royal Canadian Mounted Police, the Canada Border Services Agency and the Department of Public Safety would be responsible for enforcing the regulations.
The Cannabis Act states they plan on implementing a fully functioning regulatory framework by July of 2018. Transporting cannabis across international borders or selling to minors would be serious criminal offenses. If the legislation becomes law, adults could have up to 30 grams of cannabis on their person and grow up to four plants in their home.
Individual provinces would ultimately be the regulating authorities, but if local jurisdictions do not have a regulatory framework in place, the press release says Canadians could purchase cannabis online and have it shipped to them. In addition to establishing the regulatory framework, the Cannabis Act would tighten laws on impaired driving. “Additionally, the proposed legislation would authorize new tools for police to better detect drivers who have drugs in their body,” reads the press release. That would give the police authorization to use oral fluid drug screeners, but cannabis is particularly difficult to detect at low concentrations. It is unclear exactly how that would be enforced and specifically what technology they would use.
In a Facebook post this morning, Justin Trudeau announced the proposed legislation to his followers. “It’s too easy for our kids to get marijuana,” says the Prime Minister. “We’re going to change that.” That mention of keeping cannabis out of reach of the Canadian youth is heavily emphasized in the press release as well.
Earlier this month, Health Canada, in a press release, gave a glimpse as to what the new Access to Cannabis for Medical Purposes Regulations (ACMPR) might look like. On August 11th, they announced the new set of regulations would go into effect on August 24th this week. Information presented was not shocking. Most Canadians had hoped and suspected that the announcement would include a provision for growing cannabis at home – and it did exactly that.
Essentially, the ACMPR expands accessibility of cannabis from our highly regulated 34 licensed producers (LPs) to include those authorized by their health care practitioner to access cannabis. Anyone with the appropriate medical documentation can now grow for him or herself at home, or designate a grower to do so for them. Health Canada also stipulated in the press release that “Storefronts selling marijuana [sic], commonly known as ‘dispensaries’ and ’compassion clubs’ are not authorized to sell cannabis for medical or any other purposes.” The regulatory body went on to add: “These operations are illegally supplied and provide products that are unregulated and may be unsafe. Illegal storefront distribution and sale of cannabis in Canada are subject to law enforcement action.”
There were a few curve balls in the announcement, including a statement issued that suggests commercial producers may be the only ones authorized to distribute seeds or plants to those growing for themselves or on behalf of another. It is unclear how the plant and seed sourcing aspect will be regulated and/or how that statement may impact LPs over individual producers. Restriction of strain availability and additional costs are examples of potential implications to individuals. LPs therefore remain in control of the types of cannabis available on the market. It is unclear if this regulatory aspect will mean they can restrict access to strains they have on hand, or not, especially if they are popular for sales.
When the first glimpse of the ACMPR was released, we saw many LPs stock drop in price across the board, in some cases greater than 10%. It is not anticipated however that the ACMPR will cause any long-term negative effects on LPs stock price or profitability. The ACMPR was put in place merely to satisfy a court ruling on a deadline. The deadline was inconvenient, occurring around 9 months before the regulations governing recreational sales are meant to go in effect. It meant that Health Canada employees had to dedicate time to finding a Band-Aid solution up until recreational sales instead of focussing on recreational regulatory framework itself.
Recreational regulations are scheduled for release in 2017, and it is unclear when exactly they will begin. As they do begin to unfold it is projected that the production and sale of cannabis will remain highly regulated. LPs will remain the consistent quality source of supply. There have been multiple distribution models in discussion, including co-op retail ownership, pharmacy dispensary and liquor board models. While yes, those with medical documentation anticipate still being able to produce at home; it is unlikely this allowance will have any effect on the overall sales of LPs as the market unfolds. Alcohol and wine are good examples to compare the regulatory model to. While sure, any of us can do home brewing, odds are we would still like to purchase beer from commercial breweries. In both Vancouver and Toronto, property is very expensive. Higher percentages of the population are starting to live in apartments, condos and smaller homes. Many people working full time are not interested in growing their own cannabis and would prefer the variety of the marketplace. There are many reasons individuals will continue to purchase from LPs. As competition rises in the marketplace, so will efficiencies in production as producers become more familiar with growing practices. Canada is anticipating a drop in retail prices to be much more affordable than existing “black markets.” Cannabis will become commonplace on shopping corners and it will be a product that most will be able to afford.
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