Tag Archives: cannabis industry

Is There a Medical Cannabis Crisis Brewing in Germany?

By Marguerite Arnold
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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).

Photo: Ian McWilliams, Flickr

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.

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The Cannabis Industry’s Pesticide Problem

By Aaron G. Biros
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Colorado regulators recalled roughly 65 batches of cannabis produced by two separate companies last Friday. Pesticide recalls plastered all over the news in the past few months have painted a picture of the cannabis marketplace to the public as unsafe and lacking crucial quality standards. The continued pesticide recalls in Colorado, along with poor safety standards in Washington, show the cannabis industry in an unfavorable light. The recalls include not only cannabis sold recreationally, but also medical cannabis, which should highlight a sense of urgency to deal with such a pervasive issue.

Because patients with weakened immune systems are seeking treatment with cannabis, it is the producer’s obligation to grow cannabis safely and without pesticides. That requires proper quality controls, pesticide use standard operating procedures, very robust lab testing and an overall push to protect consumer safety from both regulators and industry leaders.

The pesticides most commonly found in cannabis products include myclobutanil, a fungicide in Eagle 20, and avermectin, commonly found in Avid pesticides. The Pesticide Action Network lists both compounds as “bad actors” and as developmental or reproductive toxins.

Largely due to federal illegality, there are no EPA-approved pesticides for use in cannabis production, thus a lack of guidelines for states to follow in regulating pesticide use. As a result, states are working to write their own lists of approved pesticides.

Until very recently, Washington had no procedure for recalls of cannabis in place. “The LCB in Washington State has implemented emergency recall rules but more clarity on what types of pesticides are harmful is needed,” says Trek Hollnagel, co-founder of Dope Magazine and a chain of dispensaries in Seattle, WA. It is no secret that the Washington State Liquor Cannabis Board (LCB) poorly regulates cannabis labs.

Reports show immense variation in different labs’ results and rampant laboratory shopping. Dana Luce, co-founder of GOAT Labs, Inc., a cannabis-testing laboratory based in Vancouver, Washington, has been clamoring for a standardized recall procedure. “The state needs to take a much more proactive approach in monitoring laboratories,” says Luce. “Using blind testing or secret shoppers would give them the opportunity to catching those labs playing below board.” Luce also believes that retail outlets should absorb the cost of recalls, which could help prevent laboratory shopping just for higher potency test results.

In Washington, regulators rely on producers to self-report coupled with random inspections; furthermore they do not even require pesticide testing. Without a burden of proof placed on the producer or even the laboratory, it is hardly a regulated market.

Those producing cannabis with pesticides listed above should know they are violating the law. According to Comprehensive Cannabis Consulting (3C), “applying pesticides off label is a violation of state and federal law and could result in criminal and civil sanctions…”

In reality, the solution to this problem is not just a quick fix, but a multitude of corrective actions to move the cannabis industry forward. Nic Easley, chief executive officer of 3C, believes it starts with educating cultivators on using pesticides properly and good agricultural practices (GAP). “Many of the pest problems prompting the illegal use of pesticides are due to poor facility design, lack of cleanliness, over-fertilization and other general plant health issues,” says Easley. “All of those issues could be greatly reduced through education in GAP.”

Then comes regulator-industry collaboration, where all parties are constantly learning. “Regulators or independent third-party groups need to be performing on-site inspections, which cultivators need to participate in openly and transparently,” adds Easley. The Colorado Department of Agriculture (CDA) is actively working on this aspect by offering workshops aimed at helping producers get up to speed with worker protection standards.

“Adequate standards need to be applied across the board to labs, and ongoing proficiency testing needs to take place to ensure that a lab’s facility, processes and instruments are fully validated,” says Easley. So the problem is cannabis producers still using pesticides off label and if that continues, so will the recalls. It seems the solution involves industry-regulator collaboration, more robust laboratory systems and calibration methods and educating cultivators on good agricultural practices. Additionally, more state guidance is needed in the form of research for an approved list of pesticides on cannabis and a bigger push for regulation in the form of inspections and laboratory oversight.

MedicineManTechGrow

Legal Cannabis Industry’s Energy Bill Not So Alarming

By Aaron G. Biros
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MedicineManTechGrow

New Frontier, a financial data analysis firm, recently released a report that caused a media frenzy over the cannabis industry’s alarmingly high energy bill. The Washington Post published an article with the headline “The Surprisingly Huge Energy Footprint of the Booming Marijuana Industry.” Denver news publication, Westword, posted an article with the headline “Legal Marijuana Used Over $6 Billion in Energy Last Year, Report Says.” There are dozens of articles published suggesting the legal cannabis industry’s energy consumption has a $6 billion price tag, which is misleading.

What’s the problem? The $6 billion figure that New Frontier cites comes from a 2012 research study that estimates the energy footprint for legal and illicit markets. That means the $6 billion estimate includes the legal cannabis industry and the black market’s energy footprint. To put it in perspective, the size of the entire legal cannabis industry in the United States was less than that in 2014 at $4.6 billion, according to the ArcView Group.

newfrontierreport
The projected energy demand for growing in the Northwest through 2035, from the New Frontier report.

According to Giadha Aguirre DeCarcer, founder and chief executive officer of New Frontier, only including the legal market would significantly reduce the size of this estimate. “Dr. Mills’ study looked to assess the total energy use associated with marijuana in the US, not just that of the nascent legal marijuana industry; including this holistic view is an important growth determinant for the legal market as the U.S. transitions from a predominantly illicit production environment,” says Decarcer.

Dr. Evan Mills, energy analyst at the Department of Energy and member of the UN Intergovernmental Panel on Climate Change, conducted the 2012 research study and is a senior advisor on the New Frontier report.

Brett Roper, founder and chief operating officer at Medicine Man Technologies, believes those numbers still need to be adjusted. “Dr. Mills’ study is based on pre-2011 data and sources that date back as far as 2003,” says Roper. “The study provides figures that are, quite frankly, outdated based upon changes in the industry related to cultivation and production efficiency.” The study focuses on cultivation increments of sixteen square feet consuming 13,000 KW per year that, according to Roper, is not reflective of current indoor cultivation technology and energy consumption metrics.

medmantech
A back-end view of Medicine Man Technologies’ indoor production facility

According to Roper, today’s efficiencies, scalable cultivation operations and new technology could explain the overestimate from five years ago. “We are a Tier III operator that produced approximately 5,100 (+/-) pounds of dried cured flower in 2015 and have a total power bill of approximately $420,000 for the year,” he says. Note that the company had roughly $18 million in revenue in 2015. “Using this metric we have a total energy billing of approximately $83 per pound grown.” According to Roper, they cultivate completely indoors with HPS lights that are not particularly energy-efficient, so this estimate is relatively conservative.

MedicineManTechGrow
Medicine Man Technologies’ approximately 40,000 sq. ft. cultivation facility.

Dr. Mills’ research cites much higher numbers for the cost of energy per pound of finished product than Roper’s findings. “From the perspective of a producer, the national-average annual energy costs are approximately $5500 per module or $2500 per kilogram [roughly 2.2 pounds] of finished product,” says Dr. Mills. That would suggest the average cost of energy for indoor growing to be above $1,000 per pound, roughly half the current average wholesale price. These numbers would mean that cannabis growers, on average, lose roughly 50% of their total revenue to their energy bill. Medicine Man Technologies’ energy usage is less than 3% of their total revenue.

coloradoenergydemand
Xcel, a Colorado utility, showing the rise in electricity demand for cultivation.

The New Frontier report does provide caveats on the use of Dr. Mills’ research. “While this analysis was conducted before many of the recent advancements in cultivation technologies, it highlights the significant energy-related environmental impact of marijuana production, and makes the issue of energy efficiency not just one of competitive advantage but also one of environmental sustainability.”

New Frontier’s CEO, DeCarcer, stresses that their report is intended to serve as a starting point to a much broader exploration of energy use in cannabis. “We are already in the process of establishing a partnership through which New Frontier will ingest real time energy-use data from cultivators across different legal markets for analysis in our next report,” says DeCarcer. “Our goal is to build on the work done by Dr. Mills and others in order to ensure that we are providing the most accurate representation of where the industry currently is, and where it is headed.”

Regardless of the discrepancies, this kind of discourse is great for prompting innovation and getting people to think about the environment. It is very important to examine the energy footprint of cannabis cultivation as it raises questions regarding energy efficiency, which would help the industry’s long-term environmental sustainability.

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Emerging Cannabis Markets: The California Gold Rush

By Aaron G. Biros
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California has enjoyed legal medical marijuana for almost two decades, giving the state one of the greatest head starts in the industry. States like Colorado, Washington, and Oregon have since legalized recreational use for adults and passed legislation providing for state regulation of the industry.

For the past two decades, California’s medical marijuana market lacked strict, enforceable regulations, allowing for a black-market-mentality to remain prevalent.

However, that could all change with a 2016 ballot initiative that would legalize recreational use for adults along with more regulations for medical marijuana. I have noticed a schism developing in the cannabis industry, with some clamoring for more regulations to ensure safety and traceability, and others fearing over-regulation and big business involvement.

In the interest of advancing legalization efforts nationwide with mainstream acceptance, I think regulations that address traceability, testing, and safety are important to jettison the cannabis industry into a legitimate spotlight.

Since Deputy Attorney General James Cole issued a memorandum on Guidance Regarding Marijuana Enforcement, known as the Cole Memo, in 2013 on behalf of the U.S. Department of Justice, federal priorities have moved away from clashing with legal state marijuana markets, giving a sense of security to those established in the industry. California is the world’s eighth largest economy, just behind Brazil with a GDP of more than $2 trillion, and the cannabis industry can benefit greatly from the passing of the 2016 ballot initiative.

Colloquially known as the “Wolf of Weed Street”, Jason Spatafora, founder of MarijuanaStocks.com and CEO of FBEC Worldwide, Inc. believes that the marijuana market in California could be on par with the tech boom. “Previously, California’s medical marijuana laws might as well have been recreational, but as the state introduces new legislation we will see heavy expansion with companies getting into the recreational market, leading to increasing growth and production, which requires ancillary businesses to support that growth,” he says.

“It is not just the private market that will benefit, the public sector will soon be on par with Colorado when tax revenue begins to grow,” says Spatafora. “California is the most populated state in the country, [and] new legislation will really change the landscape of the cannabis market.”

Matt Karnes, founder and managing partner of GreenWave Advisors, LLC, believes that while implementation of new rules would not go into effect until 2018, the process will be facilitated by existing infrastructure expected to be established for medical marijuana. “We are conservative in our estimates for 2016 and expect that California’s legal medical marijuana market will grow 15% to approximately $2 billion from the 2015 estimate of $1.8 billion,” says Karnes.

According to Karnes’ figures, we can expect both markets to grow considerably over the next five years, leading to a $7.61 billion total marijuana industry in California by 2020.

Steve Goldner

Federal Marijuana Policy: A Q&A with Stephen Goldner

By Aaron G. Biros
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Steve Goldner

Ahead of the launch of our newest publication, CannabisIndustryJournal.com, I interviewed Stephen Goldner, President of Regulatory Affairs Associates, regarding the possibility of federal oversight in the cannabis industry, namely direct FDA involvement via regulations.

With experience as a forensic toxicologist and attorney, Stephen Goldner has worked over 35 years as a regulatory professional in the healthcare space. He has contributed to the approval of 230 drugs and medical devices serving as an FDA advisor. Steve is credited with the development of the liquid dose form of methadone and various screening tests for drug abuse.

We discussed the current regulatory frameworks in place for legal marijuana in the United States and found that there are some gaps in understanding when it comes to regulating the plant. Here is a snapshot of our conversation discussing federal involvement in the cannabis industry:


 

Food Safety Tech: Are state governments and marijuana businesses working jointly to handle the regulatory framework succeeding? Can you see, in the handful of states that have already legalized marijuana, a need for FDA regulatory guidance?

Steve Goldner: To many people’s surprise, the states that have legalized marijuana are doing very well setting up a regulatory framework. Plus, the legitimate operations really want to succeed in business and provide safe and effective recreational and drug products. I’m surprised to hear myself say it, but FDA might be best served if it stayed out of this issue for a while.

FST: What are some reasons why the FDA might want to get involved in the cannabis industry?

Steve: Certainly if there were reports of injuries, but so far the marijuana products seem to be much less hazardous than other common recreational substances like beer and wine. But FDA also gets involved when there are outrageous claims that products cure diseases like cancer. I expect FDA will act against cannabis distributors who make those claims, even if they only distribute their marijuana within one state.

FST: What are some reasons why the FDA might want to let this social experiment run a little longer?

Steve: Thousands of people have gone to jail or otherwise had their life ruined because of small amounts of this product being used or being sold. If it turns out, as the data appears to show, that marijuana is not a ‘gateway drug’ to other drugs, and it’s use is fairly harmless, then FDA stepping in will probably just send most of the users and growers into the black market and then nothing will have been gained.

FST: What actions might you suggest the FDA take in the near future as more states continue to legalize marijuana?

Steve: Great question! FDA is excellent at monitoring data, along with the CDC. If FDA sees a real health hazard problem, it can convene a panel of experts to offer solutions. And then monitor the situation to see if growers and producers of marijuana edibles can adopt those solutions into their business practices.


 

Ahead of a number of state reforms and initiatives to legalize the recreational use and sale of the plant in 2016, The New York Times published an op-ed by The Editorial Board in favor of removing marijuana from the Controlled Substances Act. While Goldner, along with many others, believe that states are making great strides with regulatory measures, The New York Times believes “State legalization efforts are not uniformly well thought out, which is another reason for Congress and the president to act.”

With the 2016 elections fast approaching, we hope to see major changes coming soon in the federal government’s position on marijuana.

We want to hear your thoughts! Do you think the federal government should step up their involvement? What actions or inactions would you like to see the federal government take? Do you think the FDA should chime in? Post your questions or thoughts in the comments section below.