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.
In the United States, the idea of transporting cannabidiol (CBD), let alone medical cannabis across state lines is still verboten. As a result, a patchwork of very different state industries has sprung up across the map, with different regulatory mandates everywhere. While it is very clear that California will set the tone for the rest of the United States in the future, that is not a simple conversation. Even in-state and in the present.
In the meantime, of course, federal reform has yet to come. And everywhere else, there is a very different environment developing.
In Canada, “territorial” reform does mean there will be different quality or other regulatory guidelines depending on where you are. The main difference between the territories appears to be at point of retail – at least for now. Notably, recreational dispensaries in the East will be controlled by the government in an ABC package store model. That will not be the case across all provinces however. Look for legal challenges as the rec market gets underway.
In Europe, the conversation is already different – and based on the realities of geopolitics. Europe is a conglomeration of federally governed nation-states rather than more locally administered territories, supposedly under federal leadership and control (as in the US). That said, there is common EU law that also governs forward reform everywhere now, just as it hindered national drug reform until a few years ago on the cannabis front.
However, now, because European countries are also moving towards reform but doing so in very different ways in an environment with open borders, the market here is developing into one of the most potentially fertile (and experienced) ex-im markets for the cannabis plant anywhere. On both the consumer and medical fronts, even though these labels mean different things here than they do elsewhere.
Medical reform in Europe basically opens the conversation to a regulated transfer of both non and fully loaded narcotic product across sovereign national borders. This is already happening even between nation-states where medical (read THC infused) cannabis is not federally legal yet, but it is has been accepted (even as a highly restricted drug). This means that Europe has already begun to see transfer of both consumer and medical product between states. In the former case, this is also regulated under food and cosmetic safety laws.
Cannabis in this environment is “just another drug.”While a lot of this so far has been via the strategic rollout of the big Canadian LPs as they attempt to carve up European cannabis territory dominance and distribution like a game of Risk, it is not limited to the same.
Pharmaceutical distributors across Europe are hip to the fact, now, that the continent’s largest drug market (Germany) has changed the law to cover cannabis under insurance and track its issuance by legal prescription. So is everyone in the non-medical CBD game.
As a result, even mainstream distributors are flocking to the game in a big way. Cannabis in this environment is “just another drug.” If not, even more significantly, a consumer product.
The race for Europe is on. And further, in a way that is not being seen anywhere else in the world right now. And not just in pharmacies. When Ritter Sport begins to add cannabis to its famous chocolate (even if for now “just” CBD) for this year’s 4/20 auf Deutschland, you know there is something fundamental and mainstream going on. Lidl – a German discount grocery chain that stretches across Europe, has just introduced CBD-based cannabis edibles – in Switzerland.
As a result of this swift maturation, it is also creating from the beginning a highly professional industry that is essentially just adding cannabis to a list of pharmaceutical products already on a list. Or even just other grocery (or cosmetic) items.
In general, and even including CBD, these are also products that are produced somewhere in Europe. As of this year, however, that will include more THC from Portugal, Spain and most certainly Eastern Europe. It will also mean hemp producers from across the continent suddenly have a new market. In many different countries.
This means that the industry itself is far more sophisticated and indeed used to the language and procedures of not only big Euro pharma, but also mainstreamed distribution (straight to pharmacy and even supermarket chains).
It also means, however, understanding the shifting regulations. In general, the focus on ex-im across Europe is also beginning to standardize an industry that has been left out of the global game, on purpose, for the last 100 years. Medical cannabis, grown in Spain under the aegis of Alcaliber (a major existing opioid producer) can enter Germany thanks to the existing partnership with Spektrum and Canopy, who have a medical import license and source cannabis from several parts of Europe at this point. It also means that regular hemp producers, if they can establish the right brand and entry points, have a new opportunity that exists far outside of Switzerland, to create cross-European presence.
And all of this industry regulation is also setting a timeline, if not deadline, on other kinds of reform not seen elsewhere, anywhere, yet.
The International Cannabis Business Conference (ICBC) in Berlin is now officially over. The speeches have been made, the parties have been attended. The hard-working crew behind it all has wrapped up, checked out and is off to Vancouver. And most of all, the marathon of meetings and deal discussions that were the mark of this budding and certainly by now established market are done. Even if there are still details to be ironed out in all the new business in the coming months.
As always, the dilemma for conference attendees was how to spend the limited time in this concentrated cannabis gathering. With all of the networking and excitement, people still wanted to hear the experts who spoke on topics ranging from cannabis financing to actually doing business in Germany to new medical advances. Traffic in the expo section was also heavy, as attendees visited the wide range of vendors. Producers and distributors of both plant and derived product were present, along with vape companies brave enough to compete with Storz and Bickel on their own turf, various tech solutions and of course, international consultants.
As the dust clears and the contracts get signed, what are the takeaways from the second edition of the ICBC in Berlin?
Germany Is Going Green
The simplest takeaway? The ICBC Berlin is not a market to be missed in the future for the global cannabis executive. Even if you are an American firm (and for the most part still largely excluded from a rapidly expanding worldwide trade that is establishing itself now with authority), you need to be here. The contacts you make are global, and you do not want to be left out. For foreign investors interested in this market, it is a must. For everyone else, this is a meet and greet, not to mention education, barnone. The German medical and even prosumer CBD market is attracting the world.
Yes, there have been ups and downs even in the last three weeks that include the crashing of the German bid along with news stateside that the Trump Administration is going to hang Jeff Sessions out to dry for Russia with his latest “Make American States Great For Cannabis Again” contortion.
But here on the other side of the Atlantic, it is clear that the federal cannabinoid horse has left the barn. There are now rumorsfloating that the bid is not yet entirely dead (now apparently in a legal purgatory of appeals and even potentially “bid amendments”) that nobody is willing to go on record to discuss. Beyond that, however, as was clear from the frenzied deal-makingon the floor and off it at the ICBC, the market is open, distributors are finding new channels to move product, and patients demanding access are not leaving the streets.
Far from it. In fact, the budding nascent umbrella national non-profit campaign designed to open access for patients and educate doctors, The German Patients Roundtable, had a huge second meeting during the conference, with both German and international attendees from countries including Israel and South Africa.
The CBD and THC genie cannot be stuffed back into the local bottle. And everyone knows it. This is federal medical reform, and even better, covered under German national public health insurance. Despite the hiccups and challenges that still remain, this is open blue water for a medical market that has never existed anywhere to date.
Anyone with a GMP facility, Euro cleared export rights and crop or product ready to ship will be welcome here in a market that at this point, cannot get enough plant or oil. Edibles are still a to-come discussion.
To the extent that this is also negative, it is very clear that the market is still highly inefficient. Producers who do have productare not being found by those on the ground who want to sell it to patients. That will also begin to change. But for now, many on the ground are playing a digitalized Rolodex game of “who do you know” that still consists of personal emails between conference-met colleagues if not LinkedIn contacts and impromptu (and freebie) favors. Those who hope to gain an income merely by connecting the source of product and outlets the old fashioned way are also about to be left in the dust by a market that will not be held back and activist businesses who are eyeing both the United States and Canada right now (if not Israel and Australia), and translating all of that into both euros and German.
It is also very clear that the savvy Germans who were largely left out of the bid proceedings last time do not mean to sit this party out – and are angling to get into the game however they can. This is taking some interesting forms, but processing and testing are going to be huge issues of the market here for a long time to come. And so is home-grown, high-quality CBD. The German government is even offering tax credits for growing certain kinds of hempright now. Sound familiar Kentucky?
Trends and Takeaways
It is not just the Canadians who are going to get market share. The Canadian LPs are still in a good position to dominate the early market but it is clear that there is still room for others to enter. Whether the government allows an appeal of the court’s decision to hold up, there is a quick bid “redo” for the top 10 finalists, or a second bid, the market has now arrived and is in its second year.
CBD is going to be an important path to other kinds of provision and cultivation. Despite the widespread misconceptions about Germany being a “CBD only” market (it is not), it is clear that a consumer CBD only strategy will be an interesting path into the market here but not one for the faint of heart. The Canadian companies in particular are beginning to move into the realm of big pharma (their market caps certainly are). But it is also clear that more local competition is hip to the same. And as a result, even this part of the market will be a highly competitive one.
German firms are first at this gate, beyond the big Canadian LPs, but they are not the only ones now in the market. See Dutch, Austrian and Swiss firms, many with pharmaceutical company credits and market entry already under their belt. Not to mention producers from both Greece and the Baltics. Everyone on the import side is eyeing the opening market and stalled bid as a fantastic opportunity. Look for products from these locales as testing and certification protocols become more effective.
Central to all of these developments? The conference is theplacefor the global cannabis industry to meet and get to know one another, put together by Alex Rogers and a seasoned, international team behind the ICBC.
The Justice Department rescinding the Cole Memo, the Omnibus bill including Leahy Amendment protections, a host of potential bills for federal cannabis policy change: a lot has been happening in Washington D.C. recently with respect to cannabis business. With the National Cannabis Industry Association’s (NCIA) Cannabis Business Summit in San Jose fast approaching, as well as the 8th Annual Cannabis Industry Lobby Days, we thought it would be a good time to hear what NCIA has been up to recently.
We sat down with Aaron Smith, co-founder and executive director of NCIA, to learn what the organization is working on right now and how we might be able to make some real federal policy changes for cannabis.
CannabisIndustryJournal:With the Department of Justice rescinding the Cole Memo, working as a group to tackle federal policy reform is now more important than ever. Can you give us a 30,000-foot view of what NCIA is doing right now to help us work together as a group and affect policy change?
Aaron Smith: So our team in D.C. consists of three full-time staff members as well as lobbying consultants, who have been really focused on the appropriations process, which is the way we’ve been able to affect change in such a dysfunctional congress by affecting the budget and restricting law enforcement activities. The medical marijuana protections, formerly known as the Rohrabacher–Farr amendment, [and now known as the Leahy Amendment] prevent the Department of Justice from using funds to prosecute state-legal medical marijuana businesses and patients. Going into the fiscal year, thankfully after a lot of hard work, we were able to include protections for medical marijuana, which just happened last week. Now we are really focused on the next year’s fiscal budget, working to hopefully expand those protections to cover all state-legal marijuana activity so the Department of Justice cannot go after all state-legal cannabis businesses, including those businesses in the recreational cannabis industry, which is certainly one of our priorities right now. As Congress starts to transition into fiscal year 2019 appropriations, the D.C. team is working with Capitol Hill staff and other cannabis groups in D.C. to ensure an organized, uniformed strategy through the appropriations process.
CIJ: What are some other priorities for NCIA in the House and Senate right now? What is NCIA focusing its resources on?
Smith: Another big issue for us is the 280E section of tax code, which prevents legal cannabis businesses from deducting normal business expenses. A lot of these businesses face upwards of a 70 percent effective tax rate. Working with our champions in Congress, we are working on reforms to 280E so we can make normal deductions and be treated fairly, just like any other legal business. The Small Business Tax Equity Act of 2017 addresses this issue and has bipartisan support in the House and the Senate right now, and we are working to build more support for that. This bill currently has 43 cosponsors in the House.
The other big issue for us right now is banking reform, which is a very high priority for NCIA as it affects most of our members. The Secure and Fair Enforcement (SAFE) Banking Act of 2017 provides a “safe harbor” and additional protections for depository institutions who provide “financial product or service” to a covered business. This bill currently has 89 cosponsors in the House. NCIA’s D.C. team and lobbying consultants continue to push for cosponsors and support on these important bills.
CIJ: I saw that the Omnibus spending package includes Leahy Amendment protections for cannabis businesses through September. Would you consider that a win in your book? How are you working to maybe extend those protections?
Smith: It was a big win for us. It doesn’t always seem like it because it is really just maintaining the status quo, but we are up against an Attorney General lobbying congress to strip those protections and the house didn’t allow us to vote on it. But by including the Leahy Amendment in the budget we are not only protecting medical marijuana patients and businesses, but we sent a clear signal to Congress that the intention is not to go backwards. We have been playing some defense recently given the current administration’s policies. But we are working with our allies in congress to negotiate those protections for recreational businesses as well. Negotiations for that are just getting started now.
The fiscal year ends September 30th so the protections are in place for now, but Congress needs to pass another budget for the next fiscal year with those protections included. It’s hard to say when the vote will be, because they haven’t been passing budgets in a timely manner, but usually it’s in May or June, right around our Lobby Days. This is what we are focused on now, getting as many of these cannabis businesses and NCIA members out there to really show Congress what the legal industry looks like.
CIJ: NCIA is hosting the 8th Annual Cannabis Industry Lobby Days a little more than a month from now; do you have any goals for that event? Is there anything in particular you hope to accomplish there? How can cannabis businesses get involved?
Smith: The primary purpose of Lobby Days is to show members of Congress and their staff (many of whom have never had exposure to cannabis businesses) what a responsible industry really looks like. And it lets business owners come tell Congress how current policies and laws are affecting their business. It is great for the cause and helps change minds in DC.
Last year, we came out of Lobby Days with several new co-sponsors of cannabis legislation and we hope to get that again this year. It is a great opportunity to connect and network as well; some of the top people in the industry will be there.
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.
While reformers at this point are loath to do any more than publicly hope, events in the UK continue to unfold in favour of reform.
This time, it is in the wake of a highly upsetting and embarrassing incident that further highlights the human toll of prohibition. When the British Home Office (a combination of the State Department, Homeland Security and a few other federal U.S. agencies) refuses cannabis oil to six year-old Britons with epilepsy named Alfie, don’t expect the famed stiff upper lip in response.
Not anymore.Why on earth would a home-grown company deny treatment to a British kid with epilepsy?
Especially not when the rest of the EU is moving forward, Canada and Australia (both countries are a part of the British Commonwealth) are now firmly in the medical camp with Canada moving ahead with recreational use this summer. Not to mention continuing reform on both fronts in many U.S. states. Even with setbacks that include the Trump White House and Justice Department (the recently dismissed federal case in New York being just the latest casualty), recreational reform in California is an international beacon of change that will not go quietly into the night. Not now.
One of the more interesting aspects of the Dingley case in the UK, in sharp contrast, is how fast Parliament responded to the plight of the six-year-old and his mother. Not only has Dingley’s medical import license been reconsidered in Parliament, but the matter appears to have finally galvanized significant numbers of the British elected class to do something about an appalling situation that affects hundreds of thousands, if not millions of Brits too.
Cannabis Medical Refugees
Medical refugee policy, especially around cannabinoids, is at least as controversial as the other kind. In Europe and the rest of the world, just like cannabis reform itself, these are national, not state issues as they have been in the U.S., (where the issue of cannabis patient state “refugees” has nonetheless been an issue for most of this decade).
Outside of the U.S., however, it is still the case that national governments can be embarrassed into reform with the right case (or groups of them).
That was certainly true in Israel in 2014, when the so-called “15 Families” threatened to emigrate from Israel to Colorado unless the government allowed them to treat their sick kids (federal government policy was changed within a month). Not to mention an internal, state to state migration of families in the United States to Colorado around the same time.
It may also be true in this latest British case. The Home Office has been embroiled in a few embarrassing take backs of late, mostly on the topic of immigration of people. The Alfie-Dingley cannabis case hits both medical cannabis reform and lingering buyer’s remorse over Brexit where the British people actually live (and on topics they actually care about).
Refusing at least medical cannabis rights in the UK might also well tip the scales in favour of a redo on Brexit. Or at least capture the support of people who still dream of that possibility. While the UK is still part of the continent, British citizens also have the right to travel freely, with medical rights intact, to other countries and get treatment. The British are no strangers to this idea (in fact, many British retirees end up in Spain and Greece for precisely this reason). Add cannabis to the mix, and current British policy looks even more out of step with reality and the wishes of the British people. Even the older, more conservative and “middle class” (read: American working if not blue-collar class) ones.
Local Production and Prohibition
And then of course, there is this irony. GW Pharmaceuticals, one of the oldest, cannabis companies in the world, is located in the UK. It even grows its own crops there, and has a special license from the British government to do so.
Worse, in this particular situation, it also is busy bringing several cannabinoid-based anti-epileptic drugs (for children and adults) to the market.
Why on earth would a home-grown company deny treatment to a British kid with epilepsy? And how could a government grant a license to a company to develop the plant for profit, but not a child who desperately needs the drug to live?
In a move that seems more than coincidence, GW Pharma also reported this week that their product Epidiolex (for the treatment of childhood epilepsy) is being considered by the European Medicines Agency, while a separate drug also bound for the epilepsy market called GWP42006 had just failed a Phase IIa trial for focal seizures.
The business press of course, has mostly reported that the only impact of this development so far of course, is that the company took a hit on share price.
It might do a bit more than that. Starting with legislative reform and ending with the sparking of significant home-grown (and legal) competition.
The combined impact of a failed trial in Eastern Europe by the only British company licensed and qualified to produce medicinal cannabinoids for any reason, and the plight of a British boy at home who needs precisely this kind of drug (and has so far been denied it), might in fact be the tinder match that lights political and market reform if not the development of a cannabis industry (finally) in Great Britain.
The Greek Parliament is finally expected to approve the medical use of cannabis – probably in the first weeks of February. The move is far from a surprise. Greek politicians announced last summer that this development was in the cards.
What is even more promising for the sector domestically, not to mention in terms of European reform, is the unflinching acceptance of this industry by the establishment and national politicians, and further as one with great economic development potential for a still-ailing economy.
A $2 Billion Injection of Capital
Deputy Agricultural Development Minister Yannis Tsironis (for one) has already publicly expressed his hope that the Greek medical program will attract beaucoups bucks from overseas.
However given the context in which this announcement has taken place, is this seriously a commitment to medical cannabis? Or is it an easy (if not slightly buzzy) way to attract foreign capital to a Mediterranean paradise still in dire need of a capital injection from any source it can get one?
Maybe it is a combination of both.
Many in Europe are forecasting that 2018 might finally be the light at the end of the tunnel for the Greek economy, which has been mired in austerity for the last decade. The Greek government is now in the process of moving forward with the final requirements of both labour reforms and receiving what is hoped to be the last bailout of its economy by foreign investors before it finally goes it alone by August 2018.
The Greek economy finally grew 1.5% last year. In 2018, in part thanks to the final package of reforms, the economy is expected to grow by 2.4%.
A foreign-financed medical cannabis business might be just what the economists have ordered. Especially if it is also open to visitors.
Medical Marijuana on Mykonos?
The development of a domestic medical cannabis industry in Greece is good news for not only medical reformers but also those who are looking for ways to expand the influence of the flower into the broader economy.
And Greece is one place where such ideas could easily and quickly take root in Europe.
Greece has long been the haven for a highly niche, international tourist audience. Tourism in general has also been on the uptick over the last two years again as particularly Europeans look for relatively cheaper beaches and sunshine. Over 30 million foreign tourists flocked to the country last summer – a number of people roughly three times the population of the country.
Again, mainstreamed medical cannabis would only add to the economic results in a way that is just as heady if not (economically) stimulating as a good sativa.
The idea of a medical tourism industry here, could also potentially create not only a Greek medical paradise, but potentially also have a growth impact on European cannabis programs too. Especially if reciprocal medical rights we
re also offered to EU citizens looking for an extended canna-friendly vacation.
Greek Cannabis Club Med?
Of all the countries in Europe, the Greek cannabis experiment offers the first real chance for a Canadian/American style cannabis industry to begin to flourish in Europe. In colder, more northern European countries, medical cannabis is still being treated as an expensive adjunct to traditional healthcare. And no matter how much citizens are moving towards acceptance of a recreational industry down the road, things are moving much slower in the rest of Europe. Germany, to put things in perspective, passed medical reform several months before the Greek decision to legalize medical use last summer. Yet now it appears that Greece might actually move into a full-fledged, domestically grown industry before its Teutonic neighbour to the north.
And further, unlike Germany, Greece may well decide to develop its “medical cannabis industry” as an adjunct to its tourist industry.
Sure, Holland and Spain led the way in this part of the world if not internationally. Neither country, however, needs new industries now in the same dire way, nor is emerging from a national, decade-long recession.
All the elements are here, in other words, for the Greeks to turn a new page in their very long and documented history, and do something a little different.
German media is now reporting that in the first 10 months of medical cannabis reform, over 13,000 applications for medical cannabis have been received by the largest three public health insurance companies. Most of the applications were received (and processed) by AOK who received 7,600 applications. Barmer received 3,200 applications. Krankenkassen Techniker (or TK as it is widely referred to here) received approximately 2,200 applications.
The reality is that most patients still rely on the black market.Between 62-64% of those who applied at the big three were also reimbursed. That means that there are already close to 10,000 patients, if not slightly more, covered under some kind of reimbursed cannabis scheme in Germany (where cannabis costs only $10 per month as a co-paid expense). When cannabis is not covered by health insurance, however, patients must pay out of pocket for the drug which can run as much as $3,000 for a single month’s supply.
This information is also being released, fascinatingly, not from the government, insurance companies or even advocacy groups. Instead it comes from a report produced by local media (the Rheinische Post in Dusseldorf). The media outlet surveyed the three top largest health insurance companies on the number of cannabis-as-medicine applications they have received since the cannabis law was reformed last year.
Home cultivation and recreational use, except in a few city trials now underway in places like Bremen, is still outlawed on a federal level. The new law also specifically prohibits patients from growing their own. And since the reform law passed last year, the prevailing story from patients is the difficulties they have had in not only finding a doctor willing to prescribe cannabis, but also getting their health insurers to reimburse them for huge out of pocket expenses that most of the chronically ill can never hope to afford.
The reality is that most patients still rely on the black market. It is still easier to get cannabis this way. And far cheaper – unless of course approved by health insurance.
What Does This Mean For The Bigger Picture?
Despite the fact that many in the mainstream German media are still highly sceptical of the medical efficacy of cannabis, the tide is turning here too, rather dramatically. According to recent polls, about 57% of the country is ready for recreational reform. That means in the last four to five years, the majority of public opinion has also shifted. It is also clear that medical cannabis cannot be as easily dismissed as it once was. Here or anywhere.
What makes this even more interesting is the impact this now moving situation will have on the debate, particularly domestically, but also internationally.
The first is that Germany clearly has a huge number of potential patients. Local advocates put the real number here north of 1 million for conditions the drug is commonly prescribed for in other places. At the present time, the only doctors who are allowed to prescribe the drug must also have a special license to dispense such restricted “narcotics” as cannabis is now classified auf Deutsch. And the only “on-label” condition for cannabis is still Multiple Sclerosis. That means that cancer, AIDS, chronic pain and movement disorder patients, along with those who manage to get approved for PTSD, ADD, depression and other “psychological” disorders only get the drug approved as a measure of “last resort.” In other words, after all other drugs fail. That is a high bar to pass.
The second, as a result, is that these numbers appear artificially low for another reason. The government claimed upon passage of the cannabis reform legislation last year that it expected only 10,000 new patients a year for the first few years (and before domestic cultivation began). As these results already prove, there are clearly far more patients who want the drug than those who can get it. There are also more patients whose doctors are willing to write prescriptions for the drug than are getting reimbursed by public health insurance.Bottom line? No matter how slow it is in getting started, the medical cannabis market has arrived in Germany. The numbers will only grow from here.
Third, this entire debate is now happening at a time when Germany is re-examining its own health insurance policies. While 90% of the country is on much cheaper public healthcare, 10% of the country, mostly the self-employed, foreigners and high earners, have private coverage. This is highly expensive, and ends up trapping even Germans in a system that is unaffordable as they age. In fact, the issue is a big one in Berlin right now as particularly the SPD is pushing Chancellor Merkel and the CDU to finally address a growing problem.
The law last year mandated that public health insurance must cover cannabis if prescribed under the right conditions. That means that private health insurers have to cover it too.
On the cannabis front specifically, what this may indicate, however, is that the public health insurers are being tasked to only approve a certain pre-identified number of patients nationally in the early part of the cannabis program. Especially as all of the medical cannabis in the country is still imported – and most of that is still coming from Canada.
What these numbers clearly show however, beyond all the caveats, is that demand is starting to pick up. Cannabis as medicine has not entirely caught on in the mainstream, although Germans are clearly interested in the idea. Especially given all the noise and news from abroad on this front.
It also means that no matter how “anaemic” these numbers may seem in early 2018, it is a respectable kick-off to what many in the industry view as one of the world’s most lucrative medical cannabis markets. Counting the approximately 1,000 patients who received medical cannabis before the law changed last year, it is safe to say that the market is now up and running.
Bottom line? No matter how slow it is in getting started, the medical cannabis market has arrived in Germany. The numbers will only grow from here.
How Does This Compare To Other Countries?
But how does the German patient ramp up compare to other countries after significant reform has been passed?
In Canada, the cannabis-as-medication discussion is clearly mainstream as the country prepares to launch its recreational program later this summer. The medical program began in 2014. The most recently released figures as of the beginning of January 2018, show that medical cannabis has clearly caught on. Health Canada’s most recent figures show that by September of last year, there were 235,621 registered cannabis patients in the country. Significantly, this is also up dramatically from 174,503 registered patients as of just April 2017. The previous year, the total number of cannabis patients literally tripled in 2016. To put this in “historical perspective,” as of Q1 2015, about a year into the new medical law in Canada, there were “only” 23,930 patients (or about twice the number in Germany as of now). This growth is all the more impressive when one considers that there is no mandate for insurance coverage of the drug in Canada. That said, cannabis is far cheaper in Canada. It is of course covered domestically. Plus the licensed producers can mail order it directly to patients.
Israel’s path to medical cannabis access has been slower off the ground in terms of overall numbers, but it is has still dramatically expanded over the past decade too. In 2012, there were about 10,000 cannabis patients in Israel. That number more than doubled by 2016 to over 23,000 patients. This will continue to increase too. Israel’s medical cannabis is covered under national health insurance and patients must pay about $100 a month for their meds.
What Is The Official German Government Response To This News?
Marlene Mortler, German drug commissioner for the federal government and affiliated with the CSU, has issued comments that seem to be supportive of the continued program in Germany. “The growing number of permits shows how important it was to launch this law last year,” she said, while warning that medical cannabis is not a panacea.
Europe saw big developments on the cannabis front all year. This includes country-by-country developments that include legalization of medical use and even plans to begin domestic production, no matter how delayed such plans have turned out to be.
By far the most interesting market developments were in Germany all year. The Teutonic state has entered some interesting territory – even if its potential is still in the development rather than rollout status.
Elsewhere, however, medical acceptance is clearly starting to bloom across the continent in a way that is more reminiscent of American state development than what is about to happen in Canada.
One of the most interesting aspects of European reform however, that is in marked difference to what has happened in the U.S., is that grow facilities are being slowly established with federal authorization, even before further reform comes (see Turkey, Slovenia, Germany and even Denmark).
How reform will continue to roll out and shape the discussion however, is still a matter very much left up to individual European states. Cannabis legalization may become the first uniting issue of the new Deutsch ruling parliamentary coalition, whatever that is. In Spain, the cannabis question might yet be a play in simmering separatist tensions. Across the continent, legislatures are, for the first time in two generations, reconsidering what cannabis is, how it should be used, and what the penalties should be for those who use the drug either medicinally or recreationally.
Change is still all over the map. And it is still very, very slow.
The country’s federal legislators voted unanimously to mandate medical coverage of cannabis under public health insurance (which covers 90% of the population) on January 19th. Since then, however, forward movement has been stymied by a combination of forces and politics. While the legislation became law in March and the government established a cannabis agency, other developments have not been so clear cut. Yes, import licenses are being issued. And yes, there is a pending tender bid. However announcements of the finalists have been delayed since August due to lawsuits over qualifications of the growers, among other things. The new German government (whatever it will be) plus apparent CETA (EU-Canada Comprehensive Economic and Trade Agreement)-related complications have all added to the drama. That said, when the cannabis opera moves into its next act, as of probably early next year, expect to see domestic medical grow go forward. Importing medical supplies, even from across the continent (which is what is happening now) is ludicrously expensive. Rumours are already flying out of Berlin that further cannabis reform is one of the few things that all parties can agree to as a new government forms.
Sadly, the biggest cannabis-related “development” this year was the decision by all major health insurers to stop covering the drug, just as the German government changed its mind about the issue. Greater regulation of coffee shop grows coupled with this lack of insurance coverage means that patients are being forced into a coffee shop culture which is also commoditizing and commercializing into a high-volume affair, particularly in Amsterdam. While this might just be the new face of an old business, the laid back “coffee shop” culture of yore is an endangered species.
Catalonian independence made headlines globally this year. So did the associated bid for other freedoms of a cannabis sort – particularly in Barcelona. Club grows were set to become more regulated as of this summer. However the massive Catalonian bid for independence has further muddied the waters. Given the fact that cannabis reform appears to be at the forefront of finding political compromise elsewhere in Germany, perhaps givebacks about taxes for this industry might be one way to temper down the still-raging separatist forces afoot.
The Polish government surprised everyone this fall, and legalized the drug for medical purposes (at least in theory) in November. What this actually means for patients is another story. There are no plans to cultivate on the radar. Patients under the new law are allowed to travel to other countries to seek their medical cannabis. How they might afford it is another question. Not to mention how they will escape prosecution from personal importation if checked at a border.
Polish pharmacists will however be trained on how to make medicaments from imported cannabis. They will have to be registered with the Office for the Registration of Medical Products. This means that pharmacists must be pre-registered with the government – in a move much like the early days of the Israeli medical program. The medicine is expected to cost about $460 a month. How well this will work in serving the country’s more than 300,000 already eligible patients is another story.
Cannabis economists have long said that what the Greeks really need to heal their economy is a vibrant cannabis injection. And as of mid-November early investors in the nascent market had already staked close to $2 billion in cultivation opportunities. Senior ministers in the government have also publicly backed plans to move Greece into a strategic position to claim a piece of a global cannabis market estimated to reach 200 billion dollars a year by the end of the next decade. It means jobs. It means capital infusions. Exactly, in other words, what the Greek economy desperately needs. Expect to see further formalization of the grow program here in 2018 for sure.
It appears that quite a few countries in Europe are pushing for real cannabis reform by the end of the year, and this little EU country is joining the list. With a unanimous agreement in Parliament already to change the country’s drug policy, Lithuania’s legislators could vote to legalize the drug on December 12th of this year. All signs look promising.
MCG, an Australian-based company, made news in the fall by announcing a new cannabinoid extraction facility in the country, on track for completion this year. The company also ramped up domestic production operations in August. Real reform here still has a long way to go. However with domestic production underway, greater medical use looks promising.
The country signed a production agreement to open a new facility in Odense, the country’s third largest city with Spektrum Cannabis, the medical brand of one of the largest Canadian producers (Canopy Cannabis) now seeking a foothold in Europe late this fall. What this means for ongoing reform in Denmark is also positive. The company will import cannabis via Spektrum Denmark until all the necessary approvals are ironed out for cultivation.
While “reform” here is less of an issue than it is elsewhere (since all drugs are decriminalized), Portugal might yet play an interesting role in cross-European legalization. Tilray, another large Canadian-American firm with interests in Europe, announced the construction of a large medical cannabis facility in the country earlier this year. That plant could easily ship medical supplies across Europe as new countries legalize but do not implement grow facilities.
Munich, Germany- In a darkened movie studio on the east end of town, the Digital Insurance Agenda or DIA, the largest insurtech conference in the world, kicked off its annual event in mid-November. The sold-out event attracted about 1,000 top insurance executives from 40 countries and all six continents.
CannabisIndustryJournal attended from the perspective of investigating the overall status of digitalization in the industry. However, there were a couple of things we were on the hunt for. The first was to see how and where blockchain has begun to penetrate the industry. This revolutionary processing and identification layer of digital communications is coming – and fast – to the insurance industry everywhere.
We were also there of course to see if cannabis was anywhere on the agenda. Digitized or not.
By way of disclosure, I am also a high tech entrepreneur with my own insurtech, blockchain-based start-up that we are in the process of launching. MedPayRx is intended to be the first insurance product that will help patients access their meds facing nothing but their co-pay and help insurers automate the approvals process for all prescription drugs and medical devices.
By definition, in Germany, this includes medical cannabis.
Ultimately, our mission is to take the paper and the pain of all reimbursement out of the prescription process. At present, as anyone with a chronic condition knows, many medications and medical devices must be paid for out of pocket first and then reimbursed via a claims process that is paper-based, laborious and expensive. This is not a model that works for anyone. Certainly not poor and chronically ill patients who face this process at least monthly. And certainly not insurers who are now facing higher drug costs if not more claims reimbursements for the same from an aging population.
In a country like Germany where 90% of the population is covered by public health insurance, the situation also poses quandaries of a kind that are rocking the fundamental concept of inclusive public healthcare.
The Impact of Digitalization On The Insurance Industry
As one insurance executive and speaker mentioned from the stage during DIA, there are few industries that are more universally despised than insurance in general. And few verticals where the existing mantra is “you cannot do it worse.” The insurance industry is well aware of that. Further, for all insurances that are not “mandatory” the competition is fierce for consumers’ bucks. Particularly in places like Europe where insurance is also seen as a kind of savings scheme.
If you are a private insurer, of any kind, or offering services to both end consumers and B2B services, you are out of the game if you are not now thinking how to streamline and upgrade all aspects of your business in the digital era. There are many start-ups now tackling what is euphemistically called “cloud2cloud” integrations.
What does that mean?
According to DIA co-founders Reggy de Feniks and Roger Peverelli, the influence of tech in general is here to stay and is now driving widespread innovation across the industry. “The DIA line-up and the massive response among the audience show that insurtech is now mainstream,” says de Feniks. “This edition clearly showed the…ever growing attention for artificial intelligence, machine learning and other shapes of advanced analytics.”
“Platform thinking, thinking beyond insurance and creating new insurtech enabled services will be the next challenge for insurers,” added Peverelli.
Subtext? Insurers want your data. They want to use tech to analyse and understand it. The technology is here. But is the regulation? Specifically, in an industry that wants to know everything about you, how is privacy understood and implemented with revolutionary tech?
A Cloud-Based Future
Paper is rapidly becoming an old-fashioned concept in insurance, much like it has in banking. And like banking, insurance has a strong “financial” side to it. Germans, for example, tend to use insurance policies as retirement accounts, (the idea of a 401K is almost unheard of here). And by far, the most dynamic and digitalized part of the industry tends to be in areas unrelated to healthcare.
Some of the most interesting start-ups at DIA were actually weather-based.
The challenges of these types of insurtechs of convincing both regulators and the industry that such services are not only feasible but needed, pale in comparison however, to the challenge now facing all public health insurers.
And while they were certainly present at DIA, this industry segment was underrepresented at the November gathering. There is a reason for this. The real threat to consumer medical privacy is only growing, not receding in an era where data can be seamlessly transferred globally and digitally.
For that reason, blockchain has many uses and applications in this part of the vertical.
MedPayRx – even as a pre-seed start-up, was not, even this year, the only blockchain-based service we found in attendance at DIA. Next year look for even more.
Blockchain might be the next new “buzzy” tech, but in the insurance industry, there is a real reason for it.
What Was The Response To A Cannabis-Themed “Insurtech?”
As readers in the United States know, health insurance and cannabis is a loaded subject. And while insurance services are beginning to be available as high-risk commercial services for the industry, inclusive health insurance is still off the table because of the lack of federal reform.
Other places, however, the issue is taking a fascinating turn. And in Germany, right now, the situation so far has shaped up to be cannabis vs. public health insurance. It is a mainstreaming trial drug in other words. For that reason, beyond any lingering but rapidly fading stigma, it is a fertile time to be in the middle of it, with a tech solution.
It is also perfect timing from the digitalization and privacy perspective. Unlike the U.S., Germany in particular has tended to keep its insurance services, certainly on the health front, undigitalized because of privacy concerns. That is no longer feasible from a cost perspective. It is also increasingly one that has to be dealt with from a tech and regulatory one.
Why Is CannabisIndustryJournal At DIA?
My nametag identifying me as both “media” and of a certain green source, was the source of endless discussion with everyone I talked to. Many attendees were extremely curious about why a cannabis industry publication was at an insurance conference. And most people, certainly the non-Germans in attendance, were unaware that per federal law, cannabis is now, at least in theory, covered by public health insurance here.
Medical insurance that treats cannabis just like “any other drug” is a discussion at the forefront of the medical community in Europe. Even if not at health insurance industry events like DIA. Yet. In the last year, in fact, Dutch insurers have started refusing to cover the drug as the German government moved forward on mandating coverage.
In other places, like Australia, Israel and Canada, the conversation is also proceeding, albeit slowly within the context of public health coverage.
However compliance and tracking of the drug itself, not to mention the need for research on how cannabis interacts with other drugs mandates a consideration of how digital health records, privacy and tracking can exist in the same conversation. And further, can be accessed by the insurance industry, the government and policy makers as reform moves into its 2.0 iteration – namely federal recognition of the drug as a legitimate medicine.
We at MedPayRx think we have one answer. And next year, we hope to present from the stage as we continue to move forward with engaging the insurance industry here on all such fronts. Not to mention helping move the conversation forward in other places. And of course, launching services.
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