Tag Archives: certification

Alcaliber Spinoff Linneo Health Gets Greenhouse GMP Certification In Spain

By Marguerite Arnold
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As the industry faces what is undoubtedly a watershed moment for the international cannabis vertical, a new Spanish firm steps into the market with its own EU GMP certification license. Linneo Health is also helmed by the ever eloquent and highly experienced Jose Antonio de la Puente – a tall drink of water with a conscience, a brain and an admirable mission statement.

As Cannabis Industry Journal broke in our last story, a lack of international standards in Europe have been on trial of late. The same day that the CannTrust scandal began to blow in Canada and as Danish authorities rang global alerts, the only qualified packager in Holland was issued a new EU GMP cert. That is a government decision, not a commercial one.

This also implies, at minimum, government lack of coordination and agreement on EU GMP cert even between European nations, for a nascent industry while also trying to avoid the thorny issue of patient home grow. See also the trials and travails of the erstwhile German cultivation bid and its reconstituted Frankenstein-esque bigger if younger sister. In fact, this contretemps is almost certainly involved if not indirectly to blame.

Not All Is Entirely Rosy On Cannabis Europe’s Eastern Front

Almost simultaneously to Linneo Health’s announcement, however, the news came that in Poland, authorities had suspended the pending product registration process. Will this be on hold until after the October election?

In this environment it is almost impossible to know.

Here is one thing to consider. These almost simultaneous developments in Spain and Poland and the newest announcement about further certification of the Dutch recreational system under a new pending “recreational trial” are almost directly related.

That said, even such political maneuverings are not new – and far from limited to any single company. Both Germany and Poland have been wracked by reform stuttered by short term gain and market entry strategies executed by most of the biggest players in the room. Aurora, for example, announced their first import into Poland the same day the Polish government changed the law last fall. Aurora uses Germany as its breakpoint distribution center for Europe.

A Stamp of Authenticity That Is Sorely Needed

Beyond the pharma and market entry politics, however, this Alcaliber-helmed project creates a ring of authority to the same that creates at least one cannabis brand the European medical community can see the certification for.

For now at least, certainly among the ranks of the upper echelons of the international cannabis industry, there must surely be a sigh of relief.

EU GMP certifications (in other words, the authorization to produce product bound for a medical, pharma market) do not happen overnight. On the European front, this is surely at least a step in the right direction for an industry embattled by scandals, particularly of the securities, production, certification and accounting kind right now.

In this case, however, it is also clear that no matter the egregious oversteps and potentially illegal and certainly dubious behaviour of some members of the industry, there are also clearly those within it, and at high levels, who have tried to do the right thing. And further, from the beginning of the nascent industry here as of 2015.

Who Is Alcaliber?

Alcaliber is one of the world’s largest opioid manufacturers. Unlike American counterparts, the company decided several years ago to invest in and back ideas of the opioid-to-cannabinoid therapy model. Linneo Health is a 60% subsidiary of Alcaliber and 40% owned by a Spanish family office called Torreal, S.A.

This is, as a result, one of the most important GMP licenses in Europe at the moment if not the world. It means that within a pharmaceutical environment, the first widespread research and production of plants and therapies for those suffering from both chronic pain, plus neurological and oncological conditions that cause or are related to the same, will be put on a fast track long in the offing. Certainly in Europe.

And that for one, is a positive development that will have widespread implications elsewhere. Particularly given the news that the opioid epidemic in the United States finally has a name, and culpable parties.

What Else Is Unusual About This Project?

GMP certification is a vastly misunderstood concept at the moment. It is also a highly thorny one because of a still standardizing set of agreements. The regulatory environment is in place, in other words, but there are many, many gaps, as well as shifting rules and underlying treaties.

GMPHowever, on top of this, there is also an amazing lack of innovation in interpretation, in part because of many misadvised consultants who are actually seeking to “save” production costs for their clients, or because they do not know any better. Or because producers are scared of doing the wrong thing.

The new project in Spain is unusual because it is a greenhouse grow that got EU GMP cert – although look for more of this in the future. It means that with careful, standardized, pharma production, not all regulated cannabis grows, even for the medical market, have to use huge amounts of energy in repurposed post-industrial developments. It is also certainly cleaner than growing outside. And, when done right, saves huge amounts of water.

Cleantech, in other words, has finally hit the cannabis industry in Europe. As well as a pharmaceutical company invested in the cannabinoid treatment of (at least) chronic pain.

That is an overdue and hugely positive development. No matter what else can be said for shenanigans engulfing the rest of the industry at the moment.

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Does Germany Have a Gray Market Problem?

By Marguerite Arnold
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Tilray just did something very interesting. In addition to announcing that it was shipping product to German distributor Cannamedical via its Portuguese facility, it also announced that it had begun outdoor cultivation.

Groovy.tilray-logo

Even more intriguing: the company is claiming that somehow, via its proprietary technology (apparently), this kind of crop will be legit for distribution within the EU medical system.

There is only one problem with this. Outdoor growing does not sound remotely GMP-certified.

Here is the next bit of exciting news. Tilray, apparently, is not the only large Canadian cannabis company now operating in Europe that appears to be trying to get around GMP certifications for medical market penetration. Or appear oblivious to the distinctions in the international (and certainly European market).

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Photo: Ian McWilliams, Flickr

And things are a bit smelly on that front, not only in Denmark post CannTrust, but in truth even in Germany, the supposed “Fort Knox” of regulatory consumer and pharmaceutical standards.

In fact, at least according to insiders, there is apparently quite a bit of gray market product sloshing around in the Teutonic medical market. Even though so far, at least not publicly punished for the same, nobody has been caught. Or at least publically reprimanded.

And who is on the hot seat at least according to most of the licensed if not just pre-licensed indie producers and distributors who were contacted for this story? Sure, there are dark horse “start-up” indie violators, but they are not the only problem. Many who talked to CIJ named big public Canadian companies too. And potentially Bedrocan beyond that.

Who Is Who And What Is What?

Part of the problem, beyond any kind of deliberate flouting of regulations on the part of many companies who are at least trying to understand them, is that global standards are different. “GMP certifications” of every country, even within a region like Europe, are in fact, not uniform. That is why, for example, the new EU-US MRA agreement had to be signed first regionally and then on a state-by-state level across the EU.

Beyond Germany of course, there are other problems that are coming to the fore.In the medical cannabis space, in particular, right now, that is causing problems simply because many with pharma experience are not hip to the many risks in the cannabis industry itself. On the Canadian, Australian and American side, there is also a lot of bad advice, in particular, coming from consultants who should know better.

To be properly EU and German GMP-certified, one of the required steps is to have German inspectors walk your production floor. It is also not good enough to have “pesticide-free” or national organic certification at the crop cultivation site, and add GMP cert at time of “processing.” That piece of misadvise has been showing up not only in Canada, but Australia too. And creates a nasty reality if not expensive retooling upon entering the legitimate market in Europe, for starters.

These Issues Affect Everyone In The Industry

German Parliament Building

In an environment where ex-im is the name of the game, and even the big guys are short of product, compliance is getting granular as smaller players step up to the plate – and many if not most hopeful Canadian producers (in particular) now looking to Europe for sales are not (yet) up to speed.

A big piece of the blame also lies in the lack of proper administration at the federal and state level too – even auf Deutschland. To get a distribution license, a company must actually get three licenses, although there are plenty in the market right now who begin to describe themselves as “distributors” with less than the required certs.

The lack of coordination and communication, including which certs to accept as equivalent and from where is creating a market where those who know how to game the system are.

For example, several people who contacted CIJ, claimed that uncertified product was making its way into Germany via Central and Latin America, through Canada, picking up “GMP cert” along the way. In other words, not actually GMP-certified but labelled fraudulently to make it appear that way.

The same claims were also made by those with on-the-ground industry knowledge in South Africa (Lesotho).

Beyond Germany of course, there are other problems that are coming to the fore. As CIJ recently learned, a firm authorized by the Dutch government to provide cannabis packaging, including for exports, was not GMP certified until July 2019 – meaning that all product they shipped internationally even within Europe before that date potentially has labelling issues. Cue domestic importers. If not regulators.

Grey Market Product Is Making Its Way In Through Official Channels

For those who are taking the time to actually get through the legal registration and licensing process, it is infuriating to see others who are apparently fairly flagrantly buying market position but are in no position to fulfil such obligations. It is even more infuriating for those who intend to meet the requirements of the regulations to realize that the vast amounts spent in consulting fees was actually money paid for inaccurate information.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.German distributors are so aware of the problem that they are starting to offer gap analysis and specific consulting services to help their import partners actually get compliant.

Government agencies also might be aware of the problems, but they have been reluctant to talk about the same. CIJ contacted both BfArM and the local Länderauthorities to ask about the outdoor grow in Portugal and the lack of GMP cert for a Dutch packager. After multiple run-arounds, including sending this reporter on a wild rabbit chase of federal and state agencies (who all directed us back to BfArm) and an implication by the press officer at BfArM that the foreign press was not used to talking to multiple sources, CIJ was redirected back to state authorities with a few more instructions on which bureau to contact. The state bureau (in Berlin) did not return comments to questions asked by email.

Here is the bottom line that CannTrust has helped expose this summer: the entire global cannabis industry is trying hard to legitimize. Not every company is shady, and there are many who are entering it now who are playing by the rules. But those who are hoping to exploit loopholes (including “name” if not “public” companies) are also clearly in the room.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.


Editors Note: This is a developing story. CIJ has been contacted by the Dutch Cannabis Agency as it investigates what appears to be an intra-government debate over qualification of EU-GMP cert, acceptance of audit documents and other matters within European countries that appear to have caused much of this confusion with regards to Bedrocan and its packager Fagron. Many reputable, licensed sources within the industry spoke to us on deep background, out of concern that they too would be held liable. That said, so far, nobody can explain why the only licensed Dutch packager, was issued a new EU GMP cert document on July 9, 2019, the same day that Danish authorities halted CannTrust product entering Denmark. That is a government decision. Further it is also still unclear why rival cannabis companies would attempt to contact the cannabis media with a certain (and misguided) spin on this situation.

CannTrust Meltdown Indicative Of Summer Of Scandal To Come

By Marguerite Arnold
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While you may not have heard of CannTrust Holdings so far, that is now about to change. A summer spectacle of double dealing and corporate greed has put this Canadian cannabis company on the global map.

Unfortunately, the current meltdown underway is indicative of more to come.

A Summary Of The Story So Far

CannTrust, a company which serves 72,000 Canadian patients and got into the game early, decided to do what it saw other companies doing all around them. That covers a lot of ground (good and bad at this point). Regardless, the most relevant recent twist to the saga came when the company hired a new CEO, Peter Aceto last October.

Aceto however, along with the now also fired co-founder and chair of the board Eric Paul, decided to continue growing and harvesting unlicensed product. Worse, this occurred while boasting in public of their productivity gains on the way to securing a hefty investment of capital this spring. $170 million. The grow rooms finally got their certification in April.

What is even more embarrassing however, is that this was a round led by the much-vaunted investors the industry has been courting assiduously for the past several years. Specifically, in this case? Institutional banks like Bank of America, Merrill Lynch, Citigroup, Credit Suisse Securities and RBC Capital Markets.

But that is “just” the North American hemisphere. The rather unfortunately named CannTrust (certainly at this point) also had a European footprint – notably Denmark. Unlicensed cannabis ended up there too, of course. Stenocare A/S, the company at the receiving end of the same, reported receipt of product from the unlicensed rooms on July 4.

As far as such things go, however, you have to give it to CannTrust company executives. In terms of setting standards if not benchmarks and “records”, they certainly seemed to have set a few, although probably not the ones they aspired to. If not, with certainty, their investors.

A Surprise Or Inevitability?

That said, for many who have been sounding warnings for at least a year, the 2019 Summer of Canadian Cannascandal is certainly starting to confirm what many have been saying for quite some time. This is not the first time a securities exchange, for one, has sounded the alarm. Deutsche Börse delisted the entire North American public cannabis industry last summer briefly. Then they revised their policy, reluctantly, after Luxembourg changed its stance on medical use. That said, they are still watching with a standing policy of bouncing any company that runs afoul of their rules.

The problems, issues and more bubbling at the center of this cannameltdown, in other words, are not limited to just one company or country.

And everyone knows it.

Accounting For Past Mistakes

For those who are counting, the value of all of that illegally grown CannTrust product is not insignificant. Estimates are floating in the CA$50-70 million range. The problem is, of course, nobody is sure what numbers to rely on. CannTrust employees knowingly provided inaccurate information to the new CEO if not regulatory body until a whistle-blower provided a few more details.

That said, for all of the hullabaloo, one thing this story also does is point a bright spotlight on the lax enforcement of even this pretty easy-to-understand regulation.

The question, however is, if CannTrust thought it could get away with this kind of blatent flouting of the rules, if not lax oversight, are there any other companies who might have also done similiar things?

After all, even the pesticide scandal of 2016 did not occur at just one company either.

Where Are The Proceedings?

This is a rolling story, which began to break at the beginning of last month when Health Canada issued a non-compliance order to CannTrust and impounded 5,200 kg of dried cannabis that was apparently grown in unlicensed grow rooms on July 3.

There have already been some jaw dropping revelations so far (beyond the executive decision to even go down this road in the first place) no matter how attractive pimping numbers was. Starting with things like fake walls being erected to hide the grow. And then of course pictures that have been all over social media of late, of the now departed CEO Aceto being photographed directly in front of said unlicensed rooms too.

As a result, the drama has continued to unfold in a highly predictable way.

By August 1, CannTrust Holdings, a Canadian cannabis company listed on both the New York and Toronto stock exchanges, was facing a “quasi-criminal investigation” by the Canadian Joint Serious Offenses Team. This is a coalition of law enforcement agencies including the Ontario Securities Commission, the Royal Canadian Mounted Police Financial Crimes Unit, and the Ontario Provincial Police Anti-Rackets Branch.

But CannTrust’s issues don’t end there. This is an international story that is just beginning. Government regulators in Europe if not elsewhere are paying attention.So are shareholders, and their lawyers.

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Why International Trade Agreements Are Shaping The Cannabis Industry

By Marguerite Arnold
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If you have wondered over the past several years, why the big Canadian companies (in particular) are following the global strategy they are, there is actually a fairly simple answer: Newly implementing trade agreements, particularly between Europe and North America.

More specifically, they are highly technical trade agreements that are also called Mutual Recognition Agreements, (or MRAs).

In fact, look at the schedule of the MRA agreements signed between the U.S. and individual EU countries over the last several years, and it also looks like a map of the countries that have not only legalized at least medical cannabis, but where the big Canadian companies (in particular) have begun to establish operations outside of their home country.

But what is going on is actually more than just CETA-related and also will affect cannabis firms south of the Canadian-U.S. border.

All of these swirling currents are also why the most recent MRA to come into full force in July this year, between the U.S. and Europe, is so interesting from the cannabis perspective. Even before federal reform in the U.S. If this sounds like a confusing disconnect, read on.

What Are MRAs?

MRAs are actually a form of highly specialized trade agreement that allow trading countries to be certain that the pharmaceuticals they purchase from abroad are equivalent to what is produced at home. This includes not only ingredients but processing procedures, production plant hygiene, testing, labeling and more.

When it comes to the  EU-US MRA agreement, this means that individual states of the EU can now recognize the American Food and Drug Administration (or FDA) as an effective federal regulator of American pharmaceutical production that is equal to the procedures in Europe. US GMP standards, in other words, will be recognized as equal to those of EU states.

This will now also, by definition, include GMP-certified medical cannabis formulations.

What is so intriguing, however, is how this development will actually place certain American (and Canadian) manufacturers in a first place position to import cannabis into Europe ahead of the rest of the American cannabis industry.

What Are Mutual Recognition Agreements All About?

One of the most important quality and consumer safety aspects of establishing a clean supply chain is tied up in the concept of GMPs (Good Manufacturing Practices). These are procedures, established by compliant producers of pharmaceuticals, to ensure seed (or source) to sale reliability of the medication they make. In the cannabis industry, particularly in the advent of Canadian-European transatlantic trade in cannabis, this has been the first high hurdle to accept and integrate on the Canadian side.

GMPIf European countries recognize a country’s GMP certifications are equivalent to its own, in other words, and cannabis is legal for export, a country can enter the international cannabis market without facing bans, in-country inspections and the like. In the interim, imported products still have to be batch tested until the agreements are fully accepted and operational.

Israel, for example, already had an MRA with the EU, and medical cannabis is legal in the country. However, Israel was prevented from selling cannabis abroad until a legislative change domestically, passed on Christmas Day.

That is why the MRA agreement between the US and EU with Canadian companies in the middle also put both Israeli and U.S. firms at an extreme disadvantage in comparison. Both in entering the market in the first place, and of course associated discussions, like the German tender bid. That is now changing- and as of this year.

A Specialized Map Of Global Medical Cannabis Exporters

Ironically, what the new US-EU MRA could also well do is create a channel for pharmaceutical cannabis from the United States to Europe (certainly on the hemp and CBD front) just as Israel is expected to enter the international cannabis export industry (later this summer or fall). It could well be also, particularly given the Trump Administration’s tendency to want to not only “put America first” if not pull off “a better deal” in general and about everything, that this is why President Trump offered the delay to Israel’s president Benjamin Netanyahu in the first place.

Regardless of the international individual developments and subtleties however, what is very clear that from the time the first bid stalled in Germany in the summer of 2017 until now, the U.S.-EU MRA has been in the room even if not named specifically as a driver.

For example, the FDA confirmed the capability of Poland and Slovenia to carry out GMP inspections in February of 2019.  It was only last fall that Aurora pulled off its licensing news in the former (on the same day licensing reform was announced by the government). Denmark was recognized in November of last year during the first year of its “medical cannabis pilot progam.” Greece was recognized in March 2018. Italy, Malta, Spain and the UK came online in November of 2017.

Overlay this timetable with a map of cannabis reform (and beyond that, cannabis production) and the logic starts to look very clear.

The upshot, in other words, is that while cannabis still may be “stigmatized” if not still “illegal” in many parts of the world, more generalized, newly negotiated and implementing, specialized global trade agreements between the US, Europe and Canada in particular have been driving the development of certain segments of the cannabis industry globally and since about 2013.

The Biggest News?

As of this year, as a result, expect at least from the GMP-certified front at least, that such international trade will also include medical cannabis from the U.S.

Want an example of the same? First on that list if not early in the game will now undoubtedly be Canadian-based Canopy Growth, with Acreage on board, headquartered in New York.

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How Germany Gets Its Cannabis

By Marguerite Arnold
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The German cannabis cultivation bid may be mostly done and dusted (although the last four lots are now up for legal challenge) but the drama is only intensifying on the ground in Germany. Namely, where is the cannabis being consumed on the ground now actually coming from?

For the past several years (in fact since 2016 when a Frankfurt-based start-up called Medcann imported the first Canadian medical cannabis into the German market in partnership with Canopy Growth), the conventional wisdom has been that Holland and Canada were the only two countries allowed to import medical cannabis into the country.

Canopy_Growth_Corporation_logoAs is usually the case in the cannabis industry, when it comes to such things, there were also multiple and highly creative explanations about this strange state of affairs that sounded oddly exotic enough to be plausible. This is after all, the international cannabis business.

These explanations also usually referenced conventional industry “lore” including such tall tales as these two countries were not signatories to an international drug treaty (not true), to being European (nope) or even a member of the EU (also completely false).

Yet there was always something strange with such urban legends – perpetuated by insiders across the German industry. Starting with a deliberate vagueness about details. Especially as in the summer of 2017 when Tilray announced grow facilities in Portugal, and by the end of it, Canopy was moving into Spain, and later by early 2018 Denmark and more. Italybegan to appear on the radar of multiple big Canadian companies. Clearly all these big companies seemed to know something that those outside did not. See Greece. Not to mention the teeth-gnashing of the Israelis– repeatedly shut out of the German market by not being allowed to export by their own government until Christmas Day, 2018.

The mystery deepened in March in fact, as a furore rocked the German-based cannabis industry over the last weeks. Farmako, a new, Frankfurt-based distributor, not only announced that it was importing 50 tonnes of cannabis into the country– and from Poland (where production of such bulk has not even been seeded) – but then gave additional details on a Bloomberg appearance that appeared to indicate that in fact the medical cannabis they were already selling (sourced from other places) had come from Macedonia. 

Certification, and most certainly paperwork are the name of the gameIn fact, no such transfer of cannabis had occurred from the Macedonian side (yet), although the firm in question at the other end of the deal was subjected to considerable harassment in the German canna-specialty press in the meantime.

The news, that occurred right at a time when Tilray is clearly training pharmacists for the German market, the first bid is concluding, Greece issues even more cultivation licenses, Canadian companies are clearing still stepping up their production game, and South Africa is also getting into the formal licensing act, with all sorts of interesting things afoot in Uruguay, also set off what appears to be an official investigation of the firms involved at the governmental level.

Insiders are tight lipped and nobody is willing to talk on record. However, the distribution firm, Farmako, has subsequently reported that in the month of March, they became the top selling cannabis specialty distributor in Germany. And since they are not out of business, it is also clear that while their PR may have been a little premature if not easily misunderstood, the broader message is very obvious.

What is also very clear at this point, in other words, is that the German door for cannabis and the international industry appears to be opening to product sourced from many places. Further by extension, the German government is in the process of recognizing foreign GMP certification processes from multiple countries all over the world as being equal to its own – at least on the cannabis front.

In fact, this has been going on relatively quietly for the past six months or so.

What Are The Standards, Certifications, and Qualifications?

A press release from January of this year, issued from an Australian firm called MCA, announced they had accepted the first letter of intent to ship to a German firm (in 2020). The company is currently accepting pre-orders as it finishes construction and achieves EU GMP certification. The same (female founded) firm was also present at the ICBC in Berlin this year in March, reporting that German demand from a universe of local distributors was already greater than they could fill. The news that their first sale went to German firm Lexamed, the controversial German wheelchair distributor who helped bring down the first German bid, was also largely unremarked upon at the time by most of the industry press and in fact, ever since.

GMPIn truth, it appears that the countries and companies that have the right to import to Germany must first have their own national GMP certification recognized as being equal to German standards – or a so-called Mutual Recognition Agreement (or MRA) must exist between the importer and exporter nations. It still means that to be really EU-GMP compliant, inspectors have to walk your cultivation floors. But first your country has to have the MRA. And that is a matter for lawyers and regulators to decide.

In the Australian case, the GMP equivalence for cannabis production apparently became reality within the last six months although no one is giving exact dates. In the case of Macedonia, this is pending, with German inspectors now apparently scheduled to begin inspecting domestic cultivation facilities within the next month to six weeks.

The biggest news, of course, which makes even more sense on the heels of Canopy’s latest “record breaking” U.S. acquisition, is that the EU and the U.S. will enter into an MRA in July that was finally agreed to in February of this year. This will also mean that cannabis “medicines” potentially even beyond CBD, produced via U.S. GMP processes, will be allowed to enter Europe if not Germany in the near future – and from the U.S. for the first time. Ahead of federal legalization in the U.S.

It also means that Israeli and American firms will be allowed to enter the European and thus German market for the first time (on the ground with product) by at latest, the third quarter of this year.

Caused By The Bid….and Likely Shorter Term Outcomes

What the events of the last several weeks make clear is that the bid is not only insufficient for demand, but the authorities are officially, if quietly recognizing the same. There are already rumours about the next cultivation tenders in Germany, and there is a high likelihood that other countries (see Poland in particular) may also follow suit shortly.

Further, the difficulties in making sure that not only countries but the companies based in the same remain compliant with EU and further German sanctified EU- GMP processes (for one) is likely to be an issue that continues to bubble. Why? It is a problem already in the broader pharmaceutical market here.

The Plusses and Minuses of The News

The first thing that is also obvious is that even Wayland cannot source the entire German market with the product it has begun to grow here no matter who ends up with the last four cultivation licenses this time around. Further, that the other winning bid firms (Aphria and Aurora as known at this point) without cultivation on the ground, are sourcing from somewhere that is also probably at this point, not even Canada. No matter how much expansion is going on in Canada, in other words, what is now entering the German market may bear a Canadian brand but could just have easily been sourced from almost anywhere in the world.

That also means that enterprising firms (see Australian MCA) can skip the Canadian introduction to the German market and sell directly to local producers before they even have crops on the ground, as well as the burgeoning German cannabis distributors across the country.

For such firms now wanting to enter the market, however, it is not all clear sailing. The events of the last few weeks clearly show that the government is watching, including reading English language industry press, and willing to pursue any firms it deems are breaking the rules on both sides of national borders.

Certification, and most certainly paperwork are the name of the game, as well as greater accuracy in company intentions (even if in the near term).


Disclaimer: Nysk, the Macedonian firm referred to in this story, is a sponsor of the MedPayRx pilot to market program

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German Cultivation Bid Appears To Have Three Finalists

By Marguerite Arnold
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The Frankfurt-based newspaper Handelsblatt Zeitung is reporting that three Canadian firms (actually two Canadians and a German start-up cofounded by another Canadian company) have now been selected as the first cannabis cultivation bid finalists, however insiders on the ground say that this is not necessarily a final decision.

A Berlin-based subsidiary of Wayland in Germany called Demecan, along with Aphria and Aurora have all been named as bid finalists pending a normal review period.

However, there are other complications still looming. This is far from over.

The first issuance of the bid in 2017 went down in court over a technical fault on the part of the issuing agency. The current iteration was posted last summer and saw its application moved several times because of further legal challenges.

As Peter Homburg, partner and head of the European Cannabis Group at Dentons said when contacted by Cannabis Industry Journal, “This is of course not an official announcement. I have a tendency to believe that others involved in the tender process historically may well challenge this decision.”

BfArM, the federal German agency in charge of the cannabis cultivation tender process, did not respond to a request for a comment as of press time.

The Decision Is Far From Over

Here are the basic challenges still ahead:

There is a lawsuit pending against the bid itself from applicants that has yet to be decided. The Klage (formal hearing in court) is due next week. If that does not derail the process, here are the next considerations.

While all three firms named in the bid have international reputations, there are some pending questions.

Wayland is far ahead of the other two firms in terms of production capability in the country. Their facility in eastern Germany has just been certified GMP standard – which means they are qualified to produce the quality of flower required for medical consumption. This news is also far from a surprise.

As Ben Ward, CEO of Wayland Group, commented when contacted by CIJ for a response via email: “At Wayland, we believe in meaningful partnerships, investing in Germany from day one, demonstrating a long-term commitment to the market,” says Ward. “Wayland GmbH is a German company, operated by Germans, existing in Dresden and Munich and is committed to this market. The companies awarded lots received the allocation based on a rigorous application process, not media sensation.”

Of all the Canadian firms, in fact, despite its lack of high-flying stock price, Wayland has made the most concerted effort to show its commitment to producing in Germany by a large investment of capital and expertise. Further, the firm has shown itself to be the most culturally sensitive to German culture, including hiring a female member to the board (a hot topic far from the cannabis industry). However, there are other issues looming. On the same day that Wayland issued a press release announcing its position in the bid, it also issued one announcing the merger talks with ICC had failed.

The second is that Aphria’s main cultivation center in Canada is not EU-GMP certified although they have applied for the same and now also own one of Germany’s largest distributors (with approximately a 6% market share).

Other firms not only kicked off the entire cannabis discussion in Germany, but have established GMP-compliant facilities both in Canada and across Europe, namely Canopy Growth, which was widely believed to have also applied to the second tender. However prevailing rumours about a Canadian “crop failure” in British Columbia (described by the company as a deliberate destruction of plants created by delays in the licensing process) last fall may have also played a role in the German decision.

Canopy_Growth_Corporation_logoAurora is also in interesting waters. Having distinguished itself as Canopy’s closest rival across Europe, winning significant kudos in Denmark, Italy, Poland and Luxembourg last year, the company is also clearly not “just” a medical cannabis company and apparently was refused an opportunity to go public on the Deutsche Börse last fall. The selection of the firm by BfArm for the bid in a situation where the company is on a watch list created by the stock market regulatory agency in Frankfurt is also an intriguing one. Especially given the company’s announcement of its Polish success on the same day as the decision to import was announced, and the fact that so far it is the only Canadian cannabis company to successfully import to Luxembourg.

And The Import Game Is Just Getting Hot…

The unsurprising news that the bid appears to be moving forward is actually not the hottest news in Europe right now. The reality on the ground is already shifting. Several weeks ago, a Frankfurt-based distribution start-up announced that they had successfully imported cannabis into the country from Macedonian-based Nysk Holdings via Poland.

At the International Cannabis Business Conference (ICBC) in Berlin last weekend, Australian producers (for one) were also reporting a German demand for their product that was greater than they could fill. And there were many Israelis present for what is expected to be an official opening of their import ability by the third quarter of this year.

Price Wars Are Looming

The bid itself is going to have a powerful impact on pricing in both the German and European market beyond that. It represents the first time in any country that a government has attempted to pre-negotiate prices for the drug as a narcotic beyond Israel and in this case, it will have at least regional implications.

aurora logoAt the same time, it is also clear that producers like Nysk and beyond them, Israeli and Australian firms (in particular) are actively finding ways to have their product enter the country- and further at prices that are catching the Canadians on the hop. Indeed Aurora is reporting that it actually lowered its “usual” prices to win European contracts which have been reported as being 3.2 euros a gram in Italy and 2.5 euros a gram in Luxembourg.

To put this in perspective, this is a range of about CA$3-5 a gram of flower which is also well below what Canopy (for one) has reported selling its product even to recreational users in Canada and significantly below medical export prices as reported by recent company corporate reports.

Wayland in contrast, is reporting that its production price in Germany will be at least a euro-per-gram cheaper than this. Or in other words, more in line with prices expected to be generated from both the bid itself and the cannabis now entering the country from other sources.

And of course, this is only the first of what is expected to be a series of new tenders. The original amount, itself increased in the two years the issue has been pending, is clearly not enough to even begin to meet demand as proved by the levels of competitively priced imports now entering the country.

Beyond questions about whether this time the tender will actually stand, are those now pending about new ones potentially in the offing – and not just in Germany but across Europe as cannabis continues to see a very green spring.

How To Choose The Right Cannabis Consultant For Your Company

By Martha Ostergar
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The cannabis industry is growing fast as more states implement legislation to legalize cannabis in different ways. If you’re trying to break in or keep your place in this new market, it can be difficult to understand and comply with ever-changing government regulations as you try and scale your business.

Cannabis businesses need to comply with a range of new local, state and federal regulations related to cannabis specifically, in addition to regulations already in place for the pharmaceutical and food industries to ensure their products are safe for public consumption. On top of that, there are the complexities of managing a supply chain, including growing, warehousing, transportation, food safety requirements, product labeling, business plans, marketing, selling and any other necessities that come with running a businesses.

This is a lot of new information when you’re vying for your place in the cannabis industry. That’s why some businesses are turning to consultants to help. Consultancy is a great and time-tested way to grow your businesses and keep a competitive edge. But just like every other industry, when you choose a consultant, there are specific things to look for and avoid.each party will have work to do in order to communicate clearly, define responsibilities and execute on a plan.

Understand the Role of Consultants

The expertise of  cannabis consultants can vary widely. Usually there’s no “one stop shop” for everything you need to run your business, meaning consultants often specialize in a specific area. Consultant expertise includes specialties such as cultivation, manufacturing, food safety, dispensary, transportation, legal, accountants, human resources and more, all within different regulatory compliance wrappers.

It’s important to remember that consultants are usually not responsible for setting goals for you, but the right consultant can help you refine, meet and even exceed your goals. However, each party will have work to do in order to communicate clearly, define responsibilities and execute on a plan.

Focus on Your Specific Needs

Identifying your specific needs and understanding what success looks like for you is a critical step to take before contacting any consultant. This prep work helps you identify what kind of consulting you actually need and what you’re willing to spend to get it. Some consultants can help you tackle more than one area, but most will specialize. In fact, choosing several specialized consultants (if you have many needs), may feel like it costs more up front, but it will likely save you frustration, headaches and money in the long run. Additionally, if a consultant claims they can do everything in several areas of expertise, they may be overpromising on what they can actually deliver to you as a customer.

Ask the Right Questions

When vetting a consultant, it’s your job to ask probing questions. Don’t hold back and don’t be put off by vague answers. If a consultancy avoids questions or can’t give clear answers, they may be overpromising or being less than honest about their skillset. Here are some general areas of discussion to help you get started when interviewing consultants:

Consultants can help you get through unfamiliar territory or help you to manage your team’s workload.
  • The consultant’s relevant experience.
  • Past or current client references.
  • Detailed discussion of your specific needs as a business.
  • How much time can the consultant dedicate to you as a client.
  • Detailed outline of the consultation plan, including a clear timeline.
  • Responsibilities of each party, deliverables and what success looks like for customer sign off.
  • Certifications and credentials if relevant to your consultation needs (e.g. legal, accounting, regulatory).
  • What is and is not included with their quoted fee, and what you may be charged for as an “add on” to your contract.
  • Any possible conflicts of interest, including how consultants separate work for clients who are competitors.

Avoid Red Flags

As with any burgeoning market, there will be consultants who get into the cannabis space that are more interested in making money than helping you as an individual client as businesses work to legitimize the industry as a whole. Doing your research and asking for referrals helps, but there are also red flags to look for. Some of these red flags may pop up due to inexperience and some may be a sign of bad actors in the consultant market.

  • Asking for equity as payment.
  • Refusing to provide references.
  • Avoiding questions or giving unclear answers.
  • Unwilling to track time and itemize costs on bills.
  • Overpromising AKA “this sounds too good to be true.”
  • Dominating the process instead of treating you like a partner.

Build a Strong Relationship

To get the most out of a consultancy experience, it’s important for both parties to work at building a strong business relationship. You know you’re hitting the sweet spot in business relationships when you have well-oiled communication and feedback loops, including honesty around expectations and frustrations from both parties. A great consultant wants feedback so they can improve their process, therefore they will actively listen to and address your concerns. Additionally, it’s important for you as a client to also be open to feedback and ready to make changes to your process to get the best return on your investment.

Wayland Group’s GMP Certification Begins To Clarify German Cultivation Scenarios

By Marguerite Arnold
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Wayland Group just announced that they received GMP (good manufacturing practices) and GDP (good distribution practices) certification for their Ebersbach facility near Dresden, Germany. The plant already produced 2,400 kg of CBD isolate last year.

The certifications give Wayland the right to sell directly into German and other EU markets, and more significantly, the ability to store bulk product domestically.They have, by far, the largest cultivation site now legal in the country, with distribution to not only German pharmacies, but Europe beyond that.

Wayland is also widely believed to have applied for the much-stalled German cultivation bid. With per-gram production prices at Ebersbach cited at 1.34 euros, this certainly also sends an interesting message about who might win what in the bid, and where the price of cannabis might be headed.

Currently, cannabis is being sold to pharmacies in Germany at prices almost twice the retail price per gram in Canada. In turn, this means that the “retail” price of floss (flower) is running much higher than it is in more established markets (read Canada and of course the U.S.). Point of sale prices in Germany, for example, run between $2-3,000 per month per user. That is an era that is clearly also now coming to an end.

The Cultivation Bid

With the news of Wayland’s certifications, comes an almost certainty that they will become finalists in the pending cultivation bid in Germany. Why? They have, by far, the largest cultivation site now legal in the country, with distribution to not only German pharmacies, but Europe beyond that.

If Bedrocan was the incumbent favorite to win the majority of the licenses handed out to any one firm (especially given the recent increase in cannabis allowed to be sold into Germany across the Dutch border), this places Wayland in a strong second. If Bedrocan is not involved in the bid, this news might indicate that Wayland might be the largest winner in German cultivation licenses this time around.

The plot indeed thickens.

Prices: In General, Across Europe

The firm will be providing product, no matter what the outcome of the bid, at a production price, which is in line with the widely estimated requirements of the bid itself. Winning firms must also be able to provide pricing that is competitive to each other. It is unclear where the government will set that floor, but all medical cannabis sold in Germany after that, will then be competing with that price.

Could it be that the reference price of cannabis, in other words, has just been indirectly announced with the Wayland certifications?

Then there is this wrinkle. Given that production in Germany is more expensive than other countries in Europe (see Portugal, Spain and Greece in particular), the difference in labor costs may still outweigh the costs of shipping across the continent. Or, as the market gets going, it may not. Regardless, in a country like Germany where drug prices are routinely pre-negotiated in bulk by the government, cannabis prices will start to be regulated in a way they have not in other places, notably Canada. This means that heady visions of “mark-ups” to meet a so far unmet demand are also probably not in the cards, although government supported cannabis exports might be.

Insurance “Brands” And Bulk Buys Ahead?

Then there is this intriguing wrinkle. German “public” insurance patients (in other words 90% of the population) are not always free to choose the products they use. Why not? Beyond bulk purchases by the government, insurance companies are also allowed to enter into bulk contracts with some providers, namely medical equipment manufacturers. This is sort of the same situation as visiting an “in network” provider in the United States. In other words, the equipment is free (or vastly cheaper) to the patient if the selected brand is chosen.

Could cannabis go the same route?

german flag
Photo: Ian McWilliams, Flickr

At this juncture, that is unclear. Dronabinol, the only widely available source of cannabinoids in the country until 2016, is considered more of a generic than “name brand.” So far, neither it nor Sativex were pre-negotiated drugs. This was also for a very simple reason. There were only 800 registered patients in Germany until that year. That is far under the “orphan drug” category, which in Germany is 10,000 people. At this point, there are already much higher patient numbers (some cite as many as 79,000), with the majority of treatment going to patients with chronic pain.

By definition, this means that cannabis prices here will continue to be negotiated with little room for high mark-ups as the market consolidates. The more patients there are, the more attention will be paid to ensuring that the drug becomes affordable- not just to patients, but also insurers.

There is zero chance that the government will allow German public healthcare to be bankrupted over this still stigmatized plant, no matter how medically efficacious it is.

Germany and Israel at this point, have the longest established insurance mandate for cannabis- and in the German situation, this is now just two years old. The British NHS just announced that cannabis would be covered, with Luxembourg and Poland now also in the mix. However, the place of the insurance community in this debate is also a factor to be considered into the entire conversation as it unfolds here, beyond efficacy.

Dutch insurers in fact, stopped covering the drug almost as soon as Germany announced its own experiment.

It is unlikely that Wayland is unaware of such realities. The company has former executives from AOK on its German board. AOK is one of the largest statutory health insurers in Germany and one on the front line of cannabis reimbursements for the last two years.

Liberty Health Sciences Receives Second GMP Certification

By Aaron G. Biros
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According to a press release sent out last week, Liberty Health Sciences announced that the British Standards Institution (BSI) awarded the Good Manufacturing Practices (GMP) certification for a facility located in Gainesville, Florida. The certification covers their 10,000 square foot medical cannabis manufacturing facility, where much of their extraction and processing takes place. Liberty also operates a large cultivation space at the same campus.

“it demonstrates our commitment to producing the highest quality and safest products possible for our customers throughout the state of Florida”According to Jessica Engle, director of regulatory compliance for Liberty, they actually did much more than just a GMP certification, including designing a HACCP plan. “In addition to GMP compliance, Liberty has gone above and beyond the DOH requirements to create a fully operational HACCP (Hazard Analysis Critical Control Point) plan that helps ensure the products we produce are safe for consumers,” says Engle. “The basis for HACCP is a scientific approach to preventative risk analysis. Every time a process changes, equipment changes, or raw material changes, our HACCP team meets to identify potential physical, chemical, and microbiological risks. Preventative measures are then put into place to help reduce the likelihood of the contamination hazard from ever occurring.”

Florida’s regulations on medical cannabis producers and processors actually require a form of certification demonstrating proper food safety protocols. “Within 12 months after licensure, a medical marijuana treatment center must demonstrate to the department that all of its processing facilities have passed a Food Safety Good Manufacturing Practices, such as Global Food Safety Initiative or equivalent, inspection by a nationally accredited certifying body,” reads Rule 9 in the 2017 Florida Statute. Edibles producers in Florida “must hold a permit to operate as a food establishment pursuant to chapter 500, the Florida Food Safety Act, and must comply with all the requirements for food establishments pursuant to chapter 500 and any rules adopted thereunder.” The rules also lay out requirements for packaging, dosage and sanitation rules for storage, display and dispensing of edible products.

Also according to the press release, the company is expecting to grow immensely, saying they will add an additional 160,000 square feet of cultivation space at their Gainesville campus. George Scorsis, CEO of Liberty Health Sciences, says this GMP certification is an important landmark for them. “Receiving GMP certification at an additional facility is a major milestone for Liberty Health Sciences and it demonstrates our commitment to producing the highest quality and safest products possible for our customers throughout the state of Florida,” says Scorsis. “This achievement reflects the incredibly high standards we expect of ourselves and that our clients expect as a patient provider. We will continue to produce the highest quality products and exceed production standards that surpass even the most stringent regulatory requirements.”

Liberty has dispensaries, manufacturing facilities and cannabis education centers all over Florida. They have plans to launch a large number of locations in 2019, including ones in Boca Raton, Ft. Myers, Miami, Orlando and more.