The COVID-19 pandemic has certainly impacted the cannabis industry, no matter where you are. However, the impact of a global virus outbreak and subsequent economic recession has had a mixed impact overall on the industry, and further against a backdrop where the entire conversation of reform is also now an international one.
While the big international decisions were slowed down deliberately, as a result of the pandemic, there is a clear indication almost everywhere that this might also have been taken to allow countries to catch up to the inevitable.
Even in the world of cannabis there is a level of diplomacy. The good news of course is that as a result, the topic of reform is now on official agendas, and those are now moving forward with an air of authority.
As a result, here is a look at some of the most significant events that will impact the discussion long after this fall.
The WHO Vote In December Is A Massive Global Benchmark
There is little indication that the global health organization will punt on their reclassification discussion in December. This starts with the fact that Germany, ever cognizant of things like health management leadership is moving ahead with its medical program, full steam ahead.
Further, there are indications all across Europe that the individual countries where cannabis reform has clearly landed are having an impact on their neighbors, if not a more global discussion. European countries like France are quietly announcing medical trials to begin before the end of the first quarter of next year. And Italy just added hemp to its official list of medical plants. Bureaucracies do not move unless they have to, and in this case, they are clearly in transit on the cannabis conversation well beyond the interdiction only phase.
The New Zealand Recreational Vote Is Also Highly Important
Whether the Kiwis actually take this ground-breaking recreational decision across the finish line is almost immaterial at this point. The ballot measure is being decided during a national election within a week and further set against another one (the U.S.) where it is clearly not on the agenda in the immediate future.
That said, of course if the measure does pass, and there is late breaking evidence to suggest that it might, the bar, beyond whatever the UN decides, will have clearly been set.
With recreational reform, New Zealand will also join the ranks of Canada and Uruguay when it comes to this issue. If not, Luxembourg will most likely take this spot at the end of next year if plans continue to unfold as so far promised in country.
Without it, the country will join the many who are implementing plans to integrate the drug into formal medical infrastructure, which is far from a “loss,” at any level. That said it is a sign that individual countries, rather than regional or international bodies, will lead on the issue of reform and will continue to, no matter what the WHO does.
Regional Reform Is Shaping Up In Europe
Beyond this, of course, there are also signs that the issue of cannabis access, no matter what bucket it is being lumped into, is headed for a showdown in Europe on a regional level that has never been seen before.
The state of the Spanish industry now has a date with the European Court of Human Rights at Strasbourg over basic access issues. If that is decided for the plaintiffs, it will mean that not only will Spain be forced to formalize its own cannabis laws, but so will countries across Europe.
What that will mean for nascent recreational reform is also unclear, but at minimum, it spells good news for those who want to participate in the industry in a new way, and with a non-profit model so far not given much official traction across Europe so far.
Dr. Philipp Rösler, the former federal Minister of Economics and Technology and Vice Chancellor of Germany from 2011-2013 has just joined the board of Swiss cannabis company Pure Holding AG.
The move is interesting for a number of reasons, not the least of which is that it signals how political currents are moving in Germany, if not Europe beyond that.
To American eyes, Pure Holding looks like a very organized, corporate farm and cannabis manufacturer, organized to produce and test high quality cannabis, extracts and white label products for the coming storm of interest – no matter where European regulatory winds may temporarily go on hemp extracts.
Geopolitics At Play The fact that the farm is on the Swiss side of the border is also a signal that many Germans (at least) expect the EU to drag its feet on what kind of animal even low-THC and THC-free cannabinoids are while consumers vote with their pocket books across the continent and buy online imports.
The fact that Rösler is politically associated with the Free Democratic Party (FDP) of which he was also chair, is another indication that Germans in general are deeply upset about the slow movement of the CDU party (the Christian Democratic Union) on this issue (just like many others).
The FDP, like all other parties (except the extreme right wing Alternativ für Deutschland or Afd) has been much more forward about cannabis reform. That said, the party currently at the helm of the ruling coalition (CDU) has also been repeatedly accused of dragging its feet on the issue – no matter that medical cannabis was approved here as a therapy mandated for coverage by public health insurers.
The difficulties however that most patients have had to go through is not over. Reform has come here, but still for most, in name only.
The fact that Rössler was also a cardiothoracic surgeon before his stint in national politics is also a sign that the medical community is taking notice of the health effects of cannabis. That he was also federal minister of health of Germany (between 2009 and 2011 in Angela Merkel’s second cabinet) is also a clear indication that the topic of more cannabis reform is on the agenda at home in Germany, including Europe beyond that.
Even if, right now, certainly compared to what is developing in the UK, on a much slower boat to at least commercially accessible, low THC reform.
The Current Debacle Over Hemp In The EU
It is unclear what the fate of hemp is in the EU at present. With the region’s administrators coming to a legally non-binding and decidedly non-scientific holding pattern on “CBD,” (namely that it is a narcotic) it could very well be that the Swiss, English and importers from the rest of the world bring in flower, extracts and products that the region cannot keep out, but is not quite copacetic about embracing, just yet.
That said, with major health food producers now stocking hemp seed extract on the stores of major German grocery stores, it is clear that the worm is turning, one former politician and now board member at a time.
Why The Fuss Over Hemp At All?
The bigger debate is actually a scientific one. It boils down to parsing cannabinoids from the same plant correctly, while also understanding the role that they play together.
That this is now happening, roughly twenty years after the discovery of the human endocannabinoid system – and the recognition that the human body itself creates cannabinoids that are mimicked by external phyto (or plant sourced) cannabinoids, is a victory, even if a late one.
It also signals that at a high level, the debate about cannabis as a drug if not a tool for maintaining overall body wellness, is not abating, but indeed proceeding even as the debate stymies politically at a country-by-country if not regional level.
What Will Reform In The EU Look Like?
While the analogy is not exactly the same, and for a variety of reasons starting with the fact that European countries are sovereign and independent states of Europe and not part of a single federal country, it appears that cannabis reform will look very similar to the progress of the same as it has unfolded so far in the United States.
It is official. BfArM, the German version of the Food and Drug Administration and the federal agency with oversight of the national cannabis program, has approved Spanish medical cannabis imports into the country. Indeed, three German companies are now finalizing their paperwork to allow the transfer to be completed.
As Cannabis Industry Journal has learned, at least one of the companies on the Spanish side of the equation is the ever-interesting Alcaliber (Linneo Health). So far, the privately funded company has made smart, strategic business moves through a challenging transition period. With one of the few EU GMP-recognized licenses in Spain, it is a logical choice for German distributors in search of foreign-produced, but up-to-snuff product.
This is a positive and widely predicted turn of events as Germany begins to institutionalize its cannabis program at the next level. As of this fall, three producers will begin to distribute domestically grown cannabis in Germany. However, there is a clear need for a vibrant import market here and there will be for a long time to come.
Domestically grown cannabis, by design at least so far, was never intended to serve the entire base of medical cannabis patients in Germany. And Spain has been, from the beginning of the discussion, along with Portugal, Greece, Poland, Eastern Europe and of course Italy, an attractive market to produce high quality cannabis for export to (at minimum) Germany.
The European Ex Im Market Is Opening
While the Canadians still have an outsize impact on this market, that is clearly a period of time that is coming to an end. Indeed, Canadian produced cannabis is being turned down at the German border for quality issues linked to certification.
This is not a new issue. It has haunted the German market since 2017 and the beginning of the discussion about the German cultivation bid. But now it is official. Beyond Holland, and even Canada, in other words, lower cost cannabis is now entering the German market and from other European countries.
While Portugal and Denmark beat Spain to the punch, however, this is likely to be an impactful development for not only patients, but the entire price discussion. Distributors are clearly on the front lines of not only obtaining high quality cannabis (from somewhere), but meeting a price that is increasingly on the downward slide, just from the pressures of domestic production and the price structure created around the same by the German government.
Producers have been feeling the pinch, no matter where they are based, for at least the last 12 months.
The Impact On The Spanish Cannabis Discussion
It is unlikely that this development will not be duplicated by other Spanish companies vying for entry into the European and German markets. Spain has a thriving grey market cannabis economy in the form of Cannabis Clubs. It also, like Holland, has allowed a semi legitimate market as well as a distribution network to spring up around the same.
However, the times are also clearly changing. Holland is in the midst of regulating even its coffee shop cultivation economy as it becomes one of the most important exporters of medical cannabis to Germany. Expect the same trend in Spain, especially as Europe increasingly comes to the same conclusion as everywhere else. The regulated medical cannabis industry is great for economic development, especially for countries like Spain, with great weather and perhaps an overreliance on the tourism industry.
The Other European Producers Now In View Beyond Spain, Portugal and Denmark have the right to import medical cannabis to Germany. This list is expected to continue to expand as patient numbers grow. Because of the price restraints now placed on the entire market by the German government, however, entering the country with an attractively priced product that will pass muster, not only with regulators but doctors and insurers, is now absolutely the name of the game.
And that is of course, before the recreational and CBD topic even enters the discussion – and both are clearly on the agenda now, across Europe.
Reports estimate that up to 8 million people in the UK use CBD for its variety of wellness benefits. The market is currently worth £300 million, a figure which is expected to more than triple in the next five years.
Sales of CBD already outstrip those of Vitamin C at £301 million vs £119 million and given that almost 90 percent of users in the UK purchase CBD online, new investments into omnichannel and e-commerce capabilities are likely to lead to even more growth.
Yet, for all this excitement, the truth is the UK’s CBD industry is facing a bit of a roadblock.
Until this year, CBD has been in a period of regulatory uncertainty and the industry faced understandable criticism when high profile cannabis probes found that over half of the most popular CBD oils did not contain the amount of CBD promised on the label. On February 13, 2020, the Food Standards Agency (FSA) unveiled new plans to better regulate the industry and announced a deadline of March 31, 2021 for the submission of a valid application for novel food licence for businesses selling food and food supplements containing CBD in the UK. Contained in the announcement was a warning to all CBD companies that failure to comply may result in products being taken off the shelves.
Consumers are also advised by the FSA to “think carefully” about taking CBD, and not to consume more than 70mg a day, making the UK the first country in the world to set recommended limits for CBD consumption, despite no scientific basis for the 70mg recommended limit.
Whilst it is undeniable that the CBD market requires some form of regulation and standards need to be raised for CBD products, to ensure consumers are receiving safe, legal and quality products, this will be a complex and costly process. CBD companies, particularly smaller CBD brands, will need to ensure they have the necessary infrastructure, expertise and resources to meet this deadline.
The deadline is fast approaching, and no extension has been granted despite of the difficulties caused by COVID-19. This will put all businesses under pressure, as the process for applying for Novel Food status requires supplying a large amount of data from rigorous testing. For larger players, this will likely be nothing more than a costly inconvenience, but for smaller, nascent businesses, these costs may put their longevity at risk. There are hundreds of CBD start-ups which have done great work to future-proof their businesses and create safe, high-quality products. Now, instead of preserving costs to try and stay afloat during the pandemic, these businesses must put a significant amount of precious resource and funds into finalising their applications in time.
Improving end user confidence in CBD products and understanding the process from seed to shelf is crucially important in this developing industry, however, I firmly believe these regulations are suffocating the market. I fear that on April 1, 2021, many smaller firms who haven’t managed to achieve Novel Food status yet have a superior product, will suddenly find themselves unable to legally trade.
On the other hand, there is the argument that the FSA ruling may increase the importation of CBD products from firms based outside of Europe. So far, the large cannabis firms in North America, which have the budget and expertise to meet FSA standards, have held back on importing CBD products to the UK. This may well have to do with the slightly dubious legal status CBD has so far had in the UK, so it will be interesting to see whether this changes in April next year and which players will enter the market. The CBD market will continue to grow and diversify but it will be essential that this leads to increasing consumer choice rather than confusion.
In my opinion, the only way the UK will be able to fully harness the potential of CBD is to create an independent, self-sufficient industry that not only helps consumers but contributes to the wider economy through jobs, skills and investment. The pandemic has done well to put a spotlight on the huge access issues cannabis patients face in the UK, bolstering the case to ‘onshore’ the industry.
Whilst this would require a streamlining and simplification of the licensing laws around growing cannabis, the development of a UK-based industry would have endless benefits. Not only would medical cannabis patients see improved access to their medication, CBD firms would no longer have to ship oil in from the dominating wholesale nations such as Poland, Czechia and Italy, this in turn having huge economic benefits. The development of a UK industry should involve the creation of a new regulatory system specifically designed for cannabis products and preferably for a new regulatory body, similar to the Office of Medicinal Cannabis in the Netherlands, to oversee all cannabis regulation, licensing, importation and approvals. This would mean a move away from the current solution of forcing CBD products into the Novel Food category and subjecting them to inappropriate regulations which will soon begin to smother the market with unnecessary red tape.
People are increasingly turning to more natural health and wellness solutions, so as Britons become better informed about CBD products and as the market matures, demand will certainly increase. Yet with both Brexit and standardisation of cannabinoid regulations occurring in parallel, the future and scale of the CBD market is still to be determined. A huge UK market could potentially help push it in a positive direction, facilitating processes for CBD producers.
The cannabis industry is resilient and until this point, has managed to grow at an exponential rate despite regulatory uncertainty. As acceptance and demand continues to increase, so the case for an independent UK industry will strengthen and regulatory roadblocks finally overcome.
Here is the good news: There are beginning to be regional- and country-specific guidelines on at least one widely grown cannabis crop internationally. This includes a range of regs on the medical side (GMPs) but they are also expanding for the “other” cannabis crop too. Namely, hemp.
Now, here is the bad news: The regulation that is developing in different regions is frustratingly not uniform, and can still differ greatly in critical areas. Most notably, for some reason, while the U.S. Farm Bill of 2018 created a new national standard for the amount of THC that could be contained in American hemp crops (0.3%), the same conversation in Europe during the same period of time led to a decision to set the level of allowable THC in hemp plants and products at a slightly lower one: 0.2%. As a further confusing muddle, Switzerland has set its THC limits at 0.1% (Switzerland is not in the European Union), and other countries across the region have also attempted to limit the THC in industrial hemp production to no more than this level, no matter what regulators rule at the EU level.
Beyond a lack of scientific reasoning obvious in the same, by definition, this creates a natural trade barrier between hemispheres. If U.S. farmers are looking for export opportunities to Europe (for example) not to mention other states, they have to worry about both local as well as destination standards – which on the surface at least, are currently incompatible.
It is also creating some frustrating issues for anyone who is in the market for hemp as either a buyer or seller.
Other Issues In The Mix Markets are driven by many factors – including regulations but also cost and of course consumer demand for a product within a certain price range. Certainly, the CBD industry if not the recreational THC one right behind it (even in Europe now) desperately wants to attract those who are known euphemistically as “daily consumers.”
This means that both the price point and consumer opportunities must hit a mainstream distribution norm. While the recreational market will continue to be distorted by delayed, but inevitable discussions about reform across Europe, the medical market is beginning to set some groundwork that is also bleeding into the entire discussion. Namely, that extracts will play a large role here.
What does this wrinkle mean in a world where the agricultural cultivation standards are different?
Biomass And Extracts Are Gaining In Importance For those in the strictly “flower” game, the market at least in the U.S., will remain a place where pretty flower crops will gain premium prices as long as they meet local spec.
However, this is a limited proposition, even now – especially in the CBD business. The edibles market, for one, has created a huge potential for vast quantities of industrially produced, outdoor grown hemp, bound for extraction and downstream, a vast variety of end products across a wide spectrum of niches – from wellness to purely cosmetic. So is the burgeoning medical market in Europe.
This means two things. The first is that consumer-facing products with any amount of cannabinoid (take your pick) can be produced to order, no matter the cannabinoid concentrations of the original plant. The second, by definition, means that biomass bound for extraction, particularly export, will gain an increasingly larger share of the wholesale market.
Does it really matter, in other words, to a European extractor, that the source product is of higher THC concentrate than is allowed for B2C sale in Europe? No. Indeed, all it means is that they have to buy lower amounts of biomass. The rest is merely a mechanical problem.
Playing The Regulatory Game For an increasingly competitive hemp market in the United States, in other words, foreign exports are absolutely an intriguing option for revenue right now, and will continue to be as long as price competitiveness and overall quality issues remain high. Furthermore, there will be almost no pressure to regulate the market globally to the same standards, particularly if CBD itself is descheduled in December by the WHO.
In other words, the regulatory disconnect between the U.S. and Europe right now, and certainly for certain kinds of unfinished bulk product, could therefore open a new niche in the market that is unlikely to be “fixed” anytime soon.
At the outset of 2020, the cannabis industry appeared poised for a series of incremental changes: a number of states were considering decriminalization and legalization measures, and support was growing for federal legislation allowing cannabis businesses access to banks and financial services. Then the COVID-19 pandemic hit, which disrupted state legislative sessions (and legislative priorities), obstructed signature gathering for ballot initiatives, and reshuffled federal priorities. However, despite all of these changes, the cannabis industry has seen significant developments across the country. Beyond of course the many challenges and losses brought by the pandemic and its aftermath, in some ways, it may prove a boon for the industry.
Legalization and Decriminalization
Currently around a dozen states have legalized cannabis for recreational use, while just under two dozen states allow use of medicinal cannabis. With support for legalization measures steadily growing in most states, a number of major states seemed poised to pass legislation legalizing recreational cannabis, including large potential markets in the Northeast such as New York, New Jersey, Connecticut and Pennsylvania. And in many other states, advocacy groups were well underway gathering signatures to qualify legalization measures for the November 2020 ballot. When the pandemic hit, however, state legislatures largely suspended their normal operations, and signature gatherers were stymied by stay-at-home orders and social distancing requirements.
Despite these major obstacles, legalization and decriminalization legislation has continued to move forward in a number of states, and still others will have legalization referenda on the ballot for November’s election. Perhaps more important than these initiatives themselves are the diverse states that are moving toward loosening of restrictions around cannabis: rather than being limited to a handful of especially liberal states, cannabis advocates are seeing tangible progress is every geographic area, among states whose political leanings span the spectrum.
While the Northeast corridor had planned to undertake legalization efforts in a coordinated fashion this year, those results were put on hold given the seriousness of initial COVID-19 outbreaks in the greater New York area. However, the New Jersey General Assembly nevertheless passed decriminalization legislation, though the matter has not yet cleared the New Jersey Senate, and the appetite for full-scale legalization remains strong there, with a ballot initiative going directly to voters in advance of the New Jersey Legislature considering the issue. The Commonwealth of Virginia enacted decriminalization legislation also, and a legislative caucus in Virginia has pledged to introduce recreational legalization legislation this summer when Virginia convenes a special legislative session. Voters in Mississippi and South Dakota will be able to vote on ballot initiatives to legalize recreational cannabis, and similar ballot initiatives are underway or likely in Arizona and Nebraska. Advocates in Arkansas and Oklahoma had also hoped to bring initiatives to the ballot, but have encountered practical and legal obstacles to gathering the required signatures in time for this year’s election.
These myriad initiatives reflect a strong shift toward legalization of recreational cannabis across the country, and the ability to continue gathering signatures and momentum despite stay-at-home orders and social distancing underscores the growing popularity of the movement. Whether through the legislature or directly by the ballot, it seems all but certain that the number of states permitting recreational cannabis will grow significantly this year.
COVID-19 Business Closures
As the COVID-19 pandemic took hold in the early months of 2020, most states instituted various forms of stay-at-home orders that required the closure of nonessential businesses. While these policies had—and continue to have—serious impacts on businesses of every type, cannabis companies have largely seen strong economic growth notwithstanding.
One of the most important developments in this space came in the context of state and local governments designating certain businesses as “essential” for purposes of business closure orders. In nearly every state to consider the issue—Massachusetts being the main outlier—state and local governments recognized cannabis companies as essential, which allowed them to operate during the shutdown.
The “essential” designation largely carried between both recreational and medicinal cannabis jurisdictions. And this matters because of what it means for the industry. State and local governments clearly realize the important medicinal role that cannabis plays for patients dependent on it for treatment, and the overlapping customer bases of mixed dispensaries further contributed to keeping cannabis companies open during the pandemic. Even in states where certain dispensaries operate solely in a recreational capacity, those jurisdictions recognized the importance of allowing access to a safe recreational substance, like alcohol, during prolonged stay-at-home orders.
Similarly, likely as a result of those same stay-at-home orders, cannabis companies largely saw significant increases in sales revenue. More customers visited retail establishments, and those customers often purchased more product per visit. This resulted in better-than-expected sales revenue for cannabis companies, and also produced increased tax revenues for state and local governments.
The cannabis industry saw more than just increased sales, however. In the process of issuing emergency rules for the cannabis industry during quarantine, a number of state and local jurisdictions either began to allow cannabis deliveries or expanded its availability, a shift in policy that may stick around well after the pandemic subsides.
One final impact of the pandemic may also help push legalization initiatives forward in the coming years: decreased tax revenue and major budget gaps. Due both to a decrease in economic activity like shopping and dining, as well as the unexpected health care costs associated with responding to the COVID-19 crisis, state and local budgets are expected to see significant shortcomings for years to come. In response, state and local governments are starting to see cannabis as a significant and viable source of tax revenue. For example, various cities in California that had previously been reluctant to permit recreational cannabis are beginning to welcome cannabis companies in hopes of making up for lost tax revenue. Similarly, in New Mexico, where legalization has remained a heated topic of discussion, Gov. Lujan Grisham has explicitly expressed her regret that the state failed to legalize cannabis, recognizing that tax revenues from the industry could have reached upwards of $100 million. Other state and local governments are coming to similar realizations, which should help propel expanded access to legal cannabis in coming years.
Major changes in the cannabis industry in 2020 have not been limited to the states. In the midst of changes and crises across the country, the federal government has been making meaningful progress in two major respects, COVID-19 notwithstanding.
First, cannabis companies are edging closer to having full access to banks, bank accounts and related financial services. The SAFE Banking Act, championed by Rep. Perlmutter, has made it through the House of Representatives and is currently in the Senate Committee on Banking, Housing, and Urban Affairs. However, as Congress continues to toil away at future COVID-19 relief legislation, political signals from Washington, D.C., suggest there is a reasonable likelihood that the protections of the SAFE Banking Act will be included, in some form, in the next round of major COVID-19 legislation out of Congress. The enactment of these banking provisions will provide substantial relief to cannabis companies who have largely been excluded from opening bank accounts and utilizing the services major banks provide. Additionally, allowing access to banks and their services should further facilitate the rapid growth in the cannabis economy we are witnessing elsewhere, and this movement could further legitimize the industry as part of a broader push for federal legalization.
Second, after a four-year delay, the DEA has finally proposed draft rules to expand the DEA’s limited cannabis research program. For decades, all cannabis research to date has relied on limited supplies of cannabis grown at the University of Mississippi. Now the DEA is finally following through on its promise to further develop, refine and expand its research program by allowing additional suppliers and market participants to play a role in cannabis research. While the rules proposed are not without detractors and critiques—and the rules themselves have not been finalized—this marks an important step forward to a better understanding of the effects of THC on consumers, not only because more research is needed to understand a substance consumed by millions annually, but also because the limited supply of cannabis on which researchers currently rely has been shown to differ substantially in appearance, consistency and chemical composition from cannabis that is commercially available in states across the country. With an expanded research regime comes the hope that scientists will be able to develop new and innovative cannabis-derived medications, while also furthering our understanding of how THC affects health and the body.
At every level of government, the year in cannabis so far has proven to be far more eventful than many predicted. And the COVID-19 crisis has not slowed progress. There appears to be continued momentum to further mature how cannabis is treated at every level of government, which signals that significant changes are on the horizon. Industry observers will be closely focused on how the rest of the year proceeds, especially with a presidential election on the horizon.
Editor’s Note: This article was revised to clarify that New Jersey has not yet decriminalized marijuana. A decriminalization bill passed the New Jersey General Assembly, but the New Jersey Senate has not acted as of this writing.
As Germany begins to enter a summer where life seems ever more normal, there are fairly major shakeups underway in the German cannabis market. These are structural but will have a profound impact on the entire market going forward.
A Mass Of Distribution Licenses It is an interesting metric to understand that before 2015, there were no specialty cannabis importer/distributors in Germany. As of July 2020, there are rumors that this number has now shot to close to 80 (either licensed or in the process to become licensed). That is a huge number. So was the last amazing number (40) as of the beginning of this year. Just the previous estimate would mean, literally, 1 specialty cannabis distributor for every 2 million Germans. That obviously is not sustainable. What it does indicate is the huge surge of interest in medical cannabis not to mention acceptance, as well as the amount of money actually now beginning to slosh around in the domestic market.
And that spells good news for both patients and insurers. The rest of the industry, however, will be under further pressure to reduce cultivation and operation costs to meet the challenge.How many of these distributors will survive is another question, particularly in an environment where the government is looking for just one to fulfil the needs of all of Germany’s pharmacies from what is grown domestically. This does not of course mean the end of specialty distribution. Indeed, far from it. There is not enough cannabis entering the market, presumably this fall, that is grown here to even come close to meeting demand.
No surprises here. This has been one of the enduring criticisms of the entire process, if not the bid itself since 2017.
However, one thing this does mean is that distribution fees, like pharmacy fees for processing the plant before them, are finally hitting a price adjustment phase.
This is also going to be good not only for patients, but also health insurers.
For all the standardization of the industry, including fees and mark-ups, one of the strangest things about the German cannabis market is how widely cannabis prices can differ even between pharmacies. This is as true of flower as it is of dronabinol.
The Wholesale Price Of Medical Cannabis Is Dropping Again, no surprise here, the government will end up buying more cannabis than contracted for under the original bid. This was actually anticipated in the language of the contract that currently exists between the government and the three bid winners. Namely, an automatic 50% reduction in price is mandated for any cannabis sold beyond the 120% agreed upon qualities.
The growers domestically, in other words, who won the bid will be under a severe price restriction. This may have been the ultimate strategy of the government to begin with (namely to attract foreign capital and expertise but then begin to reign in the sky-high prices of medical cannabis so far.)
This means that the price of €2.30 a gram will undoubtedly fall. Where it will float is anyone’s guess, but right now it appears on course to hit about €1.87. Or about the same price that other governments across Europe (notably Italy) had previously negotiated with the big Canadian cannabis companies (notably on this one, Aurora’s military contract in Italy).
Implications For The Import Market With domestic producers under the gun, this also means that all imports will begin to feel the price squeeze too. And that will also have a significant impact on point of sale cannabis prices.
And that spells good news for both patients and insurers. The rest of the industry, however, will be under further pressure to reduce cultivation and operation costs to meet the challenge.
Despite the limitations and privations caused by the COVID-19 pandemic, Germany’s market is “up” in terms of sales and overall insurance approvals. For all the victories however, there are still many kinks along the way. That is of course, not just on the medical front (where flower is yet again in short supply this summer), but also in the CBD space.
There is also clearly a drumbeat for more reform afoot in a country which has bested the COVID-19 pandemic like few others in the world. And like France as well as other countries in Europe, the conversation across the region has turned to including cannabis in recovery efforts, and in multiple ways. That includes not only relying on a new crop and industry for economic revitalization, but also of course, on the topic of further reform.
A Brief Overview Of The “Modern” German Cannabis Market Germany kicked off the entire cannabis discussion in a big way in Europe in the first quarter of 2017. The government got sued by patients and changed the law mandating that public insurers had to reimburse the drug. They also kicked off a cultivation tender bid which promptly became mired in several rounds of lawsuits and squabbles. The first German grown cannabis will hit pharmacies this fall, but it is not clear when, and the unofficial rumour is that the pandemic will delay distribution. The German distribution tender has been delayed three times so far this year.
In the meantime, the German market has developed into the world’s most lucrative target for global exporters, particularly (but not limited) to GMP and other certifiable high-grade cannabis (and in all its forms).
Other Issues, Problems and Wrinkles
Nothing about cannabis legalization is ever going to be easy, and Germany has been no exception.
The first problem on the ground is that the supply chain here has had several major hits, from the beginning. This is even though the supply has come from ostensibly otherwise reliable sources. Companies in Canada and in Holland have all had different kinds of problems with delivery (for different reasons) throughout this period.
Right now, there is a major reorganization afoot in Holland which may also be affecting the recent decision on the Dutch side to reorganize how the government picks (private) German narcotics distributors. Aurora also had product pulled last fall because of labelling and processing issues. But these, no matter how momentous momentarily, are also just waves in a cannabis ocean that is still choppy. Domestic sales continue to expand and foreign producers can still find a foothold in a still fairly open market.
As a result, even with a new dronabinol competitor, Israel, Australia and South Africa as well as multiple European countries now in advanced export schemes, the supply problem is still a thorny one, but not quite as thorny as it used to be.
However, On The CBD Front…
Things have gotten even more complicated since the repeated decisions on Novel Food at the EU level. Namely, last year’s decision that the only CBD extract that is not “Novel” is extracted from seeds, has thrown the entire industry into a major fluff. Especially when such decisions begin to filter down via a federal and regional approach. This has begun to happen. Indeed, the city of Cologne, in Germany’s most populous state just banned all CBD that is not labelled per an EU (although admittedly) non-binding resolution on the issue.
This in turn is leading to a renewed push for the obvious: recreational cannabis.
Where Is the Recreational Discussion Auf Deutschland? The recreational movement, generally, has been handed several black eyes for the last three years. Namely, that greater reform was not preserved in the first cannabis legalization that passed, albeit unanimously, in the German Parliament in 2017. However, as many recognized, the first, most important hurdle had just been broached. And indeed, that cautious strategy has created a steadily increasing, high quality (at least for the most part) medical market that is unmatched anywhere in the world except perhaps Israel.
Now, however, there are other issues in the room. The CBD discussion is mired in endless hypocrisy and meddling at both the state country level and the EU. There are many Germans who are keen to try cannabis beyond any idea of cannabis as therapy. Remember that Germany has largely managed to contain the outbreak, despite the emergence of several recent but isolated hotspots of late. In Frankfurt, for example, with the exception of more people on kurzarbeit (which is not visible), most street traffic proceeds apace these days with masks on, but with that exception or two, feels pretty much back to “normal.” And of course, economic development in the form of exports is one of Germany’s favorite pastimes.
Beyond that, the needle has absolutely moved across Europe. Several countries, including Greece and Portugal as well as the UK’s Channel Islands, have already jumped on the cannabis economic development bandwagon, and this is only going to encourage the Germans as well as other similar conversations across the region. It has even showed up in France.
And of course, it is not like the implications of Luxembourg and Switzerland as well as recent efforts in Holland to better regulate the recreational industry there, have not been blatantly obvious to those in Europe’s largest medical market.
Look for new shoots and leaves, in other words of the next stage of cannabis reform to take hold auf Deutschland. And soon. It is inevitable.
Dr. Linda Klumpers has a Ph.D. in clinical pharmacology of cannabinoids. Originally from the Netherlands, she began much of her career in studying cannabis there. She now lives and works in the United States, where she has worked on a number of projects, started her own company and is continuing her research on cannabis as an effective medicine.
After studying neuroscience at the University of Amsterdam, she went on to train at the Centre for Human Drug Research and Leiden University Medical Center, where Dr. Klumpers obtained a clinical pharmacology degree and a Ph.D. in clinical pharmacology of cannabinoids. She has been researching cannabinoids in humans since 2006. Dr. Klumpers co-authored a number of peer-reviewed cannabinoid publications and she has received five honors and awards for her work, including the BJCP Prize from the British Journal of Clinical Pharmacology.
In 2016, she moved to the United States and founded Cannify, an online tool that helps patients and clinicians with product matching and providing legitimate cannabis education based in sound science. In 2018, Dr. Klumpers joined forces with Dr. Michael Tagen, another clinical pharmacologist, to launch Verdient Science, a consulting partnership. Their work at Verdient Science includes helping clients set up human studies, advise on FDA submissions, creating course materials, adjusting product pipelines and product development strategies, among other areas of focus.
Right now, Dr. Klumpers is waiting to hear back from a grant application they submitted to study THC and CBD ratios for medical efficacy in chronic pain patients. We sat down with Dr. Klumpers to hear her story, what she is working on now and how she hopes to continue researching cannabis as an effective medicine.
Cannabis Industry Journal: Tell us about your background as a research scientist. How did you get involved in cannabis?
Dr. Linda Klumpers: During my Ph.D. work, we studied the effects of so-called cannabinoid receptor antagonists that block the effects of THC – I prefer to say “we”, as research is always done by multiple people. The problem with studying these compounds in healthy volunteers is that you can’t observe acute effects, which means that you won’t measure any effect after a single dose. To circumvent this issue, we applied a trick and developed a ‘challenge test’: after you give the ‘invisible’ blocking compound, you stimulate the cannabinoid system by giving people THC. If the subjects don’t feel the effects of THC, you know that the blocker worked. One thing lead to another and we ended up studying various administration methods, such as intrapulmonal (via the lungs) with vaporization, oral and sublingual. We studied the behavior of cannabinoids in the body and how the body responded to them.
CIJ: Can you share some information on the projects you are working on? What is Cannify and what is Verdient Science?
Dr. Klumpers:Cannify was founded in 2016 after I saw that too many people had opinions about cannabis that were more based on emotion than fact. Besides, I noticed that a majority of the scientific literature on cannabis pharmacology was left unnoticed and unapplied to the people getting exposed to cannabis, such as patients, the cannabis industry – that was in a very different stage at that time – healthcare providers and regulators. With my Ph.D. in cannabis pharmacology, I wanted to add a level of objectivity to cannabis education and research. Cannify’s goals are to understand the science of cannabis, and share this with others.
The way we do this is multi-fold:
Cannify Quiz: Patients with an interest in cannabis often want to know the science about cannabis and their condition. Our quiz helps these people by asking in-depth questions and showing them relevant scientific literature in a personalized report. After that, an overview is given with products and product matching scores. Our account system allows users to track their progress over time. Product manufacturers, dispensaries and other companies can use the quiz for their websites and their stores to help out retail employees and save them time, and to receive insight with our analytics on customer desires and behavior. Needless to say, an educated customer is a better customer. It is important that customers come and leave stores well-informed.
Education: Speaking of education, our website contains educational articles about everything cannabis: from plant to patient and from product to mechanism of action. We regularly publish educational quizzes for people to test their knowledge level. With a free Cannify account, you can find all of our educational quizzes and save your results. We also provide customized courses, and have educated a wide audience varying from industry professionals to CME-accredited courses for healthcare providers. On top of that, our educational videos in dispensaries (in collaboration with our partner, Enlighten) reach customers and retail employees.
Research: To expand the knowledge on cannabis, performing and especially sharing research is essential. We have already performed and published some of Cannify’s results on descriptive statistics and effect prediction during conferences, as well as a review paper on cannabis therapeutics in a peer-reviewed journal and a book chapter. This year, we expect to co-publish the results of a survey in different sleep patient groups. We collaborated with the Centre of Excellence for Epilepsy and Sleep Medicine in the Netherlands on a peer-reviewed paper from which we expect new research to follow to benefit these patients. We have also co-submitted a grant to study THC and CBD ratios in chronic pain patients: fingers crossed! Another important next step is to test a healthcare provider-specific version of Cannify’s quiz in the clinic once COVID dies down. I want to add that after working in a clinical lab for many years, it is important to combine the results of clinical trials to what people do in real life, which is what we do with Cannify.
And here’s some information on Verdient Science:
Verdient Science is a consulting partnership I have with clinical pharmacologist Dr. Michael Tagen. We provide clinical and translational pharmacology expertise to improve the quality of product development & clinical testing. While both working as independent consultants, we decided from 2018 to start working together to offer better services. Since then, our work has been very variable and includes helping clients set up human studies, advise on FDA submissions, creating course materials, adjusting product pipelines and product development strategies to make them more efficient and cheaper, performed scientific due diligence and much more. When clients want additional services that are beyond our expertise, we are typically able to introduce them to various people per expertise area, or refer them to our partner companies, Complex Biotech Discovery Ventures (CBDV) with Dr. Markus Roggen, and Via Innovations with Dr. Monica Vialpando. A benefit of working with the same partners includes smooth handovers and the feeling of a one stop shop.
CIJ: How does Cannify match available products to consumer needs? Is there an algorithm you developed that matches moods or feelings to cannabinoids or chemical profiles?
Dr. Klumpers: That is a great question and the core of what we do! So back to the Cannify quiz: there are three steps:
Users fill in questions;
A personalized report is generated with the relevant science;
The user gets a product overview with product matching scores.
The report and the matching scores are generated using algorithms that are regularly updated. These algorithms are based on various data sources:
Literature: There is a lot of available literature, and we make sure to select the most relevant and reliable studies;
Raw data: There is only so much one can find in the literature, and lots is hidden in the raw data. Therefore, we piled up data from studies done at various research institutions, including the University of Kentucky and Johns Hopkins University, and used them in our algorithms;
Internal studies: From the thousands of users filling in their results, there is a lot of information that we should learn from. This feedback loop helps us to better understand how the lab relates to real life situations.
CIJ: The world of cannabis research has been historically stymied by red tape, DEA interference and a host of federal regulations. How have you managed to work through all that? Do you have a DEA license? What did it take to get it?
Dr. Klumpers: Luckily, a majority of our research was and is done outside of the US. You still need to obtain the appropriate licenses, but I was perhaps lucky to have filled in every form very thoroughly and we got the licenses within months. The process is quite meticulous, as you need separate licenses for almost every step from manufacturing to administration. An additional complication is that our cannabis is not stored in our own building, but in the hospital pharmacy across the street, involving transport via the public road. Despite the roadblocks, including a legal procedure about this matter that was going on in parallel, I had no major issues getting our work done. For our research in the US, we were lucky to have been working with partners that already have the required license.
Also with publishing, I have never had an issue with the cannabis stigma. Generally, in my field of science, good quality science is very much welcomed and appreciated, and this was even before the time that there were four different cannabis-related journals, as is the case nowadays.
CIJ: Looking to the future, where do you hope to focus your research efforts? Where do you think the cannabis community should be focusing their efforts in the next 5-10 years?
Dr. Klumpers: Besides continuing to analyze the data generated from Cannify, I keep my fingers crossed for the grant application I mentioned earlier on THC and CBD ratios in chronic pain patients. Although we know that CBD is able to influence THC-induced effects, it is not known at what dosages, which ratios and how the effects are related to each other. For example: is CBD able to decrease certain side-effects of THC without decreasing pain-relieving effects?
Whatever is done, wherever in the community: good quality data are keyNext to that, I am also interested in other neurological and psychiatric disorders, and, of course, my Ph.D. love: the cannabinoid antagonists. Sadly, all the research efforts on this compound group were halted more than a decade ago. However, there is a renewed interest. I would love to help turn these compounds into effective and safe medicines.
Regarding the cannabis community: 5-10 years sounds really far away for an industry that is relatively new to many, but a lot has already changed since I started cannabis research more than 14 years ago and time has flown by. Some changes have been positive and others less so. Whatever is done, wherever in the community: good quality data are key. Many companies gather data and even publish them in peer-reviewed journals, but that does not always mean that the data are useful or that the studies were done well. Only a few minor changes to how and which data are gathered, and so much more can be done. What can help with achieving this is to let the right people do the right thing: many call themselves a ‘cannabis scientist’ or ‘cannabis expert’, but that does not mean anything. What has someone truly achieved and what is their exact expertise? A Ph.D. in chemistry is not going to help you in setting up effect studies, neither will I be able to improve your product’s shelf life or extraction yield. Getting the right people in the right place is key. Lastly: the cannabis community should stay critical. The length of one article in Cannabis Industry Journal wouldn’t be enough to lay out all the misconceptions that people have about cannabis. Make sure that those misconceptions do not live on and do not be afraid to admit you don’t know something, irrespective of the branch you work in: only then, can the cannabis community progress to the benefit of all.
The South African government has taken a leap into the future (ahead also of the expected World Health Organization (WHO) decision on cannabis this December). Namely, it has begun to regulate hemp (more in line with Europe intriguingly, than the U.S.) and attempted to remove the THC part of the equation from a domestic list of plants and drugs with no medical use.
The notice was signed by South African Minister of Health Zweli Mkhize and published a week after a domestic moratorium on CBD expired. The moratorium permitted the sale of some kinds of CBD products.
This is an intriguing new development, although it will also undoubtedly cause headaches for the burgeoning industry in the region.
On The CBD Front…
South Africa’s new hemp guidelines – namely for the amount of THC allowed in legit hemp crops that are also regulated – are that plants contain no more than 0.2% THC. This makes the guidelines absolutely in line with what is generally developing across the EU. And even more intriguingly, below federal guidelines for most U.S. domestic hemp crops (which are 0.3% at a federal level and only differ in a few state cases where the amount is lower by state law).
However, there is also a unique twist to all of this: The South African government has now created a two-pronged regulatory schemata just for CBD. The default approach to the cannabinoid is that it is in fact medication, scheduled under South African internal and global drug guidelines as a “Schedule 4” drug.
The other designation is reserved for CBD packaged in sizes of 600mg or less (and limited by instructions to no more than 20mg a day). This kind of CBD (despite the dubious understanding of cannabinoid science) will henceforth be labelled a “supplement” and on “Schedule 0”.
However, do not be fooled: This is not “descheduling.” This actually means that all CBD has been classified as a medical substance except in packets that are under a certain size, with portion suggestions on the outside of the wrapper or package.
That is hardly scientific. However, what is more burdensome is that any CBD cultivator in South Africa must also be GMP- (or internationally medically) certified (even if bound for the supplement market). By definition, in other words, it will make the cost of production for the supplement (commercial, food and cosmetic) part of the equation as expensive as pharmaceutical production. While from a purist’s point of view, having ultra clean cannabis in any product (at the level of pharmaceutical standards) is a wonderful idea, but this gets ridiculous when it comes to reality, and will ultimately never stand.
This development is also undeniably inconvenient (at minimum) for any who had envisioned outdoor hempires, which most of the cannabis grown in South Africa is. The only people who have the money to build indoor grows, starting with GMP certified greenhouses, are, for the most part, white people, foreigners or those who own property and have access to external, international equity.
The sins of Apartheid, in other words, are being writ large on the entire cannabis industry at present in South Africa. And CBD is contained right in the middle of the mix.
On The THC Front…
There are several interesting aspects to this.
The first is that THC has been removed from the South African “Schedule 7” which is roughly equivalent to the international “Schedule I” that cannabis also resides in until the WHO re- or deschedules the same.
However, this also means that all CBD as well as THC must be produced by those with pharmaceutical-grade facilities – and this of course includes more than just indoor, temperature-controlled greenhouses. It also includes a complex supply chain that is European and Western centric, starting with the requirement to access a rather large amount of capital to construct the same.
Global Re-Alignment Or Stopgap Measure?
This new regulation, in other words, specifically leaves the vast majority of what has already been seeded, or what is most likely to be, in the hands of a few Canadian and other companies who have been moving in this direction for the last several years.
It also implies, intriguingly, that the intra-African cannabis market is low priority at present for those writing the (health) rules. And that also means that eyes are being set more on creating an export market than for treating South African citizens.
It is not an unusual move, rather tragically so far. And almost certainly one that will be challenged, and in several directions, both by events, but also by firms caught up in the mix.
Why? For starters, the South African cannabis market also effectively controls the Lesotho cannabis regulatory scheme (namely all exports from Lesotho, which has seen quite a lot of cannabis investment over the last several years). All such crops must be labelled per South African guidelines if they, literally, can hit a port to be exported.
The vast majority of those grows, even with relatively decent foreign backing, are also outside – and of course as a result ineligible for GMP certification.
Of course given the fact that the UN is likely to clarify both the status of THC and CBD by the end of the year, this current situation in South Africa is also fairly clearly intended to be a stop-gap regulatory measure to last up until at least this time.
Where it may go after that is anyone’s guess. This measure, however, is also clearly being made to protect those who have invested in GMP-grade facilities as opposed to those who have been clearly angling for reform on the CBD front, starting with the beer market. Stay tuned. Interesting developments clearly ahead.
Strictly Necessary Cookies
Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.
We use tracking pixels that set your arrival time at our website, this is used as part of our anti-spam and security measures. Disabling this tracking pixel would disable some of our security measures, and is therefore considered necessary for the safe operation of the website. This tracking pixel is cleared from your system when you delete files in your history.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.