Back in November, New Jersey elected Democrat Phil Murphy for governor, who ran on a campaign of legalizing adult use cannabis and using tax revenue from that for important government programs like education and pensions. According to CNN Money, NJ State Senate President Stephen Sweeney says he wants to vote on draft legislation and have it approved within 100 days of Gov. Murphy’s inauguration.
New Jersey’s Governor-elect Phil Murphy Photo: Phil Murphy, Flickr
That bill, sponsored by Sen. Nicholas Scutari back in May (the same Senator that sponsored the state’s now-implemented medical cannabis law), would legalize cannabis use, growing and sales, for those over the age of 21, while tacking on a hefty tax. The legislation, if it passes the vote and signed into law this spring, would also create a licensing framework and a “Division of Marijuana Enforcement,” the government body that would be tasked with regulating the industry.
Election victories throughout the state for Democrats means they now control the executive and legislative branches of the state’s government, opening the door for possibly legalizing cannabis within a year. This is a massive about-face for the state, previously controlled by Republican and Trump-supporter Chris Christie, a less-than-cannabis-friendly Governor who once called tax revenue from cannabis “blood money.”
Senator Nicholas P. Scutari (D)
But the newly revived fervor over legalizing cannabis in New Jersey comes with its own hang-ups. For one, Governor Phil Murphy claimed this could bring up to $300 million in tax revenue, which is a bit of a pipedream in the short term. The state would need total cannabis sales to hit $1.2 billion to reach that amount of tax revenue, something New Frontier Data doesn’t expect would happen until maybe 2025.
Amol Sinha, executive director of the ACLU of New Jersey, wrote an op-ed addressing Murphy’s campaign promises. Sinha says that Gov.-elect Murphy ran on legalizing cannabis “as a social and racial justice priority.” He argues that in order for New Jersey to legalize cannabis equitably, the legislation needs to have automatic expungement of previous cannabis-related criminal convictions, a provision for growing at home, fair regulations and community reinvestment of the tax revenue. On the surface, Sen. Nicholas Scutari’s bill introduced back in May of 2017 seems to have provisions in place to meet all of these requirements.
According to a press release published this morning, BioTrackTHC successfully implemented their Universal Cannabis System (UCS) in Washington State, a temporary solution for the state’s seed-to-sale cannabis tracking system, while the new system is yet to be deployed.
BioTrackTHC had a contract with Washington State for four years, which expired just weeks ago at the beginning of November. Back in June, after a few minor hiccups, the state announced that MJ Freeway would be the successive software platform used for the state’s seed-to-sale traceability system.
The deadline for the new software to be ready for deployment was set for November 1st, when the BioTrackTHC contract would expire and the MJ Freeway contract would begin. Between when the contract was awarded and the deadline for implementation, MJ Freeway made headlines for a series of security hacks and systems failures. Subsequently, MJ Freeway said they could not deliver the software platform until January of 2018, leaving a two-month gap where businesses have no state-mandated software to use for the tracking system.
The contingency plan that the state laid out consisted of business owners manually inputting data in excel spreadsheets. When first pressed for a Band-Aid solution, representatives of BioTrackTHC cited security concerns related to MJ Freeway’s hacks as reason for being hesitant to extend their contract through the interim period.
In an open letter to the Washington cannabis industry back in October before the end of their contract, Patrick Vo, president and chief executive officer of BioTrackTHC, laid out an explanation for what went wrong and provided an alternative solution, essentially a private sector version of their government-mandated traceability software system.
The open letter to the Washington cannabis industry, written by Patrick Vo
Announced this morning, the new system, UCS, is being used by over 1,600 of the 1,700 cannabis licensees in Washington. The UCS has so far submitted 39,000 individual excel spreadsheets to the Washington State Liquor and Cannabis Board (WSLCB). “After the WSLCB announced that their replacement system would not be ready in time and that the only other option was for all 1,700 licensees to submit their seed-to-sale data via manual spreadsheets, BioTrackTHC created the UCS—a privatized clone of the government system—within a few days and deployed it minutes after the termination of the old system to minimize the impact on all licensees,” reads the press release.
The UCS allows business owners to streamline data recording, instead of manually entering information into spreadsheets. It is also integrating with 3rd party software competitors such as WeedTraQR, GrowFlow, Mr. Kraken, TraceWeed, GreenBits, S2Solutions and DopePlow. “After the WSLCB’s announcement, we knew that we had only a few days to provide a universal system to which the whole industry could submit compliance data and enable communication across the supply chain between licensees and their seed-to-sale system,” says Vo. “Our priority was to ensure that licensees could continue to operate in the absence of a government seed-to-sale system. Not having that system in place could have left Washington licensees vulnerable to noncompliance in a variety of ways, not to mention the potentially crippling volume of extra work needed to manually track a business’ entire inventory.”
Washington State’s new traceability software system by MJ Freeway is expected to deploy in January of 2018.
Poland has now legalized cannabis for medical purposes.
That said, it will be some time before patients have access to the drug. While Poles can now technically access medical pot, the scheme approved by the Polish Parliament that went into effect on November 1st is regressive, to say the least. Certainly compared with even other countries in Europe that are now finally admitting that cannabis is a drug with medical efficacy, the Polish experiment looks “old-fashioned.”
What Does Medical Cannabis Reform Look Like in Poland?
Like most conservative countries, Poland is sticking with a highly restrictive approach that still puts patients in the hot seat. In addition to getting a doctor’s prescription, the chronically ill must be approved by a state authority – a regional pharmaceutical inspector. They must get a license first, in other words. They must then find about $500 a month to pay for cannabis. To put this in perspective, that is roughly the total amount such patients get from the state to live on each month.
Warsaw, Poland Image: Nikos Roussos, Flickr
The multiple steps mean that only patients with financial resources– and an illness which is chronic but still allows them to negotiate the many government hurdles, including cost –will now be able to access medical cannabis. Unlike Germany which makes no such distinctions, Polish law now recognizes the drug as an effective form of treatment only for chronic pain, chemo-induced nausea, MS and drug-resistant epilepsy.
The heavily amended legislation also outlaws home growing. And while 90% of pharmacies will be able to dispense the drug, this is again, a technicality. Where will the pharmacies get the cannabis in the first place?
So the question remains: will this step really mean reform? There is no medical cultivation planned. And no companies (yet) have been licensed to import the drug.
This is what is clear. Much like the conversation in Georgia and other southern American states several years ago, legislators are bowing to popular demand if not scientific evidence, to legalize medical use. But patients still cannot get it – even if they jump through all the hoops.
In Poland, patients who cannot find legal cannabis in the country (which is all of them at this point) now do have the right to travel to other EU countries in search of medicine. But the unanswered question in all of this is still present. How, exactly is this supposed to work? Patients must come up with the money to pay for their medical cannabis (at local prices) plus regular transportation costs. Then they must pay sky high fees to access local doctors (if they can find them) at “retail cost” uncovered by any insurance.
The issue of countries legalizing cannabis on paper, but not in action, is a problem now facing legalization advocates in the EUThe most obvious route for Polish patients with resources and the ability to travel is Germany. The catch? Medical cannabis costs Just on this front, the idea of regular country hopping for script refills – even if “just” across the border – is ludicrous. And who protect such patients legally if caught at the border, with a three month supply?
Poland, in other words, has adopted something very similar to Georgia’s regulations circa 2015. Medical cannabis is now technically legal but still inaccessible because of cost and logistics. Reform, Polish-style, appears to actually just be more window-dressing.
And while it is an obvious step for the country to start issuing import licenses to Canadian, Israeli and Australian exporters, how long will that take?
The Next Step Of Reform – Unfettered Patient Access
While things are still bad in Poland, right across the border in Germany where presumably Polish patients could theoretically buy their medical cannabis, all is still not copacetic. Even for the “locals.” Germany’s situation remains dire. But even before legalization in March, Germany was importing bud cannabis from Holland and began a trickle of imports last summer from Canada. That trickle has now expanded considerably with new import licences this year. And presumably, although nobody is sure, there will be some kind of domestic cultivation by 2019.
At Deutsche Hanfverband’s Cannabis Normal activist’s conference in Berlin held on the same weekend as Poland decided to legalize medical cannabis, a Gen X patient expressed his frustration with the situation of legalization in general. Oliver Waack-Jurgensen is now suing his German public insurer. He expects to wait another year and a half before he wins. In the meantime, he is organizing other patients. “They [political representatives] are bowing to political expediency but completely ignoring patient needs,” says Waack-Jurgensen. “How long is this conversation going to take? I am tired of it. Really, really tired of this.”
The issue of countries legalizing cannabis on paper, but not in action, is a problem now facing legalization advocates in the EU and elsewhere who have achieved legislative victories, but still realize this is an unfinished battle. Germany is the only country in Europe with a federal mandate to cover the drug under insurance (for Germans only). And that process is taking time to implement.But even in Germany, patients are having to sue their insurance companies
Germany, Italy and Turkey are also the only countries in Europe as of now with any plans to grow the drug domestically under a federally mandated regulation scheme. Import from Holland, Canada and even Australia appears to be the next step in delaying full and unfettered reform in Europe. See Croatia, Slovenia and Bosnia. How Spanish or Portuguese-grown cannabis will play into this discussion is also an open question mark. Asking Polish patients suffering from cancer to “commute” to Portugal is also clearly unfeasible.
Unlike the United States, however, European countries do have public healthcare systems, which are supposed to cover the majority of the population. What gives? And what is likely to happen?
A Brewing Battle At The EU Human Rights Court?
While the Polish decision to “legalize” medical use is a step in the right direction, there is still a long way to go. If the idea is to halt the black market trade, giving patients real access is a good idea. But even in Germany, patients are having to sue their insurance companies. And are now doing so in large numbers. In a region where lawsuits are much less common than the U.S., this is shocking enough.
But the situation is so widespread and likely to continue for some time, that class action lawsuits – and on the basis of human rights violations over lack of access to a life-saving drug – may finally come to the continent and at an EU (international) level court.
Patients are literally dying in the meantime. And those who aren’t are joining the calls for hunger strikes and other direct civil action. Sound far-fetched? There is legal precedent. See Mexico.
And while Poland may or may not be the trigger for this kind of concerted legal action, this idea is clearly gathering steam in advocacy circles across Europe.
In rather shocking news out of Germany on the cannabis front, it appears that Canadian LP ABcann has not been selected as one of the finalists in the country’s first tender bid to cultivate cannabis domestically.
As reported in the German press, the company has not been invited to submit an offer in the final award procedures. The reason per a company spokesman as quoted in the German media? The company proved it met the required qualification thresholds – namely it could deliver the required amount of product as required by the German government. However the amount it could produce was less than other firms being considered.
That is a strange statement, especially because the ten licenses on offer only called for a total of 2,000 kgs of production total by 2019 and 6600 kgs by 2022.
Who Is ABCann?
ABcann has been in business since 2014 in Canada, when it received one of the first cultivation licenses issued by the Canadian government. It has also been aggressively positioning itself in the German and European market this year – and in multiple ways. It got itself listed on both American and German stock exchanges by summer. The company established a subsidiary headquarters in Schönefeld as of August 2017. As late as October, the company also was appearing at industry conferences, like the IACM medical conference in Cologne, as an expected finalist in the first bid.
An ABCann facility in Canada
However, the company’s plans to build a $40 million, 10,000 square meter plant somewhere in Lusatia are now also reportedly on hold. The exact location of the plant is unknown, per German government requirements that grow facilities remain secret. That said, with a year and a half to complete construction, if given the green light even by early next year, it may be that this was the reason the company has apparently not made the cut. Or perhaps the German government did not believe the company was adequately funded. A September exercise of warrants netted the company an additional $45 million in operating cash. But with expansion plans in not only Canada and Europe, but Australia too, did the company pass the German test for liquidity?
Management changes are also afoot. As of October 1, Barry Fishman, a former Eli Lilly executive took over as CEO of ABCann Global. Ken Clement, founder of the company, announced in mid-October that he was stepping down from his position as Executive Chair of the Board to be replaced by Paul Lucas a former President and CEO of GlaxoSmithKline Canada. John Hoff, the Geschäftsführer (or CEO) of ABcann’s German subsidiary, has also recently left the company. When asked by CannabisIndustryJournal about his reasons for doing so at the Cannabis Normal conference in Berlin at the beginning of November, Hoff cited “management and creative differences” with ABcann Canada as the impetus for his recent departure.
However with the news of ABcann’s apparent loss of a front-runner position in the pending bid, such news appears to herald a bit more of a shakeup at the company, if not a refocussing of overall global strategy.
A source within the company who wished to remain anonymous also said this when contacted directly by CannabisIndustryJournal. “Our top priority currently is to acquire an import license. We also fully intend to pursue all of our plans in the German market, but we have no firm dates on the construction front.”
The State of Medical Cannabis Reform Auf Deutsch
The German medical cannabis question has certainly jerked forward over the past several years through several rough patches. This year it has gotten even stranger. And nobody is quite sure where it will end up.
The news about ABcann is also the latest episode in a very strange story that has continued to develop mostly out of sight of the public.
That bid process, which was expected to announce the winners by late summer, has now dragged on through the fall.Germany began moving forward quietly on the cannabis issue in the first decade of the century. Patients could only access the drug in basically trial mode. Most patients who qualified with a doctor’s prescription and a special permit to take the drug, could also access only Sativex (which is very expensive) or the synthetic form of the drug, dronabinol, manufactured domestically in a facility near Frankfurt. All bud cannabis was imported from Holland by Bedrocan. Strictly controlled not by German, but rather Dutch law on cannabis imports.
In 2014, the first German patients successfully sued the government to grow their own plants if their insurance companies refused coverage of the drug and they proved they could not afford alternatives.
This year, in January, the German government voted unanimously to change the law to mandate public health insurance. The law went into effect in March. Mainly driven by a desire to halt home-grow, the rules changed again. Post March 2017, patient grow rights have now been revoked. Now patients are theoretically allowed to get cannabis covered under public health insurance. In reality, the process has been difficult.
In April, the German government created a new “Cannabis Agency” under the auspices of BfArM. And BfArM in turn issued a tender bid for the country’s first domestic licences in April.
That bid process, which was expected to announce the winners by late summer, has now dragged on through the fall.
When Will The Winners Be Announced?
That too is unclear. It is very likely that the final announcement will not be made by the government until the beginning of the year – after the new government is formed. The so-called “Jamaica Coalition” – of the mainstream CDU, the Greens and the liberals (FDP) is under major pressure to address the issue of access. So far Chancellor Angela Merkel has signalled her resistance for additional changes to the new cannabis law. That said, the current situation in Germany, which is untenable for patients and doctors, as well as companies trying to enter the market and investing heavily, is unlikely to hold for even the next several years.
Problems with finding doctors and medical reimbursement under insurance have kept this patient population from growing the way it would otherwise.In late October, the news broke that two legal complaints had been unsuccessfully filed against the bid itself. Both parties’ complaints were dismissed. Yet there also appears to have been a third complaint that has actually devolved in to a real Klage – or lawsuit. Lexamed GmbH’s claim directly addresses issues expressed by many German-only firms this year. Namely that they were unfairly left out of the bid process because of a supposed lack of experience. As such it is likely to be closely watched by other existing German hopefuls.
This lawsuit has now formally delayed the announcements on the bid decision until at least after December 20th of this year, when the oral arguments will be heard in the case. A decision about the bid will go forward when this has been decided, by the beginning of 2018.
In the meantime? Cannabis imports are starting to enter the country. In late summer last year, Spektrum Cannabis, formerly MedCann GmbH, located just south of Frankfurt, received the first import licenses from the German government to bring medical cannabis into Germany from Canada. Both Aurora and Tilray were granted import licenses this fall.
There are 16 different kinds of cannabis on the market right now. And about 170 kilos of cannabis were imported into the country in the last year. There are also currently about 1,000 patients although this number is artificially low. Problems with finding doctors and medical reimbursement under insurance have kept this patient population from growing the way it would otherwise. There are easily a million patients in Germany right now who would qualify for cannabis if the system worked as it was originally intended in the legislation passed in January.
That said, despite the recent news that ABcann is “out” – at least for this round– apparently the pan-European bid process is still very much alive, despite many recent rumours that it was dead in the water. And plans also seem to be afoot for a separate and additional cultivation licensing round potentially as soon as next year. Details however are unclear and nobody either in the industry or the government is willing to be quoted or give any further information.
Last week, Hoban Law Group announced a major international expansion, with new offices in Latin America and the European Union. The Denver-based law firm said they will have four new offices across the EU by late fall and two new offices in Latin America by spring of 2018.
Bob Hoban, managing partner
Bob Hoban, managing partner and co-founder of Hoban Law Group, says they have already been working internationally for years. “HLG steps in to global markets quickly as our direct work with government officials on policy and regulation has kept us in this important global curve,” says Hoban. “We have accepted the challenge of being global cannabis industry leaders & experts and will work with strategic industry-leading partners, such as New Frontier Data, to move the industry forward across six countries.”
The press release says the law firm has been advising governments around the world on cannabis policy for several years, as well as working on a handful of international business transactions in the past. These new offices will work mainly with structured finance, mergers and acquisitions, worldwide trade, regulatory law and equity placement in the cannabis (including industrial hemp) industry. “Combining the firm’s corporate practice, with our intellectual property and tax practice groups will position our firm’s client’s to succeed at the highest levels in this international marketplace,” says Hoban.
The press release also announced they have added Andrew Telsey, an experienced securities attorney, to their firm. He has helped take more cannabis businesses public in the U.S. than any other attorney.
Hoban Law Group, founded in 2009, is the nation’s largest cannabis business law firm. They have attorneys in every state that has legalized cannabis in the United States.
MJ Freeway, a seed-to-sale traceability software company with a number of government contracts, has been making headlines this year for all the wrong reasons. A series of security breaches, website crashes and implementation delays have beleaguered the software company throughout 2017.
Just this morning, the Philadelphia Inquirer reported the company’s services crashed Saturday night and Monday afternoon. That article also mentions an anonymous hacker tried to sell sensitive information from the Washington and Nevada hacks in September. Back in April, when Pennsylvania awarded the state’s contract to MJ Freeway for its tracking system, Amy Poinsett, co-founder and chief executive officer of MJ Freeway told reporters “I think I can confidently say we are the most secure cannabis company in this particular industry.” It is safe to say this is now being called into question.
Earlier this week, New Cannabis Venture’s Alan Brochstein reported that MJ Freeway is unable to meet Washington’s October 31st deadline to integrate their software with the state, forcing customers to manually report data.
According to an email we obtained, all of MJFreeway’s clients in Spain experienced an online outage, but that services were restored within 24 hours. In an email sent to clients in Spain, the company told customers that the problems were the result of a system failure. “Our initial analysis indicates that this was a system failure and unfortunately none of the data was able to be successfully retrieved from the backup archive due to an error but we can assure you that none of your data was extracted or viewed at any moment,” reads the email. “We are extremely distressed regarding the event that occurred with the system and the service interruption that occurred yesterday. We recognize that this is a situation that is very serious and negatively impacts your club.” The email says that MJ Freeway is addressing those problems in a few ways, one of which being ongoing audits of their data backups. “The event has led us to reconstruct our “hosting environment” in Europe to use the latest technology from Amazon Web Services with the best redundancy, flexibility and security, using the highest stability measures in the AWS environment,” reads the email. While the site will be restored fully, according the email, historical data is lost. The company is working with their clients to help them get data back into the system.
Germany is proceeding down the path to officially grow its own medical cannabis crops. Medical use became legal this year, along with a federal mandate for cheap access. That means that public health insurance companies, which cover 90% of Germans, are now firmly on the hook if not front line of the cannabis efficacy issue. As such, Germany’s medical market is potentially one of the most lucrative cannabis markets in the world, with a total dollar amount to at least challenge, if not rival, even California’s recreational market. Some say Canada’s too.
However, before “home grow” enthusiasts get too excited, this legislative move was an attempt to stymie everything but commercial, albeit medical production. Not to mention shut off the recreational discussion for at least another four years.
How successful that foray into legalization will be – especially given the chronic shortages now facing patients – are an open question. Not to mention other infrastructural issues – like doctor unfamiliarity with or resistance to prescribing cannabinoids. Or the public insurers’ so-far reluctance to cover it even though now federally mandated to do so.
Regardless, Germany decided to legalize medical use in 2017 and further to begin a sanctioned domestic cultivation for this market. The decision in the Bundestag to legalize the drug was unanimous. And the idea to follow UN regulations to establish this vertical is cautiously conservative but defendable. Very predictably German in other words.
Since then, however, the path has been far from smooth. Much less efficient.
Trouble in Germany’s Medical Cannabis Paradise
In April the government released its tender bid. And no matter how exciting it was to be in the middle of an industry who finally saw a crack of light, there were also clouds to this silver lining that promised early and frequent thunderstorms on the horizon.
By the time the tender bid application was due in June, it was already clear who the top firms were likely to beIn fact, by the end of the ICBC conference, which held its first annual gathering in Berlin at the same time the bid tender was announced, the controversy was already bubbling. The requirements of the bid, for a laughably small amount of cannabis (2,000 kg), mandated experience producing high qualities of medical marijuana in a federally legitimate market. By definition that excluded all German hopefuls, and set up Canada and Holland as the only countries who could provide such experience, capital and backlog of crop as the growing gets started.
The grumbling from Germans started then.
However, so did an amazingly public race to gain access to the German market directly – by acquisition or capital expenditures that are not refundable easily (like real estate or even buyouts). The common theme? They were large amounts of money being spent, and made by major Canadian Licensed Producers who had the right qualifications to meet the standards of the bid. In fact, by the time the tender bid application was due in June, it was already clear who the top firms were likely to be. They were the only ones who qualified under the judging qualifications.
And while nobody would commit publicly, news of the final decision was expected by August. Several Canadian LPs even issued press releases stating that they were finalists in the bid. But still no news was forthcoming about the official list.
Delay, Delay and More Delay
A month later, as of September, and there was still no official pronouncement. Nor was anybody talking. BfArM, the regulatory agency that is supervising this rollout as well as the regulation of all narcotic drugs (sort of like a German version of the FDA) has been issuing non-statement statements since the late summer. Aurora, however, one of the top contenders for cultivation here, was quietly issued an ex-im license by both Canadian and German authorities. Publicly, this has been described as an effort to help stem the now chronic cannabis shortage facing patients who attempt to go through legitimate, prescribed channels. On the German side, intriguingly, this appears to be a provisional license. Privately, some wondered if this was the beginning of a backdoor approval process for the top scoring bid applicants for cultivation. Although why that might be remains unclear.
Whispered rumours by industry sources that wish to remain anonymous, have suggested that the entire bid is still hanging in jeopardy. Late in the month, rumours began to fly that there were now lawsuits against the bid process. Nobody had much detail. Not to mention specifics. But CannabisIndustryJournal can now confirm in fact that there have been two lawsuits (so far).
The summary of the complaints? It appears that two parties, filing with the “Bundeskartellamt” (or regulatory office focusing on monopolies and unfair business practices) did not think the bid process or scoring system was fair. And both parties also lost.
But as of mid-October, there is still no public decision on the bids. What gives?
Whispered rumours by industry sources that wish to remain anonymous, have suggested that the entire bid is still hanging in jeopardy. Even though the plaintiffs failed, some have suggested that the German government might force a complete redo. Others hint that it will likely be slightly revised to be more inclusive but the regulatory standards must remain. If a redo is in the cards, will the German government decide to increase the total amount of yearly cannabis to be delivered? At this point, it is only calling for 2,000 kg per year by 2019. And that, as everyone knows, is far too little for a market that is exploding no matter the many other obstacles, like insurance companies refusing to compensate patients.
What Is Behind The Continued Delays?
There are several theories circulating the higher levels of the cannabis industry internationally right now even if no one is willing to be quoted. The first is that the total number of successful applicants, including the recent litigants, will be slightly expanded, but stay more or less the same. There is a high standard here for the import of medical cannabis that the Germans intend on duplicating domestically.
The Comprehensive Economic Trade Agreement (CETA – the often controversial free trade alliance between Europe and Canada) is still in the final stages of approval.The second is that the German government will take its time on announcing the final winners and just open the doors to more imported product. This will not be popular with German insurers, who are on the hook to pay the difference. However with Tilray now on track to open a processing facility in Portugal and Canopy now aligned with Alcaliber in Spain, cross-continent import might be one option the government is also weighing as a stop-gap provision. Tilray, who publicly denied in the German press that they were participating in the cultivation license during the summer, just issued a press release in October announcing a national distribution deal to pharmacies with a German partner – for cannabis oil.
But then there is another possibility behind the delay. The government might also be waiting for another issue to resolve – one that has nothing to do with cannabis specifically, but in fact is now right in the middle of the discussion.
The Comprehensive Economic Trade Agreement (CETA – the often controversial free trade alliance between Europe and Canada) is still in the final stages of approval. In fact, on September 19, a prominent German politician, Sigmar Gabriel of the Social Democrats (SPD) made a major statement about his party’s willingness to support Germany’s backing of the deal. It might be in fact, that the German government, which is supportive of CETA, got spooked about the cannabis lawsuits as test trials against not cannabis legalization, but a threat to the treaty itself.
Quality control, namely pesticides when it comes to plant matter, and the right of companies to sue governments are two of the most controversial aspects of this trade deal. And both appear to have risen, like old bong smoke, right at the final leg of closing the cannabis cultivation bid.
Will cannabis be seen as a flagship test for the seaworthiness of CETA? On a very interesting level, that answer may be yes. And will CETA in turn create a different discussion about regulatory compliance in an industry that has been, from the beginning of this year, decidedly Canadian-Deutsch? That is also on the table. And of great concern to those who follow the regulatory issues inherent in all. Not to mention, of course, the industry itself.
Conclusions?
Right now, there are none to be had.
However at present, the German bid process is several months behind schedule as Canadian producers themselves face a new wrinkle at home – the regulation of the recreational crop in the provinces.
It is also clear that there are a lot of questions and not a whole lot of answers. Not to mention a timeline when the smoke will clear.
This article continues the bill-by-bill review begun in the August 1st article on cannabis reform legislation proposed in the 115th Congress. In the next article and final piece in this series, we will examine the banking and tax reform bills related to cannabis.
Medical Cannabis Reform Bills
S. 1008 – Therapeutic Hemp Medical Act of 2017
HR. 2273 – Charlotte’s Web Medical Access Act of 2017
Policy: These bills would amend the CSA to end federal prohibition over all CBD products and all hemp plants with THC content levels of below 0.3%. In other words, people and businesses would be free to grow hemp and/or manufacture CBD products without any fear of federal prosecution. These products would most likely then fall under the regulation of other federal and/or state agencies, but the bills do not specify what agencies they might be or what controls might be put in place.
Impact: The impacts from these bills nationwide have the potential to be massive. Hemp is a plant that can be put to highly effective use in many different industries, from textiles and construction to foodstuffs and seafaring. The efficiency of its growth and the breadth of its utility will make it a highly valuable commodity and a competitor with many other raw materials. For state-legal cannabis businesses, the legalization of CBD and hemp at the federal level could fundamentally change the market for those products. States that legalized cannabis already have provisions in place dealing with hemp and CBD—sometimes alongside their cannabis laws, sometimes handled by a separate state agency—and they could either leave those as they are or open up those markets to interstate activity. In states that have not legalized, CBD and hemp are typically included in the state’s definition of cannabis, and therefore they will remain illegal under state law unless further action is taken. Most likely, if federal prohibition ends on hemp and CBD, state prohibition will follow suit. Because legalization at the federal level will allow for interstate commerce in hemp and CBD, expect the emergence of a nationwide market, driven by online sales and interstate marketing, and developing independently from a cannabis industry still constrained to in-state activities.
Procedural Status:
Senator Cory Gardner (R-CO) Photo: Gage Skidmore, Flickr
S. 1008
Introduced: May 2, 2017 by Senator Cory Gardner (R-CO)
Cosponsors: 7 Republican, 4 Democrat
Referred to Senate Committee on:
Judiciary
HR. 2273
Introduced: May 1, 2017 by Representative Scott Perry (R-PA)
Cosponsors: 10 Republicans, 10 Democrats
Referred to House Committee on:
Judiciary
Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
Energy and Commerce
Subcommittee on Health
Financial Services
S. 1276 – Cannabidiol Research Expansion Act
Policy: This bill would accomplish two objectives: First, it would open channels for researchers to access and experiment with cannabis and cannabis extracts. Second, it would initiate the process at the end of which the Attorney General must make a determination as to which Schedule of the CSA is most appropriate for cannabidiol (CBD).
Impact: The impact on this legislation to state-legal cannabis businesses is rather remote—in both time and practice. The research access provisions will certainly create an uptick in medical and psychological research activity, the outcomes of which will add to our knowledge of how consuming cannabis in different forms and amounts effects the brain and body. This type of government-regulated research takes many years to process and complete, as both bureaucratic and scientific standards must be met. As for initiating the re/de-scheduling review process for CBD, this is a direct response to the 2016 denial by the DEA to re/de-schedule cannabis. That determination, published in the Federal Registrar on August 12, 2016, was made following a comprehensive study of the medical benefits and harms of cannabis conducted by the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA). Although such an in-depth study and its resulting negative determination pronounced so recently would normally rule out the chances of success for another re/de-scheduling attempt so soon after, the DEA did leave the door open with its statement that it “did not focus its evaluation on particular strains of marijuana or components or derivatives of marijuana.” It is just this door that S. 1276 seeks to exploit. By focusing the re/de-scheduling process on CBD specifically, the presumption is that the outcome of the scientific CBD studies would have a far better chance at satisfying the re/de-scheduling criteria set forth in the CSA. If such a determination was made, then the impact would come in two potential varieties. One, CBD would be rescheduled and become available for medical use according to FDA rules applicable to other prescription drugs. Two, CBD would be descheduled and would fall under the prerogative of the states, in which case the above analysis for S. 1008 and HR. 2273 would pertain.
Senator Dianne Feinstein (D-CA) Photo: Daniel Torok
Procedural Status:
S. 1276
Introduced: May 25, 2017 by Senator Dianne Feinstein (D-CA)
Cosponsors: 3 Republican, 2 Democrat
Referred to Senate Committee on:
Judiciary
S. 1374 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017
HR. 2920 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017
HR. 715 – Compassionate Access Act of 2017
HR. 714 – Legitimate Use of Medical Marijuana Act (LUMMA) of 2017
Policy: All four of these bills would make an exception to the CSA for state medical cannabis laws. Federal prohibition, in other words, would end for medical cannabis in those states that have legalized, and it would be left to those states to devise how it would be regulated. In states that have not legalized, both state and federal prohibition would remain. The companion CARERS Acts in the House and Senate, along with HR. 714, would also amend FDA rules to widen access to cannabis for research purposes.
Impact: The impact of these bills on the rules for state-legal medical cannabis businesses would be relatively minor in terms of functionality. This is so because they leave not only the determination to legalize up to the states, but they leave the design of the regulatory system up to the states as well. In other areas, however, big changes will be seen that benefit the industry: banking will open up for state medical businesses, and so will the opportunity to write-off ordinary business expenses. Investment risks over legality will end, making for easier access to capital. Questions about contract enforcement and risks of federal prosecution will become moot, and when state regulatory bodies make decisions on how to govern the industry, they will no longer have to concern themselves with U.S. DOJ enforcement and/or prosecutorial policies. Enactment of any of these bills would be a big win for medical cannabis.
Senator Cory Booker (D-NJ) Photo: David Shinbone, Flickr
Procedural Status:
S. 1374
Introduced: June 15, 2017 by Senator Cory Booker (D-NJ)
Cosponsors: None
Referred to Senate Committee on:
Judiciary
HR. 2920
Introduced: June 15, 2017 by Representative Steve Cohen (D-TN)
Cosponsors: 1 Republicans
Referred to House Committee on:
Judiciary
Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
Energy and Commerce
Subcommittee on Health
Veterans’ Affairs
Subcommittee on Health
HR. 715
Introduced: January 27, 2017 by Representative Morgan H. Griffith (R-VA)
Cosponsors: 2 Republicans, 1 Democrat
Referred to House Committee on:
Energy and Commerce
Subcommittee on Health
Judiciary
Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
HR. 714
Introduced: January 27, 2017 by Representative Morgan H. Griffith
Cosponsors: 1 Democrat
Referred to House Committee on:
Energy and Commerce
Subcommittee on Health
HR. 2020 – To Provide for the Rescheduling of Marijuana into Schedule III of the CSA
Policy: As its wordy title indicates, this bill would bypass the schedule review process and by legislative fiat move cannabis from Schedule I to Schedule III of the CSA.
Representative Matt Gaetz (R-FL)
Impact: Businesses handling drugs in Schedule III must register with the DEA and comply with DEA record keeping and security requirements. Doctors would be permitted to prescribe cannabis products. Importing/exporting will become available by permit, which would bring state businesses into competition with foreign cannabis firms. The biggest impact will be that cannabis sold pursuant to federal law will have to undergo the FDA’s New Drug Application process conducted by the Center for Drug Evaluation and Research, the largest of the FDA’s five centers. This includes clinical testing and a comprehensive chemical/pharmacological review. The drug would then be subject to FDA regulation for marketing and labelling. For states that wanted to maintain their legal medical cannabis systems, a conflict would remain because cannabis cultivators and dispensaries could operate in compliance with state law while simultaneously failing to meet new FDA and DEA requirements. States will then have a choice: bring state laws into line with federal laws, creating all of the advantages of federal legality discussed above, yet causing major disruptions to the industry; or retain the status quo, allowing the industry to grow as is with all of the in-state advantages but without the advantages of federal legalization. This all would of course leave behind recreational cannabis which would remain in the legal gray zone.
Introduced: April 4, 2017 by Representative Matt Gaetz (R-FL)
Cosponsors:
Referred to House Committee on:
Energy and Commerce
Subcommittee on Health
Judiciary
HR. 331 – States’ Medical Marijuana Property Right Protection Act
Policy: Section 881(a)(7) of the CSA subjects to federal forfeiture all property involved with cannabis activities. This bill would make an exception to that provision for all property in compliance with state medical cannabis laws.
Impact: Although not legalizing medical cannabis, this bill would be a strong step in the direction of legitimizing state-legal medical cannabis businesses. As a result of the property forfeiture clause of the CSA, two impediments faced by the medical cannabis industry is that investors are hesitant to invest and land lords are hesitant to lease or otherwise engage the medical cannabis market. By eliminating the risk of such property loss due to the federal-state conflict, this bill would have the very welcomed impact of easing access to capital and expanding opportunities for land use.
Introduced: January31, 2017 by Representative Barbara Lee (D-CA)
Cosponsors:
Referred to the House Committee on:
Judiciary
Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
Recently Puerto Rico approved the law that regulates the production, manufacturing, dispensing and consumption of medical cannabis. Although medical cannabis was already “legal” through an executive order and was “supervised” by local regulation, there was no law to back up the industry and protect investors.
The creation and approval of laws resides in the hands of elected individuals. Expecting absolute knowledge is unrealistic, especially when we refer to cannabis as a medicine. Sadly, the lack of knowledge is affecting the patients, and an emerging industry that can be the solution to the Island’s current economic crisis.
I am in no way insinuating that Puerto Rico is the only example. I have seen this type of faulty thinking in many places, but cannabis is the perfect manifestation of this human defect. Check some of your laws, and you will find a few that nearly qualify for the same characterization.
As we can see, lack of knowledge can be dangerous. Objective, factual information needs to be shared, and our leaders need a formal education program. Patients need them to have a formal education program to better understand and regulate the drug.
The approval of this law is a significant step for the Island. Still, many Puerto Ricans are not happy with the result. The lack of legitimate information coupled with conservative views made the process an excruciating one. It took many hearings, lots of discussions and created tensions between the government and population, not because of the law, but for the reasons behind the proposed controls. Yes, it was finally approved, but with onerous restrictions that only serve as a detriment to the patient’s health, proving the need for an education program designed specifically to provide data as well as an in-depth scientific analysis of the information, then, you address the issue at hand.
Let’s take a look at some of the controls implemented and the justification for each one as stated by some members of the government.
Patients are not allowed to smoke the flower in its natural state unless it is a terminal patient, or a state-designated committee approves it. Why? Because the flower is not intended for medical use (just for recreational) and the risks associated with lung cancer are too high. Vaporize it.
It was proposed to ban edibles because the packaging makes it attractive for children. Edibles made it, but with the condition that the packaging is monochromatic (the use of one color), yes, insert rolling eyes here.
It only allows licensed pharmacists to dispense medical cannabis at the dispensary (bud tending). The rationale? Academic Background.
The new law requires a bona fide relationship between the doctor and the patient to be able to recommend medical cannabis, even if the doctor is qualified by the state and is a legitimate physician. This is contrary to their policy with other controlled substances, where a record is not required.
When there are different beliefs on a particular topic like it is with medical cannabis, you are not only dealing with the technical details of the subject; there is an emotional side to it too. Paradigms, stigma, stereotypes, beliefs and feelings affect the way we think. We let our judgment get in the way of common sense. When emotions, morals and previous knowledge are hurting objectivity, then we have to rely on scientific data and facts to issue resolution. However, when the conflict comes from opinions, we rely on common sense, and this one is scarce.
Now education: what can education do with beliefs, morals and emotional responses?
David Burns in his book “Feeling Good: The New Mood Therapy” discusses ten thinking errors that could explain, to those like me that want to believe this is a legitimate mistake, that there are cognitive distortions that affect the result of ours thoughts.
Now let’s analyze …
There are many things wrong with this prohibition. First, the flower is natural and organic. It is the easiest to produce and the cheapest alternative for patients; there are more than 500 compounds all interdependent to make sick people feel better. There are seas of data, anecdotal information, serious studies collecting information for decades and opinions of highly educated individuals that support the consumption of flower in its natural state for medical purposes. The benefits are discarded, and personal opinions take the lead. Based on Burns’s work this is a textbook case of Disqualifying the Positive: dismissing or ignoring any positive facts. Moreover, let’s not forget the benefit for illegal growers and distributors.
Keep out of reach of children, does it ring a bell? For years and years, we have consumed controlled substances, have manipulated detergent pods, bleach and so many other products that can be fatal. The warning is enough, just like is done with other hazardous Here we can notice how we can fall into the Fortune Teller Error, which believes that they know what will happen, without evidence.
Not even the largest drug stores in the USA have this requirement. There is one pharmacist per shift, and a licensed pharmacist supervises pharmacy technicians. Medical cannabis is not even mentioned in current Pharmacy’s BA curricula. Most pharmacists take external courses in training institutes. On the other hand, bud tenders go through a very comprehensive certification process that covers from customer service to cash management and safety and of course all technical knowledge. If anything, a botanist (plant scientist) makes more sense. What a splendid example of magnification (make small things much larger than they deserve). This is an unnecessary requirement.
The relationship between a certified doctor and patient has to be bona fide (real, honest). In practical terms, the doctor has to treat the patient for some time (sometimes six months) and have a history of the patient. Even though this sounds logical, not all doctors are certified to recommend cannabis, but all can diagnose. Are we penalizing the doctor or the patient? The only thing that you need to qualify as a patient is the condition. Besides, I had prescriptions filled for controlled medications at the drug store with no history. Why are we overgeneralizing Do we think that all doctors are frauds?
There is a great deal to be happy about with medical cannabis legalization in Germany. This is the first country that has mandated insurance coverage of the drug – at least at the federal legislative level.
However, as the government evaluates the finalists in the first tender bid for domestically grown and regulated cannabis, a real crisis is brewing for patients on the ground. And further one that the industry not only sees but is trying to respond to.
Spektrum Cannabis GmbH, formerly MedCann GmbH began trying to address this problem when they obtained the first import license for Canadian cannabis last year. They are also one of the apparent five finalists in the pending government bid to grow the plant domestically for medical purposes. According to Dr. Sebastian Schulz, head of communications for Spektrum, “Shortly after the new cannabis law was reformed we experienced a huge increase in demand from the side of patients. We had prepared for that. The German population is very curious about cannabis as a medicine and in general very open to natural remedies.”
People are curious here. But like other places, the law in Germany has evolved slowly. Much like Israel, the government has allowed a trickle of patients to have access to cannabis by jumping through multiple, time consuming hoops. The process of getting cannabis prescribed, much less getting a pharmacy to stock it, was difficult. Patients had to pay out of pocket – a monthly cost of about $1,700. While that is expensive by American standards, to Germans, this is unheard of. The vast majority of the population – 90% – is on public health insurance. That means that most Germans get medications for $12 a month, no matter what they are. Allegedly, German patients were supposed to get about 5oz a month for this price. At least that is what the law says.
People are curious here. But like other places, the law in Germany has evolved slowlyAs in other countries, no matter what Germans think about recreational reform, the clear majority of them at this point support medical use. And at this point, both legislatively and via the courts, the government has said and been required to provide the drug to Germans patients at low cost.
Unintended Effects & Consequences
Since the law went into effect in March of this year however, things have suddenly turned very dire for patients.
The handful of people who had the right to grow at home – established under lawsuits several years ago – were suddenly told they could no longer do so. They had to go to a doctor and regular pharmacy. Even regular patients in the system found that their insurance companies, allegedly now required to pay, are refusing to reimburse claims. Doctors who prescribed the drug were abruptly informed that they would be financially responsible for every patient’s drug cost for the next two years (about $50,000 per patient).
Photo: Ian McWilliams, Flickr
To add a final blow to an already dire situation, German pharmacies that carried the drug, then announced an additional fee. It is about $9 extra per gram, added at the pharmacy, pushing the price of legitimate cannabis north of $20 dollars per gram. This is justified as a “preparation fee.” Cannabis bud is technically marked as an “unprocessed drug.” This means the pharmacies can charge extra for “processing” the same. In reality this might be a little bud trimming. If that. The current distributors in the market already prep and pre-package the drug.
What this bodes for a future dominated by infused products, oils and concentrates is unclear. However the impact now is large, immediate and expensive in a country where patients also must still go to the pharmacy in person for all prescription drugs.
There is no mail order here, by federal law. Online pharmacies are a luxury for Auslanders.
At minimum, this could mean that without some relief, German patients will go right back into the black market and home grow.While nobody has challenged this situation yet en masse, it is already a sore point not only for patients but across the industry. It means that an already expensive drug has gotten even more expensive. It also means that the government regulations are not working as planned.
At least not yet. For the large Canadian companies now coming into the market with multimillion-dollar investments already sunk in hard costs, Germany will be a loss-leader until the system sorts itself out.
According to Schulz, whose company is now in the thick of it, the new law is very vague. “Currently, there are almost no cannabis flowers available in German pharmacies because companies like us are not allowed to sell them,” says Schulz. “Various different regulatory demands come up that seemed to change on a monthly basis. We are ready to deliver even large amounts of cannabis for a market that might well explode soon – but we first need to overcome the regulatory nightmare that leads to the suffering of so many patients here these days.”
At minimum, this could mean that without some relief, German patients will go right back into the black market and home grow. Black market costs for cannabis are about $10-15 a gram. In other words, exactly the situation the government was hoping to avoid.
What Is Causing The Situation?
The intended effect of the legislation was twofold, according to industry insiders: To legalize cannabis in such a way to meet a rising public demand and, in the face of a court decision, to limit the home grow movement. The latter of which, despite federal regulations, is thriving here. Germans like to grow things, and cannabis is a rewarding plant to nurture.
High attendance at the Mary Jane Grow Expo in Berlin in June is just one sign that the genie is out of this particular bottle. BfArM – the federal agency in charge of regulating narcotics and medical devices – cannot stuff it back.Patients are going back to the way things were
However home grow does not build a professional, high volume cannabis market, much less a highly regulated medical one make. The government also made clear that it is going to have strict inspections and quality controls, and will technically buy all the cannabis produced, per the terms of the bid application process.
However, it is not entirely clear when the government will start actually doing the buying. And why the buying has not started yet. If insurance companies are refusing to pay, this means the government is not reimbursing them. The same government, which has also agreed to do so, as of March 2017.
What Gives On Good Old German Efficiency?
On the streets, patients are going back to the way things were. Many are used to fighting for the only drug that makes them feel better. The euphoria in May, for example, has been replaced with weary acceptance that things might get a bit worse before they really improve.
That said, there is also a realization that more activism and lobbying are required on just about every front. If an extrapolation of data from say Colorado or California is applied to Germany, there are already at least a million eligible patients here, based on the qualifying conditions. The government is planning for an annual increase in medical patients of about 5-10,000 a year, including in the amount of cannabis they are planning on buying from the licensed producers they choose. The numbers, however, are already not matching.Even existing patients are literally being forced into the black market again.
Added to this wrinkle is the other reality that is also looming, particularly now.
With one exception, all of the firms now apparently in contention as finalists for the German government bid will also be supplying a domestic market in Canada that is going rec next summer. One year, in other words, before the German companies even begin producing.
What Is The Upshot For Patients?
Guenther Weiglein is one of the five patients who sued for home grow rights in 2014. He is now suing again for the right to extend home grow privileges until the government figures out its process. He is not the only one. Earlier this year he was told he had to stop his home grow and integrate into the “mainstream” system. So far, he, along with other patients who are suing, including for insurance coverage, have not been able to get cannabis easily through the system, although they are starting to make progress.
Weiglein’s situation is made even more frustrating by the fluidity of the situation. As of late July, he had finally gotten agreement from his insurance company to cover the drug. But now he cannot find a doctor willing to accept the financial risk of prescribing it to him. And in the meantime he has no access to medication.
Talk to any group of advocates right now, and there is one ongoing story. Even existing patients are literally being forced into the black market again.
And those that can’t afford it? They are out of luck. Some patients say a tragedy like someone dying will create the impetus to move this into public eye. A hunger strike here by a leading cannabis doctor earlier this summer has so far not had much impact on policy. There is a great deal of pessimism here, as promised change earlier this year has turned into a long and drawn out multiyear question mark.
If this sounds like a bubbling and untenable situation, especially before a national election, it is. The prospect of another four years of Angela Merkel does not bode well for fast cannabis reform.
That said, the German government is now in an interesting situation. The law has now clearly changed to say that sick Germans are allowed to use cannabis as a drug of choice for chronic diseases when all else fails. Further, the national government has bound the insurance industry to cover it. So far, every patient who has sued for coverage has won. That has not, however, moved the insurance industry altogether. Nor has it solved the problem with doctors prescribing the drug.
Many now ask what will? It is clear, however, that it will change. The question is when, how fast, and in what situations.
The problem will undoubtedly ease by 2019, when the first German crops are finally ready, although it will be far from completely solved.
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