The news is intriguing in a world overwhelmed with pandemic news. THC Global, a Canadian-Aussie company now raising money and signing global deals, has just bought a “clinic network” of 30 prescribing physicians that will be able to supply up to 6,000 Australian patients this year.
In doing so, this entity is clearly beginning to establish a pattern of expansion in a new medical market not seen so far outside of Canada. Namely being able to obtain the all-important prescription for one’s brand at the doctor or prescriber’s office which is affiliated with a certain producer. Pharmacies and dispensaries downstream have no discretion for any other product to sell if the brand is written right on the prescription itself.
And this marks a new step in an industry frustrated with the high prices and high levels of red tape in other international environments where more widespread medical cannabis reform has come.
The Situation in Germany Germany represents, so far at least, the destination market of choice for Canadian cannabis firms (for the last several years at least). This is for several very sound business reasons (at least in theory).
The German medical market is the largest in Europe. Health reforms which swept the country at the time of reunification also created a system that is in its own way a hybrid of the more European (and British) NHS and American healthcare. Namely, 90% of the German population is on the system, but it is tied to employment and income. Freelancers, even of the German kind, must use private healthcare as must all non-passport foreigners. If you make over a certain amount of money (about $65,000), you must also pay for private healthcare. As the cannabis revolution rolls forward, many cannabis patients are caught in changing rules and a great reluctance by public health insurers to allow fast entry of any new drug, including this one. This is based on “science” but also cost.
Bottom line? Yes, the market is lucrative and growing, and yes, cannabis is covered under public health insurance, but the ability of any producers to be able to maintain a reliable, steady market of “prescribers” is highly limited. Furthermore, unlike anywhere else in the world, pharmacists play an outsized role in the process – namely because there are no chains (more than four brick and mortar outlets are verboten). Prices and availability vary widely across the country.
There are also no “online” drug stores where patients can send prescriptions in the sense that this vertical has developed in other countries.
Hospital dispensation is, for all the obvious reasons, highly expensive and generally prohibitive for the long term, if not serving much larger numbers of patients.
The Problem in the UK Like Germany, the UK decided to launch medical “cannabis” – or at least cannabinoid-related drugs under the purview of the NHS, but there are several issues with this.
The problems start with the fact that the system remains a monopoly for one British company, GW Pharmaceuticals. The medication produced by them, including Sativex and Epidiolex is expensive and does not work for many patients that it is produced “on label” for (such as MS or childhood epilepsy).
And then of course, the largest group of cannabis patients anywhere (chronic pain) have been explicitly excluded from the list of conditions cannabis can be prescribed for under public health guidelines in the UK. This, like Germany, has created a highly expensive system where those patients who obtain the drug on a regular (and legal basis) have to have both private healthcare and obtain help through private clinics. While there are several chain clinics now forming in the UK, this is not the same thing as “buying” patients in the thousands – the model seen in Canada from the beginning of 2014.
The market has a lot of potential, in other words, but like Germany, via very different paths to market than seen in Canada, in particular.
Why Is Canada Different? The development of the medical market came through federal change in the law around the turn of the century. Namely, after patients won the right to grow for themselves, via Supreme Court legal challenge, patient collectives gradually formed to grow and sell cannabis that was more “professionally” cultivated. This, in turn, became the right of private companies and indeed household names in the Canadian market saw buying patient pools as their path to financing on the equity markets as of 2014.
This is not widely popular within the industry. Indeed, the last legal challenge mounted by the industry to ban non-profit patient collectives fell apart in 2016 – the year that the larger Canadian companies began to look abroad to Europe.
It is also undoubtedly why, beyond the red tape they face in Germany and the UK if not across Europe, Canadian firms are looking to hybridize a model which worked well for them at least in the early days of capitalization of the private industry. And maybe Australia will be “it.” Stay tuned.
There is no doubt all industries are feeling the effects of the coronavirus pandemic; however, cannabis businesses face a unique set of challenges.
Business operations, consumer behavior and financials will be analysed more than ever as businesses seek to position themselves during the pandemic and beyond when lockdowns will eventually be alleviated. As Benjamin Franklin said, “Out of adversity comes opportunity.” COVID-19 is an opportunity for cannabis firms to restructure their business model from a direct, consumer, wholesale and partnership level; eradicate inefficiencies and reassess launch or expansion plans.
Like many other sectors, the cannabis market should still expect to lose revenue due to factors like store closures, disrupted supply chains and restricted transport.
The outlook may seem bleak, but it’s not all doom and gloom when looking at the CBD and medical cannabis markets in more detail.
With social distancing measures still in place, cannabis firms which offer an online sales platform are seeing a surge in business. During COVID-19, there has been a greater focus on staying healthy and boosting immune systems which is driving consumers to a variety of health-focused products including CBD.
Fortunately, many of the physical retailers who stock CBD products in the UK have been permitted to stay open, despite a nation-wide lockdown, so some consumers are bulk buying their usual products while others are turning to e-commerce and delivery services. This demonstrates how quickly some firms have adapted to keep their businesses afloat.
However, border restrictions have tightened and as many supply and logistics workers remain in quarantine, the CBD market could see challenges in maintaining supply lines as the pandemic continues.
This comes in addition to CBD firms working to process a Novel Food Application and fulfill the necessary requirements by March 31, 2021. Despite lobbying from the Cannabis Trades Association (CTA) and despite the impact the global pandemic is having on the sector, the deadline has not been extended.
CBD businesses need to capitalise on the opportunities arising during this downturn; be creative and pin-point ways to keep CBD consumers engaged. By building on their brand and refreshing where necessary, they can attract consumers and develop a loyal customer base. Sustaining a strong online presence and enhancing social media and marketing strategies can lead to an increase of online sales. The brands which can leverage awareness and embody trustworthiness will be the winners.
CBD cannot cure COVID-19
As the epidemic continues into May, there has been no shortage of scammers attempting to try and short-change a fearful, confused population. Unfortunately, the cannabis industry has seen some shameful claims by CBD and hemp companies, notably in the US, who claimed their products could cure or fight off the symptoms of COVID-19.
CBD has been positioned as having several positive health effects by manufacturers and retailers – most notably in reducing pain and inflammation, decreasing anxiety and helping sleep – which may be on the rise within this unsettling environment.
The International Association for Cannabinoid Medicine (IACM), issued a statementon the coronavirus pandemic saying, “there is no evidence that individual cannabinoids or cannabis preparations protect against infection … or could be used to treat COVID-19.” Trials have been launched in Israel to explore whether CBD’s anti-inflammatory properties can be an effective COVID-19 treatment. Until this has been clinically proven, cannabis firms must not make unsupported claims.
During COVID-19, health systems are under unprecedented pressure, which is impacting patient access to all medical treatments, including cannabis.
The medical cannabis industry has swiftly adapted to these challenges by rolling out video consultations and other online consultation services to enhance patient access.
While the Home Office activity for licencing will be limited during this time, companies must work with regulators to keep supply lines open, so that those in need receive their medicine without relying on black-market activity. On April 29, the government published emergency legislation to allow patients to continue accessing controlled drugs for the duration of the epidemic, from pharmacies, without a prescription. This only applies to patients with ongoing NHS treatment, so there is still a long way to go, as private cannabis clinics must fill the gap in the meantime.
The global pandemic has impacted us all, and many patients are concerned about how they will access vital services. Many patients receiving medical cannabis have underlying health conditions which make them more susceptible to contracting COVID-19 and those with chronic neurologic conditions like epilepsy are in danger of suffering potential side effects.
Several of the qualities needed to survive the coronavirus pandemic – awareness, self-containment and support – are basic skill sets to carers. Beyond the pandemic, policy shifts, investment and education are needed to lift the barriers to medical cannabis access, and this will require all businesses operating in the cannabis industry to drive change.
2020 is a defining year for cannabis
The cannabis industry is resilient against socio-economic, political and policy drivers- this we’ve seen time and time again. Now we must create an even stronger UK industry, where products are safely and readily available to those who need them. As the cannabis market matures and the competition things out, only quality cannabis products and services will be in play. Those that can innovate their approach to production, distribution and consumption during the pandemic can be the catalyst for long-lasting changes for the cannabis industry to operate for the better.
As of March 2, right before the UN punted on reclassification of cannabis at the international level for another nine months, the UK government eased import restrictions for people in search of the drug.
Specifically, licensed wholesalers will now be able to import larger quantities of cannabis-based products and hold supplies for future use by patients with prescriptions.
Previous restrictions meant that patients had to wait for weeks or months to obtain the still highly expensive drugs (an import license from Canada can take 8 weeks).
Essentially, while welcome, this also means that every single potential cannabis patient who does not suffer from epilepsy or MS must import, via private means, a drug that is still unbelievably expensive. Those with the means are subjected to high prices and bureaucratic complications (like a regular thirty-day review of the prescription).
Cynical Cannabis Moves
While those who can afford to pay approximately $1,000 a month now have options, this is not exactly cannabis reform that is inclusive. Indeed, the entire conversation appears to be about making sure that private companies make profits rather than scientific advancement.
While the government is planning to engage with patients and to participate in trials to figure out how the NHS can utilize the drug, this is little help for sick patients now. Particularly in the middle of a global pandemic and almost as surely, global recession.
Soundbites by government ministers are also putting a cheery face on a situation that is dire, not just because of access but because of cost.
Per British Health and Social Care Secretary Matt Hancock, “We still have a long way to go. We need more research into the quality and safety of these medicines, and to do all we can to cut down the costs and remove barriers so that, when appropriate, patients can access it, including on the NHS.”
As recent events, including not only Brexit and cannabis reform, but indeed the now global pandemic have proven, healthcare systems globally are not up to the kinds of threats now thrown in their direction. Designed mostly after WWII, with a far different tax and economic base to support them, as well as far different demographics, most are also clearly not up to the rigors of the 21st century.
It is not just the supply chains for cannabis or even pharmaceuticals that are in the mix of course. Food security in the UK is now also, according to one international expert, Tim Lang, World Health Organization advisor, “in serious trouble.”
The Covid-19 pandemic, in other words, caught the world with its pants down, despite numerous warnings and even models predicting almost exactly this situation as recently as last year. Just like the AIDS crisis. This time, however, there are options available.
The question is, will governments and international organizations rise to the challenge to meet them?
A New World Drug Order
The British, while behind the Germans, are unfortunately, delaying a decision which has been already extended for too long. Relaxing drug import rules are one thing. But recommendations about the uses of the drug are still very narrow in the UK (even more stringent than in Germany).
Beyond that, overall food and drug security (supply chain) issues are in the room and for drugs far from cannabis. As many have begun to point out, cannabis is now prescribed for patients (and in many countries) and these patients are the most vulnerable to a virus like Covid-19. They are vulnerable not just because their immune systems are weak, but frequently because they are also economically exposed.
As the world battles another retrovirus pandemic, perhaps it is time that the lessons of the past be learned by those with the power to make decisions that will ultimately affect billions of people globally.
HMS Great Britain has now set forth from its European home port for another intriguing and very British escapade on the high seas.
So far the jury is out.
It could be the beginning of the next British Golden Age, Spanish Armada and all that. Or could it could end up (more likely) somewhere up the Khyber Pass (a sordid misadventure of British Imperialism that did not go well in the 19th century with global implications still reverberating to this day). For Netflix fans of The Crown, think “Suez Crisis” as a more recent and apt analogy. Starting with as much as a 6.7% reduction in domestic GDP already on the horizon.
Snarky historical analogies and nostalgia aside, how will Brexit influence and shape a global cannabis industry, starting at home?
The UK Is Not Actually in Regulatory Free Fall
The first thing to realize is that most of the puffery around Brexit was that with the exception of labor conditions, there is little free choice in the world of trade anymore. The players who get export and import licenses, for anything, have to conform to basic equivalency rules, no matter what they are called.
This applies to cannabis in a big way. No matter how the UK market develops domestically in other words, and that is a separate discussion.
Currently, shamefully, the domestic medical guidelines for prescription of cannabis exclude chronic pain patients and a few other obvious groups. The NHS medical market in other words, is a monopoly, set up by the current and previous governments, mainly serving GW Pharmaceutical patients who qualify for Sativex and Epidiolex. Not to mention company shareholders.
Everyone else, including those for whom these drugs do not work well, or work less well than other alternatives, are left in an international trade negotiation in their living rooms as they and or their children suffer.
The import barriers for cannabis – both from Europe and from Canada are absolutely in the room and in a very personal way for the British right now.
How they actually define cannabis, will also clarify. This will be driven now by the UK’s biggest import partners – namely Europe, the United States and Canada (although South Africa and Australia of course, will always be in the picture).
Which regulatory scheme the UK adapts, including for cannabis and of both the THC and CBD variety (not to mention other cannabinoids), in other words, will at minimum have to be broadly equivalent with all of the above. Not the other way around. No matter how much the Food Standards Agency (FSA) wants to fuss and fiddle with “Novel Food.” That alone is a canard.
Cannabis is a plant. It is time to start acting like that. And it is no more “novel” than tomatoes in many, easy-to-understand environments, including commercial ones. Not to mention will increasingly be regulated like commercial food crops – even if those crops are then also bound for dual purpose medical use.
The regulators will eventually get there – but not without a lot of tortuous twists and turns.
A “New” Market? Not So Much…
There is a lot of consultant palaver and baloney in the room right now. There is no more a new market in the UK as there was in Germany (or Canada or Colorado). Local producers are already organizing, and on the hemp front. The big ones are hip to regulations and are getting certified to enter it. Everyone else is being left on the dangerous sharp end of police raids, even with prior local approvals.
That said, foreign producers are of course looking at the UK right now, and in a big way. The lock GW Pharmaceuticals has on the domestic market will not hold long. European producers are absolutely in the room (starting with Tilray in Portugal and Alcaliber in Spain). Not to mention what is going on in other places right now, even if of less well-known corporate branding.
Every big Canadian company is already in the room in the UK, and many Americans are now beginning to show up in the market.
However, for the most part, such ventures are doomed outside of conference sponsorships until the regulatory questions are answered if not met.
And that includes federal certifications that are easy to find – there is no one single authority that handles cannabis internationally. And there never will be. Supply chains are already global.
A Perfect Export Market
One of the biggest, so far widely discussed questions is who in Europe will start exporting to the UK (forget Holland for the moment). Not to mention producers in Spain, Greece, Poland if not Macedonia. That conversation is also on the table now. For the first time, so is Germany, and on the medical side.
Pharmaceutical producers in particular who meet international pharma standards may be the best hope yet – although right now policy makers are still looking at cars rather than cannabis to help keep Germany’s trade export quota where it feels “comfortable” domestically.
That too will change. And fairly quickly. See Greece, if not South Africa.
The political roil of branding and politics afoot in Germany right now makes this new kind of export market idea as a part of economic development, an inevitability.
Not to mention, at least for the present, a reverse trade in regulated British CBD products – if producers are smart about regulations – throughout the continent right now.
Of all countries, outside Switzerland, the UK has the ability to develop a broad and intriguing market in the EU – but only if they are compliant with regulations in Europe.
And this is where the policy makers in Parliament and 10 Downing Street have already misjudged if not broadly misled, not in a regulatory environment of their own, but in fact in a diplomatic “room” where the rules are already set via international standards and certifications, not to mention treaties.
Europe continues to be the new frontier of medical and wellness developments in the cannabis industry, with various sources predicting that Europe will become the world’s largest legal cannabis market over the next 5 years. Key related statistics, include:
A population of over 740 million (over double US and Canada combined)
Total cannabis market estimated to be worth up to €123 billion by 2028 (€58bn medical cannabis (47%), €65bn recreational cannabis (53%))
Over €500 million has been invested in European cannabis businesses (including significant expenditure in research and development, manufacturing and distribution)
To reiterate this belief, this month, hundreds of industry experts and delegates will be attending Cannabis Europa in Madrid, to discuss the expansion of cannabis across Europe and the challenges facing the industry across the member states of the EU and the UK.
Global mainstream leans to European strength
Since late 2018, major global operators have made substantial moves into the cannabis sector. Anheuser-Busch InBev, the world’s largest beer company and maker of Budweiser, entered into a partnership to research beverages infused with two types of cannabis. Constellation, owner of Corona beer, announced a commitment for $4 billion investment in Canadian cannabis company Canopy Growth. BlackRock Inc, through five actively managed BlackRock funds, has invested into Curaleaf Holdings Inc, a dispensary operator, for a not too insignificant investment sum of $11 million (as at March 2019). Such international investments prove that cannabis has moved from the fringes and into the mainstream.
When considering the impact of mainstream cannabis, it should be recognised that major European countries have approved or are planning on implementing, legalisation of medicinal cannabis. The UK, Germany, Italy and the Netherlands already have legal systems in place for medicinal cannabis and France and Spain are currently reviewing key legislative reform to align themselves with international practices. At present the German market is the third largest cannabis market (in terms of size) behind the US and Canada.
In addition to medicinal cannabis, several key European countries have systems in place, or are developing systems, or considering the reform of existing systems, to approve cannabis with THC content at a recreational level. The Netherlands already has a system and Luxembourg’s health minister in August 2019 announced the intention to legalise cannabis for Luxembourg residents. The Luxembourg government is lobbying EU member states to follow suit.
Whilst the EU has a labyrinth of laws in relation to edible CBD (as a novel food) which make the regulatory landscape complex, there has been an explosion of CBD products for vaping and cosmetics. Of course, with each of these products being subject to different local laws (some aligned between EU members states) in relation to vaping and cosmetic related regulations. The Brightfield Group has predicted a 400% increase in the European CBD market (including vaping liquid) from $318m in 2018 to $1.7 billion by 2023. There is also an expansion into applications for CBD with animals with many US manufacturers of CBD-infused pet food.
The European Parliament’s health committee has been calling for properly funded scientific research and there are motions to establish policies to seek to incentivise member states to advance the studies of medical cannabis, with a priority on scientific research and clinical studies – the first step necessary to drafting legislation, designed to better support the industry.
Where does the UK sit within cannabis?
Medicinal cannabis famously saw a legalisation, of sorts, by the then Secretary of State, Sajid Javid, who provided the authorisations for prescriptions for the high profile cases of Billy Caldwell and Alfie Dingley. Subsequently, on 1 November 2018, this was codified into law by an amendment to Schedule 2 of the 2001 Misuse of Drugs Regulations. This allows clinicians to prescribe cannabis as an unlicensed medicine.
There have, of course, been some high profile licensed medicines. The UK company, GW Pharmaceuticals, is the largest exporter of legal medical cannabis in the world, cultivating medical cannabis for production of cannabis-based medicines (e.g. Epidiolex & Sativex). Epidiolex (manufactured by subsidiary Greenwich Biosciences) became the first cannabis-derived medicine approved for use in the US for treatment of seizures caused by Lennox-Gastaut and Dravet syndromes (both severe forms of epilepsy).
When considering the level of research development and investment in the medicinal field, it is no surprise that the UK is the world’s largest producer and exporter of medical cannabis. Research published by the International Narcotics Control Board indicates that the UK produces over 100,000kg a year of medicinal cannabis.
Previous guidance from the National Institute for Health and Care Excellence (NICE) indicated that further research is required to demonstrate the benefit of medicinal cannabis, citing its cost versus evidenced benefit. However, there is now renewed confidence in the UK following NICE’s approval of two cannabis-based medicines produced by GW Pharmaceuticals, Epidiolex (cannabidiol) oral solution and Sativex (nabiximols), for routine reimbursement through the NHS.
Following the re-categorisation of medicinal cannabis in November 2018, a number of clinics have been established where specialised clinicians can start the process of prescribing cannabis based medicinal products (CBMPs). Whilst this route is not fast, and challenges are well documented as to the satisfaction of prescriptions made in the UK, there is momentum behind the development of this as a means for providing genuine and established medical care. A significant step in October 2019, was the CQC registration of one such cannabis clinic, Sapphire Medical Clinics Limited.
The UK medicinal cannabis sector is establishing a research-based approach to expand usage in the UK and across Europe.
How North America compares to Europe
Canada, as a first mover within the cannabis sector, has a multitude of large companies which are well-capitalised and have substantial international footprints. The Canadian exchanges have large listed companies looking to Europe with the intention of acquiring or investing into European operations. As of the date of writing, the 10 largest cannabis companies in Canada have an aggregate market cap of over $23.5 billion (and all registered cannabis companies in Canada having an aggregate market cap of over $46.5 billion).
Listed companies have had a tough time over the last 6-12 months with a slowdown in the market as a natural re-balancing occurs – part of which is due to rapid expansion and heavy investment into cultivation by all the major participants in the market. Over the next 6 -12 months we can expect to see management changes (some of which will be voluntary and some of which will be imposed by institutional pressure) to introduce different skill sets at board and senior management level to facilitate the oversight and leadership necessary for large pharmaceutical companies. Many operations have expanded into highly regulated products and complex supply chains whilst still operating with fundamentally the same team that established the operations with entrepreneurial efforts but, perhaps, a lack of experience in these sectors. The recent announcements by Aurora Cannabis and Tilray demonstrate that these restructurings and costs reductions have already commenced. However, with increased experience at board level and an improvement of profitability focused on sustainable business practices, should come new opportunities on a global scale for these North American operations.
The US market, because of the complexity of state and federal laws not being fully aligned, is closer to its infancy than the Canadian market. This is not too dissimilar to the European market. That said, there are a number of well-funded and quite large US enterprises. A limited number of these, such as Tilray, are looking to expand into Europe.
Many of the companies in the US have, and continue to, expand quickly so we can expect to see a number of mergers and acquisitions. We are likely to witness Canadian and US entities merging with one another with the potential for acquisitions for operations within Europe. It is unlikely that the North American companies will risk their capital through organic growth so would be expected to be identifying “turnkey” solutions.
One of the major challenges facing US companies is the complexity of supply and distribution. This is largely a result of the complexities for state and federal laws interacting with one another as well as international importation and exportation with US states.
How you can invest within the UK and Europe
Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.The UK remains, despite the events of Brexit, a major financial hub for Europe. The London market has seen the growth of several investment and operation cannabis companies. This includes private companies such as; EMMAC Life Sciences Limited and the operations formerly trading as European Cannabis Holdings (now demerged into several new entities including NOBL and LYPHE) as well as publicly listed companies; including Sativa Group PLC (the first publically listed cannabis specific company in the UK) and World High Life Plc, both operating on the NEX Exchange.
The Medical Cannabis and Wellness Ucits ETF (CBDX), Europe’s first medical cannabis ETF fund, domiciled in Ireland, and which has been passported for sale in the UK and Italy, has also caused a renewed stir within the market with a further platform for listed investment.
As the regulatory framework evolves further there is an anticipation that more medicinal cannabis and CBD related enterprises should have the opportunity to list on public exchanges, whether in the UK or in European countries.
Despite a period of slow down following the natural rebalancing of the fast-growing North American markets for the cannabis sector, there is renewed confidence in the expansion of the industry. Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.
There is an increased push for a public dialogue and consultation in relation to medicinal and recreational cannabis in the UK, backed by several mainstream media platforms. This is likely to be shaped in some parts by national debates in Luxembourg and other European countries as they consider their own domestic laws.
With European parliaments across the EU (including the UK) hopefully having time freed up to discuss other political matters now that Brexit is progressing, the next 18 months should prove an exciting time within the European cannabis sector.
Cannabis as a news story and an industry moved forward again this year, albeit in a rather more halting way than the last few. The volatility of the market in fact was one of the largest stories of the year, particularly after the events of this summer.
It’s Been A Wild Ride Kind Of Year
This time last year, the world was in a tizzy over the literally billions of bucks invested into a few top Canadian cannabis companies. This year, predictions are definitely a little more sober when it comes to the future of cannabis stocks. Most of the industry has taken a major beating this fall.
That said, the current correction was in the cards for just as long. What goes up, dramatically, must come down.
That said, this is not the whole picture of the industry – not by a long shot. Reform ain’t going back. Patient numbers are climbing, albeit slowly.
Here in Europe, the first and so far biggest public tender on cannabis was finally concluded in Germany with Aurora, Aphria and the cannabis company formerly known as Wayland (ICC) winning the bid lots for domestic cultivation this spring.
The British, who waffled around all year on what kind of “animal” cannabis actually is, celebrated that anniversary late in the year with a highly limited scope of coverage by the NHS.
The most interesting discussions right now are clearly emerging on the international front. Cannabis became an internationally mainstreaming commodity this year as patient numbers began to climb on the continent.
This in turn has led to the normalization of the idea at least of an export trade in cannabis not only across Europe but globally as companies target the region. Cross border cannabis companies, in other words, are a “thing” that blossomed this year – and frequently, while sometimes financed by Canadians, called another country home.
The announcement of at least the first German wholesale reference price this year will also do wonders to start to normalize prices across not only the EU but all those hoping to export here.
That in turn will have global impact.
Regulation Is Beginning to Materialize
For those who thought that higher standards were a passing fad, the events of this year, particularly of the latter half of it have confirmed one thing for sure: Regulatory muster is here to stay.
To add to the general confusion, however, international standards on medical products and even food are absolutely in the mix as countries find that standards, measurements and production processes might be similar, but on the ground, still differ. Harmonization is a word many in the cannabis industry are hearing now, and not just in the medical space, but also the food and supplements market.
The initials “GMP” are on the lips of many this year. Not to mention another exciting development the cannabis industry from abroad did not see coming and still broadly does not understand – namely Novel Food.
The War For Reform Is Being Fought On Several Fronts
Inevitably, just as in the United States, the fights in the room right now as well as legislative gridlock are focusing on some strange nitty gritty. For example, cannabidiol (CBD) is just one cannabinoid from the plant. It is a chemical substance. Yet, suddenly, in Europe, this discussion is being bogged down in pseudo-scientific discussions in the name of public policy about whether CBD is a “new kind” of food.
Ultimately this is a discussion about regulation – whether CBD and hemp production should be regulated differently than they are right now – and whether the plant should be put in a different bucket than, say, tomatoes. Or when extracted, tomato juice.
GMP is also a very strange discussion which has still not exited the stage – mostly because of the lack of uniformity internationally between Canada and European states although that is moving in the right direction.
The last issue of course, which has been looming from the Canadian side for several years, including of course all the pesticide scandals, new regulations on the cultivation of all plants for human consumption. Even German farmers are up in arms (with a recent tractor protest in Berlin that paralyzed the city).
Cannabis is in the bullseye on all fronts.
Auld Lang Syne
If there was a theme to the industry as of this summer, it was clearly that things cannot continue as they have. The CannTrust Scandal absolutely encapsulated all that is wrong with the industry.
That said, there is every reason to believe that the most egregious scandals (or at least quite so many of them) are a passing fad. Indeed, many in the industry are in fact committed to turning over a new leaf (for the new year or just because).
The good news? There is every sign of course that it will.
2019 opened with a strange vibe in the air on the cannabis front. Israel and Thailand set the stage with dramatic reform announcements last Christmas. And as the calendar counts down to 2020, the larger players all seem to be licking their wounds (if not stock prices).
But cannabis reform is not just about profits on the public markets. What has gone down and where and ultimately, has the year lived up to its promise?
Reform Marched On In Several Countries
At this point, reform is certainly “too big to fail.” There will be no going back anywhere no matter the laggards still in the room.
From the perspective of opening patient access (and markets beyond that), There were several big stories on the medical front this year – and – in a real first for the EU – of not only the medical, but recreational kind as well.
Germany of course is going, relatively speaking, like “gangbusters” on the medical front although supply, quality and supply chain issues are still in the room. Even more so now because the German government has also announced, for the first time, a public reference wholesale price per gram of floss. That alone is big news, although expect that too to drop (see Aurora’s pricing for Italy, for starters).
In the UK, the NHS finally got down to brass tacks and negotiated a bulk discount for GW Pharmaceuticals cannabis drugs for a very narrow band of patients (mostly child epileptics and MS patients). A tiny minority of the estimated 1.4 million daily British “medical” users including those suffering from chronic pain can afford imports. The rest is all black, or in the case of CBD, gray market.
In France, the country finally got on the reform bandwagon with a “medical trial.” This means that all the major countries in the region are finally on board with some kind of reform. That too is a meaningful move.
Poland is also opening – a good sign for the remaining conservative countries in Europe still on the fence.
And in a real first (although do not get too excited just yet), on the “recreational” front, it is not just Holland that is in the room any more. Both Denmark and Luxembourg announced that they were opening this conversation. In Denmark and Holland’s case, this is in the form of “trials” in places where operational grey markets have already been established. In Holland, this is of course, regulating the “coffee shop” trade in large cities like Amsterdam. In Denmark, the new “trial” will be on the grounds of a revived hippy experiment called Christiana, that morphed predictably into the control of gangs over the last generation.
Luxembourg, however, seems intent on setting the benchmark if not timeline and is moving aggressively in one direction. As a result, as of this year, the strategic “heart” of Europe is now on the schedule to go full monty by 2022. That said, it is a country of about half a million people. Further, no matter the inevitably hype on the way, don’t expect the country to turn into a big cannabis hub- nor encourage pot tourism even from neighboring Europeans.
The end of 2021 is the time to watch for all things recreational. In the meantime, including next year, look for increasing “experiments” in other places. Particularly of the Swiss variety (where both recreational and medical products are sold via pharmacies.)
THC Is Being Accepted As Having Medical Efficacy
No matter the controversy in the room, and the strange inclinations of the British NICE to try to undo forty years of medical knowledge about the impact of THC on chronic pain, medical cannabis and specifically medical cannabis with THC has made its global medical debut as of this year.
That said, the push is on to “pharmacize” the product.
Flower (floss) is in the room, in other words, but the future is looking towards oils and distillates – at least for the medical market long term. And a lot of that will also come increasingly to this market from places like Portugal, Spain, Greece and other European markets now moving into the cultivation space seriously.
Then again, there is still a lot of road to travel. Wags who predicted that German health insurers would never pay for floss cannabis just five years ago were wrong.
CBD Is Not All Its Cracked Up To Be
For all those who sang “Free the CBD” this year, Europe has taken a rather conservative and concerted push back. From Austria to Italy and Sweden to Poland, the path to market for any product containing CBD has been a tough one this year.
That said, perhaps it is a call for more standardization- no matter how painful that might be economically. At a presentation given at this year’s IACM medical conference in Berlin, a medical researcher revealed the results of a study he had conducted on the accuracy of labelling of these products in several European countries. The industry has not standardized, labelling is all over the place in terms of accuracy – and the claims about “medical efficacy” are hard to swallow for substandard over-the-counter product.
If the CBD-based part of the industry is to thrive here, it will have to find a way to establish and certify itself. That appears to be going on in Italy right now. It also impacts every cultivator from Portugal and Spain to Eastern Europe looking at the possibilities right now.
However, with labelling and other EU cross currents in the room, this route to the industry has been fraught this year with all the cross winds and those are not likely to dissipate next year or indeed for the next several.
The Cannabis Winds Of Trade Are In The Air
While it may be a bit ironic, given that international trade has pretty much always been a hallmark of the development of the modern cannabis industry, next year will undoubtedly be the year of “International Cannabis Trade.”
No matter the problems “back home,” as of this year, a German-based manufacturer of GMP-certified product got fully underway (see ICC/Wayland’s success this year). That, along with the final decision on the first German cultivation bid, has clearly shaped a market that is still changing. And that change is driven by the admission, even by authorities, that there is not enough legal cannabis grown in the country.
That means that the strength of the German market will continue to drive policy (see the recent announcements on wholesale pricing) as well as demand that will be met across the continent.
Along the way, cannabis reform is also being driven locally. And that means, no matter the trials and tribulations of the Canadian part of the sector, which perhaps can be considered aptly warned for getting a bit too big for its britches, and no matter how faulting, the winds of reform are still afloat. Just perhaps, on the cards for next year and those to come, blowing from many more points on the globe.
You have to hand it to the Brits right now. There is nothing that seems to be working in a land caught in the gray zone of “Brexit or Not.”
That absolutely can be said for cannabis prescriptions and the subsequent availability of the drug, via the National Health Service (NHS). For all the hand-wringing and drama so far, it has only taken a year between possibility and execution. That said if Brexit were that “fast” who knows what might have already happened to the NHS to begin with?
Regardless of the many deservedly snarky comments in the room (from both the British and elsewhere point of view), here are the basics:
Cannabis-based medicine will be available only to treat two relatively rare forms of childhood epilepsy, Multiple Sclerosis, or chemo-induced nausea caused by cancer treatment. The drug can also only be prescribed by specialist doctors (not GPs).
Perhaps they should have attended the 10th biannual IACM conference in Berlin at the beginning of the month. There were certainly reform-minded Brits who did.
What Were They Thinking?
When reading the recommendations from NICE, it is hard to imagine how a medical policy body could get most of the cannabis discussion so wrong. While it is nice to know that dying children seem to be highly effective in setting drug policy in the UK, that is hardly comforting to the potentially millions of adult Brits who have absolutely been left out, this time.
This begs the question why an adult in chronic pain or suffering muscular spasticity of a kind not caused by MS (much less adult epileptics) is somehow in a different basket of care? Indeed, the idea of recommending against the use of THC specifically for chronic pain is, at this point, a sign of at minimum gross inability to read even recent medical studies from just about everywhere, not to mention patient evidence and testimony. Those adults who managed to get coverage, at least so far, will be given the right to continue treatment until their doctor decides otherwise. Not a very comforting place to be.
Here Comes The Gray And Black Market
All this will do of course, is push those who do not qualify for NHS coverage into either the private market (if they can afford it), or more likely, the existing gray and black market. The former of which of course, is, like other places, underground.
And while GW Pharmaceuticals has everything to cheer about, the rest of the established industry, at this point, surely should be ready to take a concerted stand.
The ridiculous posture of the NHS beyond that on cannabis in this day and age is hard to understand. Even the Germans are ahead of them. And Deutschland is hardly a country where the use of cannabis is anything like mainstream yet.
But then, welcome again, to the wacky world of cannabis reform where it is possible to take one step forward and then many back.
Is This The Face Of The British Conversation Post Brexit?
If there were a single conversation to unite a country right now, the medical coverage of cannabis for the country’s poorest and sickest might be it.
Unfortunately, this does not appear to be a conversation that will progress in the UK until it moves in the United States. Federal reform in America would of course open the doors, and immediately, to a state-like “recreational” market, where, theoretically, patients could buy any kind of cannabis they want.
Just like Colorado. Or California.
But here is the rub. In the United States, federal reform has not come yet. And even then, what health insurers decide to cover or not, and for what condition, is a topic many Brits have never had to really contemplate. And certainly not when it comes to cannabis. This new decision by the health authorities might just be a terrifying glimpse of what is yet on the agenda if and when Britain “divorces” the continent.
Is The Dream Of Medical Coverage For Cannabis Just That?
Here is the good news. Cannabis always makes progress, no matter how long the slog has been. If the Brits are determined to sit this one out while their citizens suffer, the conversation is still alive, if struggling, elsewhere. Notably Germany. And Israel.
These are, to date, the only two countries who have jumped in, seriously, on the issue of insurance coverage of cannabis, and for a broad range of conditions, although even here in both countries, there are still issues and controversies galore.
The terrible reality in the room however, is clearly writ large for all those who are brave enough to grasp it. Most patients are going to be on the hook for the cost of their medical cannabis for a long time to come.
In other words, decidedly less colorful (or at least in the North American sense) if not at lower volume than other places.
In the meantime, particularly filtered via American and Canadian coverage and industry success stories, the British are succumbing to the green magic any way they can.
Low-THC, CBD products as a result, are flourishing in a way that seems a bit like the “Colorado of Europe.” The early days. When all sorts of strange stories about processing leaked out of the first legalizing state market in the U.S. It is shocking to European eyes, in particular, of late.
“CBD” is, literally, everywhere.
For those with other kinds of experience in the world of cannabis, however, it is both slightly sad and slightly exhilarating. The Brits have the cannabis bug. But they seem a bit lost on where to go next.
What Is The Deal In The UK?
Regulations are weird here. You cannot use the flower of any cannabis flower (including those with under the requisite amount of THC) – also known as hemp. The novel food discussion is lost.
Regardless, there are clearly plans afoot, particularly on the corporate farming level, to begin a transformation of crops to include cannabis sometime soon. And far beyond the farmers, the boys in the city are getting hot under the collar for this kind of green.
London is also turning into (rather predictably) a center of all things cannabis equity.
There are already more specialty funds planning to list on London exchanges than anywhere else in Europe.
But is this all that surprising?
In the midst of Brexit, a failing NHS, and a society at odds with itself like no time since the 1970’s, the British are facing the cannabis revolution with anything but a stiff upper lip.
When it comes to all things cannabinoids, at least on the CBD side, no matter the odd police raid on a health food store or crunchy vegan experiment on land not protected by the rights of an inherited “country pile”, the cannabis horse, certainly of the broadly stroked CBD variety, is out of the barn.
But What Does this Really Mean?
For the moment? As globally financed companies set up in the UK for all kinds of cannabis trials, the CBD market here is taking on an oddly Bulldog twist.
There is more of a cottage industry of all kinds of CBD products unseen elsewhere in Europe (including from the U.S.). Labeling, testing and sourcing are largely a matter of hit or miss. And just like everywhere else, desperate, sick, depressed people (or those who fear becoming that way) are turning to the CBD miracle to fix a range of conditions.
The problem is that a lot of this is pure snake oil.
Yes, high quality, medical grade CBD does work as a stabilizer (just like THC). But not every oil containing some measure of highly diluted (or worse, contaminated) cannabinoid extract, is the panacea that cannabis offers.
Bottom line? The CBD market in the UK is sort of like Swiss Lite. There are medical trials in the offing, but the country is also in the middle of a constitutional crisis. There are many regulations, and of a bit more fundamentally intrinsic kind, on the line right now. Cannabis is in the room. But so is the Irish Border (the largest if not most existential sticking point in the never-ending Brexit negotiations).
Investing In The UK CBD Market
There are investors who are clearly examining the market, and a few big deals so far, but the vast majority of money flowing into the UK is going into its more flexible (if not frothy) equity market. The British, in other words, may be flailing a bit on domestic implementation, but equity funds in London are in touch with global investors on this issue – even if that money then flows back into Europe.
More than a few cannabis “education companies” – mostly from Canada and the U.S. but some with Israeli ties, plus German and British efforts have targeted Europe as the next logical expansion plan in their global roadmap.
These include most recently Cannvas Medtech Inc., and several initiatives funded by Canopy Growth, including teaching children about the drug. It also includes training programs for frontline staff, launched by Organigram (although in this case it appears to be geared towards “brand education.”)
There are also doctor training programs launching in the UK.
In Germany, there are several efforts underway, helmed by both doctors and cannabis advocates generally, in several cities around the country.
But how effective is all of this “education” in both preventing illegal use, and promoting legitimate sales?
Particularly if such “education” platforms are exported from a foreign market for use in Europe?
Education Is Desperately Needed, But So Is Channel Penetration
Nobody is arguing that “education,” as well as trials and more information for payers and doctors are not required. The problem is that some education is more effective than other campaigns. And most of the talk in most places is more a discussion of the need for further regulatory reform, more trials and more investigation.
That has to get paid for somewhere.
That, at least in Europe is also tricky, as both early educational movers Weedmaps and Leafly have both found out, especially in medical only markets in the EU. Why? There are also highly limited opportunities for advertising either a drug, or to doctors.
Different Regulatory Environments Cause Bigger Issues
Even in Canada and the United States, there is an ecosystem of supplying the demand that has very much grown up customized by the strange paths to reform if not the first mover discussion.
That is not going to be the case in Europe, which in effect creates a brand-new ecosystem to educate, with new players, and every ecosystem participant group has a different kind of educational needs.
Here is one example of where this shows up. So far, in most countries, doctors are still highly resistant to prescribing the drug. Nurses, on the other hand, in both the United States and Canada at least, have proven to be a much more reliable source of converts for the cannabis cause. That approach of course is not possible in places like Germany where only doctors may issue prescriptions, including of the cannabis (and narcotic) kind.
Access issues also play a big role in just about every country- from cost to privacy. And on the privacy front, it is not just foreigners who are getting used to new rules. So are German doctors.
The pharmacy discussion is also very much in the room – and this is not “just like” approaching a “dispensary” from North America. They are regulated chemists. Which causes a whole new set of issues and a serious need for new kinds of educational materials.
In Germany, for example, pharmacists are being recruited and trained by not only staff recruiters specializing in the same, but also sent on special training courses funded by the big Canadian companies (Tilray being the noticeable one recently). The brick and mortar vs. online discussion is also a big topic across Europe. Notably, where it is allowed and where it is, as in Deutschland, verboten.
And, of course, the big green giant in the room everywhere in Europe, in particular, is payer/insurance approvals, which are based on a kind of education called proven medical efficacy.
And that, so far, is in markedly short supply.
In the UK, it is so far the main reason that NHS patients (for example) cannot access coverage for the drug to treat conditions like chronic pain.
In the meantime, the most widespread “education” that is going on, is still mostly at the patient level. Especially when patients sue their insurers, or lobby doctors to prescribe.
The cannabis industry may be maturing, in other words, to be able to answer these questions – but there is also clearly a long way to go.
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