Cannabis Commerce Association of Canada

Transcription

1 Cannabis Commerce Association of Canada January 19, 2018 Cannabis Legalization and Regulation Secretariat Health Canada Ottawa, Ontario K1A 0K9 The Cannabis Commerce Association of Canada (CCAC) is a national, not-for-profit cannabis-specific trade association that represent small and medium-sized cannabis entrepreneurs across Canada. CCAC members are united in their belief that recreational cannabis can be a socially-responsible endeavor that creates good jobs for Canadians of all backgrounds, and that the cannabis economy should be open to small business. CCAC members work in all sides of the cannabis economy, and include both craft and large-scale licensed cannabis producers, cannabis extractors, value-added processors, and other cannabis businesses. CCAC s representatives have participated in public consultations on cannabis legalization throughout the process surrounding the Cannabis Act, and remain committed to providing meaningful, evidencedbased input into the process. The proposed regulatory framework for the Cannabis Act has evolved considerably since its inception, and CCAC are pleased with many of the proposed amendments and new programs. However, there are also still areas of significant concern for our members, and indeed to the wider cannabis business community. To that end, we are submitting some final policy notes to the cannabis secretariat, in the hopes of spurring continued dialogue around these specific areas of concern. Improving Genetic Diversity + Facilitating Exchange Under the present ACMPR framework, Licensed Producers (LPs) and Licensed Producer Applicants (LPAs) are restricted in where they can source cannabis starting material, including seeds, clones, and other genetic material. At present, there are only two legal sources of cannabis genetics under the ACMPR: Genetic material derived from plant stock that was acquired from personal medical growers prior to April 1, Licensed Producers that were able to take advantage of this amnesty now have a significant advantage, as they can sell or licensed this genetic material back to other LPs or LPAs.

2 Genetic material acquired from international sources. This material is very difficult to acquire, as evidenced by the limited amount of importation that has occurred to date. This method also does not allow for the importation of uniquely Canadian genetic material, including widely popular Canadian cannabis strains. The result of this highly restricted regulatory model for acquiring genetic material is that most LPs currently producing cannabis at a commercial scale are working from a limited pool of cannabis strains and phenotypes, and LP applicants are forced to buy this material, often at considerable cost, from their competitors. This creates a regulator-driven imbalance in the marketplace, and gives established LPs a significant business advantage over upstart competitors. What s more, there does not appear to be any scientific or medical rationale for this restriction. Given the significant quality assurance and analytical testing standards all current LPs and LPAs must go through before selling cannabis, there seems to be no public health reason to restrict what types of cannabis plants licensed cannabis producers can grow, particularly from seed. Beyond the competitive advantage this gives to existing LPs, the genetics bottleneck also has ramifications for the competitiveness of the ACMPR-derived recreational cannabis market. Visiting any well-established retail cannabis outlet, be it a grey-market licensed location in Victoria or Vancouver, or a dispensary in a legal jurisdiction like Colorado or California, illustrates the scope of the problem. These retailers carry a wide variety of cannabis strains, including long-flowering (12+ week) sativas and other specialized strains of cannabis; the wide availability of these strains in a black- or greymarket context continues to drive the growth of the nonregulated cannabis economy. Few, if any, Licensed Producers currently produce these strains, and ongoing systemic shortages in the ACMPR medical cannabis supply relating to specific strains of cannabis (e.g., CBD-rich strains) demonstrate the difficulty in bringing these strains of cannabis to market in volume via the ACMPR with the current genetic bottleneck at play. To ensure a successful regulated recreational cannabis marketplace, LPAs and existing LPs need access to the most popular commercial and recreational strains currently being grown by personal medical growers. Without these strains, the regulated market will be unable to produce the varieties of cannabis currently in demand at a retail level. Put simply, a regulated cannabis system with little to no sativa strains is not going to work. This matter is not simply important, it is urgent. If Health Canada does not design and implement a second amnesty for cannabis genetics immediately, LPs and LPAs will not have the time needed to dial in the growing techniques necessary to bring these strains to market. Every week that passes without the ability to onboard the most popular commercial strains available across Canada is another week of agricultural R&D lost to a needless regulatory hurdle. At present, there is a very real possibility that by July of 2018, there is simply not enough variety of cannabis to stock a half-decent retail ecosystem, because there isn t enough time left to ensure a

3 successful legal crop of the most popular strains before the summer. Without timely action from Health Canada, this will not change in time to prevent significant product shortages. CCAC believe that by allowing existing personal medical growers to register their own genetic material, Health Canada can facilitate many of the vital functions that are currently held up by the lack of official status for most of the cannabis strains grown in Canada today. Examples of the business activities that would become possible under such a scenario make it clear how necessary and foundational these exchanges really are to the entire project undertaken in the Cannabis Act. For example, consider the various knock-off effects these activities would have for both small craft producers and large LPs. A MMAR or ACMPR-licensed personal medical grower or Designated Grower would be able to finally register her personal strains, rather than being forced to buy genetic material from LPs (most of which came from other MMAR growers before April 1, 2014). She could then proceed to: Apply for a micro-production license under that future micro-licensing regime, using her nowlicensed genetics to produce cannabis legally under those new regulations; Sell or license those genetics to other licensed producers, increasing genetic diversity and giving LPs access to in-demand strains; Sell the rights to her genetics entirely and retire from cultivation, reducing the number of greymarket producers; Sell the rights to her genetics to a Licensed Producer applicant as part of hiring her to grow those strains for the Licensed Producer on their behalf, helping LPs with talent acquisition and helping to ensure former grey-market growers have legitimate jobs; If she doesn t have a criminal record or history of diversion, she could find partners and apply to become a Licensed Producer herself, growing those strains under the ACMPR and increasing the number of experienced commercial operators. Obviously, these outcomes in many ways mirror the best-case objectives stated in the Cannabis Act and through the Health Committee, namely bringing grey market cannabis producers into the legitimate market. In most cases, without the ability to bring their genetics into the legitimate system, current producers will not participate in the regulated system, all because of a small technicality regarding the origin of the genetic material. Conversely, a pool of registered genetic material becoming available would allow Licensed Producers to do many important things, many of which are critical to the success of the entire licit cannabis economy. These include: Acquire the rights to the most popular black market recreational strains, ensuring their ability to compete adequately; Acquire fresh genetic material from outside of the existing LP genetic base, allowing start-ups to compete with existing providers without unfair regulatory advantages;

4 Acquire the rights to difficult-to-find strains with significant medical applications, e.g. high-cbd strains like Hayley s Comet; Acquire the rights to less common strains that tend to be more difficult to grow, e.g. longflowering land race strains, so that Licensed Producers have adequate time to learn how to grow them and provide them to the legal market. Again, it is immediately obvious how important it is to do these things in a timely fashion to facilitate the success of the legitimate market. Without the ability to execute these genetic transactions and exchanges, the market will lack most of the products consumers will expect on Day 1. Recommendation CCAC recommend that Health Canada move quickly to institute a window for on-boarding and registering cannabis genetics from existing personal medical license-holders (either MMAR or ACMPR), to allow these strains to be registered with Health Canada for the purpose of both micro-licensed cultivation, as well as sale to other licensed producers. Extraction and Cannabis Edibles CCAC remain concerned that the government s plan to delay regulations allowing the sale of cannabis concentrates and edibles until mid-2019 at the earliest is both unworkable, and represents a material threat to the regulated market. According to sales data from legal-cannabis jurisdictions including Colorado and California 1, cannabis concentrates, including distillate and hash oils, account for a significant and growing percentage of retail sales in both the recreational and medical markets. Similar estimates of grey-market Canadian retailers prepared by cannabis consultancy Althing Consulting, indicate concentrates make up as much as 40% of product sales, with edibles (where available) making up a further significant percentage of sales. This significant- and growing- market indicates a strong consumer preference for cannabis concentrates. By opting to not regulate these products for ACMPR producers, Health Canada is leaving this significant market in the hands of black market producers and an entirely unregulated market. CCAC are concerned that this is both counter to the best interests of the legitimate recreational cannabis market, as well as suboptimal from a public health perspective. CCAC recognize that the regulation of cannabis for recreational purposes is a significant policy shift, with a great deal of regulatory work to be done. The fact that cannabis concentrates and edibles both invoke new regulatory regimes and safety concerns is not lost on us or our members, nor is the concern that Health Canada s regulatory capacity is already being strained by the tight timeline for cannabis flower-specific regulations. 1

5 However, we must point out that by turning a blind eye to these significant markets for over a year, the government is effectively putting the perfect ahead of the good. There are many significant consequences to this policy delay, including the following: 1. First, by limiting access to the two most common smokeless forms of cannabis consumption, the government runs the risk of invoking the same Section 7 Charter issues for medical cannabis consumers dealt with in R. vs. Smith. This would almost certainly result in the continuation of grey-market dispensaries providing these products, which will further the bifurcation of the legitimate and illegitimate markets at a time when legitimate service providers are initially launching their offerings and are therefore most vulnerable to continued competition from existing and entrenched grey-market providers. 2. Second, history tells us that these products will continue to be manufactured and sold, regardless of the intentions of government regulators. Both edibles and concentrates have been manufactured and sold under the strictest conditions of cannabis prohibition, and that supply/demand dynamic will not stop simply because the government has indicated it will wait a year to develop regulations. Given the increasing popularity of concentrates and edibles, this will reinforce the factors driving customers from the legitimate market into the robust and existing illegitimate market outlined in point #1. These producers will also require significant quantities of diverted cannabinoids, which will also create and sustain a market for black-market flower, further undermining Health Canada s efforts to reduce cannabis diversion overall. 3. Third, these concentrates and edibles will be produced in an unregulated environment. By opting for a delay over any regulation at all, Health Canada is effectively leaving this existing, mature market unregulated for a significant duration, putting consumers at unnecessary risk. Given the health and safety consequences relating to these two categories of product (food safety, edible dosage, extract purity and testing, residual solvents in concentrates, safety of extractor machinery, et al), CCAC believe this delay is both impractical and unwise, and feel that at the very least Health Canada should consider establishing basic criteria for both activities pending further refinement of the regulations. This iterative regulatory model (used in Colorado throughout their evolving cannabis regime), while not perfect, at least allows Health Canada to remain in control of this market from Day 1, while also prompting producers to follow basic guidelines that will eliminate most of the most egregious health and safety concerns in the interim. Recommendation

6 CCAC strongly recommend that Health Canada allow for the production and sale of cannabis extracts and edibles concomitant with adoption of the Cannabis Act. Given the regulatory challenges associated with this, CCAC recommend Health Canada adopt a simplified regulatory framework for these products, with the intention of further refining these regulations in 2019/20. By selecting certain significant but simple criteria to base licensing on, Health Canada can begin regulating these producers immediately in a meaningful way, while also improving public health. An example of some basic regulatory requirements Health Canada could place on extract and edible producers pending full regulations include: Requiring concentrates be produced in certified extraction machines, in properly-zoned environments (eliminating safety issues surrounding both hydrocarbon gasses and highpressure machinery, and also helping municipal regulators). Requiring concentrates and edibles be made with cannabanoids sourced from Licensed Producers (eliminating pesticide and other tainted product concerns, as well as black market diversion). Requiring cannabis edibles be made in FoodSafe-certified facilities, similar to how other food processors are regulated, and that all cannabanoids used are LP-sourced (eliminating food safety and tainted product concerns). Requiring cannabis edibles be dosed accurately and tested for safety (eliminating dosage and homogeneity concerns) These simple regulatory measures are not catch-all solutions to these complex areas, but CCAC strongly believe they will result in a significantly healthier and safer populace in the interim while full regulations are developed. Again, the perfect must not be the enemy of the good; significant improvements in public health can be achieved by, at a minimum, regulating these activities in the ways outlined above. Further, they will ensure that these products are available in the licit market Day 1, preventing the bifurcation of the cannabis retail market, and incentivizing cannabis product diversion. Conclusion CCAC recognize that these areas of regulatory need represent enormous challenges for regulators at all levels of government. That said, we also believe these are very important areas of need, and that addressing them in a timely fashion will be critical to ensuring the success of the Cannabis Act. We are committed to continuing a positive and productive dialogue with the Cannabis Secretariat on these and other topics, with the hopes that we can work together to solve these challenges. Sincerely,

7 Ian Dawkins President Cannabis Commerce Association of Canada