Internal documents raise questions about Canada’s Cannabis Act review

June 29, 2023 · MJ Biz Daily

Hundreds of emails, documents and reports obtained by MJBizDaily through a Canadian federal records request paint a more complete picture of the Cannabis Act review currently underway – a reexamination that could have far-reaching implications for operators in the country’s 5.6 billion Canadian dollar ($4.3 billion) legal marijuana industry.

The 1,700-page package of documents reveals fresh details about the government-appointed expert panel undertaking the review, in particular the group’s tardiness in launching, the scope of the topics covered – as well as what’s not covered – and the panel’s level of independence from federal officials.

Canada’s landmark 2018 Cannabis Act legalizing recreational marijuana requires the federal health minister to initiate a review of the adult-use legalization law three years after its passage and implementation, meaning the review ought to have kicked off in late 2021.

But the review was ultimately launched nearly a year later, on Sept. 22, 2022 – with only one identified member, the chair, Morris Rosenberg, a former deputy minister under two federal governments.

The trove of documents indicates the government’s cannabis review was “broadened” at the behest of a minister’s office in the immediate days after the panel was launched, though the documents don’t reveal whether it was health ministers Jean-Yves Duclos and/or Carolyn Bennett who made the request.

Other insights from documents obtained by MJBizDaily’s Access to Information and Privacy (ATIP) request include:

  • An internal draft of the Terms of Reference – essentially the review’s scope and limitations – contains significantly more detail than the scope and limitations that have been issued publicly.
  • Other federal departments and agencies may undertake parallel, separate reviews beyond the one stipulated by the Cannabis Act.
  • Compensation for the panel’s chair, almost 200,000 Canadian dollars ($146,000), and the expected workload.
  • Instructions for the panel to create an Indigenous Engagement Plan to foster Indigenous participation in the review as well as a stipulation that the review “be conducted in a manner that advances core principles outlined in UNDRIP” – referring to the United Nations Declaration on the Rights of Indigenous Peoples, a legally nonbinding human rights instrument that details the rights of Indigenous peoples around the world, including in Canada.
  • A requirement for the Cannabis Act Legislative Review Secretariat – the office, housed at Health Canada, responsible for the panel’s administrative affairs – to keep the panel informed of the findings and recommendations by the federal cannabis “strategy table,” which is a separate business-focused body.
  • During the “second phase” of the panel’s review, it will work with provinces and territories to identify “priority areas” for action that might have implications for their respective jurisdictions under the Cannabis Act.

Cannabis industry officials are particularly interested in the panel’s scope of work and its key areas of focus, which are laid out in the Terms of Reference.

Those specific areas, such as the economic, social and environmental impacts of the Cannabis Act, could lead to reform down the road that has major ramifications for the regulated industry.

In particular, a large number of insolvent cannabis companies have cited the 2018 law’s restrictions in their Companies’ Creditors Arrangement Act (CCAA) filings, the latest being the insolvent retailer Fire & Flower Holdings.

Rahim Dhalla, founder of Ottawa-based medical cannabis business Hybrid Pharm, said knowing what the review process will consider is critical to the longevity of many industry operators.

“As a business owner in a highly regulated industry, it is vital for short-term and long-term strategy to know what focal points the review will consider,” Dhalla said.

Dhalla noted Canada’s cannabis industry directly and indirectly sustained approximately 98,000 jobs annually and contributed more than CA$43 billion to the country’s gross domestic product, citing a report from accounting firm Deloitte.

“The review is critical to the success of the industry,” he said. “Consumers, businesses and industry professionals have given feedback expecting critical changes to be made with little to no communication.

“Being late on a critical review process is frankly insulting,” Dhalla added, referring to the panel’s tardy start.

Why so late?

The documents obtained by MJBizDaily do not explain the nearly yearlong delay to the review’s launch.

However, in a detailed answer to an MJBizDaily question about why the review was launched late, a Health Canada spokesperson said the Cannabis Act requires the review start three years after the law comes into force but does not mandate the start date to be on the three-year anniversary.

The spokesperson also said the chair was appointed first “as the vetting process continued for the rest of the panel members.”

“This allowed time for the chair, working with the secretariat, to support the orientation for the expert panel and plan for future engagements, prior to the other panelists commencing in their roles, as the vetting process continued.”

The 1,700-page package details Health Canada’s original plan for a review that was narrower in scope than the one ultimately launched, including pledges to not scrutinize important areas of federal jurisdiction.

For instance, a document dated “Fall 2022” notes that pardons for cannabis convictions – an area of federal jurisdiction – would not be part of the review and instead “would be referred to federal departments” for consideration.

After the Canadian government estimated that more than 10,000 people would be eligible for the pardons, known as record suspensions, fewer than 1,000 have been granted.

Only 148 were ordered in the 2022-23 fiscal year, according to the Parole Board of Canada.

It also appears there were issues tied to the choice of the panel’s final member.

Health Canada’s Andrea Budgell sent a June 17, 2022, email to Rosenberg, who would later become the panel’s official chair, introducing herself as the director leading the Cannabis Act Legislative Review Secretariat.

This appears to be when Rosenberg, previously a deputy minister under Conservative and Liberal governments, was brought into the review’s fold.

The June 2022 email contained a list of the four proposed members. One of the names and biographies of the four panelists is redacted. (Rosenberg, as the chair, is the fifth member.)

Then, in early September, Rosenberg sent a “draft email” to Budgell outlining the government’s intent “to appoint an Indigenous member of the panel.”

The final list of panelists was not published until the end of November 2022, two months after the panel was officially launched.

The panel members themselves lean heavily into academia and do not include any members with cannabis business experience.

The appointed panelists were:

  • Oyedeji Ayonrinde, a consultant psychiatrist and associate professor in the departments of psychiatry and psychology at Queen’s University in Kingston, Ontario.
  • Patricia Conrod, clinical psychologist and full professor in the Department of Psychiatry and Addiction at the University of Montreal.
  • Lynda Levesque, a criminal lawyer and member of the Fisher River Cree Nation in Manitoba, Treaty Five territory.
  • Peter Selby, head of mental health and addictions in the Department of Family and Community Medicine at the University of Toronto.

Levesque is the only panel member not named in the June 2022 email.

Scope, pay and independence 

There appears to have been efforts to broaden the Cannabis Act review in the days after it was launched in September 2022.

An email from Budgell on Sept. 27 informed the panel’s chair, Rosenberg, about changes to the scope of the review “asked for” by the ministers’ office.

Budgell wrote the potential changes included broadening the panel’s scope to cover economic, social and environmental issues.

A document titled “Terms of Reference 09-23-22” was contained in the email.

Responding to a request from MJBizDaily, Health Canada also provided the most up-to-date version of the Terms of Reference.

The document appears to be nearly identical to the draft version contained in the Sept. 27 email.

Both the draft “09-23-22” Terms and the internal Terms shared by Health Canada contain significantly more detail about the panel’s scope than the Terms of Reference spelled out publicly on the health department’s website.

The documents released under the ATIP law also contain a draft employment contract between Rosenberg and the Canadian government.

Since the contract is in draft form, any details could have been revised before it was concluded.

Some details of the draft contract include:

  • Rosenberg was expected to work 2.5 days, or 18.75 hours a week.
  • The contract was set to end Feb. 17, 2024.
  • The chair would be given an office at a federal Health Canada facility.
  • The contract is valued at CA$199,444.99 ($148,100), inclusive of CA$22,945 in “applicable tax.”

Some “obligations” listed in the draft contract include a requirement to attend “up to 18 in-person meetings with stakeholders outside the National Capital Region” for the duration of the review.

The Canadian government spokesperson said the panel is “independent from Health Canada,” but some details of the draft contract for Rosenberg raise questions about that degree of independence.

For instance, the draft contract says the “project authority” – in this case, an unidentified Health Canada representative – would give Rosenberg “advance approval” for the 18 in-person meetings.

However, Health Canada’s response to MJBizDaily‘s questions said the panel “does not seek approval” for any of its meetings.

The agency’s response also indicates the two federal ministers, Duclos and Bennett – not the panel’s independent chair, Rosenberg – selected the panelists to review the cannabis law.

“The ministers have carefully selected individuals deemed best fit to represent Canada’s diversity, with significant public sector experience, expertise in public health and justice, and experience engaging with Indigenous communities and organizations,” Health Canada said.

Rosenberg is also required to provide status updates to the two ministers throughout the process, per the internal Terms of Reference.

The internal Terms also stipulate that the panel is required to complete an interim report “close to the midway point” for delivery to the two ministers.

The midway point for the review was in May.

Asked if Health Canada would release the interim report to the public, the spokesperson said the agency would commit only to releasing a “what we heard” report later this year – which is a separate report.

The same internal Terms of Reference document said Rosenberg would be employed via a “sole source contract” – a contract issued without a competitive bidding process – as a result of the “additional responsibilities” he would have as the panel’s chair.

There appears to be no explanation in the other emails about why the position of panel chair was not open to other candidates.

Rosenberg doesn’t appear to have been available to participate in the Cannabis Act review until midway through 2022.

The former senior public servant had been commissioned by the federal government to prepare a report on threats to Canada’s September 2021 election.

That report was wasn’t published until February 2023.

Other than Rosenberg, Health Canada said the panel members were conducting their review “on a voluntary basis.”

However, according to the internal Terms, the panel members will earn “a nominal monetary payment in recognition of their contribution” after the interim and final reports, in addition to being reimbursed for expenses incurred when traveling.

More detail

The Terms of Reference that has been issued publicly on the health department’s website state that the scope of the panel’s legislative review would focus on:

  • Protecting young people.
  • Safeguarding public health.
  • Protecting public safety.
  • Deterring criminal activity and displacing the illicit market.
  • Access to cannabis for medical purposes.
  • Impacts on Indigenous Peoples and communities.

The scope of the review was subsequently broadened to also cover:

  • Economic, social and environmental impacts of the Act.
  • Progress toward providing adults with access to regulated “lower risk” legal cannabis.
  • The impact of legalization on access to medical cannabis.
  • Impacts on people who might face barriers to participating in the legal industry.

The internal version of the Terms of Reference acquired by MJBizDaily contains much more detail, including dozens of specific questions the panel is supposed to examine in each of those areas.

Potentially noteworthy are the panel’s queries pertaining to economics and business.

The section on “deterring criminal activity and displacing the illicit market” notes that Canada sought to dismantle the illicit market, deter cannabis-related criminal activity and reduce the burden on the criminal justice system.

That section directs the panel to assess progress toward achieving those goals.

Some industry-related areas the panel was asked to examine in the internal Terms in this section were:

  • Is the geographic distribution of retail outlets in communities across the country adequate to provide adults of legal age with access to a legal supply of cannabis, and helping to displace the illicit market?
  • How has legalization, regulation and the launch of a legal cannabis industry affected illegal activities such as trafficking, the transport of cannabis across the border into the United States and the illicit production and supply of cannabis in Canada?
  • How has consumers’ sourcing of cannabis from the illicit market changed since legalization?

Two topics for examination were couched under “public safety”:

  • What progress has been made toward establishing “a diverse, competitive legal cannabis industry” in Canada that serves the principal purposes of the Cannabis Act since the legalization and regulation of cannabis?
  • To what extent do the law and regulations provide “an appropriate level of regulatory oversight” to advance public-health and -safety objectives?

One area of focus under “protecting young persons” could apply to businesses:

  • To what extent are the cannabis law and regulations, including restrictions to access and advertising, effective in protecting the health of young people?

Some questions open the door to revising the law from an “equity” standpoint.

For instance, the internal version of the panel’s scope of work calls on members to analyze how segments of the population might face barriers to benefitting from the law, “including barriers to participation in the legal industry,” based on identity or socioeconomic factors, the document says.

Some Indigenous leaders say they were excluded from the Cannabis Act and relevant provincial laws – and thus broadly from the regulated industry.

MJBizDaily has reported that less than 1% of all federal cannabis licensees were located in an Indigenous community and less than 1% of the marijuana retailers approved in accordance with federal and provincial laws were situated in Indigenous communities.

The panel’s scope will also touch on the country’s CA$407 million medical cannabis industry.

Some of the questions the panel was instructed to examine include:

  • To what extent have there been changes in reasonable access to medical cannabis, including affordability, availability, variety of products and the number of “access points” since adult-use legalization?
  • How has the legalization of cannabis influenced the medical-access framework, including the personal and designated production aspect?
  • Are the current methods of access and products available meeting the needs of patients?

Parallel reviews

The internal guidelines acknowledge that over the course of the panel’s mandate, other federal bodies may undertake their own parallel reviews or evaluations of Canada’s cannabis policies – in addition to Health Canada’s “independent” review.

The Health Canada secretariat has been tasked with keeping the panel informed of those reviews to minimize duplication, according to the latest version of the internal Terms of Reference.

An earlier version of the internal Terms of Reference asked the panelists to “refrain from providing advice” on cannabis policy that falls outside the scope of the official review.

However, that sentence was removed in the most recent version.

Now the sentence says that “the panel may offer observations” on matters outside the scope of their review.

That’s important, because it opens the door for substantive recommendations that could be good, or bad, for cannabis businesses.

So far, Competition Bureau Canada, the agency that protects and promotes competition in the country, has rolled out recommendations to strengthen competition in Canada’s legal cannabis industry.

“Our report explores the competitive dynamics of Canada’s cannabis industry, investigates potential barriers to competition, innovation and choice, and makes recommendations to enhance competition and support a more competitive legal industry,” a bureau officer told MJBizDaily via email.

‘Strategy table’ too late? 

In April 2022, Canada unveiled a plan to launch a strategy table to provide a forum for government officials and executives to discuss how to bolster the legal cannabis industry.

That was at a time when many business were struggling financially – and still are – including a large number of cannabis companies seeking cover under Canada’s corporate insolvency law.

The secretariat of the legislative review was supposed to “keep the expert panel informed of outcomes” of the cannabis strategy forum.

However, since the strategy table hasn’t yet launched, the group has no outcomes to report to the panel.

That raises the question of whether the strategy forum is already too late to be relevant for the legislative review.

Key deliverables

The internal Terms of Reference contains a detailed “key deliverables” section.

Three of the deliverables outlined are the aforementioned:

  • Status updates for the ministers.
  • The “what we heard” report.
  • The “interim” report.

The panel’s final report is supposed to be delivered to the ministers no later than 18 months after the establishment of the panel.

That would translate to March 2024 – unless the panel is extended.

The panel will operate for 18 months after being confirmed, “at which point the ministers could extend participation of some or all panel members or appoint new members.” (Full Story)

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