A government-appointed panel of experts analyzing Canada’s adult-use legalization law, the Cannabis Act, has recommended the country enable pharmacy access for medical marijuana and reconsider how excise tax is applied to recreational products.
The proposals are part of a final report, 18 months in the making, that lays out 54 recommendations and a number of observations for the federal government to consider.
Some of the recommendations align with industry expectations, such as allowing pharmacies to sell medical cannabis products, which the largest pharmacy chain in the country, Shoppers Drug Mart, had been calling for.
Canada’s cannabis industry expressed disappointment with some other recommendations and omissions.
For instance, the panel called for the government to maintain the limit of 10 milligrams of THC per edibles package, which businesses have long derided as a gift to the illicit market.
The report also acknowledged barriers and challenges facing First Nations, Inuit and Métis communities and entrepreneurs, citing MJBizDaily research about their exclusion from the Cannabis Act.
“This has led to significant public health and public safety challenges in many communities and inequitable economic development opportunities,” according to the report, written by Chair Morris Rosenberg, a former deputy minister under two federal governments.
“There is an urgent need to re-engage on these issues, consistent with the Government of Canada’s commitment to recognize the rights of Indigenous Peoples and with a shared commitment by all parties to protecting public health and public safety.”
None of the panel’s 54 recommendations are binding, and it’s unclear to what extent the federal government is committed to implementing them.
Moving forward, according to the report, it will be important for the Canadian government to allocate appropriate funding and resources to ensure the effective implementation of the cannabis framework.
Canada’s federal government alone employs hundreds of people to regulate cannabis, meaning it’s an expensive system to maintain.
Specifically, the authors noted that needs to include allocating resources to areas that did not initially receive dedicated funding, such as:
- Research on the therapeutic potential of cannabis.
- Prevention and treatment programming.
“In some circumstances, difficult decisions will need to be made about when, or the extent to which, our recommendations can be implemented,” the report notes.
“While some new investments may be required, we encourage all levels of government to consider how existing resources can be redirected, and to consider how cannabis fits into broader priorities.”
Excise tax reform
The panel made a number of recommendations regarding excise taxes applied to federally regulated businesses.
Suggestions in this area include:
- Further “review” by Finance Canada of the excise tax model overall, recognizing the average price of cannabis has decreased significantly since legalization, resulting in higher excise payments as a percentage of sales.
- Higher-potency products being subject to more tax than lower-potency products.
- The development of an excise tax-sharing framework with First Nations.
- Reviewing whether excise tax should still be applied to medical cannabis.
Some industry sources expressed hope the federal government will hear the report’s calls for excise tax reform when the next federal budget is announced in mid-April.
In its report in advance of the 2024 federal budget, the House of Commons’ Standing Committee on Finance made a number of recommendations, including changing the duty so it’s limited to a 10% ad valorem rate, meaning 10% of the value of a transaction.
Recommendation No. 27 called on Finance Canada to consider “a review” of the excise tax model, recognizing that it was originally designed when the average price of dried cannabis was significantly higher than it is today.
The duty currently imposed on producers’ dried cannabis is either 1 Canadian dollar (73 cents) per gram or 10% of the value of the gram, whichever is greater. This can end up amounting to upward of 30% of cannabis revenue.
The same recommendation asks Finance Canada to consider making reforms to the excise tax regime to apply progressively higher duties on cannabis products with higher quantities or concentrations of delta-9 tetrahydrocannabinol (THC) in order to “discourage the consumption of higher-risk cannabis products.”
Canopy Growth Corp. CEO David Klein suggested a limit of 10% of the ad valorem rate would be a leap forward and would still align with the original intent of the excise regime.
“We welcome the recommendations of the expert panel and encourage the Government to use next month’s federal budget to take urgent action on the greatest issues impacting the industry including by reviewing the excise model for adult use as well as reconsidering the application of the tax to medical cannabis,” he told MJBizDaily in an emailed statement.
Pharmacy access for medical cannabis
In another potentially meaningful recommendation for the industry, the panel asked Health Canada to allow pharmacies to distribute cannabis products to patients with a medical authorization.
Recommendation 42 asks provinces, territories and the regulatory authorities for pharmacists to consider supporting the new access channel for patients once federal changes are made.
Currently, medical cannabis patients in Canada receive the drug via courier directly from the supplier, grow it themselves or designate someone to grow it for them; pharmacy access is not allowed.
Outside North America, medical cannabis is almost always distributed in pharmacies – not via physical dispensaries, as in the United States.
Deepak Anand, principal of ASDA Consultancy Services in Surrey, British Columbia, said pharmacy access would be a significant improvement to the medical access regime.
“This would benefit patients by addressing concerns about delays in mail delivery, product shortages and allowing them to consult with pharmacists regarding drug interactions or side effects,” he said.
“It is encouraging to see the panel suggest that Health Canada prioritize efforts to integrate cannabis into standard drug-approval pathways and conventional medical care rather than a separate medical-access program.
“This would provide critical and increased avenues for patients to access medical cannabis, reduce stigma and improve overall patient care.”
Another significant recommendation calls for Health Canada to prioritize efforts “to move beyond a distinct medical access program so that cannabis is considered within standard drug-approval pathways and part of conventional medical care.”
The committee said that should start with the “rapid advancement” of a pathway for cannabis health products containing CBD.
In a separate recommendation, the committee said Health Canada should maintain the medical access program under the Cannabis Regulations, with certain improvements.
Anand noted that a scientific advisory committee commissioned by the federal government determined more than two years ago that CBD should be made available through the natural health products/over-the-counter pathway.
“It’s encouraging to see the panel urging fast progress on this matter,” Anand said.
“CBD plays a significant role in promoting health and wellness, and patients should have access to it through mainstream channels like health food and grocery stores, rather than solely relying on cannabis retail stores.”
THC limit for edibles
A controversial recommendation in the report calls on the government to maintain the current limit of 10 milligrams of THC per package – even though illicit cannabis edibles often contain THC with 100-200 times that limit.
“Ultimately, we felt that there are too many unknowns and too much uncertainty about the likely consequences of increasing the amount of THC in these products,” according to the report.
“Therefore, we are of the view that prudence is warranted here, and accordingly, we recommend that the current limit be maintained and that research be undertaken that will fill critical knowledge gaps related to this issue.”
Daniel Bear, director of Humber College’s Centre for Social Innovation in Toronto and a drug-policy researcher, suggests that maintaining the 10-milligram limit might not be prudent.
He said the low THC limit is driving medical cannabis patients to the illicit market.
“Maintaining such a low THC limit in the nonmedical legal market unnecessarily inflates costs for those consumers and maintains one of the only remaining advantages the illicit market holds over the legal market,” he said.
“Medical consumers often need higher doses of THC or CBD than are commonly found in the retail market. By limiting the edible dose, the committee forces people to either shop illicit sources or try to navigate the unwieldy medical market.”
Cannabis industry wanted more
Some members of the Canadian cannabis industry were disappointed the report didn’t dig deeper into macroeconomic challenges imposed on the industry by the government.
Organigram Holdings CEO Beena Goldenberg said the recommendations found within the report are not “robust” enough to deliver the impactful changes the industry needs.
“While we are pleased to see an acknowledgement that the excise framework needs to be revisited, the move to taxing higher THC products at a higher rate is likely to drive some consumers back to the illicit market,” she wrote in a public statement.
Goldenberg was disappointed the panel recommended that Canada maintain plain packaging and labeling requirements, saying it “hinders the ability of legal producers to convert illicit market consumers.”
A separate recommendation, however, said Health Canada should consider allowing a “portion” of a cannabis package to be transparent – but only for dried cannabis, not edibles.
Rick Savone, chair of industry group Cannabis Council of Canada, told MJBizDaily via email that his group’s expectation was that there would be more specific recommendations to guide the government toward immediate action to make the industry more viable.
Still, Savone welcomed the recommendation to focus on enforcement against illicit players, “but without concrete steps on how to tackle this problem,” he said, “we fail to see how this will happen.”
“The upcoming Budget is not the time for incremental and unimpactful changes. Our sector needs immediate excise duty relief, and nothing less will do.”
The internal Terms of Reference guiding the Cannabis Act review is available here. (Full Story)