Canadian Cannabis Rules Changes Ahead: An Industry Insider Perspective on MMPR and Legalization

The balance of 2016 offers significant potential changes for the Canadian medical cannabis program, MMPR, in August as well as the first hint at what the pending legislation for the legalization to be introduced next Spring might look like when the Task Force on Marijuana Legalization and Regulation publishes its report in November.  This is the first of a series of articles we will be publishing on these topics, where we asked Hugo Alves, who created the medical cannabis industry team at an internationally recognized Canadian law firm, for his perspective.

Hugo Alves Bennett Jones
Seven Potential Changes in MMPR and My Views on the Timing of Legalization in Canada

Guest post by Hugo Alves, Partner – Corporate/Commercial at Bennett Jones LLP

In terms of changes in August, my guess is that the government will introduce amendments to the MMPR (as opposed to trying to deal with Allard ruling by way of a s.56 exemption from the CDSA – the way they did to address the Smith ruling on derivative products). What I would expect to see in those amendments are:

  1. An accommodation for home growing – which will be subject to modest limits and some reasonable regulatory requirements. I think the accommodation is likely to be 10 plants or less in total per patient (although I don’t know if this will be measured in number of plants or allowable square footage for the home grow) as the regulator (“HC”) will look to address issues of security of supply and strain access, but mitigate the ability for people to turn their home growing allowance into a commercial growing operation. In terms of regulatory requirements, I think these will be modest – notice to the municipality and local police and fire departments that you are growing, a general requirement that no odor can emanate from the growing location (to allow HC or law enforcement to take remedial action in cases where the grow is negatively impacting immediately surrounding areas such as schools, residential neighborhoods etc.).
  2. I think that there will be an ability for the home growing patient to designate another person to grow for them (hard to think that this is will not be the case given the existing case law). There will be rules around designated growing aimed at preventing the aggregation of designated growing licenses into commercial operations, but I think that designated growers will be able to grow for more than one person (there is case law directly on this point). It will be interesting to see how the regulator tries to strike a balance between allowing designated growing as a proxy to reasonable access (i.e. allowing designated growers to have some economies of scale so that the price to the designating patient is reasonable) vs increasing regulatory requirements on those designated growers in order to ensure public health and safety, diversion to the gray/black market and prevent commercial grows.In addition to the above – which I think have to be part of the package of amendments, there are a number of things that HC may try to address. HC is working on a really compressed timeline so I don’t know if any of the following will make the amendments, but hopefully some do.
  3. In my view, if HC wants to position the legal regulated market to compete with and displace the gray market ecosystem, the best thing they can do is give licensed producers (“LPs”) the ability to produce and sell the types of products that are both constitutionally permitted pursuant to the Smith decision and which are in high demand as demonstrated by the current marketplace. The scope of this can be something as easy as removing the 3% cap on THC in cannabis oil (a limit that I’ve never understood given that patients are permitted to produce higher concentration derivatives for themselves) in order to allow LPs to produce cannabis oil that can be pre-loaded into a vaporizer pen. Edibles and other derivatives may be too big a stretch on this round of revisions because of the necessary tie-ins to food and natural health care product legislation, but even just giving LPs the ability to produce oil that can be vaporized will have a big impact on market dynamics.
  4. We may see a surprise inclusion of pharmacies as a distribution channel. We know that the pharmacies want it and that they have been actively lobbying for it. Having the greater points of distribution will be helpful to the government when if they are sued again on the same basis of Allard – i.e. that, even with the new amendments, the MMPR is unconstitutional because it doesn’t provide sufficient access. I say “surprise” inclusion because I don’t know if the regulator has had enough time to figure out what sort of additional regulatory requirements to build in around pharmacy distribution (e.g. does the pharmacy need a bigger vault, additional security requirements etc.).
  5. Also in the “surprise” category would be some rules to make it easier for a patient to manage their registration and move between LPs or order from multiple LPs. A patient’s ability to access cannabis from multiple LPs would be helpful in terms of access (i.e. if one LP is short on supply, the patient could easily order from another LP), but it presents tracking, monitoring, data security and privacy. Those issues are not insurmountable, but, again, I don’t think HC has had sufficient time to work through those issues and put forward workable legislation.
  6. We could see some minor clean-up items, such as formally introducing regs to deal with streamlining LP to LP wholesale transactions, storage and destruction of unused parts of the cannabis plant etc. – these items have already been implemented to a large extent, but HC may take the opportunity to formalize them into amendments.
  7. Similar to the above, we might see HC try to formalize the s.56 exemptions issued after the Smith decision into formal amendments to the MMPR.

In terms of when Canadians may be able to purchase cannabis legally without a prescription, I am of two minds. I think that the Federal government has to move fast or go slow. So far, the indication has been that they are going to move fast and I think that is probably their best course of action. Taking the Liberal government at face value – the Health Minister, Jane Philpott’s announcement at the UN General Assembly Special Assembly on Drugs in NYC that regulation would be “introduced” in Spring of 2017 – then I think you could have something as early as end of 2017 or Q1 2018. This is my hope and what I want to believe.  However, politics can be a funny animal and introducing legislation which is sure to have some controversy and growing pains associated with it in the back half of the Liberal government’s first mandate (the next federal election will take place October 21, 2019) will be something that, I think, will be carefully considered by the Prime Minister’s strategists. Right now if I had to make a bet, I think that they will legislate the adult use regulations early in 2018 – they’ve put this time frame out there in the public, it is a something that the Prime Minister campaigned on, they have the majority government to push the legislation through and I think it still gives them enough time between implementation and the next federal election for any kinks to be worked through such that it doesn’t negatively impact their bid for a second term.

About the author:

Hugo Alves is a corporate and commercial lawyer who specializes in domestic and international commercial transactions. He has advised industry-leading Canadian and foreign clients in connection with private mergers and acquisitions, debt and equity financings, public procurements of goods and services, outsourcing transactions, information technology transactions, joint ventures and strategic alliances. Hugo has significant venture capital and private equity experience, focusing on technology and energy companies and is a trusted advisor to emerging growth companies at every stage of their life cycle.

Hugo created and developed the medical cannabis industry team at Bennett Jones LLP and is one of Canada’s leading advisors in the medical cannabis industry established under Canada’s Marihuana for Medical Purposes Regulations. He acts for clients in all segments of the medical cannabis industry and is counsel to the Cannabis Canada Association. The breadth of his practice and network in the medical cannabis space, technical legal excellence and practical business-minded approach to clients make him a highly sought after advisor. Hugo is also an adjust professor at the University of Western Ontario’s Faculty of Law, where he developed and taught Canada’s first course in the field of medical cannabis titled “Medical Marijuana Law & Practice“.

Connect with Hugo on LinkedIn.

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Published by NCV Newswire
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