Marijuana Law, Policy & Reform

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Moritz College of Law

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Sunday, May 25, 2014

Examining regulatory realities in Canada's new federal medical marijuana landscape

About_tweedThe front-page of the New York Times business section has this new lengthy article headlined "When Cannabis Goes Corporate." Here are excerpts:

Hershey stopped producing chocolate in Smiths Falls, Ontario, six years ago. The work went to Mexico, but the factory remains, along with reminders of the glory days: A sign that once directed school buses delivering children for tours.  A fading, theme-park-style entrance that marks what used to be the big attraction — a “Chocolate Shoppe” that sold about $4 million of broken candy and bulk bars a year.

The once ever-present sweet smell of chocolate is gone, too. In the high-ceilinged warehouse, where stacks of Hershey’s bars and Reese’s Peanut Butter Cups once awaited shipment, the nose now picks up a different odor: the woody, herbal aroma of 50,000 marijuana plants....

The new owner of this factory, at 1 Hershey Drive, is Tweed Marijuana.   It is one of about 20 companies officially licensed to grow medical marijuana in Canada.

A court ordered the government to make marijuana available for medicinal purposes in 2000, but the first system for doing so created havoc.  The government sold directly to approved consumers, but individuals were also permitted to grow for their own purposes or to turn over their growing to small operations.  The free-for-all approach prompted a flood of complaints from police and local governments.

So the Canadian government decided to create an extensive, heavily regulated system for growing and selling marijuana.  The new rules allow users with prescriptions to buy only from one of the approved, large-scale, profit-seeking producers like Tweed, a move intended to shut down the thousands of informal growing operations scattered across the country.

The requirements, which went into effect in April, are giving rise to what many are betting will be a lucrative new industry of legitimate producers. The government, which will collect taxes on the sales, estimates that the business could generate more than 3.1 billion Canadian dollars a year in sales within the next decade. “It’s just so rare that you have an industry that’s growing but which has a huge established market,” said Chuck Rifici, Tweed’s chief executive....

Canada’s across-the-board law ... provides a cohesive set of regulations, laying the groundwork for a group of companies to set up operations. “That was really important for us as investors,” said Brendan Kennedy, chief executive of Privateer Holdings, a marijuana private equity fund based in Seattle that started Tilray, one of Canada’s new legal growers. “People talk about the Colorado model; people talk about the Washington model. I think someday they’ll talk about the Canada model. By creating a tightly regulated federal system, by creating a federal license, by making it difficult to navigate in and capital-intensive, Canada has attracted a different kind of player into this industry.”...

[B]efore they could even submit applications, Tweed and other growers had to secure sites for their operations and obtain all local permissions. Applicants who passed the initial vetting then had to pass a final, two-day inspection. The requirements are significant. Growers must have sophisticated carbon filtration systems to prevent the smell of marijuana from wafting outside. They must maintain high-security measures like biometric thumbprint readers. Employees need to pass rigorous security checks, conducted by the Royal Canadian Mounted Police, which take four to six months. “If I knew how much regulatory overhead there would be from the beginning, I would have probably been just as excited about the industry,” Mr. Rifici said. “But I might have thought that I might not be able to get there....

Tweed is taking a subdued, almost artisanal, approach to its branding, avoiding the Cheech-and-Chong vibe of some rivals. Many of its marijuana strains are named after fusty fabrics like tweed, as well as people and places associated with such clothes. The Herringbone strain is supposed to help with depression. Bakerstreet is used to treat anxiety. Donegal is promoted as a pain reliever.

But the industry faces an uphill battle, as prominent doctors, researchers and even the Canadian Medical Association are advising against prescribing marijuana at all. Marijuana, they say, has not been through the testing and approval process required for other pharmaceuticals.

Dr. Mary-Ann Fitzcharles, a rheumatologist and professor of medicine at McGill University in Montreal, was the lead author of a widely publicized paper recommending that, without clinical evidence, marijuana should not be prescribed for rheumatoid arthritis. About 65 percent of users in Canada under the old system said they suffered from that condition. She compares the medical claims for marijuana to those once made for tobacco....

When Tweed shipped its first two orders directly to customers on May 5, about half of the company’s management watched, partly for ceremonial reasons but mostly to make sure that its elaborate, government-mandated inventory-tracking system worked. Employees weighed the total inventory before doling out the shipments onto smaller scales calibrated to 0.01 gram. The marijuana was dropped into boxes bearing Tweed’s logo and then, to meet government requirements, vacuum-packed into odor-blocking bags. Then came a final check on the scales before the two parcels left in standard courier pouches that did not bear Tweed’s name.

http://lawprofessors.typepad.com/marijuana_law/2014/05/examining-regulatory-realities-in-canadas-new-federal-medical-marijuana-landscape.html

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