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A New Industry in Canada - 2013

Licenced Commercial Production - The New Medical Cannabis Industry in Canada

Health Canada is establishing a licensing framework to allow for a commercial industry for the production and distribution of dried marihuana for medical purposes. Personal and designated production of dried marihuana for medical purposes would be eliminated, and Health Canada would no longer produce and distribute marihuana directly to individuals, eliminating related contract costs.

Under the proposed Marihuana for Medical Purposes Regulations (MMPR), Health Canada would eliminate the role it plays in determining the eligibility of persons to access a legal supply of marihuana for medical purposes and return to its traditional role as a regulator of industry.

Private industry participation in the proposed regime is expected to yield benefits to society.

Under the status quo, marihuana is either produced through private arrangements or at a cost to the taxpayer. There were no benefits to society at large beyond the benefits to the individuals involved. Under the proposed MMPR, there would be beneficial impacts for the industry, over and above the benefits to the individuals involved in the market.

Major attention was given to longer-term benefits from the full establishment of a large, competitive and innovative legal industry for marihuana users, the economy and Canadian society, and the longer-term possibility that a fully functioning and reasonably competitive, efficient and innovative market would promote increased uptake by individuals currently accessing marihuana through the illicit market.

Business, especially medium-sized business, is also a beneficiary in terms of producer surplus benefits and the expansion of the legal marihuana supply industry that could grow to more than $1.3 billion per year in annual sales by the end of the forecast period.

The principal impact on the economy would be the replacement of the current regime — a combination of personal production by private citizens and a heavily subsidized Government supply option — by a commercial industry. This would significantly reduce the burden on the Government of Canada and Canadian taxpayers. By 2024, rather than attempting to regulate potentially up to 450,000 individuals, Health Canada would likely be dealing with a significantly smaller number of licensed businesses.

It is projected that within one to two years of the industry’s establishment, licensed producers would have grown beyond the scope of small business. While there would be substantial investments required at the start-up phase, returns supported by a growing industry could potentially compensate owners of capital in a relatively short time.

According to the United Nations World Drug Report, marihuana is the most trafficked illicit drug in North America. The Royal Canadian Mounted Police (RCMP) estimates that the illegal marihuana market in Canada alone represents a multi-billion dollar per year industry.

Because marihuana is a highly divertible controlled substance, and given that all controlled substances must be tracked and reported internationally, some administrative burden is justified. Security measures therefore account for a large portion of the administrative burden on industry in the proposed Marihuana for Medical Purposes Regulations (MMPR). These measures are included to address the risks to public health, safety and security that are associated with marihuana production.

Additionally, as there is no licit Canadian industry for the production of marihuana for medical purposes, the proposed MMPR set out a scheme which interested individuals or corporations could elect to participate in or not. It would not place an administrative burden on any existing business activities.

The proposed MMPR would enable an entirely new industry to be created in Canada. Achieving the benefits contemplated by the proposed MMPR is highly dependent on establishing a viable marihuana for medical purposes industry, with licensed producers that produce as the anticipated demand for the product increases.

Are you interested in being part of this brand new industry in Canada?

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