Business

Is There A Looming Medical Cannabis Shortage In Canada?

Written by Marguerite Arnold
Claim Your $4.20 Honolulu Haze Hemp Pre-Rolls

While Canadian firms for example are ramping up production, they are still behind…

It is already a story in Canada this summer. Medical cannabis patients are reporting shortages. This includes CBD. And further, because of the growing interconnectedness of global medical markets and who supplies them, this is more than just a local Canadian problem.

That said, it certainly will be felt and quickly. Demand from patients has boomed in the country where there are today an estimated 170,000 registered patients, up from less than 10,000 three years ago. There is no country, including Israel, where patient demand has boomed like this. And there is no state, including California as of yet, which has seen such local demand grow even after state legalization.

Licensed producers are already scrambling to keep up. Especially because the biggest firms in the country are also now in consideration to supply the entire German market plus other European countries at a time when recreational reform also takes place in Canada before domestic German crops are ready to be harvested.

What Does This Mean By The Numbers?

Right now, it is still hard to determine impact on patients, much less what will actually happen. According to the government’s own estimates, producers are shipping about half of what patients are legally allowed by prescription to consume. In other words, patients are allowed to consume about 2.5 grams a day, but are only ordering just under 1.

By the time cannabis is legal in Canada, presumably by summer 2018, Canadians will be consuming 655,000 kilograms of cannabis recreationally a year. This does not count the medical market. If patient growth only increases at 10% a month which is what it is doing now, that means there will be a doubling of this population too. That is another (ballpark) figure of 340,000 – 533,000 people who are currently consuming a medical allowance every month. Whether it is 2.5 grams or 1. If insurance begins to kick in, which is in the offing per lawsuits in Canada, that means that patients will be able to access at least twice what they can now at less cost than the amounts they can afford presently.

That puts the total just on the medical need side easily in the 170,000 – 260,000 kg range by next summer – or easily one third of the estimated recreational market. It could also be a lot bigger – as much as two-thirds to equal the recreational market just based on consumption and increased access.

The thing to remember about these numbers is that they are just aggregated and normalized data. If looking at overall trends however, the situation is not so neat. In fact, Health Canada data shows that 90,208 patients registered in the period December 2015 to 2016. That was an annual increase, albeit in the first full year of medical legalization, of 227%. Will there be a similar bump in medical patients again when the recreational law kicks into effect next year?

To put this further in perspective, the Canadian producers who will also be expected to supply just Germany as of 2019, albeit with crops supplemented by domestic German cannabis, will also be supplying another 15,000- 30,000 more medical patients per the government’s own estimates. And further, at up to 150 grams a month.

Can existing firms or even new ones keep up? The biggest LPs are certainly loaded with cash right now. Market caps have exploded, led by Canopy Growth. Equity access has so far not proved to be a problem, particularly as all of the biggest Canadian firms are now floating shares on global equity markets. They produce about 80,000 kg a year now. Expansion already underway means these firms will be about to supply about 400,000-500,000 kg by next year.

And that means only one thing. The numbers do not add up. And no matter what anyone calculates, it is clear that there will not be enough to supply both the medical market and the recreational market. And that is if all goes well. In other words, with zero delays in financing, construction or distribution for plans already underway, someone is going to suffer come next year. Even the executives of the biggest companies expect they will not be able to keep up. The inventory that has now been stockpiled is perhaps enough to make a dent next year. But that means by next year, the newly fully expanded industry has to be going full throttle.

Early Contingency Plans Are Clearly In The Works

To the extent that the LPs and the government clearly sees this is a looming problem, there are clearly discussions about how to handle this starting now. Some companies are already issuing statements about commitments to patient set asides.

To the extent that the LPs in Canada clearly see benefit in coming out on the side of medical cannabis patients, since these consumers are their most reliable customers, there are likely to be at least voluntary commitments, so the worst shortages in the immediate short term are likely to be mostly averted.

The problem is, of course, is that the situation does nothing to stem the black market, and may in fact, only encourage the same.

Ironically, of course, but for other reasons, this is also what is facing the German government and at least the Canadian growers who get selected for the first grow bid here. The stranglehold on the German side however is that patients cannot afford medical cannabis until insurance companies pick up the tab. Could it be that the crop in Germany is used to substitute additional patient need back home?

In a decade this entire debate will probably not matter anymore. But for the next few years, as the technicalities in every legalizing market get worked out, patients are absolutely on the first and front lines of both a supply shortage, and the cash to buy a more expensive product they rely on as medication.

Joy Organics 420 SALE
Claim Your $4.20 Honolulu Haze Hemp Pre-Rolls

About the author

Marguerite Arnold

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: