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Analysis

Cannabis Regulation Opens Fair Market Opportunities

By Miriam Bello | Wed, 12/09/2020 - 12:25

Regulation is key for medicinal cannabis use, from patient access to treatment outcomes. While cannabis has ancient background uses, its inclusion in regulatory frameworks is recent. Canada was the first country to legalize medicinal cannabis with the purpose of treating terminally ill patients with chronic conditions to relieve their symptoms and their pain. Many other countries have joined in, which can serve as an example for Mexico to build its own regulatory framework.

Experience Exposes Needs

When Canada allowed legal access to cannabis in 1999, its Ministry of Health granted permission for medicinal and scientific purposes within the public sector. It also allowed its use on terminally ill patients, as well as individual harvesting. In 2014, regulations broadened to allow full legalization of medicinal cannabis production. However, during those 15 years, there was a large grey area to address. Many challenges started to emerge and one of the first steps that Canada took was to issue licenses to grow the cannabis plant for medicinal use to make sure its possession remained controlled. Health Canada’s database grew from 7,914 patients to 400,000. However, medical associations required more scientific proof to prescribe the drug, as well as further studies on cannabis’ interaction with other prescribed drugs.

Germany can be seen as another case study on regulation. The country is the leading medical cannabis prescriber in Europe after legalizing medicinal cannabis in 2017. Its regulation contemplated the use of 14 kinds of cannabis flowers to treat patients who cannot receive a standard treatment. Health insurance can deny reimbursement in some cases but there is no standardized understanding for those exceptions.

According to MJB Daily, the use of medicinal cannabis in Germany resulted in 185,000 prescriptions in 2018 and 60,000-80,000 registered patients using medicinal cannabis products. Germany has even faced shortages to fill prescriptions. Nevertheless, and just as in Canada, doctors where still hesitant when prescribing the drug.

This is a common issue, according to María Fernanda Arboleda, International Director of Medical Services at KHIRON Life Sciences Corporation. “If doctors do not have the knowledge and information on the subject, there is no real advance. Universities rarely teach medical students about medicinal cannabis. Even before regulation, education needs to improve because its use is not suitable for all patients,” she told MBN. Beyond education, the lack of clarity from insurance companies to cover medical cannabis has also been a barrier for prescriptions.

In Europe, the second-largest number of medical cannabis prescriptions comes from Italy.  Growing cannabis is also legal in Italy. However, only the Italian military can grow it. According to an article by Sensi Seeds, demand for medicinal cannabis increased quickly. Doctors and patients can access it to treat specific conditions that include chronic pain, multiple sclerosis, Tourette’s syndrome, glaucoma, anorexia, injury to the spinal cord, cachexia and nausea. Nevertheless, patients must have tried other treatments before turning to medicinal cannabis. In Italy, health authorities fully reimburse medicinal cannabis prescriptions.

Just as in Italy, Dutch doctors can prescribe medicinal cannabis for a number of conditions. The government, through the Office for Medical Cannabis (OMC), is responsible for the production of cannabis for medicinal and scientific use to be supplied to pharmacies, universities and research institutes. OMC has the exclusive right to import and export cannabis, cannabis extracts and cannabis resin. With this monopoly, the country prevents illicit trafficking or a black market of cannabis. Due to the legal status of cannabis in the Netherlands, pharmacies charge less per cannabis gram, making this a more affordable and pharmaceutically safe option for patients.

What Should Mexico Consider in its Medicinal Cannabis Regulation?

An MBN article written by Pablo Ricaud Arriola, Co-Founder & Executive Chairman of Rising Farms, exposed the production and market concerns of the industry regarding regulations. “Usage can be legalized in various forms but what about production and distribution? The next question would be licensing. How many licenses will the government approve and how often?”

According to an article by Karger and based on the study of these four countries and other regulatory frameworks, previous experiences leave lessons for other countries to consider when creating their own medical cannabis frameworks. The first one is the need for education on the subject. Despite having a regulatory framework, the need for medical education to safely prescribe the drug with enough knowledge regarding its benefits would increase access to this treatment for patients in need. In Mexico, companies like KHIRON have started to take this matter into their own hands so when regulations are ready, prescription can begin safely and quickly. According to Arboleda, KHIRON has decided to offer medical education programs to fill that gap, providing medical professionals with scientific support and understanding about cannabis use. “In Mexico, we have allied with Tecnológico de Monterrey, where we offer more than 1,500 scholarships to train doctors on the use of medicinal cannabis.”

The need for stronger scientific evidence on the benefits of cannabis is a must to encourage prescription, as well. According to Karger, Canada’s licensing initiative allows to monitor the use of cannabis based on a database on side-effects tracing. This information has scientific and policy-making value to improve regulation and prescription.

Licensing has another interesting purpose, a study made by Mexico Contra la Delicuencia (Mexico Against Crime) stresses the importance of licensing to maintain other prohibitions, as is the case in Polonia. The study also states that Latin American countries like Colombia and Peru issue individual licenses for each activity related to the supply of medicinal cannabis, from production to transportation and sale. According to the report, this has helped countries divide monitoring among different regulatory bodies.

Karger’s report also describes the vital importance of transparency within the industry. The industry should be clear about cannabis products’ side effects or dangers. Globally, alcohol and tobacco products include health warnings. In Mexico, pre-packed food and beverages warn of potentially dangerous concentrations of certain substances.

Demand, cost and insurance coverage are recurrent problem in the cases of Germany, Italy and Canada. This could block access to medicinal cannabis treatments, especially in countries with lower incomes like Mexico. While out-of-pocket expenditure in Mexico is the second highest according to OECD figures, based on the Ministry of Health’s official figures, low-income opportunities are a barrier for treatment access and follow up in Mexico. In fact, poor zones and low-income groups have the highest mortality rates due to diverse health situations.

Stigma and the role of social media are another important element in cannabis’ adoption. “Social stigma has created barriers around the prescription of cannabis, partly because of limitations on medical education in the subject,” says Arboleda. Market wise, MCD recommends avoiding monopoly practices that limit the market and dictate the economic welfare of cannabis treatments. This includes guidelines that allow local production, as well as imports, trying to integrate small-scale growers and equal conditions for stakeholders. In addition, according to MCD, just as in pharma, streamlined sanitary processes would benefit products reaching the market faster with the highest quality standards.

How Can Cannabis Be Successfully Introduced to the Market?

Jaime Castro, Director General of BPF, part of QbD group, explained to MBN that the subject has to be approached from a holistic point of view to prepare society for the paradigm shift regarding cannabis. “It is important to differentiate medicinal use from recreational use. In Mexico there are strong positions for and against both cases,” Castro says. Recreational use must go hand-in-hand with strong controls that ensure minors cannot access the drug due to the dangers that this represents, according to Castro. Awareness and accountability campaigns are required regarding cannabis use, where the ethical limits that regulate the commercial activity of the product are clearly established. As for medicinal cannabis, Castro says a fiscal and regulatory framework must be established that favors the creation of companies that produce and import these products. This would also provide legal certainty and security for the handling of substances with adequate controls to prevent theft and counterfeiting of products. It is a good opportunity to strengthen product serialization. “The work on pharmacovigilance will also play an important role in this transition,” he adds.

Regulations must also take into account companies in charge of the chemical analysis of this type of products as it is necessary to have the reference substances in time and form at adequate prices. Castro explains that it is necessary to adapt regulations on import and treatment of substances. It is also paramount to ensure the security and confidentiality of the information of those who require these products to guarantee they are not targets of extortion or corruption in other parts of the world. Intellectual property and patent management is the last subject that Castro highlights, according to his experience as President and Director of ISPE Mexico. “There will be a lot of work in the coming months before what I consider is the inevitable opening of Mexico for these types of products, both in their recreational and medicinal modalities.”

An Attractive New Market

What is the potential for Mexico to become an attractive investment and exploration actor in the medicinal cannabis field? It is huge, according to Castro. “Mexico, due to its geographical location and proximity to the US and Canada, is a strong and quite viable option to invest in this business,” he says. This is also complemented by Mexico’s strong pharmaceutical industry, which allows it to have the necessary infrastructure for production, evaluation, marketing and distribution.

Ricaud mentions that this market has the potential to attack entrepreneurs. “Throughout 2019, the CBD market saw so many new participants that those earning less than US$1 million in annual revenues occupy over 97 percent of the market. The same is happening with players targeting to produce high-quality, specialty biproducts for the pharmaceutical industry.” Ricaud explain that Mexico’s advantage in this scenario is that the country has better labor costs and climate (compared to the US or Canada). However, this could put further strain on supply.

However, while Mexico fails to resolve cannabis’ regulatory matters, this will not be an exploitable market in the country. According to Andrés Galofe, Vice President of KHIRON Life Sciences Corporation, “the market opportunity is huge, as well as the strategic alliances that we could form with distributers, pharmacies and the clinical market.” Yet, all of this will be for naught if regulation remains unclear and nothing goes forward, Galofe told MBN. By legalizing cannabis, Mexico could take a slice of a US$2 billion market, according to New Frontier Data. However, the economic contribution of medicinal cannabis is still hard to predict, as this widely differs from recreational use. 

The data used in this article was sourced from:  
IMCO, OECD, MBN
Photo by:   TinaKru via Pixabay
Miriam Bello Miriam Bello Journalist and Industry Analyst