In July 2013, the government adopted the Marihuana for Medical Purposes Regulations (the MMPR), superseding the 2001 regulations on the same subject matter. The MMPR became fully implemented on March 31, 2014, dramatically changing the rules of supply of medical marihuana, from a cottage industry in which approved patients grow their own or buy from small producers, to a free-enterprise system with no limits on the number the large-scale growers charging what the market will bear. It is expected that the new regime will create a private industry eventually worth some $1.3 billion in sales annually with perhaps up to half a million customers. This industry may potentially grow even bigger if one day recreational marihuana becomes legal, as Liberal Leader Justin Trudeau calls for its legalization.

The market participants clearly see the growth potential in this area. According to some news reports, Health Canada has been swamped with more than 1,100 applications from firms interested in commercial production and distribution of medical marihuana to thousands of Canadians who use it for medical purposes. While the majority of the applicants are small private companies, some of the larger licensees such as Aphria Inc., Bedrocan Cannabis Corp., Mettrum Health Co. and OrganiGram Holdings Inc.have gone public to raise capital for their medical marihuana business. Others may follow suit if their applications get approved by Health Canada and business grows as expected. The industry may also see some mergers and acquisitions activity in the future.

That said, the MMPR regime has sparked a lot of controversy and litigation. In particular, a group of patients has brought an action challenging the new rules in a case expected to be heard in the new year. A Federal Court judge issued an injunction in March 2014 that allowed patients who were authorized to grow and possess marihuana under the old system to continue to do so until their case is resolved. The government appealed, but the Federal Court of Appeal released a unanimous decision on December 15, 2014 upholding the injunction.

Also controversial is the fact that so far only 15 companies have been licensed to produce and sell medical marihuana under the MMPR, and 8 others have been licensed to produce the drug but not to sell it. Hundreds of applications have been returned as incomplete or rejected. Contesting such a harsh treatment, one of the unsuccessful applicants recently filed a motion in the Federal Court against Health Canada, asking that a judge review the decision not to grant a licence. This proceeding may affect the way the regulator processes many of the pending and new applications.

It remains to be seen how this potentially lucrative but controversial commercial medical marihuana regime plays out in the future. For further reading on this topic, please check our previous posts on this blog regarding the commercialization of medical marihuana and how to navigate the great marihuana “gold rush”.