A brief history of medical cannabis around the world
Cannabis has been used for medicinal and therapeutic purposes for centuries, with evidence of its use dating back more than 5,000 years ago in what is now Romania[1] and 10,000 years ago in Japan[2]. In the United States (US), cannabis was first described in the United States Pharmacopoeia in 1850 before ultimately being dropped in 1942. The removal coincided with increasingly hostile legislation towards cannabis starting in 1937, with effective prohibition under the Marijuana Tax Act and culminating in 1970 with the complete federal prohibition under the Controlled Substances Act[3], which placed cannabis as a Schedule 1 controlled substance[4].
By 1961 the United Nations Single Convention on Narcotics Drugs marked a coordinated global effort to prohibit and monitor illicit drug use. This UN treaty was amended in 1972, increasing measures to prevent the cultivation and abuse of opium and cannabis and broadening the purview of the International Narcotics Control Board. Countries with existing regulation prohibiting cannabis were now reaffirmed by the global community and those without found themselves compelled to do so out of global compliance.
Against a backdrop of increasing global criminalization, there was a burgeoning movement to recognize the therapeutic benefits of cannabis and a growing awareness of the high cost of prohibition enforcement versus the social detriment of cannabis itself. As such, soon after the 1972 amendment to the UN treaty, sentiment shifted away from greater prohibition towards increased practices of tolerance.
Despite US federal legislation, in 1978 New Mexico became the first state to legislatively recognize the therapeutic benefits of cannabis and by 1982 there were varying medical cannabis frameworks in place within thirty states[5]. As the global view of cannabis began to shift to a more positive light, other jurisdictions moved to reclassify and/or decriminalize cannabis; the Netherlands in 1972 and Paraguay in 1988. As tolerance grew, so too did medical recognition of cannabis. This spurred further decriminalization and tolerance, a trend that has led to today’s medical cannabis landscape.
A brief history of medical cannabis
The Canadian context
In Canada, cannabis was criminalized in 1923 via the Act to Prohibit the Improper Use of Opium and Other Drugs. Despite being one of the first countries to make cannabis illegal, it was not until the late 1930s that the rule became largely enforced – a shift primarily influenced by the growing hostile sentiment towards cannabis in the US.
The legalization of the medical cannabis industry in Canada was primarily the result of a few key legal challenges against the government of Canada (list not exhaustive):
- 2000: R. v. Parker (Ontario Court of Appeal): The first decision that invalidated the prohibition on cannabis, declaring such as unconstitutional as it did not contain an exemption for medical use, leading to the adoption of the Marihuana for Medical Access Regulations (MMAR).
- 2011: R. v. Mernagh (Ontario Superior Court): The ruling struck down the prohibition against the possession and production of cannabis contained in the MMAR leading to the adoption of the Marijuana for Medical Purposes Regulations (MMPR) and the birth of the commercial medical cannabis industry in Canada.
- 2015: R. v. Smith (Supreme Court of Canada): This ruling found that restrictions limiting authorized patients to dried cannabis under the MMAR and MMPR were unconstitutional, leading to the introduction of cannabis derivative therapies.
- 2016: Allard et al v. Regina (BC Supreme Court): This ruling provided injunctive relief to those previously licensed for personal production under the MMAR, leading the way for the introduction of the Access to Cannabis for Medical Purposes Regulations (ACMPR).
Key legal milestones in medical cannabis
With the numerous court challenges to medical cannabis’ legality and accessibility, and the federal government’s subsequent responses, Canada became a worldwide leader in medical cannabis, with an internationally recognized commercial industry.
Canada’s status as a global leader in the industry was cemented when the Federal Liberal Party ran in the 2015 election on a platform to legalize cannabis for recreational use, and ultimately won the election. Honouring one of their most prominent election promises, the Canadian House of Commons initially passed the Cannabis Act on November 27, 2017 and the final version received Royal Assent on June 21, 2018.
On October 17, 2018, cannabis became federally legal for commercial sale and consumption in Canada with co-existing frameworks for the recreational and medical cannabis market segments.
Current state of the industry
Industry operators, known as Licensed Producers (LPs), operate concurrently across both the medical and adult-use markets and are responsible for cannabis cultivation through to distribution to either authorized patients or provincial liquor boards. LPs are currently selling predominantly the same simple and undifferentiated products (e.g., dried leaf, oil extracts) into both markets.
Canadian cannabis markets
Industry operators
Prior to the Cannabis Act[6], LPs were forced to be vertically integrated and operate across the entire value chain. The evolution of the regulatory environment and the introduction of a new licensing system from Health Canada has started to intermediate the value chain whereby companies are beginning to specialize in specific activities. As of December 2018, Health Canada had issued 140 licenses[7], across cultivation, processing and sales representing an 87.8% year-over-year growth rate since the introduction of the commercial industry in 2013.
Cannabis licenses issued in Canada[8]
Source: Health Canada
Patient registrations and product sales
The number of medical cannabis patients in Canada has grown rapidly (18.3% per quarter) since inception, reaching 342,103 patients in September 2018[9]. This growth coincides with a steady, albeit slower, 8.7% quarterly increase in medical cannabis sales (by volume) into the sector, from Q1 2016 through to Q2 2018.
Medical cannabis patient and product sale growth[10]
Source: Health Canada
Physician attitudes
From April 2017 to September 2018, there was a 96% increase in patients using medical cannabis. This was driven in large part by the 667% growth in physicians willing to authorize cannabis to patients over that same period. As of September 2018, the total number of physicians that have ever provided medical cannabis authorization for a client reached 18,086 with physicians authorizing an average of 2.1 grams/day per patient since January 2018.
The growth in the number of authorizing physicians is likely driven by increased physician knowledge, comfort with the process and increased demand from patients seeking medical cannabis as a potential alternative to traditional drugs.
Authorizing physicians vs. average authorizations amounts[11]
Source: Health Canada
Despite the increase in authorizing physicians, many continue to be reticent to authorize medical cannabis for patients due to a lack of clinical evidence. In fact, most provincial physician colleges do not endorse the therapeutic use of cannabis. However, to comply with the court rulings requiring reasonable access to legal medical cannabis, most provide limited guidance for the cautious and compassionate use of cannabis, especially where other therapeutic options have been exhausted and failed to alleviate symptoms.
Clinical data
To date, few clinical trials have been conducted for whole-plant, botanical cannabis. Without the requisite clinical data, it is unlikely Health Canada will allow any therapeutic claims for medical cannabis products. However, federal legalization in many geographies outside Canada has resulted in a growing number of trials being conducted.
Annual cannabis clinical trial volume (in-progress and completed) by start year[12]
Source: Health Canada, ANZCTR and NLM / NIH databases
Pharmaceutical companies wanting to develop prescription cannabis products have been forced to focus on specific APIs (e.g., tetrahydrocannabinol (THC) and cannabidiol (CBD)) to adhere to the strict requirements of the traditional drug approval pathway. The limitations of this approach are not only that it requires substantial investment, but also that the therapy loses the entourage effect[13] of the plant, thereby reducing its therapeutic efficacy. For these reasons, most LPs have eschewed the prescription drug development pathway in lieu of whole-plant, botanical product development without therapeutic claims.
Adjacent industry entrants
The medical cannabis industry is still primarily operated by LPs and other ancillary start-ups. To date, most pharmaceutical companies have not yet made significant moves to enter the space with the notable exception of a few generic drug companies who have formed partnerships with select LPs. The partnerships largely centre around research and development (R&D) and product commercialization.
In additional to pharmaceutical entrants, a number of Canadian pharmacy and pharma distributors have formed supply agreements with LPs, anticipating that Health Canada will eventually allow distribution through retail pharmacy similar to other drugs. While the regulations are not yet changed to permit retail distribution, Shoppers Drug Mart recently secured a license from Health Canada to sell medical cannabis through an ecommerce platform under the Cannabis Act. On January 8, 2019, Shoppers launched its medical cannabis website in Ontario to begin onboarding of authorized patients and receiving medical cannabis product orders.
Select adjacent industry entrants into Canada’s medical cannabis industry[14]
What’s next?
The future of medical cannabis is a hotly debated topic amongst all professionals operating in the industry with a variety of hypotheses emerging over the past few years.
- Medical cannabis will disappear: The introduction of the legal adult-use market will provide medical cannabis patients an alternative and more convenient distribution channel to procure cannabis for self-directed therapeutic use.
- Medical cannabis will remain but gain advantages over adult-use cannabis: There will be a policy shift by the federal government to create incentives for medical cannabis patients to procure medical cannabis through physicians rather than through adult-use channels (e.g., reduced taxation, insurance coverage/reimbursement, possession limits, acceptable consumption locations, etc.).
- Medical cannabis will disaggregate and evolve: Health Canada will revise regulations that will facilitate the disaggregation of the medical cannabis industry into traditional segments that each leverage phytocannabinoids to varying degrees.
Cannabis market segment evolution
While it is uncertain which hypothesis will ultimately prove true, we do know that medical cannabis is rapidly expanding globally with many countries exploring legalization. New legal jurisdictions are beneficial for stakeholders throughout the industry. For existing operators, new geographies represent substantial growth opportunities. For medical cannabis patient advocates, they represent further validation of their fight to recognize cannabis as a therapy. Most importantly, accelerating global legalization represents additional opportunities for entrepreneurs, researchers, physicians and patients to explore and unlock the true therapeutic benefit of medical cannabis.
Current global legalization status
