Tuesday, April 21, 2015

Farmers, Dispensaries, and the MMPR (Part I)

Also available at Cannabis In Canada.ca

In late 2012, the federal government announced phasing out the Medical Marihuana Access Regulations (MMAR) and its community of 36,000 farmers. In its place would be the Marihuana for Medical Purposes Regulations (the MMPR). The MMPR established a government-approved cartel of cannabis growers called the Licensed Producers (LPs). The former markets of MMAR farmers, the existing competitors to the government’s new system, were soon to be barred from privately cultivating cannabis. Under the MMPR, not only were patients going to lose the right to grow cannabis for themselves, dispensaries were at risk of losing their supply. As well, the capital suppliers (the shops that sell hydroponic equipment and other gardening tools catered to indoor cannabis cultivation) saw their investments at risk. It's a niche market, yet one that is entirely legal.
In 2013, this cannabis market funded litigation against the federal government. It wasn't only the patients paying John Conroy and his team of lawyers; Vancouver's medical dispensaries got behind the cause, as did the designated growers (DGs), the capital suppliers to farmers, and various other stakeholders. Known as the Cannabis Rights Coalition, this group put the federal government on trial and on March 21st Justice Manson ruled an injunction which decreed the federal government could proceed with the new MMPR, but had to hold off on literally forcing 36,000 farmers out of existence.

Cultivating cannabis is a skill-set that has been mastered over the centuries. To be clear, “BC Bud” predates the federal government's MMAR and the legal 36,000 farmers. But given the freedom to produce without fear of criminal prosecution, the last fourteen years has seen the development of strains and genetics tied directly to a close community of medicinal farmers. The largest concentration of MMAR gardens is in British Columbia. B.C.'s percentage of the national population is 13.2% but with over 15,000 medical gardens, they are representing 42% of cannabis cultivation in Canada. The many strains that define "BC Bud" have been grown as an unintended consequence of the MMAR. Patients and DGs have had the freedom to experiment and create premium strains. While black market production is confined by its illegality, medical farmers are given the freedom to innovate and improve. MMAR farmers like Chad Jackett and Don Faucion exemplify this entrepreneurial spirit. In contrast, Health Canada wishes to mitigate risk through the LPs, and to an extreme degree. The actual regulations read like a security manual for a nuclear facility. Complete with large section on security clearances and menial tasks such as:
(2) A licensed producer must retain the following documents:
(a) a registration application referred to in section 108;
(b) a medical document referred to in section 108, or, if the document has been returned in accordance with subsection 114(3), a copy of it;
(c) a copy of a registration document referred to in paragraph 111(2)(a);
(d) an application for the amendment of a registration referred to in section 115;
(e) a copy of an amended registration document referred to in subsection 116(2); and
(f) a copy of a notice referred to in section 114 or subsection 117(5).

To enter the medical cannabis business, farmers (or any Canadian) can apply to Health Canada with all the necessary – some would argue excessive – capital requirements and paperwork. But what started with R. v. Parker in 2000, culminated into the creation of the MMAR in July of 2001. Dispensaries and compassion clubs originated during the same time. The market of legal Canadian medicinal cannabis had developed for nearly 12 years when the federal government announced a regulatory overhaul. When this market was threatened, patients saw their right to reasonable access threatened.
The Cannabis Rights Coalition retained John Conroy and was partially successful with an injunction. Since March 21st, 2014, the federal government has been appealing the decision. In Allard v. Queen, the federal government is on the defensive. Given the stakes, it's surprising how poorly it has been making its case. Claims that private gardens, or even outfitted shops or "grow rooms," are more likely to be a victim of fire, mould, theft and/or organized crime, have been presented with little to no evidence. Conroy decimated the Health Canada witnesses on their basic knowledge of cannabis and even tobacco. Bibhans Vaze debunked the methodology and thus the entire argument in RCMP Corporal Shane Holmquist's expert report. All of the government's expert reports made claims that did not hold up to fact and reason. On April 30th, 2015, Justice Phelan will present his ruling on the matter. Both parties have made it clear that despite the ruling, an appeal will be filed.
Meanwhile the injunction holds that the 36,000 farmers in Canada are now a fixed number and any new hopeful must register as an LP. Through a legal discovery - an anonymous source - we know that for the 17 LPs in Canada, there are a total of 10,000 patients. Compare that number to the estimated 50,000 members of Vancouver's top three dispensaries. There are over 80 (estimated to be exactly 86) dispensaries currently operating in Vancouver. Although there are no official statistics, sources say each club brings in $10,000-a-day. Some of the more illegitimate places, where the supply comes from organized crime, can rake in $15,000-a-day, if not more. But these places also have lower requirements for becoming a member. While some of Vancouver's older medical clubs are more rigorous in vetting prospective members, black market dispensaries require none of these barriers. These are the places most likely to get busted.
$10,000-a-day is $3,650,000 a year. For 86 dispensaries that is $313,900,000 in the local economy. But even if we take a conservative estimate of $1,000,000 per year, per dispensary, that's still $86,000,000 for the local economy. The dispensaries pay their taxes. Employees make more then minimum wage. Everything is "above the table" except for the actual product itself. There are no provisions in the MMAR that allow for retail cannabis storefronts. A variety of factors (such as easily obtainable medical prescriptions, social tolerance, and police non-enforcement) allow this situation to exist. But if the Coalition fails and the MMAR farmers lose Allard, Vancouver's unique experiment in retail cannabis goes up in smoke. The farmers can't go to the black market; their addresses have been exposed to the RCMP.
Vancouver's dispensaries don't exist as an island; one can't eliminate 36,000 farmers and not expect adverse effects. Garrett Petersen, an Economics PhD candidate at Simon Fraser University says, "Shutting down the dispensaries would have many losers and few winners. They produce value for everyone they transact with: employees, customers, growers, landlords, creditors, etc. All those people would be harmed if the dispensaries were shut down."
Indeed, it's hard to imagine what eliminating $300 million from the local economy would look like. These are "unseen" consequences of government intervention. Shutting down dispensaries and legal farmers won't eradicate the illicit market. It would in fact empower them, since their retail competition ceases to exist. Patients unable to grow and priced out of the MMPR would have to resort to buying off the street.
This is why Allard is important. Without plants, there are no farmers. Without farmers, there are no dispensaries. While it's possibly true that in time the MMPR will be fit to serve the billion dollar industry, as of now, getting to that point involves destroying the legal cannabis market that already exists. This is what patients, farmers, and stakeholders find so annoying. There was, and still is, no reason why the MMAR farmers and dispensaries couldn't be grandfathered into the new system. There is no reason why the approval process for prospective LPs can't be steamrolled and cut of bureaucratic redtape. One can only guess at the political motivations behind such a regulatory overhaul as the MMPR. Ideological fingerprints are all over it.
During the Allard court proceedings, John Conroy had the pleasure of questioning Jeannine Ritchot. The former director of Medical Marijuana Regulatory Reform at Health Canada, Ritchot was the top bureaucrat in charge of the transition from the MMAR to the MMPR. Conroy asked her if the bureau took Vancouver's dispensary market into account when drawing up the new regulations. Ritchot responded that while Vancouver's dispensaries attended the pre-regulatory hearings and were regarded as important stakeholders, it was their decision to opt out of working with Health Canada. Besides, there was nothing in the MMAR that permitted retail storefronts. There was nothing in the MMPR that permitted retail storefronts either. Health Canada, in drawing up the regulations, seemed to neglect the existing market entirely. Vancouver's market, and police non-enforcement that allow MMAR farmers to buy, sell and share cannabis product with each other, was and still is totally unprecedented. But it is not new. B.C. dispensaries and compassion clubs have been around for 15 years. Losing Allard won't just affect 36,000 patients and farmers. It will threaten what is colloquially known as "BC Bud."
This was what the Cannabis Rights Coalition had been repeating over and over. But constitutional court cases are incredibly expensive. 36,000 patients and farmers can only give so much. A few donations here and there, a fundraising concert and auction. It's enough to get the ball rolling, but more was always needed. Realizing that there were other stakeholders posed to lose out, the Coalition reached out to the capital suppliers of MMAR gardens. They were the garden and greenhouse supply stores in British Columbia that, whether they publicly admit to it or not, rely on B.C.'s large number of cannabis cultivators. Thus, they had and still have, a financial stake in Allard. Reaching beyond the farmers, patients, and dispensaries, and out into the supply chain, the Coalition secured the big funds necessary for the constitutional challenge.

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