Ian Mulgrew of the Vancouver Sun writes about the Emerging Medical Cannabis Economy
This is simply too important of an article to not spread around. Ian Mulgrew of the Vancouver Sun is the only MSM journalist in Vancouver who really speaks out sensibly and professionally about the pragmatic economics and realistic public policy options about cannabis in BC and Canada.
Thanks Ian for excellent work (PS Would you like to be a guest on a Choogle on podcast?)
Copied from the Vancouver Sun article: A bright green spot in the economy
A bright green spot in the economy
With courts striking down the government’s monopoly on supplying medical marijuana, private growers are clamouring to capitalize on pot’s commercial potential
Saturday, November 15, 2008
Photo: Various types of marijuana are offered by former NDP candidate Dana Larsen at his marijuana dispensary on East Hastings Street. He says the medical pot market is about to expand.CREDIT: Bill Keay, Vancouver Sun “Various types of marijuana are offered by former NDP candidate Dana Larsen at his marijuana dispensary on East Hastings Street. He says the medical pot market is about to expand.”
DUNCAN – Eric Nash can barely contain his excitement waiting to hear from Health Canada whether he can start growing marijuana for 250 patients.
That would be just the start. There are tens of thousands more who are ailing across the country clamouring for his organic B.C. bud.
“There is a great opportunity here for the government to collect significant tax revenue currently being lost to the street market,” Nash, one of the best-known legal cannabis producers, enthused.
“With the current global financial crisis, this court ruling is certainly a bright light in dark economic times. We’re just waiting for clarification. I figure our production would increase significantly from several pounds to 150 pounds or more immediately.”
Now that the Federal Court of Appeal has struck down the government’s monopoly on supplying medical marijuana, Nash believes commercial agricultural production of pot is around the corner and the sky’s the limit.
His local company, Island Harvest, has cleared the industrial security regulatory hurdles so the company meets the standards set by Ottawa to grow the much-demonized plant.
“Our vision is to have a sustainable commercial agriculture operation,” he said. “There’s no reason we can’t achieve that. Look at the number of compassion clubs, look at the number of people using marijuana to relieve a headache or pre-menstrual cramps!”
More and more research is supporting previous anecdotal evidence that cannabis may have a wide range of therapeutic uses from the treatment of Alzheimer’s, depression, glaucoma, epilepsy and cancer to HIV/AIDS, hepatitis and ADD/ADHD. Its most ardent promoters say cannabis may be an addition to the modern pharmacopeia that rivals Aspirin in the breadth of its applications.
It doesn’t take a genius to realize the potential profits are staggering.
Until now, the government’s poorly administered medical program has artificially depressed that market by making it difficult for patients to qualify, supplied what many consider poor-quality marijuana and imposed an arbitrary restriction on qualified licensed growers to supplying only two patients.
Doctors, too, have exacerbated the situation with their reluctance to prescribe marijuana, claiming they have no guide on dosage or the usual pharmaceutical medical studies to rely on. That is changing, slowly.
Nash explained there have been three relatively recent, serious analyses of the medical marijuana market, which give an idea of its scope and potential.
The Canadian Medical Association Journal did a survey in 2000 and estimated the number of self-medicating marijuana patients to be 1.9 per cent of the population; a Price Waterhouse report prepared for Health Canada two years later concluded it was more like four per cent of the population, and a report in 2004 by a member of the federal government’s advisory committee on pot suggested the reality was closer to seven per cent.
(Health Canada, after eight years, has issued roughly 2,500 exemption permits to needy patients.)
Regardless, Nash said, based on the four-per-cent model, that puts sales at more than $400 million annually.
More optimistic projections say the medical market, including ancillary products such as vaporizers and paraphernalia, could be as high as $20 billion.
Add it up: The government sells maybe $1 million a year worth of the pot produced in a Manitoba mine, and compassion clubs across the country sell about $10 million worth of cannabis products.
By far the vast majority of patients who need marijuana as a medicine continue to buy their drugs from the black market. It’s a crazy situation: imagine if diabetics had to go to a corner dealer to score insulin.
That’s one of the fundamental reasons behind the court ruling Oct. 27: the medical marijuana program set up by Ottawa at the turn of the millennium isn’t working.
The government adopted the Medical Marijuana Access Regulations (MMAR) and accompanying bureaucracy in 2001. It has modified it since then in the face of judicial warnings that it was constitutionally inadequate, but it still can’t pass muster.
The courts find that offensive.
This new judgment heralds a tectonic shift in the country’s medical-marijuana regulatory regime and perhaps even the drug laws. It may even invalidate the cannabis prohibition.
Two B.C. Supreme Court justices sitting on separate cases (one about simple possession, the other production and trafficking) are currently seized with that question.
If they agree that because a section of medical program is unconstitutional the criminal law cannot be enforced, it would also mark the triumph of a Trojan horse strategy by cannabis activists to achieve legalization by expanding medical access.
Just as liquor was once obtained via prescription, cannabis could be regulated in a similar fashion, obviating the need for a criminal prohibition.
No matter how you look at it, the federal court decision promises an economic boon immediately for the hundreds of legal cannabis producers and increased opportunity for many others.
Nash said it was good news for both the consumer and producer.
The former government communications worker and his partner, Wendy Little, have been growing since 2002 and proselytizing longer than that. Their book Sell Marijuana Legally is a huge hit; they created an online users’ group for patients and growers, and they teach courses.
But medical growers across the country have been restricted, a policy that results in a huge gift of revenue to organized crime.
B.C. BUD’S STAGGERING NUMBERS
Stephen Easton, an economist at Simon Fraser University and with the Fraser Institute, has done the most respected work on the size of the domestic pot industry.
He sat down earlier this year in Denny’s with one of B.C.’s biggest dealers and went over his numbers.
“He figured it out differently than I did, using lights and ballasts,” Easton said. “But he worked out the numbers with me and it all worked out. He told me it was very close. He was quite surprised. I was very happy about that. We had a really good talk. He was really helpful for me.”
Since Easton’s original estimates, the domestic marijuana market has undergone some changes, but nothing cataclysmic.
“The fluctuations in the dollar are the main economic factor,” he said. “It has gone up and down and that pushes these guys.”
For most of the last few years, the most significant factor has been the various improvements in border security triggered by the 9/11 terrorist strikes.
In the 1990s and even throughout the early part of this decade, tons and tons of Canadian marijuana flooded into the U.S. market carried by anyone with moxy and a decent plan.
People were backpacking across with as much weed as they could carry in the Interior, or kayaking across with a stash of bud worth as much as emeralds.
Between 1990 and 2000, the Canadian pot market doubled in size fuelled primarily by the increased hydroponic production of B.C. bud.
Nationally, we apparently spent $1.8 billion toking up — just shy of the $2.3 billion we burned on tobacco.
By 2006, when he did his calculations, Easton said the numbers indicated a provincial wholesale market of $2.2 billion. You could increase that to $7.7 billion retail if consumers paid top dollar for their bud.
That dwarfed any other B.C. agricultural product.
The result on the street was easy to see: a proliferation of gangs duly documented by the RCMP, as every crook plucked what Easton called “the low-hanging fruit.”
The tightening of the border has had several effects.
Not just everyone can take it across now, with underground sensors, heightened air traffic scrutiny and the deployment of the military. Smuggling now is more the purview of the very organized and the very desperate.
At the same time, U.S. authorities have charted the rise of their own domestic production as American states relaxed enforcement and sentencing — the opposite of the 1980s and 1990s when their stiff attitude drove marijuana growers north.
In California alone, Berkeley, Santa Barbara, Santa Cruz, Santa Monica and San Francisco all have officially told police to make marijuana offences their lowest priority.
Pot production in California rivals Canada’s total output.
Similar initiatives have been adopted in other states and cities such as Seattle, Denver and even Missoula, Mont.
With the north-south route to market more problematic, more B.C. bud has moved east to feed eastern appetites or find a less monitored area of the border before turning south. The Mounties have responded by increasing surveillance along the Trans-Canada on the Prairies, resulting in large seizures.
By far the biggest factor in the marijuana market in recent years, however, has been the revolution in production — the ease, predictability and most importantly the portability that has come with advances in indoor cultivation that mean great weed can be grown anywhere.
The RCMP have been reporting huge busts in Eastern Canada as production has sprouted in the Maritimes and Ontario, reducing their appetite for West Coast pot.
In Ontario, whose provincial production is said to have surpassed B.C.’s, authorities have uncovered two separate operations each capable of producing $100 million worth of cannabis a year.
B.C. bud ruled in the 1990s when the underground marijuana trade was responsible for keeping afloat many small communities buffeted by resource-market gales.
Our pot even had cachet even up until four or five years ago but these days, be you in Charlottetown or Joe Batt’s Arm, Nfld., you can easily obtain good seeds and fail-safe equipment and within a few months be producing marijuana to rival B.C.’s best.
Nevertheless, Easton explained, when you are looking at a commodity and domestic production, it’s all about the money.
The rise of the dollar in recent years worked against growers and exporters, but its recent fall provides an upward fillip.
“I imagine with all the market turmoil the domestic marijuana industry will pick up a bit,” Easton said. “it’s just had a 15-to-20-per-cent bump in two months.”
Some estimates in the 1990s suggested as much as 50 cents of every dollar generated in some Kootenay towns could be traced directly to pot.
With the international financial tempest wreaking havoc again with commodity prices, B.C. bud may yet help ride out the storm but probably not to the same extent.
“We’ll just have to watch housing prices in Nelson,” Easton laughed.
MEXICO CONSIDERING LEGALIZATION
Sitting in Kitsilano eating breakfast before meeting the city’s police board, former Drug Enforcement Administration agent Celerino Castillo III nodded his head furiously.
“Yes, yes, it’s all about the money,” he said. “The money, it’s all so corrupt.”
Castillo spent 12 years in the USDA infiltrating Manhattan drug rings, destroying jungle cocaine labs and training anti-narcotics agents. The climax of his career was pulling the curtain back on drug-smuggling by the Nicaraguan Contras with links to Lt.-Col. Oliver North and the CIA.
From the Amazon to the slums of Mexico City to the ghettos of America, Castillo has had a front-row seat on the western hemisphere’s drug world and come to the conclusion it’s time to abandon our current approach.
Mexico is again considering legalization because of the violence and social upheaval caused by illicit drug trafficking, and Canada should be headed down the same path, he says. So should South America and, of course, the U.S.
The money is too corrosive.
“The corruption is everywhere — every month we arrest a law enforcement official, every month,” he insisted, “whether it’s a border patrol agent or a customs agent or a DEA agent or an FBI agent. We arrest a law enforcement officer once a month, It’s huge. The amount of money is just so big. ‘I have a mortgage to pay, I have to send my kids to college.’ That’s always the excuse.”
He shakes his head.
He explained that in his state, drug couriers once arrived with suitcases of cash to deposit in local banks: “Now they buy the banks. Especially now with this upheaval. Who else has the ready cash?”
“But that’s actually how they’re money-laundering today — they buy a bank,” Castillo added. “There’s no way we can keep up.”
In retirement, Castillo has become a featured speaker for Law Enforcement Against Prohibition, an association of former police, corrections and judicial officers who want to change drug policy.
“There’s more production, more product and more of everything than there ever was. The war on drugs doesn’t work,” he said.
“All I’m hoping for is people to start to listen and educate themselves about what’s going on in the world,” he said. “I know first-hand. I’ve seen it from an agent’s point of view.
“It’s affecting and destroying a lot of families. For 40 years we’ve been trying this John Wayne approach and it’s not working. The bottom line: There are a lot more drugs today than we had 40 years ago.”
‘THESE ARE THE DEALING TABLES’
Dana Larsen ushers me into his new marijuana dispensary in the 800 block of East Hastings Street.
The former NDP candidate, who stepped down during the federal election when his recreational drug use was publicized, has renovated the run-down storefront and is promoting a new compassion club.
Like Nash, he thinks the medical pot market is about to expand exponentially and legally.
“There’s no smoking in here,” he said as he showed me around the spartan office. “But there’s a vapour lounge two doors down in the Seed Bank where you can light up after you leave.”
There is a modest reception area and a large back room. It’s clean but unfinished.
“These are the dealing tables,” he said, pointing to a handful of folding tables separated by office screens to provide a measure of privacy.
“I guess I should call them dispensing tables.”
Larsen, who used to be the leader of the B.C. Marijuana Party and Prince of Pot Marc Emery’s lieutenant, thinks the time has come to move into the medical field.
“I think there’s enough of a market in town to support another dispensary,” Larsen said.
“There are more than enough patients who need reliable, quality cannabis products than the current two clubs in the city provide.”
His menu of cannabis products included six strains of dried marijuana, four kinds of hash, two pot products in capsules and double-strength bon-bons — cannabis-infused organic chocolates.
The pot ranged in price from $7.50 a gram for Pine Cross up to $8 a gram for Sweet Tooth; pressed Kif (soft hash made with a sieve) went for $8 a gram; and very potent Bubblehash, which was extracted using water and ice rather than a sieve, went for $25 a gram.
In Oakland, Calif., the private dispensaries that support the state’s medical marijuana program are said to be generating revenues in excess of $70 million a year.
MEDICAL MARIJUANA COULD HELP THE SICK
Michelle Rainey is one of roughly 2,500 Canadians with a licence to possess and use marijuana. She’s also a celebrity in the medical marijuana world and on YouTube.
Rainey has Crohn’s disease and finds her home-grown pot an effective replacement for her previous expensive regimen of pharmaceutical drugs.
She believes the country’s health-care system could save a fortune if there was a working medical marijuana program, and those who could benefit from cannabis could easily shift away from other medications.
The roughly 110,000 Canadians suffering from Crohn’s disease and the 90,000 living with ulcerative colitis, for example, are estimated to spend $162 million a year for prescription drugs.
Many of those people are already benefiting from marijuana, Rainey said, but many, many more could be.
Consider too that many battling cancer and HIV/AIDS find edible cannabis products work to stimulate the appetite, but they’ve got to buy them on the street.
“We have a huge problem with physicians being apprehensive about signing for patients even though the proof is there,” Rainey said.
“Our seniors, for instance, are spending their pensions on big pharma only to end up with more aches and pains when all they may need is a puff or a brownie!”
Rainey has facilitated more than 70 exemptions for local patients, 30 suffering from Crohn’s: “I receive dozens of e-mails from people suffering every day from all over the world who have discovered cannabis alleviates pain and nausea. The government should not be preventing people from getting access to an effective medicine.”
The courts agree.
In its decision, the Federal Court of Appeal did more than simply hand Ottawa a legal loss. It said the government had been knowingly dragging its heels since at least 2003.
As a result, lawyer Kirk Tousaw told B.C. Supreme Court that this decision renders the criminal law invalid based on that history of jurisprudence, which ties enforceability of the criminal law to the existence of a constitutionally adequate medical access scheme.
He said the judgments in Ontario courts and now the federal court mean the state of the law is unclear and therefore criminal sanctions cannot be imposed.
In this latest case — called Sfetkopoulos et al v. Attorney General of Canada — some 27 patients with exemptions to possess marijuana for medicinal use applied to Health Canada for authorization to designate Carasel Harvest Supply Corporation as their marijuana producer.
Health Canada refused, saying that violated the regulations that restricted growers to supplying only two patients at a time.
But the Federal Court Trial Division agreed with the patients and declared section 41 (b.1) of the MMAR was contrary to s. 7 of the Charter because it threatened their liberty and security of the person by preventing them from choosing their marijuana producer.
The judge accepted that sick people should have access to marijuana for the treatment of serious medical conditions and they should not be forced to risk imprisonment to buy their medication on the black market.
He interpreted the constitutional guarantee of security of person rights to include access to medication without undue state interference.
Ottawa appealed and lost.
COURT REBUKES GOVERNMENT
The appeal court agreed with the trial judge — the medical marijuana scheme was constitutionally deficient — and rebuked the government.
The three judges said the Crown had brought forward a case dismissed by the Ontario Court of Appeal in 2003, that nothing had changed and the marijuana access regulations remained flawed.
In the unanimous 2003 decision, the justices similarly complained about Ottawa’s failure to deal properly with this issue.
In their terse three-page decision a fortnight ago, the justices refused to suspend the impact of their ruling to give the government time to amend the regulations.
Health Canada spokesman Phillipe Laroche said the department was still studying the ruling and had not decided on its response.
Now, Tousaw has argued that those charged or convicted while the medical marijuana access scheme was deemed unconstitutional should have their convictions overturned or their charges stayed. That’s thousands of Canadians.
In particular, Tousaw says Ryan Poelzer should have his conviction overturned.
Poelzer was charged May 18, 2007 and there is no disagreement about the facts. He was smoking a joint on a B.C. Ferry as it pulled into Langdale and that offended an off-duty cop who called the RCMP. As he stepped off the ferry, Poelzer was arrested and in his backpack police found 78.3 grams of marijuana, 8.6 grams of hash, and assorted paraphernalia and pro-drug literature.
In spite of Tousaw’s argument that the cannabis prohibition was invalid, or alternatively that the status of the prohibition is so confused that prosecution constituted an abuse of process, the provincial court judge in the case decided B.C. jurisprudence had declared the medical marijuana scheme valid and therefore the criminal law was fine and Poelzer in clear violation of it.
But Tousaw says the B.C. precedents are wrong and fly in the face of this latest ruling.
The Crown disagrees.
Federal lawyer Peter Eccles said the MMAR requirements are reasonable given the legitimate societal interest in controlling the distribution of a “potentially harmful drug.”
“They ensure only those with a bona fide medical need for marijuana, verified by appropriate medical declaration, obtain legal access,” Eccles said. “Mr. Poelzer is not such an individual.”
Two B.C. justices will render their opinions soon on whether there actually is a criminal marijuana law in force at the moment or whether de facto legalization has occurred because the medical access scheme is unconstitutional.
Market issues ‘need to be addressed’
The question is how will Ottawa respond to the federal court decision.
Since the impugned marijuana access scheme is a product of regulation rather than statute, the government can quickly promulgate new rules.
“They could make cosmetic regulatory changes,” Nash acknowledged, “which would force another court challenge. But I think the judges are pretty fed up with them doing that.”
And for good reason — sick people should not have to deal with the black market.
Nash said it’s time to get medical marijuana out of the courts, properly regulated and controlled.
“It comes down to consumer choice,” Nash said. “We have people across Canada who want our organic product. Patients want different price ranges, they want different strains, they want different hybrids. There are market issues here that need to be addressed. When you go to a pharmacy do you want to be told you can only have Bayer?
“This is about patients’ rights and a legitimate need.”
Ian Mulgrew is the Vancouver Sun’s legal affairs columnist and the author of several non-fiction books, including Bud Inc.: Inside Canada’s Marijuana Industry (Random House, 2005).
Choogle on podcast interview with Dana Larsen: Party at the Vancouver Seed Bank – Choogle on #59