COVID-19 crisis has created “an effective oligopoly” of German cannabis suppliers
Importing medical cannabis into Germany requires, among other things, Good Manufacturing Practices (GMP) certification from the European Union. Several Canadian companies including Canopy Growth, Aurora Cannabis, Tilray and Wayland Group have EU GMP certification with two more - Northern Green Canada and Eve & Co. - gaining certification in early 2020.
However, “new certification audits involving cannabis facilities in Canada and elsewhere screeched to a halt as of April 2020 given the travel restrictions in place in most of the world amid the coronavirus pandemic,” author Alfredo Pascual writes in the MJBiz report. “As a result, the companies whose facilities weren’t audited before the pandemic faced a challenging situation when this report was published, with the chances of getting E.U. inspectors to travel overseas slim.”
“This means, for now, that a handful of EU-GMP certified companies supplying Germany with medical cannabis from Canada and from inside the E.U. are likely to continue enjoying an effective oligopoly.”
Germany is hiring a national weed dealer
Currently the entire German medical cannabis market, which the report estimates at roughly 6,500kg in 2019, consists of imported products. Imported cannabis is distributed by the dozens of wholesale players in the German cannabis market.
However, no distribution system exists for the roughly 2,600kg of annual domestic cannabis production expected to begin entering the German market before the end of this year. In March, the German government launched an application process for a distributor that would “ship all domestically-produced medical cannabis flower to pharmacies,” the report says.
The deadline to submit an application was recently extended to May 28th with the contract set to begin in September 2020 and last until the end of 2025.
“Requirements and awarding criteria indicate that companies with experience distributing narcotic drugs and those able to offer a low price for their services will have the highest chances of winning,” Mr. Pascual wrote in
the report (NOTE: more
specifics on the application requirements can be found on Mr. Pascual’s original post announcing the application process. “No cannabis-specific experience is required.”
German cannabis wholesale market is saturated
Recent changes to the way insurers reimburse German pharmacies for medical cannabis - from a flat percentage markup to payments based on quantity - “will probably translate into squeezed margins for pharmacies, wholesalers and suppliers, as well,” Mr. Pascual wrote.
“The implications of price reform of April 2020 will be seen throughout the rest of the year. We expect to see consolidation in the wholesaling sector of the market. We can’t imagine that the number of wholesalers - 30 as of April 2020 - can keep growing much longer.”
Medical evidence for cannabis as a chronic pain treatment key for German market growth
Companies that are “prioritizing science might see certain advantages in Germany because policymakers and physicians generally feel more comfortable with products with proven efficacy over products such as flower that are prescribed only as a last resort,” Mr. Pascual wrote.
According to German government survey data referenced in the report, 72 per cent of nearly 9,000 cannabis patients included in the survey were using cannabis to treat pain.
“Doctors often prescribe flower after requests from patients that empirically tried flower from the illicit market and realized it helps with their condition,” he wrote. “That’s not how the medical profession works in general, and for a more widespread acceptance of medical cannabis, better evidence is needed.”
Opportunity to cultivate for small-town Dutch coffee shops
Many people would be surprised to learn that the world-famous, quasi-legal cannabis-friendly coffee shops of Holland do not source the products they sell legally. Although the Netherlands has one of the oldest legal cultivation regimes for medical cannabis on the planet, the country does not legally allow cannabis production for recreational purposes.
That means coffee shops are supplied by illicit sources, but that could be about to change.
“In the second half of 2019, the Netherlands approved a pilot program that will allow 10 Dutch municipalities with 79 coffee shops to receive access to a legal supply of recreational marijuana for the first time,” Mr. Pascual wrote in the report. “The suppliers will be domestic growers that have undergone a selection process. The selected cities for the experiment were Almere, Arnhem, Breda, Groningen, Heerlen, Hellevoetsluis, Maastricht, Nijmegen, Tilburg and Zaanstad.”
While none of the largest Dutch cities - namely Amsterdam and Rotterdam - agreed to participate in the program, Mr. Pascual wrote “the main reason is that all coffee shops in a participating municipality must abandon their illegal supply - something not every coffee shop owner is ready to do.”
“The program, though modest in scope and magnitude, will create some business opportunities to supply participating coffee shops,” Mr. Pascual wrote.
Check out the Czech Republic
As of early 2020, the Czech Republic continued to have only one domestic medical cannabis supplier.
That is the result of a 2017 tender that “had only one participant,” Mr. Pascual wrote. “And there were previous application processes that were cancelled because no company applied.”
Despite being a relatively small market, the report notes that since January 1st of 2020, Czech medical cannabis patients have been entitled to 90 per cent insurance reimbursement, which has already led to dramatic growth.
In 2019, roughly 17kg of medical cannabis flower was sold in the Czech Republic. Yet in just the first three months of 2020, after the new reimbursement rules took effect, nearly 12kg of medical
cannabis was sold.