Growth of New Zealand's medicinal cannabis market

The Misuse of Drugs (Medicinal Cannabis) Regulations 2019 came into force on 1 April 2020. These new regulations enable licensed businesses and individuals to cultivate, export, possess and supply medicinal cannabis products in New Zealand under the Medicinal Cannabis Scheme.

Medicinal cannabis in flowering rooms – Helius

New Zealand's Minister of Health anticipates that the New Zealand market for medicinal cannabis will move more swiftly than other markets following similar changes in law. The Minister anticipates that the first commercial licences will be issued by mid-2020. Following recent regulatory changes, we now look at the experience of Australia, the UK and Canada to consider how likely is it that New Zealand will outpace rival medicinal cannabis markets, as the Minister predicts. This turns on a number of factors, including translating consumer demand into prescriptions, doctor/patient knowledge of medicinal cannabis’ efficacy, accessibility to export markets consideration, cost of medicinal cannabis products and the regulatory framework.

Translating consumer demand into prescriptions

In November 2018, the UK government amended the Misuse of Drugs Regulations 2001, allowing 'cannabis-derived medicinal products' to be prescribed without a Home Office licence, legalising cannabis use for medical purposes. However, within the first 12 months of legalisation (despite the waiting list for medicinal cannabis products being as long as 80,000, with an estimated 1.4 million people in the UK using cannabis to treat medical problems) very few prescriptions were issued to UK patients, and the number has only crossed 200 in January this year. In the UK, medicinal cannabis can only be prescribed by physicians on the Specialist Register of the General Medical Council, restricting the number of professionals qualified to prescribe. Like the UK, upon legalising medicinal cannabis production and use, Australia struggled with translating public demand for medicinal cannabis products into prescriptions. GPs in Australia can prescribe medicinal cannabis products, but the process is cumbersome. Like New Zealand, there is only one approved medicinal cannabis product — Sativex. If an Australian GP wants to prescribe any other medicinal cannabis product, they need to apply under the Special Access Scheme. These applications are made on a case-by-case basis, essentially requesting an exception to allow the doctor to prescribe a product that is not on the Australian Register of Therapeutic Goods. Applications include a diagnosis, a justification for requiring the unapproved therapeutic good and proof of the unapproved therapeutic good's efficacy and safety. Doctors in Australia have struggled with establishing a link between the diagnosis and the medicinal cannabis product and many have cited a lack of comfort with prescribing medicinal cannabis products as the greatest barrier. In contrast, in New Zealand, specialist sign-off will not be required for most prescriptions, keeping patients connected with their local or family doctor which should encourage greater patient buy-in. GPs in New Zealand do not need ministerial approval to prescribe medicinal cannabis products and once an unapproved product has been assessed by the Medicinal Cannabis Agency as meeting quality requirements, all GPs can prescribe that product.

Doctor/patient knowledge of medicinal cannabis’ efficacy

Education about medicinal cannabis’ efficacy is a critical factor in determining market growth. In the UK, commentators suggest that the lack of medicinal cannabis prescriptions made by the UK’s qualified professionals has been influenced by official bodies’ viewpoints, like the National Institute for Health and Care Excellence (NICE). NICE's support for use of cannabis for medical issues has been limited and NICE guidelines still advise doctors against prescribing cannabis on the National Health Service. This has made qualified prescribers hesitant to give prescriptions, not aided by the fact that only a handful of the UK’s 290,000 doctors have been trained to understand the endocannabinoid system. The New Zealand medical profession is likely to experience a similar initial hesitation with prescribing medicinal cannabis products. One study has revealed that only 22% of GPs in New Zealand felt informed enough to prescribe medicinal cannabis products. Organisations like Medicinal Cannabis Awareness New Zealand are running courses to help educate New Zealand doctors on the products available and their uses. The MedCan 2020 Summit (originally to be held prior to the regulations coming into effect but delayed due to COVID-19) is also aimed at providing education across the medicinal cannabis industry. Perhaps this proactive approach to education and the fact that for the last two years doctors in New Zealand have been allowed to prescribe medicinal cannabis products to certain terminally ill patients will mean that by the time New Zealand licence-holders are ready to bring their product to market, New Zealand doctors will feel sufficiently informed to be prescribing these kinds of products. Although New Zealand doctors have had more time to familiarise themselves with prescribing medicinal cannabis products, like in the UK, they are nevertheless taking a cautious, evidence-based approach. 84% of respondents to a recent study involving 76 North Island GPs said they would be "somewhat likely" or "very likely" to prescribe a Pharmac-approved, funded cannabis product if it was backed by evidence and had undergone testing that any other medication had. The new Scheme will only test quality and will not undertake conventional medicine testing. The UK experience emphasises that with doctors holding the pen, New Zealand will need to be able to rely on strong research and development if it is to overcome these obstacles. However, a consultation document released by the New Zealand government in July 2019 suggested making it easier for doctors to prescribe medicinal cannabis by not requiring Ministry of Health approval, highlighting that authorities are keen to promote an access-friendly market. Ahead of the changes, the government will provide doctors and consumers with guidance on the new regime, and significant funding will be dedicated to operating the Scheme and undertaking vital research. As seen in the UK, authoritative recommendations and guidelines greatly influence the medical industry, so these initiatives may lay the foundations needed for New Zealand to outpace the UK.

Accessibility to export markets

In recent years, Australia has seen similar transformation around medicinal cannabis products. Following reform in 2016, the initial medicinal cannabis licensing regime in Australia covered cultivation, production and manufacture of medicinal cannabis products but exportation of medicinal cannabis products was not permitted until 2018. The New Zealand Scheme will cover export along with various other activities. The ability to export products from the get-go should be enticing for medicinal cannabis businesses and investors in New Zealand and as such should see a relatively greater initial investment in the medicinal cannabis sector than in Australia. New Zealand has an export-led economy with an emphasis on agriculture. Its exports often capitalise on the clean, green image of New Zealand and customers associate New Zealand products with high quality, which makes the prospect of being able to export medicinal cannabis products all the more appealing. In a small market like New Zealand, the ability to export, and therefore access larger markets, will be key to ensuring the success of the medicinal cannabis industry in New Zealand.

Medicinal cannabis flos in the curing room – Helius

Product cost considerations

Cost greatly influences the speed of market growth. In Canada, it was estimated that the legal cannabis market’s distribution, quality control, tax and salary costs caused the average price of a legal gram of medicinal cannabis in 2019’s third quarter to be double that of the black-market price. Statistics show that cannabis is regularly used by up to 15% of New Zealanders, so it is likely the existing black-market will contest the legal market in the same way. In the UK, because cultivating medicinal cannabis locally is notably arduous (it requires several application documents and presentations, it cannot be done in the vicinity of schools or public areas, and cultivators must alert local police) the UK receives almost all of its medicinal supply from overseas imports. The cost of this is passed on to consumers who are shut out, and it is hard for the legal market to compete with a potentially 1.4 million person-strong black market. In New Zealand, not even Sativex (the only MedSafe-approved cannabinoid medicine) is subsidised by drug-buying agency Pharmac, meaning the drug that doctors will mostly likely prescribe could be too expensive for consumers, limiting the market’s reach. However, while in Canada companies are aiming to combat the black market by educating consumers on the value that the legal market brings with tested and quality-controlled products, New Zealand is already well underway in this area with the government’s assistance and information programmes through the Scheme. Bringing consumers into the legal market will help in expanding it early, so New Zealand may well be ahead in this regard.

Regulatory process

Regulatory process and oversight in Canada stunted potential growth early on. According to Health Canada, on 31 March 2019, 614 applications were stuck in the queue for licences, which led to supply shortages. Further, a patent cannot be issued in Canada for a unique natural strain of the cannabis plant, adding another layer of resistance to innovative Canadian companies wanting to expand the market. The UK has also struggled with regulatory process – in addition to the stringent cultivation requirements mentioned above, import licences can take up to 28 days to approve meaning imported prescriptions often expire before reaching consumers, creating supply shortages like in Canada. The New Zealand Scheme’s requirements are not lax themselves – a series of upper limits, restrictions, forms and processes must be adhered to and completed before a product will meet the minimum quality standard to be added to a licence for supply. That said, the Scheme appears to have been deliberately set up to create a local cultivation and supply network that competes with imports. Hopefully, this means that avoiding backlogs and time-consuming regulatory processes will be at the core of the Scheme’s operation, and New Zealand will fare better. New Zealand has taken a staggered approach to the regulation of medicinal cannabis. New Zealand has an established licensing regime under which businesses are able to produce medicinal cannabis products for the purpose of medical research. Currently there are 20 such licence holders. It is anticipated that because medicinal cannabis products are already being grown and manufactured in New Zealand, locally manufactured products will be available to consumers faster than in countries such as Australia where there was no intermediary licensing scheme for research purposes.

Despite Australia establishing its licensing regime in 2016, it is yet to have a locally manufactured medicinal cannabis product launched on a commercial scale. When compared to Australia, the time from the granting of a licence to launching a product to market should be greatly reduced in New Zealand where a business was already licenced to produce medicinal cannabis products for research purposes.

Final thoughts

There are features that countries will inevitably share when undergoing similar changes, but prospective industry players can be optimistic about New Zealand’s Scheme. Although several moving pieces will still need to come together in practice – exports, patient buy-in, education, training, cost and regulatory oversight – the work, thinking and planning being done early on are signs that New Zealand may outpace, relatively, other markets in this space as the Minister of Health suggests.

This article was published by DLA Piper.

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