Germany Leads The European Medical Cannabis Market

HISTORY

Historically, Germany has had a long relationship with cannabis. In fact, archaeologists have found evidence of its use in Thuringia going back 7,500 years. As you might expect, attitudes change over the course of seven-and-a-half millennia. Recreational use is currently illegal in Germany - although punishments have become increasingly more lenient in recent years. This is especially true in the larger cities such as Berlin where possession of up to 15 grammes of cannabis is typically met without prosecution. Globally, perceptions are changing for the medicinal applications of cannabis (thanks in no small part to progress in North America). Germany is putting itself at the forefront of the European market by legalising medicinal cannabis this year. An action that may get the ball rolling throughout Europe.

 THE TENDER

19th January 2017 saw a major development in Germany’s relationship with cannabis. German parliament unanimously voted to make it legal for doctors to prescribe cannabis-based treatments for ‘seriously ill’ patients. This development signals not only a significant leap forward in the country’s relationship with the drug but potentially that of many other countries to follow. A major decision from the EU’s most populous state will likely kickstart European cannabis reform. However, more imminently, the introduction of this new industry could present a fountain of economic opportunity for German and international businesses to capitalise upon.

Naturally, a development of this magnitude is not going to be without its speed bumps. In fact, when the tender bid for domestic cultivation was announced in April, many of the German hopefuls were disappointed with the seemingly insurmountable restrictions put in place:

 

  • There are only 10 licenses up for grabs in total - each tasked with producing a minimum of 200kgs of product a year.

  • Each perspective company has to be able to prove that they are capable of such a figure.

  • The companies must also show that they have been able to legally produce at least 50kgs of product a year for the past 3 years.

 

Herein lies the rub.

 

The German legal cannabis industry is still in its infancy with only 1,000 current qualified patients in the country - although this number is now expected to grow rapidly (between 5,000-10,000 patients per year). It has been illegal to grow up until the recent decision to legalise medicinal cannabis -  therefore any domestic cultivators with the necessary experience would already be in violation of the legality clause. In contrast, any companies that started growing cannabis after the law was passed will not have the proof of productivity the tender requires. As far as German cannabis manufacturers are concerned - it’s a catch-22.

 

INTERNATIONAL RELATIONSHIPS

Understandably, this appears to make bleak reading for any hopeful German cannabis producers. The reality is the regulations seem to favour imports over domestically grown products. Germany, with a gross domestic product of US$3.36 trillion is the largest economy in Europe. Furthermore, cannabis (of amounts up to 125g a month per patient) will be covered by public health insurance. This system represents a level of organisation and functionality not yet applied to medicinal cannabis anywhere in the world. So the German industry is a shining light for the future of medical cannabis but more significantly it is a very attractive prospect to outside parties.

However, rather than the German companies succumbing to these restrictions, we are seeing a number of strategic partnerships emerging between local German businesses and Canadian, American or Israeli companies. Obviously, these markets are already highly experienced in the medicinal cannabis industry.

Aurora Cannabis announced in May that it had acquired Pedanios GmbH, a German company that wholesales medical cannabis to more than 750 pharmacies in the EU. This merger was the latest in an ever-growing list of Canadian businesses, such as Canopy Canada and Tilray, establishing relationships with German companies. Similarly, the Israeli pharmaceutical research company OWC announced a strategic relationship with German-based Mediq Innovation Partners, with the aim of introducing an active cannabinoid-based topical psoriasis cream to the German market. Furthermore, Canopy Growth has recently acquired German distributor MedCann GmbH Pharma & Nutraceuticals who have now successfully placed Canopy’s Tweed branded cannabis strains into German pharmacies.

 

THE FUTURE

Things are looking at this early stage. As the first European country to produce cannabis on this scale, Germany will develop the insight and experience to capitalise on production and distribution throughout Europe. Other European markets will follow quickly so those that have cracked the German market will be very well positioned.

 

FURTHER LEGALISATION

How far away are we from seeing a change in the country’s current laws on recreational use? As it stands, there is no federal proposal to fully legalise cannabis. At least, not one that looks as if could gain enough approval across all parties to pass. However, the Düsseldorf city council is planning a pilot project to sell recreational cannabis to adults, which it hopes to launch as early as the summer of 2017.

Economically, the numbers for a legal recreational cannabis industry have already been crunched. In 2015, Green Party members presented legislation to allow adults to consume cannabis under strict conditions. In their manifesto, they estimated that (based on street prices of €10-12 per gramme - the current black market average) a tax of €6-7 per gramme of cannabis could bring in €1-2 billion per year to state coffers.

Germany’s current government - led by the Christian Democrats (CDU) - is not only opposed to the legalisation of cannabis but wishes to tighten the existing laws against its use and sale. However many German scientists, politicians and other experts follow the increasingly popular view that harsher penalties do not result in a decline in possession and consumption of cannabis or other illegal drugs.