Canada’s Medical Marijuana Monopoly

Canada is currently transitioning between the old method of accessing medical marijuana, known as the Medical Marijuana Access Program (MMAP) and Health Canada’s new Marijuana for Medical Purposes Regulations (MMPR). The new system puts an end to personal licenses that allow patients to grow and possess the drug, as well as the supply available from Health Canada.

Instead, the government will grant licenses to entrepreneurs hoping to cash-in on producing and supplying the controversial medicine in a ‘free market system.’

As of 1 October 2013, Health Canada stopped accepting applications for personal-use production licenses and designated-person production licenses from those in need of medical marijuana. 1 April 2014 marks the date when the new program comes into effect, because all licenses to grow and possess medical marijuana granted under the old program will expire, rendering previous activities illegal. Furthermore, Health Canada will no longer sell medical marijuana to patients, instead forcing them to obtain it from licensed producers through the new MMPR.

Amongst a variety of complex debates regarding medical marijuana, it is worth looking at the consequences of the new regulations’ speedy implementation. With less than seven months until the new regulations are in full effect–forcing patients to rely solely on licensed producers for legal marijuana–Health Canada has only authorized three of the reported 156 applications.

The new regulations do not limit the number of producers approved, although, each additional producer requires additional government inspection and enforcement costs, countering the proposed decrease in program costs. Furthermore, the new system permits licensed producers to set their prices without any government restrictions, raising concerns for patients.

Health Canada’s current price for medical marijuana per gram is $5, far lower than the $9 to $13 average projected by Prairie Plant Systems, the first producer approved under the new MMPR. Despite an expected decrease in the price, long-run projections estimate that prices will stabilize at around $7 to $9 per gram.

Several medical marijuana patients suffer from medical conditions that prevent them from working and, therefore, a price increase is untenable. For these patients, the price increase may cause the drug to become inaccessible through legal means.

For the time being, licensed producers are looking toward 1 April 2014 in anticipation of major profits. In contrast, however, patients are dreading the new regulations, which will eat away at their income, risk illegal access, and endure unnecessary pain.

Competition in the free market system is essential for reducing prices. How many companies gain access to this industry and how long it will take them to become productive and drive prices down, however, is unknown: the government is phasing out the old program before newly licensed producers are prepared to provide medical marijuana at a price comparable to Health Canada’s former standard.

Health Canada has already set a definite timeline but should hasten their approval of producer applicants. The more companies granted licenses, the better off patients would be. Although efficient production is unlikely within the allotted time, the sooner companies obtain licenses the sooner prices will fall.

The soon-to-be completed transition is moving at a pace set to leave users in dire circumstances, while licensed producers begin raking in the profits of a marijuana monopoly.

Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

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