Canada Publishes Long-Awaited Report On Cannabis Act, Recommends Tax Changes And D2C Sales For Cultivators

Today, the Canadian government published the final report on its review of the Cannabis Act, which saw it become the ‘first major developed country to legalize and regulate cannabis’ in 2018.

With cannabis businesses throughout the country continuing to struggle amid high tax burdens, extensive beaurocracy, and a thriving illicit market, the 54 recommendations and 11 observations put forward by the review have been hotly anticipated by the market.

The Cannabis Act stipulated that, due to the wide-ranging implications of moving from prohibition to regulation, it should be reviewed three years after coming into force.

In September 2022, the Minister of Health officially called on an expert panel to conduct a review, with a mandate to assess the act’s economic, social, and environmental impacts, particularly on public health.

It also set out to examine the impact on Indigenous communities, the impact of home cultivation, progress on providing adults with access to strictly regulated low-risk cannabis products, and the impact on access to medical cannabis.

Industry reaction to the dozens of recommendations has been muted, with some suggesting they fall short of patching some of the crucial holes in the current legislation.

These are the key takeaways from the 195-page report: 

The recommendations were split into a number of categories

Public Health

• Health Canada should establish a youth advisory board on cannabis, allowing young people to provide feedback and insights on cannabis policy.
• A new definition of higher-potency (THC) cannabis products should be established, while the use of ‘tax policy to disincentivize’ consumption of higher-THC strains by including larger duties was also recommended.
  • If the trend of higher-potency consumption cannot be halted, Health Canada should be ready to implement additional regulations, accompanied by strategies to prevent the illicit market from occupying this segment.
• Numerous changes to packaging were recommended. These include displaying only ‘total THC and CBD content for each unit’, allowing some parts to be transparent, and allowing the use of QR codes.
• A ‘standard dose’ or ‘unit dose’ should be developed as appropriate for different classes of cannabis, and should be required on product labels.

Economic, social and environmental impacts

• Regulations should be amended to allow cultivators, including microcultivators, to sell packaged and labelled dried or fresh cannabis directly to distributors, but they must follow the same quality assurance and testing requirements that apply to processors.
• The controversial excise tax model should be reviewed, as the original model was designed when the price of cannabis was significantly higher.
• Health Canada, in consultation with Agriculture Canada, should establish an expert advisory body to conduct a review of industrial hemp regulation.
• Regulatory fees for equity-deserving groups and micro-licence holders should be revised to promote greater diversity.

Adult access

• The controversial 10 milligram limit of THC per edible package should be maintained, but research should continue to determine whether this should be increased.

Criminal activity and displacement of the illicit market

• Consider the creation of authorities to compel internet service providers to block illicit cannabis websites and provide financial information that could help identify them.

Medical access

• The medical cannabis access programme should be maintained.
• Going further, efforts should be made to move beyond a medical access programme so that cannabis is considered within the standard drug approval pathways and part of conventional medical care.
• In this vein, the ‘rapid advancement of a pathway for cannabis health products containing cannabidiol (CBD)’ should be established.
• Pharmacies should be permitted to distribute cannabis products to those with medical cannabis authorization
• Finance Canada should review whether the excise tax should be applied to cannabis for medical purposes.

The review also recommended that further, regular reviews to the Cannabis Act should be conducted moving forward.

Canadian cannabis operator Organigram’s CEO Beena Goldenberg said of the recommendations: “Organigram firmly believes that to achieve the stated objectives of the Cannabis Act, a healthy and sustainable industry is required. Despite a few favourable recommendations and observations, the recommendations found within the report were not robust enough to deliver the impactful changes needed for this industry.”

“The Expert Panel’s failure to recommend that THC levels in edible products increase from 10mg to 100mg per package was disappointing as we clearly know that we are ceding ground to the unregulated and unsafe illicit market, putting public health and safety at risk. While we are pleased to see an acknowledgement that the excise framework needs to be revisited, the move to taxing higher THC products at a higher rate is likely to drive some consumers back to the illicit market. Finally, the recommendation to continue with plain packaging and limit promotions will continue to hinder the ability of legal producers to convert illicit market consumers.”

 “Despite the recommendations tabled in this report, we sincerely hope that the Government has listened, reforms the Excise Framework and amends the Cannabis Act accordingly.  Only by doing so will the government fulfill the public policy objectives of legalization.”