New Federal Court Ruling on Medicinal Marijuana Changes Little for Now, Much in the Coming Months

On February 24, 2016 a Federal Court judge in Vancouver struck down the federal government’s regulations stopping licensed personal growers of medical marijuana from growing their medicine, saying they violate the patient’s Charter rights. Before the federal government brought in the new scheme, which mandated that medical marijuana only be grown by large government-regulated marijuana growers and distributed in a manner similar to traditional medicines, small licensed grow operations were allowed to grow on behalf of patients or for their own personal medical needs. Opponents of the new system argued that it caused an exorbitant increase in the cost of medical marijuana, causing patients to go back to the black market or go back to more harmful traditional medications.

At the beginning of the litigation that came to an end with this Federal Court decision, the Court granted an injunction that allowed the pre-existing small personal medical marijuana growers from the previous system to keep growing medical marijuana. Under this new Federal Court decision, those pre-existing growers can continue business as usual, but there will be no new personal licenses or growers any time soon. The decision allowed a 6 month window for the federal government to make new regulations to ensure that personal medical marijuana growing is done safely. Until those new regulations are implemented, or that 6 months expires, there will be no new legal personal medical marijuana growers. So, for the time being, everything stays the same.

The real change comes in the following months. This decision will likely spell disaster for the large scale medical marijuana producers that invested large amounts of capital to get their facilities up and running under the new system. If medical marijuana is available legally to patients from private growers or from their own plants, at a fraction of the cost of buying from the government, the large commercial growers are likely to go belly-up. That is unless the Trudeau-led Liberal government can move fast enough on legalizing recreational pot for some of those facilities to apply to be able to transfer over to grow under that regime. In my opinion, the Federal Court decision actually helps to take some of the speed bumps out of the way of the legalization of recreational marijuana in Canada. Under the medical marijuana system, where patients were getting pot through the government from large commercial growers, the price of medical marijuana was well above the black market price for marijuana in most of the country. That presented a problem for recreational legalization. The legal recreational marijuana prices would have to be competitive with black market prices or the government would not get enough tax benefit from legalization for it to be worthwhile. If medical marijuana was more expensive than recreational marijuana, patients would buy recreational marijuana. Bottom line, legal marijuana has to be price competitive with the black market to work. When the government was selling medical marijuana well above black market value, it created a big problem for legalization of recreational marijuana. Now that medical marijuana will be price competitive going forward, through small and personal growers, the government has no issue with the pricing of legal recreational marijuana. The large commercial growers have a big problem with a finding a market for their product. They, and their shareholders and investors, better hope they can transition into growing legal recreational marijuana, and quickly.