Pubdate: Sat, 29 Mar 2014
Source: StarPhoenix, The (CN SN)
Copyright: 2014 The StarPhoenix
Contact: http://www.canada.com/saskatoonstarphoenix/letters.html
Website: http://www.canada.com/saskatoonstarphoenix/
Details: http://www.mapinc.org/media/400
Author: Jeremy Warren

CASHING IN ON POT

A Corporation. a Family Farm. Two Views on the Coming Boom in Medical Marijuana

Come harvest time at Saskatoon's CanniMed Ltd., six employees wearing 
masks and gloves crowd around a short conveyor belt handpicking stems 
from mounds of dried marijuana as the product is pushed into a large, 
clear plastic bag.

It's not a common site anywhere in Canada, and to see it is a 
revelation of industrial marijuana production. It's also one of 281 
points of quality control CanniMed's parent company, Prairie Plant 
Systems (PPS), developed in its 13 years of supplying Health Canada 
with medical marijuana.

CanniMed grows medical marijuana for several thousand of Canada's 
licensed patients. It's location cannot be disclosed, but it is a 
short drive out of Saskatoon.

Once grown deep in a Manitoba mine, the company's marijuana is 
produced and processed in industrial greenhouses not out of place 
among the farm implement dealers and industrial sites between 
Saskatoon and its bedroom communities. The company also grows three 
varieties of saskatoon berries.

On April 1, new Health Canada rules will allow a handful of companies 
to start producing marijuana for licensed patients. The change was 
meant to replace the old system of thousands of home-based licensed 
producers, which Health Canada and law enforcement argue is open to 
abuse. But a recent court injunction allows current licence holders 
to continue to possess and grow marijuana under the old regulations 
while a lawsuit works its way to trial.

Until the legal battle ends, the old and new rules will coexist, 
providing Canada an interesting test of the two systems through which 
patients get their medicine. Where some entrepreneurs and investors 
see potential revenue streams - $1.3 billion by 2024, according to 
Health Canada - many patients see a restriction of choice and their 
right to cheap medicine.

CanniMed CEO and president Brent Zettl also sees a marketing problem. 
An estimated 22,000 licensed patients grow their own cannabis or buy 
from other licence holders who are allowed to grow for a small number 
of patients, while PPS supplied another several thousand. Zettl says 
the company will be ready to supply 25,000 patients by June, but his 
product is not without its critics.

"Our competition was blind to us. We were the only ones who had to 
follow quality-control regulations," Zettl said in his office, two 
weeks before Health Canada's regulations take effect.

He explains PPS could only grow one strain under the old rules while 
patients could test as many strains from home based growers as they 
wish, and until recently it was forbidden to advertise or speak 
publicly about its product.

On his office desk, Zettl sets down brightly coloured bottle labels 
for the company's new strains, four on offer and two in development, 
all of varying THC strengths.

"Having to be bound by one product, one size for the entire country, 
how do you turn it around? One customer at a time."

Customers, patients, users - read and talk enough about medical 
marijuana in Canada and you'll see licence holders are referred to as 
all three. You'll hear more about them in the coming years. The 
federal government expects up to 450,000 people to have medical 
licences by 2024, or about 10 times the current market.

Where there is demand, there are people hoping to supply it. Health 
Canada's new Marijuana for Medical Purposes Regulations (MMPR) has 
licensed almost a dozen growers to date, including Ontario-based 
Tweed, which is renovating an old Hershey's chocolate factory into a 
grow operation.

In Saskatchewan, an as yet-unlicensed company hopes to buy a school 
in small-town Milden and turn it into a grow operation employing 
dozens of locals. CanniMed opened its Saskatoon-area grow operation 
in 2011. One building is filled with administrative offices and laboratories.

The actual growing happens in nondescript buildings separate from the 
administrative offices and research labs. To get in, one must shower 
on-site and put on coveralls to prevent contamination of the product. 
Inside the grow facility are six chambers holding up to 1,000 plants 
each. Surfaces are spotless white or shiny metal. Security on site is 
tight - retired police officers greet visitors and patrol the 
grounds. Zettl is reluctant to talk specifics about security and is 
careful about what gets photographed.

The operation is similar to what companies across Canada are doing to 
meet Health Canada's regulations - security cameras, vaults, quality 
control measures fit for pharmaceutical manufacturers.

Another application before Health Canada involves four young brothers 
who bought 80 acres of land an hour's drive from Saskatoon to start a 
non-profit operation called McLachlan Family Cannabis Farms, catering 
to patients with severe medical ailments and tight budgets.

At the family farm, Chad McLachlan, 28, walks into "the barn," the 
under-construction facility the brothers and their father are 
building in a secluded wooded area with the hope of becoming a 
licensed producer.

When finished, the place will house a lab area, production and 
processing equipment, showers, a vault and offices. For now, the 
mostly empty 7,000-square-foot building houses a television, video 
games system and a room of marijuana plants they're maintaining to 
preserve favourite strains. "They all have their unique medical 
qualities," McLachlan said, pointing to marijuana strains originating 
in Mexico, Nepal, Vietnam and Afghanistan. "People have struggled for 
the right to use this and that's a personal cause ... In 20 years, 
cannabis will be as ubiquitous as coffee, tea, whatever."

The brothers are turning to online crowd funding to equip a 
12,000-square-foot glass greenhouse. Their operation is a throwback 
to Saskatchewan's agrarian roots, collective-minded and political. 
The McLachlans plan to meet all the requirements in Health Canada's 
new regulations for producers, who must adhere to strict security and 
reporting measures. But they want to offer their dried marijuana at 
$1.50 to $2.50 per gram, below the $7 to $11 per gram cost many other 
companies, CanniMed included, say they need to be viable.

In McLachlan's ideal world, sick people aren't prevented from growing 
their own, or at least small family run operations are free to 
compete against the large-scale corporations. The landscape will be 
shaped by how many producer licences Health Canada grants to meet demand.

"There is an insane amount of profit in growing cannabis and it's 
because of prohibition," McLachlan said when asked about Health 
Canada's estimate the medical marijuana industry will eventually be 
worth $1.3 billion. For now, the McLachlans grow cannabis for one 
licensed patient under the old rules. They envision initially 
supplying 100 to 200 patients based on a five gram per day prescription.

"If you can grow a plant in a greenhouse legally, the price should 
reflect that. The cost for a producer isn't the cannabis - it's the 
wages and everything above."

Back near Saskatoon at CanniMed headquarters, Zettl won't reveal the 
company's current and projected profits. He says the company 
hasexceeded financial forecasts five years running. Just before the 
April 1 change to new rules, CanniMed announced it has the resources 
to immediately supply an extra 10,000 patients, moving up its 
projected expansion by several months.

The demand is there and suppliers are eager. But Zettl doesn't 
believe medical marijuana will quickly become a billion-dollar 
industry, and rejects the idea the changes herald a new "green rush" 
of pot pioneers.

"How many people really made it in the gold rush?" Zettl said. "Very few."

*

[sidebar]

By the numbers

Number of licensed users in 2001: 85

Estimated number of licensed users in 2014: 35,000 to 42,000

Expected number of licensed users in 2024: 450,000

Estimated number of legal growers: 22,000

Health Canada approved growers after April 1: 11 (so far)

Estimated number of plants current patients are allowed to grow: 3,500,000

Estimated taxable annual revenue of medical cannabis industry in 
2024: $1,300,000,000

Cost per gram of medical marijuana CanniMed says it needs to be 
viable: about $7 to $11

Cost per gram the McLachlan family wants to do it for: up to $2.50

Who will the new medical marijuana laws and regulations affect?

THE PATIENT

Patients no longer have to apply to Health Canada for a licence - 
once they have a doctor's prescription, they can buy marijuana from 
an approved producer. Current patients are exempt from the new 
regulations while a court challenge works its way to trial. They can 
still grow their own medical marijuana, or they can adhere to the new 
regulations starting April 1 and purchase it from Health 
Canada-approved companies. Before the injunction, Health Canada told 
patients they must destroy their existing supply before April 1 or 
risk getting arrested by police. Under new rules, patients are 
allowed to possess up to 150 grams of dried marijuana or 30 times 
their daily prescription. Also, the new rules don't allow companies 
to produce or patients to possess edibles such as pot cookies.

THE POLICE

"We will not be going and seeking them out. We have larger concerns - 
heroin, cocaine, crack cocaine," Saskatoon city police Insp. Jerome 
Engele said last week, before the court injunction allowing current 
patients to keep growing marijuana. "If they don't destroy (the 
product), that's a chance they'll take. We're not naive. I'm sure 
most people won't destroy their product." Now that there is an 
exemption from new rules, it's status quo for city police. Engele 
welcomed the new rules because the old system "was set up where it 
could be abused" by people looking to make a quick buck.

THE DOCTORS

Saskatchewan doctors must keep meticulous records of medical 
marijuana prescriptions. They have to turn over the records once a 
year or, if they prescribe to more than 20 patients, every six 
months. Doctors can't simultaneously prescribe and sell marijuana, 
and they are banned from investing in medical marijuana ventures. The 
new system, first proposed late last year, should prevent any one 
person from becoming "Dr. Feelgood," said the lawyer for the College 
of Physicians and Surgeons of Saskatchewan.

THE OTHER GOVERNMENTS

For the provincial government, the regulations won't change much in 
the way of policy or legislation. "I don't think crop insurance will 
be underwriting the risk there anytime soon," a cabinet spokesperson 
said. Zoning is a municipal issue, and crime and health matters are 
left to police and the federal government. Needless to say, the 
province hasn't studied the potential economic spinoffs or tax 
revenue earned from Saskatchewan grow operations. To date, the City 
of Saskatoon has not received any zoning applications or inquiries 
from potential medical marijuana producers.
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MAP posted-by: Jay Bergstrom