Medical Cannabis vs Pharmaceutical Cannabis

Welcome to the third edition of Insider Cannabis Q&A, where we dive deeper into the market, trends, innovation, failures, and successors of operating and building a medical cannabis business. The goal of this newsletter is to bring to light open-source knowledge for an industry that is starting to standardize itself and get news of the consolidation of a maturing sector.?

Today we will dive into the difference between medical cannabis and pharmaceutical cannabis and associated producers along the way and the products they can sell.

Medical Cannabis vs Pharmaceutical Cannabis

Q. Is there a difference??

A. Yes.

Medical cannabis is cannabis and cannabinoids that are prescribed by physicians for their patients. Medical cannabis is an unregistered medicine produced according to GMP that is prescribed on the literature understanding of the endocannabinoid system and has not undergone clinical evaluation for targeted therapy. I often refer to these as broad pathway medicines i.e. their pharmacological pathway is not understood and it’s a last resort therapeutic strategy in treating symptoms. This medicine you cannot market to patients.

Medical cannabis products are sold all around the world with Germany especially taking note that on 4 May 2016, legislation was approved allowing the use of cannabis for seriously ill patients who have consulted with a doctor and “have no therapeutic alternative”.

Pharmaceutical cannabis is a standardized medicine where the patient has been prescribed a single pharmacological pathway medicine that has targeted therapy. This medicine has undergone the 10+ years of clinical trials and has been registered with an appropriate market authorization meaning that you may market this medicine to patients who may suffer a specific ailment.

Pharmaceutical cannabis products such as Epidiolex have been approved by FDA for example for use as a treatment of seizures associated with Dravet syndrome in people one year of age and older.

Q. Will there always be a medical cannabis market if more products are registered and if recreational comes online?

A. Yes, but that is only my opinion at the time of writing this.

Medical cannabis by definition is the last resort case when all medicines have failed to treat their ailment. For example, cancer is a disease that the world has been working on curing for numerous years with little success associated with severe side effects. It’s the main reason medical cannabis has become an option for patients in severe situations. The side effects associated with chemotherapy such as nausea, vomiting, chronic pain, and muscle spasms have been treated with medical cannabis. Pharmaceutical cannabinoids in products such as Marinol and/or Syndros (the synthetic versions of THC) have also been used to treat these ailments but often patients would prefer medicines such as Cannabis sativa flowers or extracts rather than these it seems otherwise there would be this demand?

We hope to have more pharmaceutical cannabis products that have gone under clinical trials as medical insurance will pay for patients' therapy. This is likely to occur over the next few years since most companies today began in 2015 with build-out with Drug Master Files now being readily available for single source APIs and with clinical trials and market authorization needing 10+ years it's likely we will see more clinically tested pharmaceutical products in 2025, which will mature the current sector into selling and manufacturing registered APIs. This could be the transformation of the medical cannabis sector into the pharmaceutical sector but that would likely depend on recreational changes as well as patients' access to medicines that are actually working. What we can tell from this demand in the medical cannabis sector are a few things but the main being that medical cannabis offers a broad spectrum solution with few side effects.

If recreational cannabis is legalized this would also not have an effect on the legitimate medical cannabis market. This is my opinion and I could be wrong; however, this is my thought process. ?For example, let’s have a look at Germany. Germany has seen significant growth as mentioned in my first edition. While the demand and use has been increasing in Germany an interesting reimbursement rate trend has been also been happening, which I cannot be certain of why since I don’t live there. But would this mean that this demand was likely due to prescriptions getting lighter and slightly touching a pseudo-recreational model with the health insurers taking note and putting in measures for this? I don’t know. What I did find though to confirm this was that MJBizDaily in December of 2020 that reimbursed insurance-covered sales were declining. Prohibition Partners January 2022 also put out an article that the growth that was hinged on reimbursed sales was also declining with health insurers making it more difficult to obtain reimbursement. What is further interesting is that Germany’s Health Minister has decided to follow the route of adult use and legalization in the coming years. Is this because of the growth of the pseudo-recreational users and expenditure getting to rooftop levels of health insurers forcing Germany to legalize to ensure that this demand does not create significant demand in the black market? I don’t know but the data will soon tell in Germany.

When Germany legalizes I would be expecting the medical cannabis reimbursed demand to significantly drop with new laws potentially in place similar to that of Portugal where its stringent categories only such chemo-induced nausea, vomiting, muscle spasms, and severe conditions. With the inflated demand likely moving over to recreational where the growth will be continued that has been seen in the medical cannabis sector. This is just a thought and hypothesis.

But what if that does happen?

If your strategy were then to continue being a dominant player in the medical cannabis sector it would be beneficial to vertically integrate your supply chain potentially, or do what you always wanted to do with hyper-focus. This would mean from Cannabis Sativa flower to manufacturing of API through to packaging and distribution to pharmacies you would be able to have a stronger role in a smaller market playing field.

Medical Cannabis Producers & Products?

1.????GACP Cultivator

As a GACP cultivator, you would have been audited by your regulatory authority for the narcotic manufacturing license and a third party or your regulatory authority for GACP certification. Your products in the medical cannabis sector would include bulk “partially” dried bulk Cannabis Sativa. Your customer would be a GMP manufacturer or a Contract Manufacturer with GMP accreditation. You would not be able to sell your product as medical cannabis direct to a pharmacy or wholesaler who intended to go direct to the pharmacy.

Products include:

a.?????GACP Bulk Cannabis sativa flower “partially” dried to GMP cultivator

Lessons: i) You cannot sell you the “middle man” wholesaler, ii) Would be better to invest as a GMP cultivator from the start as you’ll likely burn that same capital finding a wholesaler who then says you need to find a GMP cultivator, iii) Hire a drying specialist whose worked in herbal GMP and has spent 10+ years validating dryers in a GMP environment, iv) If you want to stay here then make sure before you’ve built you have negotiated with your GMP cultivator or dryer already batch sizing and turn-around times, v) Be weary, this will restrict you in competitive times.

In South Africa, cultivators are 90% here and are giving rise to issues around little manufacturing support licensed to dry, pack and sell to wholesalers. It has created an abundance of products without the capacity to take the product internationally and is an issue, South Africa, as a country is currently facing.

1.????GMP Cultivator?

As a GMP cultivator and manufacturer, you would have been audited by your regulatory authority for the narcotic manufacturing license as well as a GMP accreditation that was according to PIC/s or Eudralex Part I or Part II. In your facilities you would have cleanrooms, drying areas, trimming, manicuring, and small bulk or finished packaging units. Your customer would be a wholesaler who can go directly to the pharmacy.

The major difference between this set-up and the set-up mentioned in point 1 is that you would have GMP-validated drying, packing, trimming, labeling, and finishing with stability on chosen pack sizes with a GMP manufacturing license and be able to sell products to be used in pharmacies.

Products include:

a.???GMP Bulk Cannabis sativa flower dried, trimmed, and packed direct to wholesaler

Lessons: i) Your first step is your customer, find the right one, ii) Potentially invest in 5x your drying capacity to offer the service to others to reward yourself with extra income during market development

1.????GMP Extract Manufacturer

As a GMP manufacturer you would have been audited by your regulatory authority for the narcotic license as well as a GMP accreditation that would allow you to extract, produce an unregistered API, formulate an unregistered product and sell direct to wholesalers to the pharmacy.

Products include:

a.???Full-spectrum extracts formulated directly to the wholesaler for pharmacy

b.??Bulk APIs direct to the wholesaler for pharmacy or contract manufacturer?

Lessons: i) Continue to innovate with the pharmaceutical cannabis markets as more information is released, ii) Worth being hyper-focus on a category segment and product, iii) Depending on the roadmap here it may be worth to legitimize your products with API/product DMF and clinical trials.