Client Update: Federal Cannabis Act regulations taking shape: consultation feedback revealed

Rick Dunlop and Kevin Landry

The Federal government has released a new report titled: Proposed Approach to the Regulation of Cannabis: Summary of Comments Received During the Public Consultation (the “new report”) which outlines the feedback received during the 60-day public consultation launched on November 21, 2017 by Health Canada.

The consultation paper titled: Proposed Approach to the Regulation of Cannabis (the “consultation paper”) outlined a regulatory approach to cannabis which we discussed in our previous article: Federal Government Desires Feedback on Proposed Cannabis Act Regulations.

Given the short timeline before legalization, regulations made under the Cannabis Act will not be pre-published before being printed in the Canada Gazette, Part II. The new report outlines “potential changes to the regulatory proposal that Health Canada is considering”, so the feedback received during the consultation, although not law, is widely expected to influence the regulations made under the Cannabis Act.

Contents of the new report

Outdoor cultivation still subject to review

Health Canada sought opinions on outdoor cultivation, and reported that a majority was in support of the idea as it would permit “producers to take advantage of natural elements including sunlight, water, and soil”. But significant challenges posed by outdoor cultivation were also noted, including concerns about good production practices, impact on adjacent crops, and whether outdoor cultivation presents a greater risk of theft or diversion. Health Canada said that “further consideration is being given to what measures, if any, are required in the final regulations to address any concerns that were raised with respect to outdoor cultivation.”

Uncertainty about starting genetics

Currently, Licensed Producers under the Access to Cannabis for Medical Purposes Regulations can only purchase cannabis genetics from other Licensed Producers, which has restricted variation in strains. For recreational cannabis, a majority of Health Canada respondents believed that a “broad diversity” of cannabis strains was necessary to “enable the legal market to compete with the current illegal market”.

Health Canada refrained from taking a specified stance, instead saying:

the regulations would need to aim to ensure that organized crime would not benefit from past or ongoing criminal activity with cannabis, and that all cannabis grown by the legal industry, regardless of source, would be subject to the same strict regulatory controls, including pesticide testing and other controls.

Closing loopholes with multiple licenses at a single site

The consultation paper did not specify if recreational cultivators or processors could obtain more than a single license. Health Canada has not arrived at a conclusion but stated that additional consideration was needed in order to prevent an individual from combining “multiple micro-scale licences together at a single site as a way to avoid the requirements associated with standard-scale licences”.

Potential reporting requirements for shareholders of recreational cannabis companies

The consultation paper proposed any shareholder, who owned more than 25 percent of a licensed organization (if privately held) or more than 25 percent of a privately held parent company, hold a security clearance. However, Health Canada back-tracked on this requirement, acknowledging that “it would be relatively simple to structure investments and assets to avoid the requirement.” Instead, “consideration is being given to alternative options to reduce the risk of criminal organizations establishing a financial relationship with legal cannabis producers in order to further their criminal activities” and mentioned that such measures could include:

1. requiring licence applicants to submit financial information (including information about investors) as part of the licence application process.
2. requiring regular, ongoing reporting of financial information by licensees to help identify suspicious financial relationships or arrangements that may warrant additional regulatory action.

Clarified thresholds for micro-cultivation and micro-processing

It will be proposed that the final regulations define micro-scale licenses as follows:

1. Micro-cultivation licence would authorize the cultivation of a plant canopy area of no more than 200 square metres (approximately 2,150 square feet).
2. Micro-processing licence would authorize the processing of no more than 600 kilograms of dried cannabis (or equivalent) per year, or the entire output of a single micro-cultivation licence.

Possible security clearances for those with non-violent, lower risk criminal histories

With respect to whether individuals with histories of non-violent, lower-risk criminal activity should be able to obtain a security clearance and participate in the legal cannabis industry, a strong majority of respondents agreed that they should. Health Canada did not speak definitively but stated that this feedback “will be taken into consideration in the development of the final regulations”.

Cannabis Tracking System and micro licenses

The proposed Cannabis Act authorizes the Minister of Health to establish and maintain a national Cannabis Tracking System to track cannabis throughout the supply chain and help prevent diversion of cannabis into, and out of, the legal market. Health Canada suggests that in implementing the proposed system, “due consideration will be given to minimizing the burden on those required to report, particularly micro-scale licensees and industrial hemp producers”.

Cannabis products

The consultation paper suggested a variety of restrictions on the types of cannabis permitted to be sold, and prescribed specified classes to legal cannabis (dried and fresh cannabis, cannabis oil, cannabis plants and seeds). Clarity was provided on the types of products which will be available:

1. Majority support for broadened product types: a strong majority of those who responded to the consultation question regarding cannabis product were not supportive of restricting the type of product forms that industry would be able to manufacture and sell.
2. Majority support for 10 milligram THC serving size: With respect to the proposed limit on the amount of THC that could be in a single unit or serving, most participants in the consultation supported the proposed THC limit of 10 milligrams per unit or serving of a cannabis product intended for ingestion.
3. Cannabis oil concentration of 30 milligrams: feedback received did not include scientific evidence to support the regulations establishing a different, specific THC concentration limit other than 30 milligrams of THC per millilitre for cannabis oil.
4. No edibles on day one: Health Canada reaffirmed that necessary regulations addressing edibles containing cannabis and cannabis concentrates will be put in place within one year following the coming into force of the proposed Cannabis Act. Health Canada plans to consult broadly on these regulations.

Detailed packaging and labelling requirements revealed

Consistent with a “plain packaging” approach, there were numerous limitation set on packaging and brand elements. The report revealed specific logos, warning labels, and details down to font sizes which will be required for packaging.

Packaging MUST HAVE:

1. One of 14 health warning messages.
2. Standardized cannabis symbol on all products.
3. Requirements with respect to information on THC and Cannabidiol content, as well as other information that would be required on each label, including specific requirements with respect to the size, placement and appearance of this information.
4. No more than one other brand element in addition to the brand name displayed. This element could include, for example, a slogan or logo.

Packaging MUST NOT HAVE:

1. Any other images or graphics than the permitted logo.
2. Multi coloured labels or package backgrounds.
3. Any fluorescent or metallic colours.
4. Any coating (e.g. could not be glossy), embossing (raised or recessed relief images), texture, foil, cut-outs or peel-away labels.
5. Any over-wrap other than clear over wrap.
6. Any insert in a package.

Cannabis for medical purposes regime to be reviewed

Health Canada’s consultation paper had initially proposed leaving the medicinal regime largely intact but in the new report it affirmed the Government of Canada’s commitment to monitor and evaluate patients’ reasonable access to cannabis for medical purposes during the implementation of the proposed Cannabis Act, and evaluate the medical access framework within five years of the coming into force of the legislation. Health Canada also clarified that the Excise Tax will be based upon THC content and generally not apply to products that contain low amounts of THC. Pharmaceutical products derived from cannabis that have a Drug Identification Number will also be exempt.

Health products and cosmetics

A majority of respondents approved of Health Canada’s proposal that the regulations would provide for a scientific, evidence-based approach for the approval and oversight of health products containing cannabis that would be regulated under the Food and Drugs Act, including prescription and non-prescription drugs, natural health products, veterinary drugs and veterinary health products, and medical devices. Health Canada clarified that the existing approval pathways under the Food and Drugs Act would be maintained but specified that further consideration was needed with regard to licensing the manufacture of prescription drugs and promotion of such drugs.

Non-prescription drugs, veterinary health products (“VHPs”) and natural health products (“NHPs”)

Health Canada proposed further consultation pertaining to potential new non-prescription drugs and NHPs containing cannabis. The consultations will focus on the appropriate level of regulatory oversight and evidentiary requirements to enable the approval of any potential new health products that could be available without the oversight of a physician.

Until these consultations and regulations for these types of products are complete, Health Canada will limit applications new applications for health products with cannabis to prescription drugs, medical devices, or NHPs/VHPs with permitted cannabis parts and no more than 10 parts per million, (or 10 milligrams/Litre) of THC.