April 1 ushered in a new era with respect to the medical use of marijuana in Canada. There are emerging implications for plan sponsors that should be considered proactively. Health Canada has repealed the Marijuana Medical Access Program (MMAP) in favour of the Marijuana for Medical Purposes Regulations (MMPR) whereby patients using medical marijuana will have to access their supply from one of 12 licensed growers (as of April 1, 2014) in Canada and can go through their own doctor for approval as opposed to having to apply to Health Canada.
The situation has been complicated by a March 21 injunction that was imposed by a federal court judge in British Columbia that will allow patients currently approved to grow their own supply at home to continue to do so. Recent estimates have suggested that up to 24,000 Canadians have licences to grow their own medical marijuana supply. There has been a significant backlash to the new regulations from existing patients who grow their own supply who fear that they will no longer be able to afford the new commercial prices that are expected to range between $4 and $12 per gram. It’s been estimated that patients growing for themselves can spend between $1 and $3 per gram to produce.
The use of medical marijuana in Canada has exploded since 2001 when Canadians were first able to legally acquire marijuana for HIV/AIDS and a handful of other conditions. As of 2014, the number of Canadians using medical marijuana has grown to approximately 40,000. according to Health Canada, and, according to the government, that number is expected to increase as much as tenfold in the next decade alone. While this may not have been on the radar screen of plan sponsors in the past, given that it was a niche market controlled by Health Canada, when we are looking at a market size of hundreds of thousands of Canadians in the future on an open market, that will change.
On Apr. 3, Tweed Marijuana Inc. went public on the TSX Venture Exchange. It’s one of the initial group of 12 licensees. The company has gained notoriety for taking the old Hershey’s chocolate factory in Smiths Falls, Ont., and turning it into Willy Wonka’s dream garden. Even facing the uncertainty of what the federal injunction has imposed, its market capitalization by Tuesday of the following week hit nearly $150 million. There are clearly some very bright minds in financial markets who also believe the sky is the limit for the growth of the medical marijuana business in Canada.
The major uses for medical marijuana today include the following:
- an appetite stimulant in patients with HIV and cancer;
- chemotherapy-induced nausea and vomiting;
- treating muscle spasticity in diseases such as multiple sclerosis;
- seizure prevention in epilepsy; and
- treating chronic pain
That being said, Health Canada has not placed any restrictions on physicians for what they can and cannot prescribe medical marijuana for. It’s expected that the use of medical marijuana will expand rapidly to treating a whole host of other conditions, including diabetes and dementia.
The interesting thing about the evolving medical marijuana market is that cannabis contains hundreds of different compounds, but the two active ingredients understood to have the greatest pharmacological effect are tetrahydrocannabinol (THC) and cannabidiol (CBD), and the combination of strengths of THC and CBD in new strains is limitless. There’s an opportunity for licensed growers to develop specific strains for specific disease states. There’s also emerging work being done in the field that would suggest that different diseases respond to different levels of THC and CBD, so there is an opportunity down the road for licensed growers to start developing an endless array of branded products.
The new rules for using medical marijuana involve the following:
- obtaining a prescription from any licensed physician—so access to prescriptions will not be a challenge for a plan member, it’s not as though they will need to wait to see a specialist;
- that prescription is forwarded to one of the licensed growers of their choice;
- producers of medical marijuana will consult with patients with respect to appropriate products and strains;
- delivery by courier is required—there will be not retail access to medical marijuana, and patients will be limited to 150 grams per month of dried buds.
Based on a 150 gram per month maximum, some patients could be looking at out-of-pocket costs of $1,800 per month or more than $20,000 per year. This is where plan sponsors may start to find more pressure from members to look at how they will cover medical marijuana under existing drug benefits plans.
Here are some of the issues that are on the table for plan administrators, claims processors, plan sponsors and their advisors to consider:
- Will medical marijuana be covered at all under third-party plans if prescribed by a licensed physician? If so, for what disease states/uses, or will there be any controls over what it’s allowed to be used to treat?
- Since medical marijuana will not have a drug identification number because the product cannot be regulated and controlled by Health Canada, how will it be handled by private plans? Will plan administrators issue product identification numbers (PINs)?
- Will PINs be issued for all licensed growers or just those who have been validated by various third-party payers?
- Will PINs be issued for all strains produced by a licensed grower or just specific strains?
- Will healthcare spending accounts cover medical marijuana from any licensed grower?
- Will plans cap what they will pay? Will there be a step-therapy process or prior authorization protocol implemented?
- There are 12 licensed producers today, but Health Canada has received up to 600 applications from other groups looking for a licence. How will plans deal with an expansion of suppliers from a dozen to possibly hundreds down the road?
Some food for thought as one of the most interesting market expansions in the healthcare space in recent years unfolds around us.