Health Canada presides over birth of billion-dollar free market in marijuana

The Canadian Press
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Large indoor marijuana farms certified by the RCMP and health inspectors will produce, package and distribute a range of standardized weed.

Chuck Rifici of Tweed Inc. looks out over the floor of the former Hershey's chocolate factory in Smiths Falls, Ont. Rifici has applied for a licence to produce medical weed in the abandoned factory.

OTTAWA — The Conservative government is launching a $1.3-billion free market in medical marijuana Tuesday, eventually providing an expected 450,000 Canadians with quality weed.

Health Canada is phasing out an older system that mostly relied on small-scale, homegrown medical marijuana of varying quality, often diverted illegally to the black market.


In its place, large indoor marijuana farms certified by the RCMP and health inspectors will produce, package and distribute a range of standardized weed, all of it sold for whatever price the market will bear. The first sales are expected in the next few weeks, delivered directly by secure courier.

“We’re fairly confident that we’ll have a healthy commercial industry in time,” Sophie Galarneau, a senior official with the department, said in an interview.

“It’s a whole other ball game.”

The sanctioned birth of large-scale, free-market marijuana production comes as the Conservatives pillory Liberal Leader Justin Trudeau’s campaign to legalize recreational marijuana.

Health Canada is placing no limits on the number of these new capital-intensive facilities, which will have mandatory vaults and security systems. Private-dwelling production will be banned. Imports from places such as the Netherlands will be allowed.

Already 156 firms have applied for lucrative producer and distributor status since June, with the first two receiving licences just last week.

The old system fostered only a cottage industry, with 4,200 growers licensed to produce for a maximum of two patients each. The Mounties have complained repeatedly these grow-ops were often a front for criminal organizations.

The next six months are a transition period, as Health Canada phases out the old system by March 31, while encouraging medical marijuana users to register under the replacement regime and to start buying from the new factory-farms.

There are currently 37,400 medical marijuana users recognized by the department, but officials project that number will swell more than 10-fold, to as many as 450,000 people, by 2024.

The profit potential is enormous. A gram of dried marijuana bud on the street sells for about $10 and Health Canada projects the legal stuff will average about $7.60 next year, as producers set prices without interference from government.

Chuck Rifici of Tweed Inc. has applied for a licence to produce medical weed in an abandoned Hershey chocolate factory in hard-scrabble Smiths Falls, Ont.

Rifici, who is also a senior adviser to Trudeau, was cited in a Conservative cabinet minister’s news release Friday that said the Liberals plan to “push pot,” with no reference to Health Canada’s own encouragement of marijuana entrepreneurs.

Rifici says he’s trying to help a struggling community by providing jobs while giving suffering patients a quality product.

“There’s a real need,” he said in an interview. “You see what this medicine does to them.”

Tweed Inc. proposes to produce at least 20 strains to start, and will reserve 10 per cent of production for compassionate, low-cost prescriptions for impoverished patients, he says.

Patients often use several grams a day to alleviate a wide range of symptoms, including cancer-related pain and nausea. They’ll no longer be allowed to grow it for themselves under the new rules.

Revenues for the burgeoning new industry are expected to hit $1.3 billion a year by 2024, according to federal projections. And operators would be favourably positioned were marijuana ever legalized for recreational use, as it has been in two American states.

Eric Nash of Island Harvest in Duncan, B.C., has applied for one of the new licences, banking on his experience as a licenced grower since 2002 in the current system.

“The opportunity in the industry is significant,” he said in an interview.

“We’ll see a lot of moving and shaking within the industry, with companies positioning. And I think we’ll see some mergers and acquisitions, strategic alliances formed.”

“It’ll definitely yield benefits to the consumers and certainly for the economy and society in general.”

Veterans Affairs Canada currently pays for medical marijuana for some patients, even though the product lacks official drug status. Some provinces are also being pressed to cover costs, as many users are too sick to work and rely on welfare.

Health Canada currently sells medical marijuana, produced on contract by Prairie Plant Systems, for $5 a gram, and acknowledges the new system will be more expensive for patients.

But Galarneau says competition will help keep prices in check.

“We expect that over time, prices will be driven down by the free market,” she said. “The lower price range will likely be around $3 a gram. ... It’s hard to predict.”

Saskatoon-based Prairie Plant Systems, and its subsidiary CanniMed Ltd., were granted the first two licences under the system and are already advertising their new products on the web.

Prospective patients, including those under the current system, must get a medical professional to prescribe medical marijuana using a government-approved form.

Health Canada only reluctantly established its medical marijuana program, driven by court decisions from 2001 forward that supported the rights of suffering patients, even as medical science has been slow to verify efficacy.

Organizations: Health Canada, RCMP, Tweed Veterans Affairs Canada Prairie Plant Systems CanniMed

Geographic location: OTTAWA, Netherlands, Smiths Falls Duncan Saskatoon

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Recent comments

  • adam pelikan
    May 22, 2014 - 08:40

    Really make me sick spit on this

  • coralee corrigall
    February 07, 2014 - 18:47

    Some of us disabled cannot work and are not on welfare. I receive C.P.P. disability. Something I paid into when I was working before my accident. I grow my own medical marijuana for $30.00 per month. The new system will cost me $800.00 per month. What person do you know disabled or otherwise can afford that kind of a jump in there monthly bills? Let the disabled grow!

  • buddy
    January 30, 2014 - 13:08

    I can't wait for Tweed to go public on the TSX. They will be the 2nd publicly traded marijuana company... The first being FITX, which is going to skyrocket in the next few days/weeks/months. They are projecting to grow 1.3million pounds of marijuana, earning $4 Billion in revenue every year, and the company has a Market Cap of $35 Million... Smell the money?

  • john mcmeekin
    October 02, 2013 - 15:03

    as a canadian citizen and licensed grower of my own medicine this is a step backwards and will only help the government and their rich cronies and asscociated millionares that can afford all the gestapo governments new bullshit ..stop trampling all of our rights as canadians. I and I only should make the decision of what goes into my body.and i feel much safer with my own supply than big brothers supply but our government knows whats best for canadians wake up people this is not just about medical marijauna but all of my and your rights

    September 30, 2013 - 12:43

    We should know by now that if something makes money the Government wants a monopoly on it. People who need it for medical reasons will now feel what it is like when a group can change the rules whenever it suits them. They are also discussing changes to the PSHCP to charge people more to claim less who cannot afford it.They are also discussing changing the Death Benefits of veterans to give them less. It appears that in Canada if you are retired and pay less taxes then you did for 40 or so years then you have lived too long for this Government.

  • Billy
    September 30, 2013 - 12:20

    Does this mean Trudeau will have it more difficult to get his dope.

  • Can't Understand Why
    September 30, 2013 - 11:28

    I can't understand why this Goverment would make it illegal for the 29,800 Canadians that are already growing it for them selves . This is wrong and is only making it possible for a few friends of goverment to get filthy rich off the poor & unhealthly that now use it by growing it themselves . They should not be forced to pay the higher prices . If it's legal to use , then it should be legal to grow it for yourself .