Companies & Industries

The feds' free-market pot plan could seed the field for a legalized industry

An unwitting step toward legalization



In their rhetoric around drug policy, the federal Conservatives have been consistently hawkish. They roundly mocked Liberal Leader Justin Trudeau’s call to end the prohibition on pot. But the government’s plan, announced in June, to open the production and distribution of medical marijuana to the free market may unwittingly end up seeding the field for a fully legalized industry.

As of April 2014, Health Canada will stop selling subsidized marijuana and allowing registered users to grow their own. Instead users will have to buy pot from licensed private producers that grow the crop in large indoor farms. Already 131 businesses have applied for licences, hoping to carve out a slice of an industry the ministry expects will grow to $1.3 billion by 2024.

“This is as close as you can get to creating a commercial industry yet still keep a substance controlled,” says Dr. Connie Carter, senior policy analyst at the Canadian Drug Policy Coalition. In Colorado and Washington, where referendums to legalize marijuana passed last year, existing medical growers and clinics have been the first to move into the recreational market. On top of their history of operating as legitimate businesses—which endears them to state regulators—they have brand recognition among users, notes Paul Grootendoorst, an expert in health economics at the University of Toronto.

As part of its reforms, Ottawa is also deregulating pricing. That will encourage businesses to differentiate their products. Prairie Plant Systems, the sole supplier of medical marijuana to Health Canada for over a decade, and its subsidiary CanniMed are the only two producers that have been granted licences under the new regime so far. They are already focused on developing their brands, says CEO Brent Zettl. “Consistency is probably the highest criticism of the people who are accessing medical marijuana right now,” he says. With production capacity to fulfil a government contract for 750 kilograms a year, his strategy is to standardize products so customers know what they are buying. Wanna-be pot sellers are focused on branding too. Former Olympic snowboarder Ross Rebagliati aims to develop a strain called Ross’s Gold to go with a chain of dispensaries.

Carter doubts the Tories intended to prepare the ground for wider liberalization this way. “I’m quite sure it’s the opposite,” she says. “I’ve spent some time thinking about whether or not the feds knew what they were doing when they created these regulations, because it really does spark a lot of business interest in marijuana more generally.”