Monday, November 24, 2008
Budding wealth in the weed
Budding wealth in the weed
With the courts striking down the federal government's monopoly on supplying medical marijuana, private growers are bullish on pot's commercial potential
Eric Nash can barely contain his excitement waiting to hear from Health Canada whether he can start growing marijuana for 250 patients now that the Federal Court of Appeal has struck down the government's monopoly on supplying medical marijuana.
That would be just the start. He says there are tens of thousands more who are ailing across the country, clamouring for his organic B.C. bud.
"There is a great opportunity here for the government to collect significant tax revenue currently being lost to the street market," enthused Nash, whose company, Island Harvest, has cleared the industrial security regulatory hurdles and meets the standards set by Ottawa to grow cannabis legally.
"Our vision is to have a sustainable commercial agriculture operation," he said. "There's no reason we can't achieve that. Look at the number of compassion clubs, look at the number of people using marijuana to relieve a headache or premenstrual cramps!"
On Oct. 27, the federal government lost its appeal of a 2007 Federal Court ruling that the government's policy allowing licensed producers to only grow marijuana for one sick person was unconstitutional. That decision was stayed pending the appeal.
The appeal court agreed with the trial judge -- the medical marijuana scheme was constitutionally deficient -- and refused to suspend the impact of their ruling to give the government time to amend the regulations.
Health Canada spokesman Phillipe Laroche said the department was still studying the ruling and had not decided on its response.
More and more research is supporting previous anecdotal evidence that cannabis may have a wide range of therapeutic uses, from the treatment of Alzheimer's, depression, glaucoma, epilepsy and cancer to HIV/AIDS, hepatitis and ADD/ADHD. Its most ardent promoters say cannabis may be an addition to the modern pharmacopoeia that rivals Aspirin in the breadth of its applications.
Until now, the government's program has artificially depressed the medical market by making it difficult for patients to qualify, supplying what many consider poor-quality marijuana and restricting qualified licensed growers to supplying only one patient.
Doctors have been reluctant to prescribe marijuana, claiming they have no guide on dosage or the usual pharmaceutical medical studies to rely on.
Nash said three serious analyses of the medical marijuana market in the last eight years give an idea of its scope and potential.
While Health Canada has issued roughly 2,500 exemption permits over eight years, the Canadian Medical Association Journal in 2000 estimated the number of self-medicating marijuana patients to be 1.9 per cent of the population. A Price Waterhouse report prepared for Health Canada two years later concluded it was more like four per cent of the population, and a report in 2004 by a member of the federal government's advisory committee on marijuana suggested the reality was closer to seven per cent.
The four-per-cent model would put sales at more than $400 million annually, Nash said.
More optimistic projections say the medical market, including ancillary products such as vaporizers and paraphernalia, could be as high as $20 billion.
Currently, Ottawa sells maybe $1 million a year worth of the pot produced in a Manitoba mine, and compassion clubs across the country sell about $10 million worth of cannabis products.
By far the vast majority of patients who need marijuana as a medicine continue to buy their drugs from the black market -- that's one of the fundamental reasons behind the Oct. 27 court ruling.
The government adopted the Medical Marijuana Access Regulations (MMAR) and accompanying bureaucracy in 2001. It has modified it since then in the face of judicial warnings that it was constitutionally inadequate.
The federal court decision promises an economic boon immediately for the hundreds of legal cannabis producers and increased opportunity for many others.
Nash said it was good news for both the consumer and producer.
Restricting growers of medical marijuana results in a huge gift of revenue to organized crime.
Stephen Easton, an economist at Simon Fraser University and with the Fraser Institute, has done the most respected work on the size of the domestic pot industry.
In the 1990s and even throughout the early part of this decade, he said, tons and tons of Canadian marijuana flooded into the U.S. market. People were backpacking across the border with as much weed as they could carry, or kayaking across with a stash of bud worth as much as emeralds.
Between 1990 and 2000, the Canadian pot market doubled in size, fuelled primarily by increased hydroponic production.
Nationally, Canadians apparently spent $1.8 billion toking up -- just shy of the $2.3 billion we burned on tobacco.
By 2006, when he did his calculations, Easton said the numbers indicated a provincial wholesale market of $2.2 billion. You could increase that to $7.7 billion retail if consumers paid top dollar for their bud.
That dwarfed any other B.C. agricultural product.
The result on the street was easy to see: a proliferation of gangs duly documented by the RCMP, as every crook plucked what Easton called "the low-hanging fruit."
With the tightening of the border post-9/11, smuggling now is more the purview of the very organized and the very desperate.
U.S. authorities have charted the rise of their own domestic production as American states relaxed enforcement and sentencing -- pot production in California rivals Canada's total output.
And with the north-south route to market becoming problematic, more B.C. bud has moved east either to be sold or to find a less monitored area of the border before turning south.
By far the biggest factor in the marijuana market in recent years, however, has been the revolution in production -- the ease, predictability and, most importantly, the portability that has come with advances in indoor cultivation.
B.C. bud ruled in the 1990s when the underground marijuana trade was responsible for keeping afloat many small communities buffeted by resource-market gales, but these days be you in Barrie, Ont., or Joe Batt's Arm, N.L., you can easily obtain good seeds and fail-safe equipment and within a few months be producing marijuana to rival B.C.'s best.
Some estimates in the 1990s suggested as much as 50 cents of every dollar generated in some Kootenay towns could be traced directly to pot.
Former Drug Enforcement Administration agent Celerino Castillo III spent 12 years in the USDA infiltrating Manhattan drug rings, destroying jungle cocaine labs and training anti-narcotics agents. The climax of his career was pulling the curtain back on drug-smuggling by the Nicaraguan Contras with links to Lt.-Col. Oliver North and the CIA.
Mexico is again considering legalization because of the violence and social upheaval caused by illicit drug trafficking, and Canada should be headed down the same path, he says. So should South America and the U.S.
"The corruption is everywhere -- every month we arrest a law enforcement official, every month," he insisted, "whether it's a border patrol agent or a customs agent or a DEA agent or an FBI agent. We arrest a law enforcement officer once a month. It's huge. The amount of money is just so big. 'I have a mortgage to pay, I have to send my kids to college.' That's always the excuse."
He shakes his head.
He explained that in his state, drug couriers once arrived with suitcases of cash to deposit in local banks: "Now they buy the banks. Especially now with this upheaval. Who else has the ready cash?"
"But that's actually how they're money-laundering today -- they buy a bank," Castillo added. "There's no way we can keep up."
In retirement, Castillo has become a featured speaker for Law Enforcement Against Prohibition, an association of former police, corrections and judicial officers who want to change drug policy.
"There's more production, more product and more of everything than there ever was. The war on drugs doesn't work," he said.
Dana Larsen, the former NDP candidate, who stepped down during the federal election when his recreational drug use was publicized, is promoting a new Vancouver compassion club.
Larsen, who used to be the leader of the B.C. Marijuana Party, thinks the time has come to move into the medical field.
"I think there's enough of a market in town to support another dispensary," Larsen said.
His menu of cannabis products included six strains of dried marijuana, four kinds of hash, two pot products in capsules and double-strength bonbons -- cannabis-infused organic chocolates.
In Oakland, Calif., the private dispensaries that support the state's medical marijuana program are said to be generating revenues in excess of $70 million a year.
Michelle Rainey is one of roughly 2,500 Canadians with a licence to possess and use marijuana. Rainey has Crohn's disease and finds her homegrown pot an effective replacement for the expensive pharmaceutical drugs she'd been prescribed.
She believes the country's health-care system could save a fortune if there was a working medical marijuana program. The roughly 110,000 Canadians suffering from Crohn's disease and the 90,000 living with ulcerative colitis, for example, are estimated to spend $162 million a year for prescription drugs.
Many of those people are already benefiting from marijuana, Rainey said, but many, many more could be.
Consider, too, that many battling cancer and HIV/AIDS find edible cannabis products work to stimulate the appetite, but they've got to buy them on the street.
"We have a huge problem with physicians being apprehensive about signing for patients even though the proof is there," Rainey said.
"Our seniors, for instance, are spending their pensions on big pharma only to end up with more aches and pains, when all they may need is a puff or a brownie!"
In its decision, the Federal Court of Appeal did more than simply hand Ottawa a legal loss. It said the government had been knowingly dragging its heels since at least 2003.
As a result, lawyer Kirk Tousaw told B.C. Supreme Court that this decision renders the criminal law invalid based on that history of jurisprudence, which ties enforceability of the criminal law to the existence of a constitutionally adequate medical access scheme.
He said the judgments in Ontario courts and now the federal court mean the state of the law is unclear and therefore criminal sanctions cannot be imposed.
In this latest case -- called Sfetkopoulos et al v. Attorney General of Canada -- some 27 patients with exemptions to possess marijuana for medicinal use applied to Health Canada for authorization to designate Carasel Harvest Supply Corporation as their marijuana producer.
Health Canada refused, saying that violated the regulations that restricted growers to supplying only one patient at a time.
But the Federal Court Trial Division agreed with the patients and declared part of the MMAR unconstitutional because it threatened their liberty and security of the person by preventing them from choosing their marijuana producer.
The judge accepted that sick people should have access to marijuana for the treatment of serious medical conditions and they should not be forced to risk imprisonment to buy their medication on the black market.
He interpreted the constitutional guarantee of security of person rights to include access to medication without undue state interference.
Ottawa appealed and the Oct. 27 ruling was the result.
The question is how Ottawa will respond to the appeal court's decision.
Since the impugned marijuana access scheme is a product of regulation rather than statute, the government can quickly promulgate new rules.
"They could make cosmetic regulatory changes," Nash acknowledged, "which would force another court challenge.
"But I think the judges are pretty fed up with them doing that."