Who Should Sell Cannabis?

A new model must meet the government’s objectives of keeping it out of kids’ hands, preventing organized crime from profiting while providing reasonable access to adult consumers

The past few weeks have seen an abundance of media coverage addressing possible models for the retail sale of cannabis, with varying parties jockeying for position.  We still don’t know what Canada’s recreational cannabis regime will look like...and there are several options.

What seems to be lost in the debate, however, is what will happen to the MMPR if/when a recreational stream is introduced. Even with regulated recreational use, I believe there is still a role for a medical cannabis regime.  Medical and recreational use should exist side-by-side, with identical production standards, licensed producers, purchase/delivery options and pricing (I’m going to ignore the issue of personal growing rights here because it’s not relevant to the issue of commercial sale).  The only differences should be that purchases made with a medical document would be exempt from GST/HST (waiting for the Federal Court of Appeal’s decision in Hedges v. HMQ on this point) and some portion of the cost would be covered by private drug plans (wishful thinking perhaps but I’m an optimist).

As a result, we should be searching for a retail model that will work equally well in both the medical and recreational use contexts.  

Step 1 should be to introduce a retail component to the MMPR.  It makes sense to test the waters with retail sales while serving the needs of a relatively small group of users.  This can then be expanded to include recreational purchases down the road.  If retail purchases for recreational use are permitted while the MMPR is stuck with mail-only delivery, we will see patients who use cannabis for medical purposes buying on a recreational basis (and not being followed by a physician).  

What are the options being discussed for the retail sale of cannabis?:

  1. Independent Dispensaries - Cannabis dispensaries continue to pop up across the country.  Sure, Vancouver’s position on dispensaries and the Supreme Court of Canada’s decision in R. v. Smith probably have something to do with this, but it’s also driven by our new Prime Minister’s promises to legalize and regulate cannabis.  The risk (or at least the perceived risk) of operating a dispensary has never been lower, and many would-be dispensary owners are looking for a way to ensure their future participation in the (legal) retail sale of cannabis.  This may be misguided thinking, as I have a hard time picturing dispensary licences being handed out to those that have been operating illegally (civil disobedience, I get it, but I just don’t think it’s realistic).  Store-fronts dedicated to just the sale of cannabis make sense to me, but I don’t think the independent ownership model is ideal (as I will discuss below).  
  2. Liquor Stores - Provincial politicians and unions representing liquor store workers are promoting provincially regulated liquor stores as the cannabis distribution model of choice.  This has been met with both enthusiasm (why not tap into an already existing infrastructure for the sale of a controlled substance?) and criticism (alcohol and cannabis are not the same, and having a combined point of sale for these substances is a bad idea).  There are also many who oppose the idea of a state monopoly on retail sale.  And there are many people out there who are well-qualified to sell cannabis in a safe and educated manner who probably don’t want to work at the LCBO or SAQ.  The debate will continue, I’m sure.
  3. Pharmacies - Sales in conventional pharmacies is yet another option, although I have yet to hear any national pharmacy chain confirm their interest.  This might be a viable option for medical cannabis, but not recreational.

Let me present you with another option: what I will call the ‘LP consortium model’.  For those of you who follow me on Twitter, you will know that this is an idea I have been floating for some time.  In its simplest terms, I am proposing that the retail sale of cannabis (both medical and recreational) be restricted to store-fronts owned and operated by a consortium of licensed producers (think Brewers Retail Inc. aka Beer Store in Ontario).  Most licensed producers do not have the resources to set up an infrastructure of retail locations nation-wide...nor do I think it is in the public interest to have single-LP locations on every street corner.  One-stop shopping where you can buy product from any licensed producer is a better option.

Some of the benefits of this model:

  1. Consistency – As opposed to independent dispensaries, dispensaries operated by an LP consortium would have a consistent look, feel and service offering across the board.  MMPR patients (and later, recreational use clients) would know what to expect when they walk through the doors of any location.  
  2. Focus - And as opposed to the liquor store model, store-fronts dedicated to the sale of cannabis would be able to address the particular needs of cannabis users (for example, an on-site pharmacist to address drug interaction issues).
  3. Producer-neutral treatment – Just as the Beer Store ensures ‘brewer-neutral’ treatment (i.e. employees may not encourage the purchase of any one beer over another), a consortium dispensary could ensure the same.  With the independent dispensary model, large LP’s with significant capital resources would undoubtedly buy preferential shelf space and treatment.  I would like to see a system put in place which encourages a vibrant and diverse range of LP’s.  If the MMPR licensing process wasn’t so flawed, I might not feel so strongly about this.  But I have many clients who have been stuck in the MMPR licensing process for so long (I can even say “years” now), I can’t endorse a model that further perpetuates the first-mover advantages that only a select few LP’s were granted.
  4. Tracking – This is a benefit specifically in the context of medical use.  A private, independent dispensary model would make it very difficult, if not impossible, to track the aggregate quantity of cannabis purchased by patients.  Trying to restrict retail purchases to registered patients on an LP by LP basis would be unduly cumbersome.  A centralized registration list would have to be maintained.  This works well with the LP consortium model, which would permit the tracking of medical cannabis purchases (to ensure that medical document limits are not exceeded, to contribute to the growing body of research, etc.).  The current registration regime (and, more specifically, the process for switching LP’s) has been an ongoing source of frustration for patients in any case.  A centralized registration system would enable MMPR patients to purchase from the LP of their choosing on any particular day.  This would, inevitably, contribute to the commoditization of cannabis, but that’s not a bad thing.  Price and product quality will become the primary drivers for customer loyalty.
  5. Administrative Ease – I’m pretty confident in saying that we are not going to see a regime where just anyone can open a cannabis dispensary.  At a minimum, there would be a licensing process involving security checks, as well as ongoing inspections and oversight.  This burden on government (and ultimately on tax-payers) would be greatly relieved with the LP consortium model, where government oversight (on the retail side) would essentially be of one entity.  

Constitutional law is not my thing so I don’t know, frankly, whether what I am proposing could be implemented solely on a federal level, or whether the provinces would have to be involved.  Although the sale of alcohol is regulated provincially, the production and sale of cannabis is (to this point) exclusively federal.  I suppose thought must also be given as to whether this model attracts any Competition Act issues.  I’m sure there are other complexities and challenges that I have not addressed in this overview, but that will be the case with any model being considered.  

And of course I realize that this model will not be appealing to those wanting to participate in the retail sale of cannabis without actually being a licensed producer.  But remember that the industry, including the scope of permissible MMPR activities, is evolving.  We are going to see non-growing LP’s that buy wholesale and sell only white-labelled product, and we will see those that only do extraction.  I predict the same will be true for recreational cannabis (it would not make sense to run two parallel regulatory systems...I predict that the MMPR will ultimately morph into one overarching cannabis regime).

There is no one model that will appeal to everyone, but I believe that what I am proposing will do the best job at meeting the government’s objectives of keeping cannabis out of kids’ hands and preventing organized crime from profiting from the sale of cannabis, while providing reasonable access to those who choose to use cannabis for medical or recreational purposes.  

FOR INFORMATIONAL PURPOSES ONLY.  THIS DOES NOT CONSTITUTE LEGAL ADVICE.

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4 comments

  1. Maxcatski Reply

    Trina has obviously spent a lot of time thinking about the current MMPR system and extending her thoughts to legalization. I believe we need to find a new model to better serve both medical and recreational customers. The most basic premise is that prices need to come down (a lot!) to eliminate the black market. I don't think one method of selling cannabis will work for all. I want the option to deal with a knowledgeable seller (a good budtender, for example) as well as other, low cost options. An on site pharmacist seems ridiculous; drug interaction with cannabis is not an issue. Tracking medical purchases is also a waste of time and money. Keep receipts, claim your deductions and be done with it. We need to move past the MMPR model. Don't make it onerous or we will keep practicing that good old civil disobedience that we all know so well. We need to free the market to keep prices low and banish organized crime. Peace

  2. Trevor Reply

    I've yet to hear a positive response towards the liquor store model, which is understandable. The benefits of going to a dispensary is the opportunity to speak face to face with a [hopefully] qualified and knowledgeable budtender who knows the products. Most liquor store employees aren't the ones to ask which beer/wine pairs with what - they would read a label just like we would.

    I'd like to see regulated, yet personal dispensaries have an opportunity to rise. Much like craft breweries are operating today, we could see cannabis dispensaries run parallel to the craft beer market across the country. Knowledgable growers producing an array of products at a quantity designed to fulfil local market needs and demands. People will still flock to craft breweries, even with large, national and international labels available at a competitive price.

  3. Drake Reply

    Everyone and any adult who wants to. You can buy your tomatoes from Lablaws or from you're local produce stand. Let the market decide.

    1. Major Reply

      The market has already decided, and craft cannabis is the clear winner.