While the coronavirus pandemic has shaken many industries to their core, the European medical cannabis industry continues to flourish. A number of recent developments in Germany show that the demand for medicinal cannabis is growing. But the German medical cannabis industry is also facing a number of challenges, including an unmet patient demand and a lack of regulatory guidelines for producers.
I have caught up with Peter Homberg, Partner and Head of the German Life Sciences Practice and the European Cannabis Group at Dentons, to discuss the latest news from the German medical cannabis sector and talk about recent developments regarding the pricing, cultivation, and import of medicinal cannabis in Germany.
Peter, what is the latest news from the German medical cannabis industry?
In recent weeks, we have seen a few interesting occurrences in the German medical cannabis sector. First, there is a new pricing model for the reimbursement of state health insurance companies for medicinal cannabis products. Together with the German Association of Pharmacies, they agreed on a model to reduce the costs for insurance companies in March 2020.
Also, medical cannabis is still a growing market. The independent body established by the 1961 UN Single Convention on Narcotic Drugs, the International Narcotics Control Board (INCB), estimates that the demand for medicinal cannabis in Germany in 2020 will be about 16 tonnes. This is significantly higher than what was imported in 2019. The BfArM revealed that the import in 2019 more than doubled from 2018. In 2018, we imported up to three tonnes of medicinal cannabis flowers, in 2019, it was 6.7 tonnes.
Furthermore, as the demand in Germany increases, we will see more EU and non-EU countries besides Canada and the Netherlands exporting medical cannabis to Germany. As of today, the BfArM has also approved Portugal, Spain, and Denmark for the exportation of medicinal cannabis under the 1961 UN Single Convention. But we will definitely see more countries approved as exporters this year. I expect Malta, Greece, and Israel.
Also, a new association is being incorporated called the European Cannabis Association, ECA. The ECA will be based in Brussels and one of its main tasks will be lobbying for the cannabis industry in European politics.
Can you explain the developments regarding the pricing and reimbursement of medical cannabis products in Germany in more detail?
Looking at the numbers, we can see that the number of medical cannabis prescriptions that state health insurance companies have been reimbursed for has increased since 2018. In 2018, we had around 185,000 medicinal cannabis prescriptions and in 2019, we had 267,000 prescriptions. Consequently, the reimbursement in 2019 was significantly higher than in 2018. While it was around €74M in 2018, the reimbursement was €123M in 2019.
Until now, pharmacies were allowed to add a 100% surcharge on the sale of unaltered forms of cannabis flowers because they are defined as an extemporaneous mixture, which means that the pharmacy has to prepare the product according to the prescription. If, for example, the sales price for medicinal cannabis flowers to pharmacies was €10 per gram, the pharmacies were allowed to charge the patient €20 instead, and get reimbursed for €20 by the statutory health insurance companies.
Consequently, the pharmacies didn’t have much of an interest in reducing the price for medical cannabis, because the higher the price, the higher their surcharge. This has been stopped. In March 2020, an annex was added to the auxiliary tax treaty between pharmacies and state health insurance companies. It includes that the basic price for unprocessed forms of medicinal cannabis flowers is uniformly fixed at €9.52. In addition, there are fixed surcharges depending on the prescribed quantity. The surcharges on the €9.52 reimbursement are gradually reduced.
The fixed surcharges are €9.52 per gram for a prescription up to and including 15g. For a prescription above 15g and up to and including 30g, the pharmacy surcharge is then only €3.70 per gram. If the prescription exceeds 30g, the surcharge is only €2.60 per additional gram. This significantly reduces the reimbursement for the pharmacies.
A similar agreement was reached for the calculation of prices for cannabis extracts and dronabinol, a specific form of THC.
The German Federal Institute for Drugs and Medical Devices (BfArM) has now set the price for medical cannabis cultivated in Germany at €2.30. This means that the cannabis producers sell at a per gram price of €2.30 to the Cannabis Agency. That’s a very low price and even if you start adding costs for logistics, etc. it might be that the set €9.52 reimbursement price will not be met.
In other words, it could be that medicinal cannabis grown in Germany is hitting the market at a significantly lower price than the current reimbursement.
How can the increasing demand for cannabis in Germany be met?
There are actually significant developments on that front. Just recently, an export of medical cannabis from Canada to Germany was denied. This might be due to the fact that the quota of medicinal cannabis demand in Germany as estimated by the INCB has been reached.
In other words, the BfArM has presumably granted too many import licenses for medical cannabis imports, with the result that the upper limit of cannabis demand in Germany has been reached.
However, just because these permits were issued does not mean that the quantities were actually imported. Permits are always issued on the basis of maximum quantities that the company concerned does not have to use. In addition, permits for extracts require a much larger quantity than for flowers, as they are calculated using a multiplier.
The BfArM can fix this by amending the respective quota. Otherwise, this situation will endanger the medicinal cannabis supply of patients in Germany.
What are the recent developments in domestic cannabis cultivation in Germany?
The cultivation of medical cannabis in Germany is delayed. Although everyone thought Germany-cultivated cannabis would reach the market sooner, several reasons are impacting the delay, and Covid-19 is one of them. The three licensed growers, Aurora, Aphria, and Demecan will hopefully be in the position to put the first Germany-grown cannabis on the market by the end of 2020.
Interestingly, the Cannabis Agency of the BfArM will be the seller of domestically cultivated cannabis flowers. They are now looking for a logistics company that can distribute cannabis grown in Germany to the pharmacies in the name of the Cannabis Agency. The decision for the European-wide tender hasn’t been reached yet, but we will soon find out who will be distributing Germany-grown cannabis throughout the country.
What challenges are cannabis importers facing in Germany?
The main problem is that there are no distinct guidelines for companies to follow. The medical cannabis industry in Germany is fairly new and the products are new, so there are very few regulatory guidelines for cannabis producers to follow.
The definition of medicinal cannabis products as extemporaneous mixtures has resulted in quite a few challenges, such as the pricing issues we just discussed. But it was done because the German government wanted to get the products onto the market quickly without further marketing authorization obligations.
So while the lack of certain regulations in 2017 and 2018 made things a lot easier for cannabis distributors in Germany, in 2019, increasing regulations made medical cannabis distribution more difficult, and in 2020, there is even more regulation.
One consequence due to the lack of regulations is a discussion on how the packaging of cannabis flowers should look like. Recently, a number of our clients received cease and desist letters from various German consumer protection associations, who told them that their packaging is not a package for an extemporaneous mixture, but that it gives the impression of a finished product. This is a common issue within the industry.
One of our clients, for example, sells their medical cannabis flowers in 10g containers with a child protection cap, similar to a pillbox. Unfortunately, they put on the label “keep out of reach of children; available only as prescription; and product may only be sold in pharmacies.” The regional court ruled that these criteria qualify the cannabis product as a finished medicinal product, although we argued that a finished medicinal product would at least require more indications.
Would you like to learn more about recent developments regarding medical cannabis in Europe and Germany? Get in touch with Peter and his expert team at Dentons!
Or read our past interviews with Peter and follow the development of medical cannabis regulations in Germany and the EU since 2017: