Europe’s role in the international cannabis market has so far been relatively minor compared to booming industries in the US and Canada. Whilst the continent has been historically strong in the pharmaceutical sector, it has been comparatively slow to develop domestic medical cannabis markets.
Having said this, there is enormous market potential in Europe, which has a population of over 700 million people and a GDP worth €2.3 trillion. In addition, there has been a gradual movement in recent years towards legalising medical cannabis, increasing access for patients.
With this, a plurality of models has emerged across the continent. Some, like Germany, have taken a more liberal view to regulation whilst others, like the UK, remain so strict almost no prescriptions have been given to patients. Those in the industry have recognised Europe’s potential and are poised for the expected boom.
Rebecca Brown, founder of Crowns Consultancy, said: “You currently have all the industry players angling to find a way into the market, while at the same time individual European countries are feeling their way through what their regulatory framework might look like, while at the same time you have the cultural aspect of people making that shift. I think there’s no question that we will see many if not all European countries adopt a legal medical framework of some sort.”
Dylan Kennett, a Canadian lawyer in DLA Piper’s corporate team, said: “I think there is a genuine opportunity for Europe to be market leaders in this space. It’s amazing to see Canada as the market leader at the moment; but in terms of market opportunity, Canada is a country of 36 million or so, but in Europe, the numbers are absolutely massive.”
HOW LONG BEFORE THE EUROPEAN INDUSTRY IS DEVELOPED?
The European medical cannabis industry is starting almost from scratch and it will take some time for this opportunity to be realised. Patients, doctors, lawmakers, regulators and entrepreneurs often have different ideas of how the market should operate. What’s more, infrastructure and processes including distribution, manufacturing and testing all need to be set up.
Mr Kennett said: “Not everybody is rushing into this too quickly, they’re taking a very mature approach to it. There’s a myriad of things that haven’t necessarily been set up or they’ve been set up in different industries and have to be repurposed for this one. So I think we’re looking at quite a bit of time before a full industry is developed.”
REGULATION IN THE EU
From a regulatory point of view, the European Parliament recently voted a resolution calling on the European Commission to define medical cannabis. This is seen by many as one step towards a unified European regulatory framework for medical cannabis.
Harmonising legislation Europe-wide would help facilitate the market itself, as it would mean frictionless trade between EU countries. During the process of harmonisation, the EU will be able to evaluate the existing models within Europe and their effectiveness to inform what should be the singular, standard model to use going forward.
According to Kennett: “You will see a lot of companies have various aspects of the supply chain based in different parts of Europe, based on the cost, the expertise etc – so you might get more of your growing operations in the Iberian Peninsula, you might have your research and development in the UK. You’ll have what each country is generally quite good at. I think that’s one of the main benefits of some kind of harmonisation of legislation and that’s been one of the unique selling points of Europe across many industries, so I don’t think that’s a bad thing.”
That said, Ms Brown pointed out there can be some advantages to a “patchwork approach”. She said: “Having different frameworks in some situations gives some advantage to domestic companies who are on the ground, closer to the things that are driving the adoption of specific kinds of policy. But if there is harmonisation it will be much easier for big companies to navigate in and we’ll see there will be much less friction towards the globalisation of the cannabis industry.”
However, despite the first steps by the European Parliament, the regulation of cannabis on an EU-level seems to remain a low priority on the agenda of the European Commission. Within national jurisdictions, new voices for reform have managed to bring the issue to the forefront, but governments remain slow to implement policies, cautiously advancing step by step.
WILL THE COST OF MEDICAL CANNABIS DROP FOR EUROPEAN PATIENTS?
European cannabis prices have been initially very high for patients, due to both lack of experience and skill, and regulations meaning there are limited places the plant can be sourced from.
Ms Brown said: “Typically what we see is as countries achieve or acquire skill in growing there is an initial phase during which the cost of cultivation per gram is very high and that cost is passed down, unfortunately, to the user. But over time we see cultivation tends to commodify and move to a surplus instead of a scarcity and subsequently, the product drops in price.”
However, there are also issues around where the cultivation takes place and where countries can import from. Due to strict regulations, it’s unclear when low-cost jurisdictions may be able to enter the European market.
Mr Kennett said: “You are getting very interesting players from elsewhere: Israel has just been given the green light to export, then you will have a lot of the African nations, which are low-cost jurisdictions, looking at export as well. But given it’s medical-grade pharmaceutical [cannabis], there are a lot of standards that need to be adhered to in the EU, so at the moment there’s probably a competitive advantage to keeping it in Europe and having those facilities that can produce that medical-grade cannabis. I don’t think anyone else will be entering the European market immediately, but over time these things will flatten out.”
Dylan Kennett and Rebecca Brown will both be speaking at Cannabis Europa London 2019. The conference will explore how the plurality of regulation models in Europe can be an asset for EU regulators as they compare how systems work for patients and consider harmonised laws regulating medical cannabis within the EU and the rest of Europe.