Vol. 143, No. 11 — May 27, 2009

Registration

SOR/2009-142 May 14, 2009

CONTROLLED DRUGS AND SUBSTANCES ACT

Regulations Amending the Marihuana Medical Access Regulations

P.C. 2009-746 May 14, 2009

Her Excellency the Governor General in Council, on the recommendation of the Minister of Health, pursuant to subsection 55(1) of the Controlled Drugs and Substances Act (see footnote a), hereby makes the annexed Regulations Amending the Marihuana Medical Access Regulations.

REGULATIONS AMENDING THE MARIHUANA
MEDICAL ACCESS REGULATIONS

AMENDMENT

1. Paragraph 41(b.1) of the Marihuana Medical Access Regulations (see footnote 1) is replaced by the following:

(b) if the designated person would become the holder of more than two licences to produce; or

COMING INTO FORCE

2. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive Summary

Issue

Marihuana is included in Schedule II to the CDSA, and as such is a controlled substance in Canada. The CDSA prohibits the possession, possession for the purposes of trafficking, production, importation, exportation, trafficking, and possession for the purposes of exporting marihuana except as authorized by regulation.

The Marihuana for Medical Access Program (the Program) was first established in 1999, and the authorization to possess marihuana and/or cultivate a limited number of plants for medical purposes was achieved via the issuance of exemptions under s.56 of the CDSA. In July 2000, however, the Ontario Court of Appeal ruled (R. v. Parker) that the prohibition on the possession of marihuana in the CDSA was unconstitutional because of the discretionary way, i.e. via a s.56 exemption, in which individuals were being authorized to obtain marihuana for medical purposes.

In response to the decision, the Government established the MMAR, which set out a scheme by which any seriously ill Canadian can, with the support of a medical practitioner, obtain an authorization to possess marihuana for their own personal medical use.

Under the current MMAR, authorized persons have three options in terms of procuring a supply of dried marihuana:

• they can produce their own supply under a Personal Use Production Licence (PUPL);
• they can designate an individual to produce it on their behalf under a Designated Person Production Licence (DPPL); or
• they can purchase dried marihuana from the Government of Canada, who contracts a private company to produce marihuana for the Program.

While the Program was originally intended to authorize access for a small number of persons, and was never intended to cover the widespread production of marihuana in individual personal residences, it has continued to grow in size since its inception. At present, there are approximately 4 000 persons authorized to possess marihuana under the Program, and this number is expected to grow to at least 6 000 by 2011.

Of those approximately 4 000 authorized persons:

• 60% hold a PUPL;
• 10% access supply produced by a designated person on their behalf;
• 20% purchase dried marihuana from the Government supply; and
• 10% obtain dried marihuana from an unknown source.

It is also important to note that due to amendments to the MMAR in 2005 that sought to introduce a greater sharing of the responsibility between persons seeking to possess marihuana for medical purposes and their medical professional in determining an appropriate daily amount (dosage), an increasing proportion of Program participants are being authorized to possess higher and higher daily amounts of marihuana. Higher daily amounts translate into larger crops for those authorized persons who also hold PUPLs and/or for designated persons cultivating marihuana under DPPLs. For example, approximately 20% of all PUPL-holders and 28% of all designated persons are licensed to produce 25 plants or more, while 1% of all DPPL- and PUPL-holders are licensed to produce at least 100 plants, a quantity that is similar to what is routinely seen by law enforcement agencies investigating illicit “grow ops.”

The invalidation of subsection 41(b.1), therefore, has the direct result of impeding the Government of Canada’s ability to limit the number of authorized persons for whom a single designated person can produce marihuana, thus enabling a situation in which individuals can be licensed to produce large numbers of marihuana plants in “legal” production operations in the absence of the tight controls applied to the production and handling of other controlled substances regulated under the CDSA.

More specifically, this could result in large quantities of marihuana being produced in unsuitable locations or environments, thus potentially

• increasing the risk that marihuana produced for medical purposes will be diverted to illicit markets; and,
• compromising the health of licensed persons, other inhabitants of the same or neighbouring dwellings and/or surrounding community members as a result of mould, infrastructure damage and fire hazards associated with the cultivation of a significant number of plants in a single location.

Health Canada has therefore elected to bring forward amendments to the MMAR that restore a level of control on the amount of marihuana for medical purposes production in Canada. In the absence of such amendments, the Federal Court of Appeal decision may result in the proliferation of large scale marihuana production operations within the context of a program that was never intended to allow more than the production of small amounts of marihuana for personal medical use.

Objectives

The primary objective of these amendments is to address the regulatory void caused by the Federal Court of Appeal decision in Sfetkopoulos. Health Canada has elected to examine amendments to the MMAR that restore some level of control on the size of marihuana for medical purposes production operations designated persons are allowed to establish. Marihuana is a controlled substance in Canada and there is concern that in the absence of subsection 41(b.1) of the MMAR, the Program that is intended to help Canadians who are seriously ill and/or suffering from debilitating medical conditions will now facilitate the production of larger quantities of marihuana that can be diverted to the illicit market.

Description

The amendments will introduce a new limit on the number of licences to produce a designated person can hold, and thus the number of authorized persons they can supply. By instituting a new limit of no more than two (2) on the number of licences to produce a designated person can hold, the Government is still respecting the original intent of the Program, i.e., allowing Canadians with debilitating medical conditions to access a legal source of dried marihuana for their own personal use. It also restores some level of control over the level of marihuana for medical purposes production in Canada. The amendments also provide authorized persons with an additional supply through the option of selecting a designated person who already holds one licence to produce.

Regulatory and non-regulatory options considered

The dismissal by the SCC of the Government’s application for leave to appeal the Federal Court of Appeal decision invalidating subsection 41(b.1) of the MMAR has signaled the need to revisit the overall Program as well as the Regulations that underpin it. To be specific, the regulatory regime, which was originally designed to meet the need of a small number of persons producing only small quantities of marihuana under personal production licences, was never intended to regulate larger production operations which may result from the lifting of the restriction on the number of marihuana for medical purposes licences to produce a single designated person can hold.

Three options were considered in addressing the issue.

The first option involves taking no action in response to the invalidation of subsection 41(b.1) of the MMAR. However, such a response would not mitigate the potential risk of diversion, or the potential health, safety and security risks that may result from the unsafe levels of production of marihuana for medical purposes in an under-regulated environment.

The second option would make an incremental change to the MMAR in order to allow designated persons to supply more than one authorized person but not more than two authorized persons.

Because this option only requires a relatively simple regulatory change, the advantages of pursuing it are that it allows for a timely response to the court decision. It also re-introduces some level of control on the amount of marihuana produced for medical purposes while minimizing the impact on authorized persons. It also recognizes that doubling the designated person to authorized person ratio may simplify growing for co-located authorized persons who are also PUPL holders, e.g. spouses living in the same household, and may result in reduced production costs for some designated persons.

The disadvantages of this option are that it may result in Health Canada receiving and having to process an increased number of applications from current authorized persons looking to modify their supply arrangements, and may also result in Health Canada having to generate an increased number of licences to produce to designated persons. It may also increase the number of new applications from prospective authorized persons as some people may associate the change with an opportunity to join the Program.

The third option examined in response to this issue would involve the establishment of a new licensing regime for entities interested in being involved in larger scale marihuana production, including for example, comprehensive requirements such as labelling, security, record-keeping, etc., similar to those in place for the production and handling of other controlled substances.

While this option offers the most thorough response to the court decision, the policy development work and stakeholder consultation required to establish a suitable framework would be extensive. Thus, this option would not provide a timely response to the SCC’s dismissal of the Government’s application for a leave to appeal the decision in Sfetkopoulos.

Given the time sensitivity and the minimal impacts of the second option, Health Canada has selected it as an interim measure while a broad review of the Program and the MMAR is undertaken.

Benefits and costs

The cost-benefit analysis pertaining to this proposal has been conducted with the assumption that failing to control the level of marihuana for medical purposes production will lead to increased risk to public health, safety and security. Quantification and/or monetization of these impacts is, however, limited by the availability of quantitative data.

Benefits

In general, social benefits are not limited to reductions in expenses or increased earnings but also include non-monetary gains to society such as avoiding the pain and suffering of illness. In this regard, they can be assessed and measured in terms of avoided social losses.

The two main groups within the Canadian public who will benefit from the amendments are authorized persons and other Canadians.

Because the amendments will enable designated persons to hold more than one licence to produce, some authorized persons may benefit by having more choice as to who to nominate as their designated person. Canadians may benefit from tighter controls on the production of marihuana for medical purposes because of a potential reduction in the risk of marihuana for medical purposes being diverted to the illicit market, and property damage and/or fire hazards associated with the production of a significant number of marihuana plants in one location.

Costs

The ability to supply up to two authorized persons may result in a small “economy of scale” for some designated persons and this may, if anything, decrease the overall production price for marihuana and therefore the cost to authorized persons. In this regard, there is not expected to be any changes to the costs facing authorizing persons.

The incremental costs to Government associated with the proposed amendments are those related to minor administrative system adjustments that are required to deal with tracking which authorized persons are being supplied by each designated person, and costs associated with the increased burden on law enforcement and the court system. These costs will be absorbed using existing resources.

Overall, the incremental costs of these amendments on society are expected to be negligible. There is also, given the nature of the MMAR, no anticipated impact on competition or domestic/international trade.

Rationale

Without a reasonable limit on production by designated persons, the current street price for marihuana, e.g. $10-15 per gram, may encourage the potential establishment of “grow-op” size crops and the considerable potential that marihuana being produced for medical purposes may be diverted to the illicit market.

Given that the Federal Court of Appeal did not provide any direction as to the number of licences to produce a designated person should be able to hold, the incremental change is an interim step that respects the original intent of the Program while Health Canada undertakes a broader review of the Program and associated regulatory framework.

Immediate amendments to the Regulations are necessary because Health Canada has already received applications from authorized persons wishing to be supplied by a designated person who already holds a licence to produce for another authorized person and/or a new designated person who is also referenced in other pending applications. By way of illustration, Health Canada has already received an expression of interest from a designated person who is capable of supplying marihuana for up to 200 authorized persons.

Consultation

In acknowledgement of the pending SCC ruling with regard to whether or not it would hear an appeal of the Sfetkopoulos decision, Health Canada initiated a review of the impacts of potential negative outcomes from the court some months ago. That review entailed a range of limited consultations with relevant federal partners, e.g., Public Safety Canada, the Department of Justice, the Royal Canadian Mounted Police, and the Department of Foreign Affairs and International Trade. Health Canada officials also met with the Canadian Association of Chiefs of Police and representatives from the Office of the Ontario Fire Marshal.

Federal partners were supportive of introducing enhanced controls on the production of marihuana for medical purposes should the leave to appeal not be granted. They emphasized the ongoing trend towards increased personal production and the increased risk of diversion to illicit markets this represents.

Law enforcement also raised particular concerns with the potential for situations in which a single address could house multiple authorized persons and/or designated persons all licensed to cultivate increasing numbers of plants, and how these types of situations often hampers their ability to investigate and shut down illicit “grow ops.” Law enforcement stressed that the lack of controls on production combined with the possibility of producing a large quantity of marihuana would most certainly lead to increased numbers or licence violations, e.g., where the amount of marihuana being produced is far more than what has been authorized via licence.

The Office of the Ontario Fire Marshal was particularly concerned with the potential risk of fire in situations where large amount of marihuana for medical purposes are being produced. They stressed their preference for the introduction of much tighter security requirements and enhanced controls on the size of production sites allowed under the MMAR.

Implementation, enforcement and service standards

Health Canada will have to review all applications from authorized persons seeking to modify their current supply arrangements via the designation of a new person to produce on their behalf. An assessment of whether or not the changes are allowed according to the new limit on the number of production licences a single designated person can hold will also have to be made. Health Canada will also need to develop a system that tracks exactly which authorized persons are being supplied by which designated persons in order to avoid the issuance of too many licences to produce to existing and new designated persons.

The current service standard for the processing of an application from a prospective authorized person and/or an existing authorized person wishing to make changes to their authorizations and/or licences is up to eight (8) weeks. Despite the increased administrative burden referenced above, it is not expected that this service standard will change with the implementation of the amendments.

At the present time, compliance and enforcement with the MMAR is handled cooperatively with law enforcement in that Health Canada has limited powers for administrative enforcement, e.g., ability to revoke a licence, etc., and is able to share certain information about production licence holders with law enforcement, who can then, as required, carry out criminal investigations and lay associated charges under the CDSA, the Criminal Code or other relevant deferral statutes. Implementation of the amendments will not have any direct impact on these arrangements, although increased information exchange with law enforcement may be required as they continue to carry out investigations of suspected illegal marihuana production and require confirmation as to who is licensed by Health Canada, what quantity of marihuana a particular production licence holder is authorized to produce, etc. There may also be an increase on the number of marihuana for medical purposes-related cases presented before the courts.

Wider stakeholder consultation will have to be carried out as Health Canada proceeds with its broader review of the Program and related regulations.

Contact

Daniel Galarneau
Policy and Regulatory Affairs Division
Office of Controlled Substances
Tobacco and Drugs Directorate
Health Environments and Consumer Safety Branch
Telephone: 613-946-6521
Email: OCS_policy_and_regulatory_affairs@hc-sc.gc.ca

Footnote a
S.C. 1996, c. 19

Footnote 1
SOR/2001-227

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