This is a guest post by Michael Sassano, CEO of Somai Pharmaceuticals.
For the last several years, all I have heard about from EU cannabis producers, growers and investors is “GERMANY, GERMANY, GERMANY!” Yes, the nation has the largest current patient base, but is relatively small and insignificant when considering investment in the future of cannabis in the European Union at large. It is also completely off-base in terms of meeting the wants and needs of patients.
It is inadvisable to invest millions of Euros into building an infrastructure simply to suit the German vision of cannabis. Germany is only at the starting phase of understanding the medical cannabis market: They still need significant improvement, and currently lack the wherewithal for grappling with the processes, costs and regulations necessary to provide patients with products that are effective.
The German market does not allow for finished products like ready-made gel caps, transdermal patches or even smokable devices like vapes and concentrates. This greatly restricts the market.
German rules require pharmacists to “compound” the product. Compounding is an end-around to clinical trials, wherein the pharmacists takes raw ingredients and mixes them for the patient. In essence, producers who sell to pharmacies must create a “kit” that includes the ingredients for pharmacists to mix, as well as testing strips to ensure the mixture is correct once made. Not only does this cause the pricing to be higher with all the bottles, extra packaging, and testing strips, it is also extraordinarily inefficient to require cannabis producers to stop their formulation at one stage and leave a pharmacist saddled with the unfinished product at the pharmacy later. This prevents manufacturers from creating products that both doctors and consumers want in an efficient manner.
Imagine that to make the patient’s products, a producer would have to install a mini-gel cap machine within each pharmacy, a manual kit for transdermal manufacturing, or even a filling machine for different drops or vaporizer categories. Each pharmacy you want to sell to must then be provided with lower-quality filling solutions or machines just to conform. Why create such hoops to jump through for pharmacies, when a patient could instead be given a nice, ready-made blister pack with gel caps that have gone through quality assurance processes and were created with the best pharmaceutical-grade filling and packaging equipment?
If the compounding process sounds expensive, that’s because it is. The German market is so expensive for the consumer, it’s a wonder anyone would buy cannabis legally.
If you’re a manufacturer you not only must conform to compounding rules, but by law must also sell through a distributor. This distributor marks up the manufactured product when selling to a pharmacy; the pharmacy accordingly marks up this product to the consumer.
This creates roadblocks for patients who need access to medical cannabis, as well. Patients must first go to a doctor, get a prescription, and then buy the product at a pharmacy. If that product doesn’t work, they must go back to the doctor and get another prescription to start the process all over. Putting aside that the doctors have no idea what products work for which patients and the complexity of cannabis interaction with each individual patient, the one-size-fits-all model big pharma preaches is not the way in which cannabis heals. For many patients, it’s cheaper and easier to buy a greater variety of cannabis products from a non-legal source, allowing them to see which products work, rather than go through the lengthy and costly pharmacy process. While it can be argued that insurance pays a good portion of patient cost the prices are still abnormally high, and the consumer would be better served to receive a general cannabis prescription and try many different products to find out what works best for their particular ailment.
Germany is very strict about providing exact measurements of the primary ingredients and ultimately conforms more to a pharmaceutical rather than herbal formulation model. Cannabis is a very special herbal remedy with many complex formulations of major cannabinoids like THC and CBD, minor cannabinoids like CBN and CBG, and also naturally occurring terpenes like myrcene and limonene. While there is little we know about the “entourage effect” and cannabis combinations/interactions, we do know that patients who are treated with natural cannabinoids and terpenes colloquially report completely different effects than with pharmacy-based cannabis. Patients are unable to benefit from all healing elements in naturally occurring cannabis, which is labeled erroneously as full-spectrum within the German medical cannabis system. This is because German medical cannabis is primarily the formulation of highly extracted singular cannabinoids. The true therapeutic effects that cannabis can provide are a far cry from the effects these single-spectrum formulations likely provide.
To make matters for the patient even more complex, Germany dictates dosages that aren’t based on the reality of what patients’ needs are, nor considers things like body size, tolerance or even sex. Not only does this add costs since many people may require high dosages than the 1-gram daily recommendation for pain, but also minimum dosages of 10mg for extracts is much too high for many users. The reality is that these rules complicate producer’s ability to create medicines that patients need but also goes against how much of the interaction of the body and cannabis is a very personal decision that doesn’t conform to one size fits all.
It’s hard to be excited about Germany when countries like the United Kingdom, Israel (which is five times the size of Germany’s cannabis market) and non-European countries like Brazil are taking the approach to allow for finished products certified by experienced producers. In addition, other international markets are looking at a general cannabis prescription that will allow patients to choose any cannabis product as well as strategies for keeping the costs down for the consumer. In turn, this will combat illicit markets and allow for more widely used cannabis products. Cannabis is non-lethal and there are years of data showing in countries such as the U.S. and Canada that cannabis use decreases the use of more dangerous pharmaceutical products and may even reduce alcohol consumption not to mention treat or mitigate more serious ailments.
Maybe Germany will change their stance with the advent of organizations like European Cannabis Association, but for now, it’s best to plan for other emerging countries rather than try and model your business to suit Germany.
Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.
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