The market for medicinal cannabis products is growing exponentially. A company that understands the complexity of medicinal cannabis production and that is able to develop a project based in science and real facts rather than in speculative unrealistic estimates and scenarios, has a clear opportunity to become a highly profitable business.

Growing demand of medicinal cannabis

Scientific evidence proving the safety and efficacy of medicinal cannabis is growing exponentially and there is a global movement towards opening the access to medicinal cannabis products for patients. Consequently, the demand for medicinal cannabis is growing at unprecedented rates around the world and, although the market is extremely unpredictable, the perspectives for its future global growth are considered by most analysts to be very promising. 

Estimates from different sources predict the global medicinal cannabis legal industry will grow from 10 to 30% annually for the next 5 to 20 years (1). According to a 2019 report by cannabis market research firm New Frontier Data (2), the worldwide cannabis consumer market was worth USD 344 billion. The report estimates that 263 million people across the globe consume cannabis at least once a year. Today, around 45 countries have legalised some form of cannabis, four of them for recreational use (3).

The use of medicinal cannabis is consistently increasing in countries where it has been legalised. For example, in Germany the number of applicants for insurance coverage doubled since 2018 reaching 100,000 applicants in June 2020. In parallel, imports of cannabis flower have increased on average over 26% per quarter (4). Until recently, Germany was the largest importer of medicinal cannabis flower in the world. However, in December 2019 Israel, which has a consolidated, rapidly growing medicinal cannabis user population, allowed the importation of medicinal cannabis, and by mid 2020 became the largest importer of medicinal cannabis flower (5), despite having a population ten times smaller than Germany. 

(1) Forbes: New cannabis report predicts legal sales to reach nearly $30 Billion By 2025.
Grand View Research: Legal Marijuana Market Worth $66.3 Billion By 2025 | CAGR: 23.9%.
Fortune Business Insights: Cannabis Market Size | Marijuana Industry Growth by 2026.
MarketStudyReport: Global Medical Cannabis Market Insights, Forecast to 2025.
Orian Research: Legal Marijuana - Global Market Outlook (2017-2026).
(2) New Frontier Data: Global Cannabis Report: 2019 Industry Outlook.
(3) Wikipedia: Legality of cannabis.
(4) MJBiz: German imports of cannabis flower up in first half of 2020 versus 2019.
(5) MJBIz: Israel passes Germany as world’s largest importer of medical cannabis flower.

The New Frontier Data report concludes that rapid growth of the world’s legal cannabis market is largely the result of an increased acceptance and acknowledgment of cannabis’ therapeutic potential. According to the analysis, a combination of clinical research findings, patients reporting efficacy, and validation from leading health organisations like the World Health Organisation and the US National Academies of Science, have helped generate sales and stimulate support for cannabis legislation. 

Global medicinal cannabis legality: Blue, legal without prescription. Green, legal with prescription. Grey, forbidden. (Source: Wikipedia, Jamesy0627144)

Global medicinal cannabis legality: Blue, legal without prescription. Green, legal with prescription. Grey, forbidden. (Source: Wikipedia, Jamesy0627144)

The outlook for New Zealand industry players is positive, particularly because of its progressive legislation which also covers exports. A publication by DLA Piper from April 2020 on the growth of New Zealand’s medicinal cannabis market (1) concluded “prospective industry players can be optimistic about New Zealand’s Scheme. Although several moving pieces will still need to come together in practice – exports, patient buy-in, education, training, cost and regulatory oversight – the work, thinking and planning being done early on are signs that New Zealand may outpace, relatively, other markets in this space as the Minister of Health suggests”. 

The Agribusiness Group, a Lincoln University based research business body, undertook an analysis of the New Zealand medicinal cannabis market (2). They observed that the global medicinal cannabis market is predicted to exceed USD 55 billion by 2020 and came to the conclusion that “if just 1% of those who could benefit from medicinal cannabis in New Zealand used it, the market could be worth NZD 379 million each year”.

(1) DLA Piper: From seed to shelf - the growth of New Zealand’s medicinal cannabis market.
(2) The Agribusiness Group: The New Zealand Medical Cannabis Market.

Limited supply of medicinal cannabis

The growing demand of medicinal cannabis will be responded with an increase in supply. However, not all medicinal cannabis products are the same. 

The entourage effect and the challenge of supplying products with consistent composition

The most commonly known cannabinoids present in medicinal cannabis are THC (tetrahydrocannabinol) and CBD (cannabidiol), but there are many other cannabinoids and other molecules with therapeutic effect in the cannabis flower.  

Unlike other conventional medicines, scientific evidence shows that an essential part of the efficacy of medicinal cannabis relies on what is known as the “entourage effect”, which basically refers to the higher efficacy of the whole flower or whole extract of medicinal cannabis compared to purified extracts made of THC and/or CBD. While medicinal cannabis products made of purified THC and/or CBD will most likely become commodities, natural products that include a complex array of therapeutic components designed to respond to individual therapeutic needs will be difficult to replicate and to produce in a consistent way. 

To produce medicinal cannabis products that include whole flower or whole extract in their composition and meet the quality standards of the Ministry of Health (GMP standard) is highly intricate. These products have very complex arrays of active ingredients and the assurance of consistency of their composition requires an exhaustive control of the cultivation environment. Consequently, GMP certification imposes serious restrictions to many widely accepted practices in mainstream plant production systems. This seriously limits the supply of GMP products with entourage effect.

Medicinal cannabis in New Zealand

The Medicines Act 1981 regulates medicines, related products and medical devices in New Zealand. The Act ensures that the medicines and products used in New Zealand are safe and effective.

Medicines cannot be advertised, sold or distributed without the approval of the Minister of Health (except in a few limited circumstances, which are described in the Act).

The Act defines what a medicine is and sets out the requirements for the approval, classification, manufacture, sale, distribution, advertising, prescribing and dispensing of medicines.

Companies who wish to sell a new medicine in New Zealand make an application to Medsafe (the business unit responsible for administering most aspects of the Medicines Act 1981 and its associated regulations). This application includes information that demonstrates the medicine meets New Zealand and internationally recognised standards for quality, safety and efficacy. Pharmaceutical companies have to undertake clinical trials to demonstrate the safety and efficacy of a medicine before it can be approved and this process can take several years. Currently there is only one cannabis medicine approved in New Zealand, and it will take years to have more cannabis medicines approved.

The Medicinal Cannabis Scheme was developed in response to the need of many patients that are already using cannabis or would like to try cannabis to treat their conditions and cannot wait years to use approved cannabis medicines. Medicinal cannabis has been proven safe enough to make it accessible without clinical trials and the Ministry of Health has developed an alternative way to allow doctors to prescribe unapproved cannabis medicines if the products meet a minimum quality standard set in the Medicinal Cannabis Scheme. 

The implementation of the Medicinal Cannabis Scheme by the Ministry of Health since the first of April 2020 allows the production of medicinal cannabis for commercial purposes in New Zealand.

Activities related to the cultivation, manufacture or supply of medicinal cannabis products must be carried out in accordance with a medicinal cannabis licence issued by the Medicinal Cannabis Agency under the Misuse of Drugs (Medicinal Cannabis) Regulations 2019.

New Zealand’s medicinal cannabis production will compete with already established medicinal cannabis industries around the world. However, it has the advantage of profiting from New Zealand’s very valuable brand, innovation tradition and good reputation of its horticultural industry. Moreover, the development of the medicinal cannabis industry is being supported and accelerated by the close relationship between industry private stakeholders and the public sector.