Dentons (Europe) The “license” to cultivate cannabis – a European comparison 

Author – Peter Homberg Dentons European Cannabis Practice Lead Peter Homberg is a partner in the Dentons Berlin office. He focuses on life sciences, IP, corporate law and M&A transactions in the life sciences and high-tech sector as well as in R&D and cooperation agreements, cross-border IP licensing and IP strategies. Furthermore, he has extensive experience providing legal advice on compliance issues. Additionally, he is the head of the European Cannabis sector group. Peter advises inter alia companies in the pharmaceutical, diagnostics, biotechnology, medical device and medical cannabis industries—from startups to large publicly listed companies. Furthermore, he has broad transactional experience in Southeast Asia. Peter is member of the Licensing Executive Society (LES), the German Association for Intellectual Property and Copyright (GRUR), the German Institution for Arbitration (DIS) as well as the Pharma-Lizenz-Club Deutschland e.V. He regularly holds lectures at seminars and conferences. He is the author of numerous professional articles and other publications regarding corporate or IP law in the field of life sciences.    The “license” to cultivate cannabis – a European comparison  With the German government coalition agreement of December 2021, the “traffic light coalition” (SPD, die Grünen and FDP) proclaimed the goal of fully legalizing cannabis for the purpose of recreational consumption by adults and establishing a state-controlled cannabis market. In the meantime, this project has been scaled back under the leadership of the Federal Minister of Health, Karl Lauterbach. After intense and transparent talks with the EU Commission, the German government has received unambiguous feedback of the original plans of full legalization being incompatible with current EU law. Instead, the government now plans to implement a “2-Pillar-Plan”, with the “1. Pillar” consisting of legalizing individual and communal non-commercial self-cultivation, and “2. Pillar” consisting of regionally limited scientific projects.  However, the long-term goal remains full legalization. Either way, the import of cannabis for recreational purposes to Germany will most likely not be possible in the near future, in view of EU and international framework, making cannabis cultivated in Germany the only possible source for recreational consumption.  A comparison with the medical cannabis market, which has already existed since 2017, whose existing supply practice could possibly be transferred to the recreational market, seems natural. Who is allowed to cultivate medical cannabis in Germany? How does the so-called “license” for cultivation work? What is the situation in other European countries?   Requirements for cannabis cultivation in Germany The production of narcotics generally requires a manufacturing license pursuant to Section 13 of the German Medicines Act (AMG), as well as a permit pursuant to Section 3 of the German Narcotics Act (BtMG). However, the cultivation of cannabis is additionally strictly regulated.  Thus, Section 19 IIa BtMG states: “The cultivation of cannabis for medical purposes is subject to the control of the Federal Institute for Drugs and Medical Devices. This performs the tasks of a state agency in accordance with Article 23(2)(d) and Article 28(1) of the 1961 Single Convention on Narcotic Drugs of 30 March 1961 (Federal Law Gazette 1973 II p. 1354). The purchase of cannabis for medical purposes by the Federal Institute for Drugs and Medical Devices pursuant to the second sentence of Article 23(2)(d) and Article 28(1) of the Single Convention on Narcotic Drugs of 1961 shall be carried out in accordance with the provisions of public procurement law. The Federal Institute for Drugs and Medical Devices shall determine its producer selling price for the sale of cannabis for medical purposes, taking into account the costs incurred for the performance of the tasks pursuant to sentence 2.”  The strict regulation of local cultivation is understandable at first glance, as it is also intended to take safety considerations into account. After all, cultivation is carried out solely by selected companies, which are chosen in a tendering process. The selection is based on strict checks of the companies. These companies, in turn, make an enormous effort to meet the conditions, especially financially (see certain requirements regarding production facilities, etc.). The three companies (Aphria RX, Aurora and DEMECAN) that took part in the first Europe-wide tendering procedure of the German Federal Institute for Drugs and Medical Devices (BfArM) in the spring of 2019 were awarded the contract for the cultivation of a total of 10,400 kg over the following four years. The first crop was harvested in July 2021, partly after pandemic-related delays. However, the strictly regulated process also puts the company at a major competitive disadvantage, particularly in terms of pricing, as sales of products from this cultivation are handled by the BfArM, which also sets the price. Unlike cultivation, however, importation is not controlled by the BfArM in terms of either quantity or price.   The BfArM performs by regulation in the BtMG on the one hand the public law (and by Art. 23 II d.) of the Single Convention of 1961 international law imposed) task of monitoring narcotics traffic, which includes the granting of permission, and on the other hand exercises the civil law function of buying and selling cannabis. The explanatory memorandum to the June 2016 draft law states, “This is intended to ensure comprehensive control over the cultivation and further use of cannabis plants and to prevent diversion. Germany has ratified the Convention and is therefore bound by its requirements.“ In view of these remarks, it seems obvious that a possible domestic cultivation of cannabis for consumption purposes would also be similarly regulated.   Legal comparison The route taken in Germany via tendering procedures is by no means universal.  In Spain, any company can apply for a cannabis cultivation license at any time. According to the website of the Spanish “Agencia Española de Medicamentos y Productos Sanitarios” (AEMPS), as of December 2022, 16 companies have a cultivation license for cannabis for research purposes, and another five companies have a cultivation license for cannabis for medical purposes. In Portugal, too, the granting of cultivation permits is not limited to standardized award procedures; thus, any producer can apply to the Portuguese health authority “Infarmed” for a cultivation permit valid for one year, which, subject to compliance with all regulatory requirements, is granted according to national needs. According to reports from “cannareporter.eu”, as of June 2022, among others, 20 cultivation permits have been issued.  In the Netherlands, on the other hand, the granting of cultivation licenses is theoretically similar to that in Germany, and takes place exclusively through award procedures under the auspices of the Office of Medicinal Cannabis (OMC). In fact, however, the company Bedrocan enjoys a monopoly position in the cultivation of medicinal cannabis and has been the only cannabis producer supplying the OMC since 2003. Currently, the Netherlands is at the beginning of a scientific model project to reform its so-called “toleration policy”, which is being carried out in eleven municipalities. One of the aims of the experiment is to find out whether it is possible to offer and sell regulated and controlled cannabis in a closed chain of coffee shops. The goal is to achieve a completely decriminalized handling of cannabis, starting from cultivation to sale, through changes in the law.   In the ten participating communities, regulated and quality-controlled cannabis is supplied by up to ten selected producers, who were also determined in a selection process. However, the respective coffee shops can negotiate the varieties to be grown and the price with the producers.    Conclusion In the case of legalization, it seems obvious that the legislation would be adapted to the legislation for the regulation of medical cannabis, so that the awarding of manufacturing licenses in the area of stimulant cannabis could also take place through Europe-wide tender procedures. However, various models in many other European countries show that there would also be alternative design options that would allow more companies to enter the market, if necessary, and that would allow the BfArM to react more flexibly in terms of time to current demand. While the BfArM initially distributed cultivation permits for a total volume of 10,400 kg over the next four years in 2019 (with the possibility of increasing the annual plan demand by up to 10% per delivery year), the International Narcotics Control Board (INCB) estimates the demand for medical cannabis in Germany to be 26.8 tons already for 2023 alone. Covering this difference between domestic cultivation and demand in the field of medical cannabis via imports is unproblematic. However, it will probably not be possible to obtain cannabis for recreational purposes from abroad, so more flexible solutions may be needed. The tendering procedure is not prescribed by international or European law, so companies in this country could be given more flexibility, especially with regard to pricing, in order to prevent competitive disadvantages.    Sources