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Canada’s main cannabis regulator is now requiring all growers to have their growing facilities fully built prior to their applications being approved, a move they say will streamline a heavily backlogged approval process, but which may also make it more difficult for smaller players to enter the market.

On Wednesday, Health Canada announced that any person or company applying to grow, process, or sell cannabis will be required to “have a fully built site that meets all the requirements of the Cannabis Regulations at the time of their application.” This is a reversal of previous policies that allowed those applications to move forward without physical facilities in place.

Health Canada claims that this will help speed up the approval process. “More than 70% of applicants who successfully passed Health Canada’s initial paper-based review of their application over the past three years have not yet submitted their evidence package to demonstrate to the Department that they have a built facility that meets the regulatory requirements,” the department claims. “As a result, a significant amount of resources are being used to review applications from entities that are not ready to begin operations, contributing to wait times for more mature applications and an inefficient allocation of resources.”

The approval process has been the subject of much criticism from within the industry since legalization, as the backlog of applicants — now over 800 applicants strong, comprising those who are applying both to build new facilities as well as to amend existing applications— has been seen as one factor in ongoing supply issues in the recreational cannabis market. Some applicants have complained that it can take up to six months to get through the process, though Health Canada did hire over 300 people in the lead-up to legalization to deal with the extra work. But that backlog still hasn’t cleared, and remains a constant annoyance for those hoping to start growing and selling cannabis.

While this move may help speed up the application assessment process, it also puts up significant barriers to smaller players who might be hoping to enter the market — particularly the much-awaited but slow-to-get-started micro-cultivator class of producers. While they may have previously been able to raise capital to build a facility by being able to point to a federal license, they will now have to build their facilities without knowing if they will be able to get an approval.

“If Health Canada is making these changes so it can significantly speed up the process of licensing, then that’s good. But if this is going to make it harder for new producers to begin growing, I’m not sure if it is going to help with the shortage issue,” Trina Fraser, an Ottawa-based cannabis industry lawyer, told the Financial Post. 

For the hundreds of existing applications currently awaiting review, Health Canada says they will take a “high-level” look at the applications to determine whether to allow it to go forward.

The government is also not making any changes to the process of approving security clearances for individuals working in the cannabis industry.

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