Canada: The Next Phase Of Canadian Cannabis: What To Expect In 2019 And Beyond

On June 14, 2019, Health Canada unveiled its Final Regulations for New Cannabis Products: Edible Cannabis, Cannabis Extracts and Cannabis Topicals (the "Regulations"), addressing the production and sale of edible cannabis (eating or drinking), cannabis extracts (ingesting or inhaling), and cannabis topicals (applying to skin, hair, or nails). The Regulations are substantially similar to the related draft regulations released in December 2018. The Government of Canada's Task Force on Cannabis Legalization and Regulation1 (the "Task Force") recommended, subject to strict regulatory controls, the legalization of a diverse range of cannabis products to displace the illegal market. In accordance with the Task Force's recommendations, the Regulations, once in force, will permit the sale and manufacturing of edible cannabis products, cannabis extracts, and cannabis topicals.

Government Objectives Underlying the Regulations

The Regulations highlight Health Canada's and the Government of Canada's three main concerns: (i) the potential for cannabis products to be overly appealing to young persons; (ii) overconsumption or accidental consumption by adults; and (iii) advancements in research relating to the use of cannabis products as forms of primary or supplemental mental health and other therapies.

Appeal to Young Persons

Concerns with these new classes of cannabis products include appeal to young persons and risks of accidental consumption or overconsumption. Accordingly, a key component of the Regulations is the overarching prohibition against promoting cannabis products in a manner that would reasonably appeal to young persons. To determine whether a product falls under this strict prohibition, a wide range of factors will be considered on a case-by-case basis. These include but are not limited to the shape, colour, smell, flavour, name, label, and presentation of the cannabis products and packaging – this is particularly relevant to edible cannabis. Health Canada has made it clear this is an important issue and while the industry may be innovative and competitive in determining products they choose to manufacture, produce, and sell, there will be zero tolerance for non-compliance with the Regulations when it comes to directly or indirectly marketing cannabis products to young persons.

Overconsumption

Health Canada has expressed its concerns that both new and seasoned cannabis users often do not fully understand the dosing effects of cannabis, particularly edible cannabis. The Regulations prescribe precautionary limits on the amount of tetrahydrocannabinol (THC)2 that can be contained in edible cannabis, cannabis extracts, and cannabis topicals to address the concerns of overconsumption and accidental consumption. Moreover, Health Canada will be investing in educational campaigns for adult consumers regarding recommended dosing and ways to reduce the risk of overconsumption – for example, Health Canada advises that new consumers should choose an edible cannabis product that contains 2.5mg of THC or less and wait to feel the full effects before consuming more. Warning messages and information on how to consume edible cannabis products have also been updated and guidelines will be provided by the Center of Addiction and Mental Health ("CAMH") and other participating agencies.

Advancements in Research Around Use in Mental Health and Therapy

Another key objective for the Government of Canada is to invest in increased research related to the use of edible cannabis and cannabis extracts as forms of primary or supplemental mental health and other therapies. Funding will be included for research, the CAMH and other federally funded organizations. Current funding supports 26 projects across Canada that cover the use of cannabis and cannabidiol (CBD) oil for treatment of pain and anxiety, as well as research teams that explore the therapeutic potential for cannabis in areas such as chronic pain, cancer, and neurodevelopment.

Timeline and Process

The Regulations are expected to be formally published in the Canada Gazette, Part II, on June 26, 2019.

On July 15, 2019, federal licence holders seeking to produce and sell new classes of cannabis will be able to apply to Health Canada for amendments to their existing licence(s).3

The Regulations are scheduled to come into force on October 17, 2019,4 which means that the Cannabis Act5 will authorize the sale of edibles containing cannabis along with cannabis extracts and cannabis topicals. Federal licence holders must provide Health Canada with a 60-day notice of their intent to sell any of the new categories of cannabis. This requirement remains unchanged from the initial Cannabis Act for the initial classes permissible for sale. Accordingly, the market should expect the actual sale of edible cannabis, cannabis extracts, and cannabis topicals to be permitted no earlier than December 16, 2019, for those who are timely to file notifications of new classes of cannabis product offerings.

Given the timeline established by Health Canada, it is likely that the selection of new classes of cannabis products available in mid-December 20196 will be limited, with increased product diversification and availability likely occurring in 2020 as the market matures.

Products and Quantity

The Regulations surrounding the manufacturing of edible cannabis, cannabis extract, and topical cannabis products remain substantially unchanged from the draft regulations. Under the Regulations, manufacturers are prohibited from producing any cannabis products (not just edible products) in buildings where non-cannabis food products are also produced. This is aimed at reducing risks of mislabelling and cross-contamination. Moreover, the area in which edibles containing cannabis are manufactured and produced must be compliant with the security and sanitary requirements under the Cannabis Act. Since the timeline for obtaining a federal cannabis licence and entering into the market for the first time will continue to be a time-intensive process, current federal licence holders will likely have a first mover advantage over food processors on the edibles side. However, the Regulations also place new requirements on federal licence holders surrounding food safety and food borne illnesses as well as obligations in line with current regulatory frameworks for items like cosmetics and topical creams and ointments. These processes will be new for cannabis companies, so we expect some creative licensing frameworks to emerge so that both industries are able to take advantage of the other's expertise.

Edibles

One of the overarching principles of the Regulations is that cannabis products may not be promoted in a manner that appeals to young persons. As a result, federal licence holders will need to be strategically cautious in creating and marketing their edible cannabis products to ensure that the products do not trip over this prohibition. Health Canada is not seeking to provide the industry with guidance on what acceptable products look like. Instead, Health Canada will leave it up to the industry to act responsibly (in accordance with the Regulations) and will make this determination as the marketplace develops. Importantly, public officials have begun indicating what unacceptable products look like – specifically, Border Security and Organized Crime Reduction Minister Bill Blair has outlined that gummy bears that are appealing to children would be prohibited.7 It is unclear what level of reduction of such appeal, if any, would allow a similar product to exist: for example, a colourless, flavourless, gummy product in a bear shape and unappealing packaging may or may not be permissible.

Cannabis infused edibles cannot include additional caffeine or alcohol. The only method for caffeine or alcohol to be found in edible cannabis products permitted by the Regulations is if it has naturally occurred in ingredients like chocolate (caffeine) or vinegar (alcohol).8 It is worthy to note that natural occurrences of caffeine is restricted to a maximum of 30 milligrams (mg).9

Due to the presence of an unlicensed (illegal) cannabis market in Canada, federal licence holders will be competing with products such as gummy bears, chocolates, or candies available to consumers from unregulated and unlicensed (illegal) producers, without the ability to replicate or produce comparable products due to stringent regulations. The Regulations may pose additional challenges to federal licence holders given restrictions on ingredients that federal licence holders would be subject to, as well as the restrictions on mg of THC per packaged cannabis product. The Regulations impose a limit of 10mg of THC per discrete unit and per container (a multi-pack). This means, for example, that a container could contain one discrete unit of edible cannabis (e.g. cannabis beverages) that contains 10mg of THC or two discrete containers that each contain 5mg of THC provided that the total amount of THC in the multi-pack does not exceed 10mg. Since a multi-pack with six beverages would result in a per unit THC amount of approximately 1.67 mg, we anticipate that four-packs may be more in line with anticipated market demand for beverages with approximately 2.5 mg of THC per can or bottle, which would also be in line with Health Canada's recommended maximum initial dose for new consumers.

Notwithstanding the packaging limitations, one of the greatest strengths that federal licence holders have when compared to the illegal market is that consumers can have assurances from federal licence holders with respect to the ingredients and dosages contained in a cannabis product. Whether consumers purchase edible cannabis products in the illegal market or migrate to the legal market remains to be seen. However, when compared to alcohol, it is a trite statement to say that the majority of spirits drinkers purchase regulated spirits rather than resorting to unregulated moonshine. If the cannabis market follows the same consumer preferences as alcohol, then federal licence holders have a discernable competitive advantage.

Extracts

Oils containing cannabis are currently permitted as a class under the Cannabis Act. However, they may only have two ingredients, the CBD and the carrier oil, and may not include sugar, sweetener or colour. Under the Regulations, the class of oils will remain but will be effectively subsumed under the extracts class. Under the new class, federal licence holders will be allowed to add certain prescribed additional ingredients, colour and some flavour (provided that the flavour does not appeal to young persons) into the product.

Under the Regulations, the limits for the cannabis extracts, as is currently the case for cannabis oil, will be a limit of 10mg of THC per discrete unit that is intended to be ingested or inserted (such as in the form of a capsule). In addition, there will be a new limit of 1,000 mg of THC per container.10 This means, for example, that a container could contain 100 capsules of an extract that each contain 10mg of THC or 200 capsules of an extract that each contain 5mg of THC.

Cannabis vaping is not restricted so when the Regulations are in place, companies will be able to offer concentrates such as cannabis oils.11 However, vape scents still cannot appeal to children. Notwithstanding the inclusion of the Extracts class, any vaping products will also remain subject to the Tobacco and Vaping regulatory framework.

Topicals

The Regulations set out strict limits for the production and sale of cannabis topicals. Cannabis topicals are products applied to skin, hair, or nails. They are not to be used in the eyes or on damaged skin. A cannabis topical is limited to 1,000 mg per package,12 and cannot include any nicotine or alcohol.

Each Cannabis topical label must include the standardized cannabis symbol for products containing THC, a health warning message, the THC/CBD content, the equivalency to dried cannabis to determine the public possession limit, ingredient list, allergens, and the intended use. The prohibited ingredients comply with Health Canada's cosmetic ingredient hotlist, which are prohibited for use in cosmetics.13

Additionally cannabis topicals mirror the other cannabis products in that they cannot be appealing to young persons, and must not make health claims. They also cannot be associated with alcoholic beverages, tobacco products or vaping products, nor can the label make any cosmetic claims.

Packaging

Under the Regulations, in addition to the prohibition on promoting cannabis in a manner that could appeal to young persons, manufacturers will be prohibited from packaging and labeling cannabis products in a manner that evokes an alcoholic beverage or references alcohol or tobacco. The rationale behind this prohibition is the preclusion of cannabis products that incorporate other substances like alcohol or nicotine. What will ultimately be deemed to "evoke" an alcohol or tobacco product is still difficult to interpret. Accordingly, federal licence holders should encourage Health Canada to be proactive and informative with their reviews of cannabis products to provide guidance on how labeling rules will be applied in practice.

Under the Regulations, lower possession limits and limits on the quantity of cannabis per package applies to cannabis products containing more than 3% THC by weight. Under the Regulations, there is a maximum quantity of 7.5 grams of cannabis (which is the deemed equivalent to 30 grams of dried cannabis) per package and public possession.14 This rule applies to edible cannabis, cannabis extracts, and cannabis topicals that contain more than 3% THC.

An additional requirement set out in the Regulations is the need for products to be packaged in child-resistant containers. This is the same for dried and fresh cannabis and cannabis oil. While there is some flexibility to the way cannabis is packaged (e.g. in a pill container, a cardboard box, etc.), packaging should not be considered a market barrier. The need for the packaging to be child resistant is non-negotiable; however, Health Canada has pointed to new products that may be less waste producing than traditional medical packaging as examples of opportunities for the industry to be creative and competitive.

The Regulations will continue to include restrictions on brand elements and locations and sizing of the standard cannabis symbol. On review, the labeling rules remain difficult to navigate. The industry would benefit from swift product reviews from Health Canada on how labelling rules will be applied in practice.

Colorado, California, and Washington State all have different regulatory schemes regarding the control of edibles. In the states where cannabis is legal (pursuant to state, rather than federal, law), the state allows up to 10 mg of cannabis per serving, in contrast to the 10 mg per package to be allowed in Canada,15 Colorado16 and California17 have also specified that each package is allowed up to 100 mgs, which is a much broader regulatory allowance than under the Regulations. As a result, there may be additional overhead costs for companies doing business in both the United States and Canada because they will have to adjust the way they produce and package cannabis products to accommodate for the varying regulations across different jurisdictions.

Cannabis packages in Canada are required to display THC and CBD concentrations on cannabis product labels, and must also display the product's equivalency to dried cannabis to provide consumers with a new tool to help determine their public possession.

Other Matters

The Regulations have put a number of restrictions on restaurants being able to sell cannabis infused products. It is important to remember that a federal cannabis licence is required to make any product containing cannabis for sale. In addition to being required to have the applicable federal license to allow production and sales, a restaurant hoping to produce or sell cannabis products will also have to package the cannabis according to the Regulations,18 pay the required tax on those products, and comply with requirements that the cannabis products be "shelf stable". While the Regulations do not prohibit selling cannabis products in restaurants, they have made it logistically impractical (read: practically impossible) to do so. For example, a cookie, provided that it did not appeal to young persons and was packaged and labelled in accordance with the Regulations, could comply with the Regulations but a baked lasagna likely could not (because, among other things, it is not "shelf stable"). Bars and restaurants that do not sell but allow consumption of cannabis products will remain subject to local provincial and municipal regulations for consumption lounges.

No changes have been made with respect to how CBD is regulated. CBD is still regulated the same way as cannabis pursuant to the Cannabis Act19 unless it is a prescribed drug, which would place it under the regulations of the Food and Drug Act.20 Health Canada has, however, stated that they will hold consultation on CBD in order to determine how to best provide regulatory oversight. As a result, the regulatory scheme surrounding CBD may change, but there is no timeline for further consultation.

Conclusion

The Government of Canada seeks to rely on a regulated cannabis industry with federally licensed products to eliminate (or at least reduce) the existence of an illegal market. Until the elimination of the illegal market, federal licence holders will compete with such products available from unlicensed and unregulated sources, with the additional restrictions placed on them from the Regulations. Legal cannabis products will provide consumers with certainty regarding the use of ingredients, the safe handling of cannabis products, and the dosage of a cannabis serving or package. This, without question, is a competitive advantage for federal licence holders.

At the initial stages of the legalization of edible cannabis products, there will be a lack of diversity of regulated products, but, over time, as more cannabis products are developed, the industry may provide enough variety of trusted products to significantly reduce the illegal market. While the Regulations do offer strict controls over the industry, federal licence holders will be left to define these standards as they apply to Health Canada for approval and populate the industry with new cannabis products. It is likely that, as the industry begins to take shape with these new products theoretically hitting the market starting December 16, 2019, the interpretation of how Heath Canada will apply the Regulations will subsequently emerge, and the industry will have examples of products that passed the screening process to build from.

Canada was the first G7 country to legalize and regulate recreational cannabis. The emergence of the legal edible, extracts, and topicals market in Canada is another opportunity for federal licence holders in Canada to be innovative, develop new products, and remain leaders on the world stage.

Footnotes

[1] Health Canada, A Framework for the Legalization and Regulation of Cannabis in Canada: The Final Report of the Task Force on Cannabis Legalization and Regulation, (Final Report) (Ottawa: Health Canada, November 2016).

[2] House of Commons, Final Regulations for New Cannabis Products: Edible Cannabis, Cannabis Extracts and Cannabis Topicals (June 2019) online (pdf).

[3] Kathleen Harris, "Canadians can expect tight supply when cannabis edibles become legal mid-December, officials say" (14 June 2019), online: CBC.

[4] Health Canada, News Release, "Health Canada finalizes regulations for the production and sale of edible cannabis, cannabis extracts and cannabis topicals" (14 June 2019), online: Government of Canada.

[5] Cannabis Act, SC 2018, c 16.

[6] Ibid.

[7] Ibid.

[8] Supra note 2 at 14.

[9] Ibid.

[10] Supra note 2 at 12.

[11] Hannah Thibedeau, "Cannabis edibles available for sale legally in mid-December" (14 June 2019) online.

[12] Supra note 2 at 57.

[13] Health Canada, Cosmetic Ingredient Hotlist (Canada: Health Canada, 2018) online: Government of Canada.

[14] Supra note 5 at part 3.

[15] US, National Environmental Health Association, Food Safety Guidance for Cannabis-Infused Products, online: National Environmental Health Association.

[16] US, Colo Rev Stat §44-12-202(d)(IV).

[17] US, Cal Code Regs tit 14, § 757.

[18] This includes, among other things, child-proof packaging.

[19] Supra note 5.

[20] Food and Drugs Act, RSC 1985, c F-27.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2019

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions