A recent move by Health Canada may spell big losses for the country’s cannabis industry, sources in the space say. The health department is asking some federally licensed cannabis companies to stop selling ingestible cannabis products which it says are incorrectly labeled and classified as “extracts” instead of “edibles,” according to an MJBizDaily report.
The decision could affect products like lozenges and chewable extracts, which are becoming increasingly popular among cannabis consumers, prompting many cannabis leaders to question the timing, as many of these products have been on the market for years.
Extracts and edibles have different limits per individual consumer. Products classified as an “extract” have 100 times more allowable THC per package than products classified as an edible. For example, a single gram distillate syringe, an extract, technically contains 1,000 mg of cannabinoids; Health Canada allows 1,000 mg per package for extracts. Edibles in Canada are limited to 10 mg of THC per package.
MJBizDaily obtained a letter sent to an anonymous licensee by Health Canada, requesting them to halt sales of the flagged products, though the company was not ordered to recall the products.
“Upon further review of the products in question, Health Canada has assessed that this product is edible cannabis and, consequently, it contains a quantity of THC that exceeds the allowable limit of 10 mg per immediate container,” the letter read. It clarified the distinction between “extract,” “edible” and “food,” saying that the department determined the products in question are consumed in the same manner as food, and therefore fit the definition of edible cannabis.”
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It’s also unclear if Health Canada sent a letter to every company selling the products that fall under this classification or just to select companies. Health Canada has also not answered the publication’s request for comment.
All new cannabis products in Canada are required to follow the government’s Notice of New Cannabis Product (NNCP) process, requiring producers to notify Health Canada months in advance of bringing new products to the market. The MJBizDaily report notes that a number of ingestible extracts with significant amounts of THC have already been on the market for years.
If a product has made it through the NNCP process, it doesn’t necessarily mean it’s gained the approval of Health Canada, but sources at another company that received a noncompliance letter told the publication that Health Canada had no concerns with the product in question until receiving the letter earlier in January.
MJBizDaily reports, via industry sources, that the move could cost the industry tens of millions of dollars in yearly revenue. Shane Morris, founder of Ottawa-based Morris & Associates Consulting, added that the Ontario Cannabis store sold roughly 942,000 Canadian dollars, about $600,000 USD, worth of the ingestible extracts in question through wholesale orders and its online consumer store.
“Assuming Ontario sells approx. 40% all cannabis in Canada, then on an annual basis this would mean the retail value of these products would be approximately CA$33.9 million per annum in the recreational market, not inducing medical or Quebec where these new products are not sold,” he said in an email.
Sherry Boodram, CEO and co-founder of Toronto-based regulatory consulting firm CannDelta, said that licensees agree that reducing public health risks associated with cannabis should be a priority, though cannabis companies have also found creative ways to make products that can compete with the illicit market.
“For Health Canada to suddenly bring down the hammer on how these products are being classified, especially three years after [Cannabis] 2.0 products became legal, will undoubtedly cause business losses during a time when cannabis companies are already struggling,” she said.
Another executive, who requested anonymity, said that the move was “highly ineffective.” They specifically cited Health Canada’s concern for the classification of these products which have already been on the market in some cases for more than 18 months, met all regulatory requirements and in which companies have already made “extensive financial investments” to bring onto the market.
The executive added that this “sudden position of concern” counters the spirit of the cannabis act and risks pushing consumers back to the illicit market, which ultimately doesn’t have the oversight and safety of the legal market.
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