As German politicians continue to avoid the conversation about recreational cannabis reform, there is another major fight underway right now that could have wide-ranging impact on the medical market. If not solved, it could also force even more patients into sourcing flower illicitly, or even into the recreational market when it finally gets approved. Namely, the discussion about insurer discount purchase agreements, cannabis pricing in general, and the larger conversation about what cannabis flower actually is.

In a nutshell, could cannabis flower ever be broadly categorized as a “generic medication” for medical purposes and thus be bought and priced within the market accordingly?

It may sound like a hopelessly geeky question, but the inherent problems, as well as most of the proposed solutions so far, are going to shape the availability if not price of cannabis flower in the medical market. If not solved, it could also remove flower from the medical cannabis conversation forever — or severely limit it. Not to mention insurance reimbursements for the same.

Further, if it is not addressed, the only people who will benefit from the status quo are those on the industry side of this conversation who are now angling for recreational reform not to mention the protection of “branded” cultivars for medicinal and other uses.

Currently the only “generic” cannabinoid medicine in the market, and defined as such under the Narcotics Act, is dronabinol — a THC isolate then diluted with a non-active oil. The fact that this isolate is extracted from a wide range of cannabis flowers has remained outside the scope of the current debate precisely because it is an isolate containing only one cannabinoid.

The fact that patients prefer cannabis flower to dronabinol, of course, has not been considered by anyone with the power to make an impact on these conversations. Patient rights have been ignored so far — and the “non-generic flower” conversation also seems to be heading in this general direction.

Medical Cannabis Definitions and Pricing in Germany

Here is the easiest place to understand the problem. The classification of cannabis as a plant is still an unsolved and confusing issue under the law. The fact that this has not been solved is in part a political problem, but it is also a scientific one.

The German medical and legal system has tried to apply terms to the classification of flower as well as pricing post 2017, but these are clearly limited. These in turn can have devastating impacts. One of the most shameful so far, which has still not been addressed, is that while cannabis flower is not considered a finished “medicine,” patients can still be criminally charged under the Narcotics Act for growing their own because they are “abusing” and “illicitly accessing” what is deemed a “narcotic medicine” at least in this instance. The other problem of course, is that patients who cannot get insurer approval (or are privately insured) must pay about twice the price for cannabis that the insurers do at the pharmacy. This population is currently the 40% of publicly insured patients denied insurance reimbursement for cannabis and the privately insured. This is why so many patients are falling out of the legitimate market and back into the black one.

However, as far as it goes, here are the definitions which so far have been set down about the pricing and trade of cannabis within the medical supply chain. Cannabis grown in Germany under commercial cultivation license issued by BfArM (and there are three companies with such licences), must be sold as an unfinished medical preparation to the sole (monopoly) distributor, Cansativa, based in Frankfurt for 2.20 euros a gram. This in turn must be sold by Cansativa to either other pharmaceutically licensed distributors or pharmacies directly. Pharmacies are the sole legal point of sale to patients and must also sell cannabis flower at a certain price. This price has also been set by law, but only when the insurer reimburses.

This also means that, assuming distributors are able to obtain cannabis from other sources for the same price mandate set for German cultivated cannabis, they and the pharmacy must split about 5.5 euros per gram between them. However, this scenario is also not a given. Many cultivators and distributors have been selling above the reference price (including Bedrocan just across the border in Holland). This means that cannabis pharmacies and other distributors beyond Cansativa, must split a profit margin even smaller than this for cannabis reimbursed via German public health insurance (which is still by far the largest group of sales).

That said, this is a situation which is changing, meaning that GMP cannabis could be sold to licensed distributors within the market for less than 2.20 euros per gram if sourced outside of Germany. This would be very attractive to both insurers and, of course, patients, if they were included in this scheme. What this also means, which is why much of the German industry is up in arms about the idea of generic discounts, is that distributors who do manage to source legitimate medical cannabis outside of Germany will be able to profit more while selling cannabis for less than the limited number of companies (all German, white male owned and operated) who essentially control the majority of the market thanks to the German bid. No discounts needed.

However, the problem does not stop here.

What, Exactly, Is Medical Cannabis Defined as Under German Law?

There are several definitions of what cannabis is. The first is that all cannabis flower, technically, is still considered a “narcotic” even if it is sourced from hemp with a THC level under .02% This is gradually changing, including by legal challenge.

Certified EU GMP cannabis flower, of whatever THC and CBD concentration, is also not considered a finished medical product, which is why pharmacists are such an important link in the chain now. They must “prepare” the flower they receive from distributors, even though in this case, all that means is that they repackage it. This also means currently cannabis flower cannot legally be considered a “generic medication.”

This being Germany where there is a law for everything, this definition also affects cannabis pricing in the medical market. Most importantly, it means that producers and manufacturers who are otherwise allowed to create discounts for generic medications may not technically be able to discount the same when sold in bulk to insurers in the future.

The only thing, as a result that the current regulations (and definitions) have created is a clear business case for the three German cultivators and the sole, monopoly distribution contract pegged to the same.

The Other Big Wrinkle

The insurers know that the days of limiting cannabis patients based on specious claims, including deliberately using old studies negating the medical efficacy of cannabis, are limited. They also do not like paying even 8 euros a gram for the patients they do qualify.

Thus, as of last fall, several distributors announced that they had entered into “discount agreements” with insurers for cannabis flower. This means that, just like wheelchairs and other prescription drugs that are deemed “generic,” insurers can further limit what kinds of cannabis doctors are able to prescribe, and further that patients are able to obtain for a monthly co-pay of 10 euros.

While this solves the price pressures for distributors who are able to sell in bulk to insurers as well as the insurers themselves, it still creates major problems. This includes the fact that a patient who is insured with an insurer who has contracted for certain kinds of cannabis, will only be able to receive a very small range of cannabis flowers. It also removes the prescription rights of doctors almost completely.

This development also still leaves self-payers completely out of the conversation. If flower were, finally, categorized, as a medicine in and of itself, it could legitimately be classified as a “generic,” and further, patients who are also self-payers could legitimately benefit from lower prices too. This development might also create, for the first time, a separate medical price for all flower which is lower than the coming recreational market (much like is done in US states like Massachusetts).

However, what this would also do is create even more of an opening for home grow, which so far, is a dirty word within the German industry itself, if not the government.

However here is what would be great about this kind of development. While there are differences between cultivars, and sativa and indica hybrids impact both recreational and medical users differently, along with the terpenes in the mix, it could be possible to create “bands” for certain kinds of flower that fall generally within a certain range of cannabinoid and terpene concentrations. That is in fact what has been established in Germany so far (at least for THC and CBD concentrations in flower), even though self-payers are still on the hook for brand name prices, no matter what they buy.

However, this development has also been criticized, mostly by the industry setting itself up to sell distinctly branded flower if not extracts. Money and mo’ money is the name of the game, even in a solely medical market.

Who Wins and Who Loses?

The status quo right now is clearly untenable. However much of this has been caused by an unwillingness of those in power to address the genuine issues. This is also however, going to be a hotly fought issue by producers — all of whom want to make money by providing “unique” strains to the medical market.

However, until some big and rather basic questions are answered, including scientific evidence which has so far, shamefully, not even been sought much less planned for, the entire idea of discounted bulk sales of cannabis flower to the insurers much less self-payers, is very much in limbo.

And in the meantime, the industry is trying to sell as much cannabis as it can, at whatever price while trying to stay afloat.

It goes without saying, of course, that there are many patients suffering as a result.

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