Pharmaceutical, Foreign investment

The new Draft of Regulatory Decree for Medicinal Cannabis: Part 3 - Protection of Small and Medium Cannabis Cultivators

17/07/2019

The Colombian Ministry of Health has proposed a draft of Regulatory Decree on the Safe and Informed Access to the Use of Cannabis currently regulated by Decree 613 of 2017. The Draft, when it is issued and enters into force, will have some important and substantial modifications on the issuance of licenses and its regulation.

The first article of our series explained and analyzed the changes in the general requirements for application to every cannabis license issued in Colombia. The second delivery analyzed the differences between the current regulations and the Draft Decree regarding international trade operations (import and export) of cannabis.

In the third issue of our series, we will make some remarks on the most important changes the proposed regulation has towards the protection of  small and medium size cannabis cultivators (hereinafter SMCC) and the effect the proposed regulation has, regarding the applications for a license of fabrication of cannabis derivates.

The Draft Decree proposes that the fabrication license holders, must acquire and transform at least 10% of each allotted quota of cannabis, from a SMCC, to whom the fabrication license holder must grant technical assistance and transfer of technology.

Bear in mind that the allotting of cannabis quotas in the Draft Decree is required for cultivation of psychoactive cannabis and for psychoactive and non-psychoactive fabrication of derivates.   

In order to comply with the 10% requirement, the Draft establishes that the fabrication license holder, except in the modality of scientific research, must be included as recipient of the cannabis harvest of at least one small or medium licensed cultivator.

When the fabrication licensees already count with a resolution (administrative act) that links them with a small or medium licensed cultivator, and it is not possible for the latter to furnish the former, the licensed SMCC must provide an affidavit manifesting the impossibility, and declaring that the fabrication license holder has granted him/her with technical assistance and transfer of technology. Once the fabrication quota is allotted, the non-compliance of the obligation to transform at least 10% of it will be a cause of cancellation of the fabrication license.

As it can be noted, the proposed regulation imposes a high burden for the fabrication license holders, as they must be compulsorily linked to a small or medium cultivator. If this requirement is not complied with, the fabrication license will be cancelled.

It is important to highlight that the current regulation (Decree 613 of 2019) conceives a timeframe of 5 years from the beginning of the fabrication activities, to transform the 10% of the allotted fabrication quota of the licensed fabricator. The proposed regulation of the Draft Decree does not provide the 5-year timeframe. Therefore, it can be interpreted that the obligation of transforming 10% of the allotted fabrication quota has immediate effects and must be commenced upon the issuance of the license and start of fabrication operations.

Furthermore, the proposed regulation imposes the additional obligation to give technical assistance and technology transfer to the small or medium licensed cultivator. Consequently, the licensed producer must spend additional financial resources to comply with this obligation, which may pose a great difficulty, as it is a known fact that the technology used in the cannabis business is not cheap.

Another notable change the Draft Decree provides, is the elimination of the possibility of a SMCC to be a good faith possessor of the land where cultivation is going to take place. In the current regulation, an affidavit manifesting the condition of good faith possessor could replace the certificate of land registration. Therefore, the proposed regulation requires that the small or medium license cultivator must own legal title for the land he is going to cultivate.

Following with the notable changes the Draft Decree proposes, regards of the allocation of quotas. In the proposed regulation, the allocation of the quota for the required 10% that has been mentioned above, will be automatic, as well as the request made by the fabrication license holder.

Analyzing the proposed regulation, it can be affirmed that the Ministry of Health is projected to issue a more protectionist regulation towards the small and medium cannabis cultivators, as it is compulsory for every fabrication licensee, except in the modality of scientific research, to transform a percentage of its allocated quota from the harvest of a small or medium cultivator. It is indispensable for the fabrication licensees to associate themselves with small or medium cultivators, regardless of the heightened financial burden the requirement poses.

There are many challenges the fabrication licensee may have to deal with, including the identification of the small and medium cultivators. For that purpose, on June 14th, 2019, The Ministry of Justice published a list that identifies all those considered small or medium cultivators, available in the following link: http://www.minjusticia.gov.co/Portals/0/Cannabis/Listado%20de%20pequenos%20y%20medianos%20cultivadores%20actualizados%2014-06-2019.pdf.

The association with SMCC may pose a series of difficulties, as they could be hard to manage, as most of them could have different cultural visions about business and may not count with entrepreneurial culture that permits them to fully understand the extent of the industry. Additionally, if there are no available SMCC near the fabrication facilities of the license holders, there may be a logistical problem to transport the untransformed cannabis to the laboratory that manufactures the derivates. Therefore, the fabrication license holders and applicants must analyze where they are going to be located.

In sum, the proposed regulation makes the SMCC a key factor to put into the equation, something to take into account while planning a project in Colombia.

 

Note:

The Draft Decree on the Safe and Informed Access to the Use of Cannabis is available in Spanish in the following link:

https://www.minsalud.gov.co/Normatividad_Nuevo/Proyecto%20decreto%20Acceso%20seguro%20e%20informado%20al%20uso%20del%20cannabis.pdf

The current Regulation on Medicinal Cannabis, Decree 613 of 2017 is available in Spanish in the following link:

https://www.minsalud.gov.co/Normatividad_Nuevo/Decreto%20613%20de%202017.pdf

The first article of the series, concerning the changes of the general requirements for license application is available in the following link:

            http://www.abusaidgomez.com/publications/article/draft-decree-cannabis-part1

The second article of our series, concerning the proposed regulation on international trade of cannabis is available in the following link:

http://www.abusaidgomez.com/publications/article/draft-decree-cannabis-part2-internationaltrade

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