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Why The German Market Is Now Destination Number 1 For GMP Certified Medical Cannabis

Marguerite Arnold

April 16th, 2018

Policy

In breaking news out of Germany, the Higher Regional Court (OLG) in Dusseldorf handed down a stunning but increasingly rumored decision on March 28 on the pending domestic cannabis cultivation bid. The impact of this decision will certainly affect the date on which the country begins producing domestically sourced medical cannabis. It also creates an environment where the savvy investor should look for firms with a foothold in this space as a way to enter this valuable and growing medical cannabis market now struggling to meet patient demand – and for now, without a date on which locally cultivated crops will enter the distribution stream.

Perspective

By way of recap, the German government changed the law last year to mandate that medical cannabis was compensated under public health insurance (which covers 90% of Germans). In April, the government also announced, via BfArM, the agency responsible for regulating all narcotic drugs, that it was issuing a tender bid for the production of about 6.6 tonnes of medical cannabis. Target date for first crop delivery? Sometime in 2019.

The process ran into problems early. By September, lawsuits had been launched. BfArm extended the deadline to respond to the bid. Despite announcements, via press release, of the top ten firms, the rumours continued to persist that the bid would not survive a legal challenge.

Those complaints – four of them – and which claimed everything from cartel-like business practices around bid selection to allowing more time to respond – were also allowed to proceed as Klages (oral hearings auf Deutsch) in court, but three of them were just largely dismissed in Dusseldorf by the OLG.

However to add even more confusion, the OLG’s decision also effectively shuts down the right of BfArM to proceed with the current bid because the agency did not give the complaining firms enough time to respond during the late-summer extension. This is, in other words, a technical fault by a federal German agency in the tendering of an EU bid. The extension was too short. As a result, BfArM may not proceed with the bid or award the ten licenses.

Bottom line? There is going to be some formal if complicated paper throwing and rule citing behind the scenes between bureaucrats and bidders if not BfArM and the rest of the government. Given the opinion of the court that BfArM was at fault, there is the potential of even more lawsuits. For those on the inside track willing to comment off the record, this could go in one of several directions.

For now, as news of the decision makes the rounds during Easter weekend, the ten finalists received the official letters from BfArM announcing that the bid was formally off.

What this ultimately means, however, is that there are currently 15,000 patients with reimbursed claims here and that number is only expected to grow – including even according to government estimates. They have to get the cannabis from somewhere. And that is where this all gets very interesting.

What Does This Mean For Foreign Looking Cannabis Investors?

This decision effectively does several things. Most importantly, however, it basically guarantees that delivery of domestic product will not commence by 2019 unless there is significant hustle on the part of everyone subsequently – but even the government does not believe this will be the case. As a result, investors interested in this market as a legitimate, federally sanctioned and medically insured region, should take note.

Here is where you should be looking for interesting plays:

  1. The German government is now under the gun to produce medical cannabis domestically. That will not go away. The German hemp farmers left out of the bid process now are also, at this point, in international cooperation or even merged buy-outs with Canadians who can easily meet the requirements of an international team. As a result, look for German firms in this position and begin conversations. The German investment market is less liquid and investors more conservative on this issue than in either the U.S. or Canada right now. That means legitimate oversees cash injections are welcomed. Be aware, however, that the laws are different, and this is a very different investment climate. There is a large legal grow space here planned for a former atomic bunker at a still-secret location somewhere in Bavaria. This ain’t California. Or even Canada. Get a lawyer, and start with a government official who is directly tasked with answering this kind of question – such as those at the German Trade and Investment ministry (GTAI). Nobody else knows what they are talking about.
  2. Canadian companies already in the game via distribution agreements – and those partnered with them in Europe and Australia are still great investments because they stand to benefit the most in the shorter and longer term from this bureaucratic squabble. The creative production and distribution agreements that have sprung up across the continent are legion at this point and tell an interesting story. Tilray sits in Portugal. Aurora followed Spektrum into Denmark last year is also now in operations in Italy as of January, along with Canadian-German Aphria-Nuuvera.  Spektrum itself is about to launch a new source of product (greenhouse-grown but medical grade cannabis sourced from Spain) bound for the German market. These companies are all, conveniently, listed on public exchanges in multiple countries. The easiest international investment in the legal pot biz is this route and will be for some time.
  3. Greece. This is a hotbed of potential domestic production and even a source for medical cannabis bound for the German market. Look for firms in this space already. However, because the Greek market is so new, be especially careful about export rights. Demand to see paper and certifications in every direction.
  4. Eastern Europe. With the Israelis now blocked from export in a deal apparently cut over the relocation of the capital to Jerusalem between Presidents Trump and Netanyahu, look for interesting Israeli-backed hybrids to start to come out of Slovenia in particular, but throughout the former “Eastern bloc” countries. The one exception to this is Poland. For the moment, the country is following its German cousin, so imports are the only way cannabis will come into the country, and export, obviously, is out of the running for now.
  5. Non-EU countries. As will be evident at the upcoming ICBC conference in Berlin, there are other alternatives now springing up with GMP cert, even if they are not in the EU but close to it. Look for innovative companies with the proper licensing and export agreements to come from the eastern regions of the EU if not just outside its borders. They exist and are about to play an interesting roll in a country where legal, medically-certified cannabis is just about as valuable as gold right now and will be, thanks to this recent decision, for some time to come.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Marguerite Arnold

Marguerite Arnold is a veteran investigative and markets journalist, American expat and author. She has covered the cannabis industry from Germany for the last six years. Her book, Green: The First Year of Modern American Cannabis Reform about the American market in 2014 has just been republished as she is writing the sequel about Europe and the global revolution this year. Green II: Spreading Like Kudzu will be published in 2020. She is also a noted technologist and entrepreneur. Her blockchain-based digital prescription platform MedPayRx was just shortlisted by the German Ministry of Health as one of the "Top 20" use cases for blockchain in healthcare.

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