Frankfurt The traffic light coalition plans to legalize cannabis. This is what it says in the paper of the Health and Care Working Group, which is available to the Handelsblatt. “We are introducing the controlled supply of cannabis to adults for consumption purposes in licensed shops,” it says. The law is to be evaluated for social impact after four years.
Legalizing cannabis could create a billion-dollar market in Germany, with high tax revenues for the state. But there are still many unanswered questions.
The working group’s paper lists key arguments in favor of legalizing the currently illegal drug cannabis. The quality of the substances can be controlled, the transmission of contaminated substances can be prevented and the protection of young people can be guaranteed. Proponents believe that taking this step will dry up the black market. Also not insignificant: a legal cannabis market opens up new opportunities for the state to generate taxes.
Industry experts currently estimate the black market in Germany to be at least 200 tons of cannabis flowers per year. With prices around ten euros per gram, this already results in a billion-dollar market.
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The economist Justus Haucap from the University of Düsseldorf also estimates in a new study that has just been published that legalizing cannabis for the tax authorities through additional tax revenue and social security contributions as well as savings in prosecution and justice could bring in a total of more than 4.7 billion euros per year.
Who delivers the cannabis for consumption?
That is probably one of the biggest hurdles in the project. Because if Germany were to import cannabis for pleasure, it would violate international law. For Germany, the 1961 uniform agreement of the UN states on narcotics is binding. This prohibits the trade, including the import and export of cannabis for pleasure purposes, referred to in English as “recreational cannabis”.
If the new government does not want to break with international treaties, cannabis would have to be grown in Germany. Basically, this already exists, but so far only for medical use and in small quantities.
With the release of cannabis as medicine in 2017, a process was initiated that enables cultivation in Germany. In 2019, the Federal Institute for Drugs and Medical Devices issued licenses for the production of 2.6 tons of cannabis per year to three suppliers: the Canadian companies Aurora and Aphria, which has now merged with its Canadian competitor Tilray, and the German start-up Demecan. All companies built indoor cultivation systems under high security conditions.
The project turned out to be more difficult than expected: So far, only part of the originally calculated quantity can be delivered. In order to meet the demand for medical cannabis, significantly more has to be imported: in 2020 there were almost twelve tons of cannabis flowers, in the first half of the current year almost ten tons.
The establishment of a cannabis production in Germany, which would meet the volume requirements in the order of magnitude of the black market, is likely to take years.
Why should only licensed specialist shops sell cannabis and not pharmacies as well?
The idea behind the proposal to sell cannabis through licensed specialist shops is to be able to control the supply only to adults and to be able to refer to an addiction counseling service if necessary. Canada also followed the same model of legalizing cannabis, but was initially faced with the problem that there were far too few shops to sell the cannabis.
Availability is a big issue anyway if you want to make recreational cannabis so attractive that the black market is actually dried up. Because not every consumer would go to specialty stores far away for a few grams of hashish if the dealer is nearby.
Various providers of medicinal cannabis advocate that pharmacies can also dispense cannabis for recreational consumption. In this way, the existing supply chains could be used. However, the health advice mandate of pharmacists and, for many, also the self-image speak against this.
The Berlin cannabis company Cantourage recently even proposed that cannabis should be declared as an over-the-counter drug, a so-called OTC product (over the counter). Lawyer Peter Homberg, partner at Dentons and head of the cannabis specialist group there, considers the idea “extremely difficult to implement from a regulatory perspective”.
Cannabis is currently a raw material for prescription drugs that, by definition, cannot be considered an over-the-counter product. “And every OTC drug also needs a marketing authorization in Europe, for which the corresponding approval documents have to be drawn up,” says Homberg. Incidentally, mail order business will not be possible in his opinion either: “Dispatching by post cannot be adequately controlled,” he said.
Other medicinal cannabis companies see new growth opportunities in the establishment of licensed specialty stores. “For us as an importer and wholesaler, a second, attractive market is opening up, for which we could use our existing supply chains and infrastructure to a large extent,” says Benedikt Sons, co-founder and CEO of Cansativa. “We also want to operate licensed specialist shops ourselves and thus open up a whole new area of the cannabis market for us.”
Finn Hänsel, CEO of the Sanity Group, can also very well imagine “building up and operating a system of licensed specialist shops”. For the Berlin company, the focus is on the medical use of cannabis. “However, we have always advocated a more liberal approach to cannabis,” says Hansel. In the future, the company also wants to promote responsible use of cannabis in the leisure sector.
How expensive will cannabis be for recreational use?
If one pursues the goal of drying up the black market with the release, then legal cannabis should not be more expensive than black market cannabis – including taxes. On the black market, one gram currently costs around ten euros per gram, depending on the city, but there are different qualities with different levels of the ingredient THC. Legal cannabis would also have to offer such a variety in order to be an alternative for current black market customers.
Despite all the open questions: In the still young German medical cannabis industry in Germany, the intentions of the Ampelkoalition are well received: “The plans for the controlled release of cannabis to adults are a good signal,” says Jakob Sons, co-founder and managing director of Cansativa. Now it is important that the project is quickly brought into parliament as a draft law. “Because then the regulatory work to implement liberalization only begins.”
More: “Made in Germany”: Domestic hemp is now conquering pharmacies