Finance Committee on May 9th, 2018

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I thank everyone for being here.

My questions and comments will be about cannabis. Thank you for sharing your expertise and for your comments.

I make a clear distinction between the GST and the HST, and excise taxes. In my opinion, those are really two different issues, but they are of course related.

I don't know exactly know to whom I will address my question. Are the GST and HST already being applied?

Mr. Killeen, you must know?

[Pierre Killeen]

Yes, they apply and they will apply to sales of cannabis for therapeutic and non-therapeutic uses once the law is adopted.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

If I understood correctly, the bill provides a potential GST and HST exemption only for prescription products that have a drug identification number, or DIN.

Do you think it would be realistic to ask for a DIN?

[Pierre Killeen]

It would take a long time.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

It's also costly. Is it not?

[Pierre Killeen]

It's costly and it will take time. At this time, Canadians are asking for access to cannabis for therapeutic purposes.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

The fact is that before it can obtain a DIN, any business has to carry out many clinical studies to prove the effectiveness of a medication.

[Pierre Killeen]

The industry is heading in that direction, but it's going to take time for us to get organized and do the studies, so that we have what it takes to submit an application to Health Canada for a DIN.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So in the short term, it's not realistic to hope for that exemption, which will exist. However, in practice, no one has a DIN at this time, correct?

[Pierre Killeen]

The important thing, Mr. Dusseault, is to know that this industry is really just starting out. Our knowledge regarding cannabis is going to grow quickly, but we need time to get ready to ask for the authorization to offer cannabis as a medication.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Do you already have products whose THC content is lower than 0.3%? Does that exist on the market?

[Pierre Killeen]

We already have products that contain less than 0.3% THC. We could offer that type of product to Canadians, but the intensity of pain and suffering varies greatly, and a product containing less than 0.3% THC would not be enough to provide relief to some patients. So the reach of that exemption is going to be limited.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Once again, obtaining a DIN, and the exemption for products with a THC content of less than 0.3% does not seem realistic in the current market. Is that correct?

[Pierre Killeen]

For some people, providing products with less than 0.3% THC would be realistic, but not for everyone.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Okay.

Now I'd like us to discuss the excise tax, which is the other important element, and it may be more important than the first point. You will now have to have a permit issued by the Canada Revenue Agency to be a cannabis producer.

In my opinion, the main issue for a producer is to make a clear distinction between recreational cannabis and cannabis for medical purposes.

Do you know any businesses that intend to produce both types of cannabis and will hold two licences from the Canada Revenue Agency, i.e. a licence to produce medicinal cannabis, as you do, and also a licence for recreational cannabis?

[Pierre Killeen]

As you probably know, our industry is highly regulated. We are getting ready to obtain a licence in connection with taxes and excise taxes. We are quite willing and ready to meet the legal obligations that are incumbent upon us as a business, and as taxpayers.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

I will address this question to Mr. Rewak, but others may wish to answer as well.

Did you assess the price difference for patients between the current cost of medicinal cannabis and the price that will apply under the proposed regime?

[Allan Rewak]

Much of this is anecdotal. Unfortunately, we just don't know because we don't have the systems fully in place. Supply agreements are still being formed and adult consumer use sales networks are being finalized.

What I can say in a generalized fashion is that I would anticipate medical cannabis to be slightly more affordable than adult consumer use cannabis. We expect different product categories to sell in the adult consumer use marketplace as opposed to the medical market, but the excise tax in addition to HST and GST will significantly add to the cost, perhaps by 25%, to medical production. We can ship directly to patients through the ACMPR. That gives us some efficiencies to keep costs low.

Ultimately it would be cheaper for us to simply apply excise tax to all products. It's easier from a production standpoint, but ethically it's wrong. We won't do that to patients. We would rather have a more complicated system from our production standpoint because the patients are what made us what we are today. They will continue to support us, and we will not forget them.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So for a producer, it would be realistic and possible to produce both types of cannabis. If they made a clear distinction between medicinal cannabis and recreational cannabis, they would not have to pay the excise tax on that second type of product.

Mr. Killeen, can you tell us if you think this is realistic?

[Pierre Killeen]

Currently, we offer medicinal cannabis to Canadians online. So we already have a system in place to offer that service to clients who have health issues. Now we have to create a system for the excise tax on the recreational products.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

There would be two parallel systems, is that correct?

[Pierre Killeen]

As my colleague Mr. Rewak said, it is going to be more costly for us, but we are aware of the obligation we have to Canadians who consume cannabis for therapeutic purposes. Without them, we would not be here today.

[The Chair, Liberal, Wayne Easter]

We'll have to stop it there, Pierre.

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

Thank you to all the presenters. There's some very good discussion here today. I'm certainly learning a few things.

I represent the Northwest Territories. Regarding freight costs, I wanted to say that we run our alcohol distribution through a liquor commission in the Northwest Territories, and cannabis is going to be run through the same commission. We already have a lot of controversy over subsidizing the price of alcohol. We have alcohol landing in a far north community and it's cheaper there than in the south. We have a lot people raising eyebrows.

I think we're going to have the same problem when it comes to cannabis. I don't have the same concern when it comes to medical marijuana, because I know the benefits of the use of medical marijuana.

I have a couple of questions. First of all, I understand the tax issue. We were looking at not having any sort of tax, no GST, no HST. We'll treat this as a prescription drug rather than an over-the-counter drug. I'm assuming that's where we're going with this. That's my first question, if you could respond to that.

Second, I want your opinion on the conference that was held in Toronto at the end of April, where physicians discussed whether doctors should continue to prescribe marijuana if it becomes legal for all. If they didn't do that, what would some of the fallout be?

There's a number of you that focus on—maybe I could get Annie to respond, and maybe the Canadians for Fair Access and Cannabis Canada could talk about the issues as well.