Thank you very much.
My name is David Johnston. I am president and CEO of CAPDM, which is the Canadian Association for Pharmacy Distribution Management.
CAPDM represents Canada's pharmacy supply chain, and counts within its membership, pharmaceutical distributors, self-distributing pharmacy chains, and prescription and non-prescription drug manufacturers. CAPDM was founded in 1964, and several of our distributor members have safely and comprehensively been distributing pharmaceutical products in Canada for over 100 years.
I would like to begin with a statement: distribution is not retail.
Effective coordinated wholesale distribution will be an essential element to the successful and safe legalization of cannabis. I'm also going to suggest that distribution has not yet been appropriately addressed by the federal or provincial governments in the current planning activities.
Let me start by providing some background information on the pharmaceutical industry.
Greater than 95% of pharmaceutical products pass through a pharmaceutical distributor. It is the system of choice for governments and industry in Canada for the distribution of pharmaceuticals. As a result, products ranging from over-the-counter headache medications to the most potent controlled substances are delivered to over 9,000 community pharmacies and 900 hospitals every day.
An order placed one day is on the shelf the next day regardless of the pharmacy's location. From a distribution point of view, the cost is the same regardless of destination. Consequently, in Canada there is no disadvantage, no difference, from a distribution point of view if you access your medicines from a small pharmacy in a rural town or a large chain in a downtown urban environment. This safe, secure, and efficient system is a global gold standard, and compares very favourably to other countries and jurisdictions.
Pharmaceutical distributors are also a buffer against drug shortages, helping to smooth out supply and demand between pharmacies and manufacturers by holding several weeks of inventory in their facilities, and working with manufacturers and governments to closely manage supply during times of constrained product availability. The industry is highly regulated through Health Canada, with multiple licences, and our members are subject to strict auditing and reporting requirements.
For a last point in this overview, pharmaceutical distributors support a two-way system; not only do they distribute but they also track the products, and have protocols in place that allow recalled products to be out of the market and back to the distributor within 36 hours.
Back to that opening statement that distribution is not retail, distribution is the movement of product between a producer and the access point, between, in this case, the licenced producer and whatever that public access point will be within the various provinces. Effective distribution is essential to the successful legalization of cannabis.
Discussions to date have been focused on production, and where legalized cannabis will be sold. In fact, in the 52 times the words “distribute” and “distributing” appear in Bill C-45, with little exception, they refer to selling and retailing, not the specific activities of distribution. The word “distributor” does not appear in Bill C-45.
With this background, I would suggest that distribution needs to be an active discussion point, and the pharmaceutical distributors are the natural partners for the distribution of both medical and recreational cannabis. By leveraging this proven and highly successful system, regardless of the final retail point, whether it be a government-controlled retail outlet or a licenced private retailer, Canada will avoid the pending hazards that are looming by not addressing distribution, which have been dramatically and negatively experienced in other jurisdictions. For example, just recently in Nevada's legalization experience, retailers ran out of inventory in the first two weeks after launch because a buffer was not provided by a wholesale distribution system.
With fewer than 10 months until cannabis legalization, this is a crucial moment for the federal, provincial, and territorial governments as they wrestle with many complex issues. The provinces are deeply concerned by the short and, some may say, unrealistic time they face in preparing for legalized cannabis.
From experience, we understand what the provinces face. There are daunting complexities and enormous investments associated with establishing a new regime that incorporates best practices for a highly regulated, secure, and cost-competitive supply chain, is mandated to safeguard public health and safety, and which by its competitiveness will reduce the prevalence of black market cannabis.
The final report from the federal task force stated that a well-functioning distribution system, where the chain of custody is well-controlled, is critical to the overall success of the new regime. We couldn't agree more.
Today, the direction is to have the responsibility of cannabis distribution in the hands of the provinces and the territories. With the regulatory demands we experience every day in our Canadian pharmaceutical supply chain, we cannot imagine a functional and cost-competitive cannabis distribution environment that is built upon a patchwork of varying provincial models and regulations trying to incorporate the federal mandate for tracking, reporting, and recall measures.
Why reinvent a system in each province and territory when a proven one already exists? This is a proven system that is well established and requires minimum government investment, a proven system that already fulfills all of the requirements defined by the federal government and has an existing oversight and audit system, and a proven system that is cost effective, therefore allowing the legal market to out-compete the black market on price.
The adoption of a ready-made cannabis distribution model will deliver a turnkey solution that is ready to go and that relieves significant system stress, as the pharmaceutical wholesalers already have secure infrastructure, processes in place for safeguarding cannabis from diversion, and efficient, low-cost distribution services, keeping cost structures competitive to thwart black market cannabis. This is a channel-agnostic distribution model that will service a wide range of retailers, whether they be government-controlled retail outlets or other channels, a model that is already vigorously regulated via national standards and inspected regularly by Health Canada. Provisions for shipment data on a timely basis, providing government full transparency of product movement and next-day delivery capacities mean that retailers could maintain low inventories, thereby minimizing losses from theft and diversion and a quick and efficient execution of product recalls.
CAPDM and its members recommend, first, that distribution be recognized as essential to the success of legalized cannabis and that effective distribution become a key deliberation point for both federal and provincial governments. Second, we recommend that a national perspective for cannabis distribution be established to avoid an inefficient and potentially dangerous conflicting patchwork of distribution systems, and third, that the safe, secure, efficient, cost-effective, and comprehensive distribution network of the pharmaceutical distribution industry be evaluated as a turnkey option for a national system.
Finally, to return to my opening line that distribution is not retail, for the legalization of cannabis to be successful, strong production, distribution, and retail models are all essential. There are thousands of decisions to be made in the legalization of cannabis. For the essential element of distribution, the pharmaceutical distributors have a turnkey and proven solution to the safe, secure, comprehensive, and cost-efficient distribution of cannabis.
Thank you very much. I would be happy to answer any questions.