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Edible, Extract and Topical Regulations : Highlights and Lowlights

Edible, Extract and Topical Regulations : Highlights and Lowlights

On Friday June 14th, Health Canada unveiled the finalized regulations for what many are calling ‘Legalization 2.0’: Extract, edible, and topical cannabis products. These are the regulations that License Holders (formerly Licensed Producers) will have to abide by when producing these ‘new’ classes of product. It is important to note that cannabis oils will now be treated as an extract and not a separate product class as they are now under the unamended Cannabis Act.

A Stakeholder Tug-Of-War

There are many important pieces of information to sift through, however firstly it’s important to examine information shared by Health Canada regarding the feedback gathered from stakeholders to understand where some of the more contentious regulatory decisions might have come from. In the document containing the regulations, Health Canada outlines some demographic information about which parties had which opinions on some aspects of the regulations.

Responses were received from the industry itself, private citizens and public health stakeholders. On the whole, if there was some conflict between what industry and citizens wanted, and what public health stakeholders wanted, the latter seems to have prevailed. On controversial decisions such as the 10mg THC limit per package of edibles, it seems that both industry and Canadians wanted less restrictive policy, while public health stakeholders favoured a more cautious approach. This also extends beyond the new product classes, to further restrictions on advertising and promotion which were made to ‘address comments received from public health stakeholders’.

Definitions

There are 3 new broad categories of cannabis products, and the logical separation between them largely focuses on intended form of use. Cannabis Topicals are products that can be applied to the skin, with 2 major prohibitions: No eye drops, and no products which are designed to be applied to broken or damaged skin. Edible Cannabis refers to products which are ingested, meaning cannabis food products or cannabis beverages. Finally, Cannabis Extracts refer to products which either use extraction techniques to create the final product, or where cannabinoids present in the cannabis plant are synthesized or artificially created.

As mentioned above, oils will now be treated as cannabis extracts, and license holders will be given a 12-month transitory period to adjust their oil production to align to the new regulatory standards, similar to the transitory provisions given to license holders between the ACMPR and the Cannabis Act coming into force.

Highlights

The first highlight to mention is that the finalized regulations have arrived, and that the legal ecosystem will now have the ability to bring these products to market and more effectively compete with the legacy market. This may seem self-evident, but it is important to realize that Canada will be a first mover when it comes to having federally legalized product classes aside from cannabis flower and oil.

A large positive to the regulations is that it is largely up to license holders to determine what would cross the line of appealing to youth. Washington State provided a list of approved shapes for candy for example, thankfully no such government-prescribed lists exist under the regulations. This will add regulatory uncertainty however, and may make the 60-day notice period for new products far less of a rubber stamp than it is now.

Cannabis topicals have the least stringent packaging requirements and THC limits, with the only restriction being 1 gram of THC per container. The 10mg discrete unit restriction on both edible cannabis and cannabis extracts are a lowlight, but at least the immediate container limit for cannabis extracts is the same as that for topicals.

As mentioned on the Health Canada Regulations Media Briefing, flavouring agents will be allowed in most cannabis extracts, as well as stablizing agents and carrier oils. This framework largely mirrors what is currently contained in the legacy market's offering when it comes to products such as vape pens, meaning companies focused on extracts will not have many hoops to jump through in order to bring vape cartridges to market.

Ethyl alcohol will also be permitted, so we will eventually see legal tinctures made with alcohol. Naturally occuring amounts of otherwise regulated ingredients will also be allowed, so the small amount of caffeine present in chocolate will not prevent chocolate edibles and other similar cases from coming to market.

Edible labelling will more closely resemble current nutritional information on food and beverages, which is a good thing as cannabis consumers will be faced with a lack of education as these new product classes are brought to market. Labelling for extracts and topicals will also give consumers important information, such as allergens and intended use. The latter may seem redundant, but will be helpful for new consumers in both communicating information about the product and also allowing a new user to easily determine what types of products they should be looking for if they wish to vape an extract versus ingest a tincture.

‘Multi-packs’ of ingestable cannabis will be permitted, so a 6-pack of a cannabis beverage product is something we will eventually see on store shelves. The relatively low THC limits per package remain however, so these beverages will likely be far less potent than those seen in legalized states or the legacy market.

A significant change to labelling allowances will also allow fold-out or ‘accordion’ labels to be used when all necessary information would not otherwise fit on the product’s container. Given the increased information that license holders will be required to provide for products like edibles, this is a very good regulatory inclusion.

Edible cannabis will be required to have a best-before date, which will be a welcome sight for consumers. Current cannabis flower products can sometimes have packaging dates ranging back to 2018 with no generally accepted expiry date. An incremental change, but a good one.

Lowlights

There are, unfortunately, several significant lowlights in the amended framework. The most notorious of which is the limit on THC, with each package being only able to contain 10 milligrams. The rationale given for this decision heavily leans on public health stakeholder feedback, and stresses the need to avoid accidental consumption and overconsumption. A similar regulation in this framework is requiring completely separate buildings for packaging of edible cannabis. Similar to how the MMPR regulated cultivation, it is unfortunate to see cannabis again being stigmatized as a dangerous substance.

This regulation will also exacerbate the already problematic amounts of packaging that are required to legally distribute cannabis products. It is a puzzling move, given the Liberals recent announcement of intending to ban single-use plastics.

The overall edible scheme focuses on pre-packaged items, restaurants will not be permitted to serve infused food. As mentioned in a previous piece on Canada’s legalization scheme, this is not innovative policy, but performing the bare minimum to be able to tick the ‘edible’ box on product offerings. Additionally, the US is slowly starting to erode our first-mover advantage in the hospitality area, given that they have begun to license lounges and infused restaurants while Canada largely has eschewed both kinds of cannabis hospitality establishments.

Further restrictions on promotion and advertising will further exacerbate the branding issue that the legal ecosystem currently suffers from. The current prohibitions will be extended from packaging to promotional activity, meaning any promotional activity undertaken by a license holder will be unable to create any associations or other creative elements that are prohibited on cannabis packaging.

These prohibitions range from health or skin benefits, to fulfilling dietary requirements. Given the potential for CBD to become a ubiquitous consumer-packaged good on its own, this prohibition gives other jurisdictions the greatest potential to offer a more attractive market for advertising products containing CBD and undercut Canada’s first-mover advantage. An unfortunate decision, given the non-intoxicating nature of pure CBD products.

Another unfortunate extension of advertising restrictions will involve ‘swag’, or non-cannabis related products containing brands and logos of license holders. After October 17th, these items may only contain one brand element, and this brand element may only have a maximum size of 300 square centimetres. Additionally, any text within the brand element may only be 4 centimetres high. This is another puzzling move, overall it seems as though there was either a large amount of feedback complaining about the lack of brand restrictions on ‘swag’ products, or a disproportionate amount of importance was given to that feedback.

More Highs or Lows?

The amended regulations represent a step forward in drug policy, and the expansion of the legal market to offer choice to consumers intended eventually to be on par with the legacy market. In examining these changes, we also have to consider Canada being the first country to have federally legalized these product classes and that more conservative regulations are to be expected.

At a high level, the regulations cover the majority of product formulations that are currently available in the legacy market, and give license holders a pathway to start taking market share away from illicit products. Several unfortunate decisions such as the 10mg THC limit on edibles, however, will make that task harder than it necessarily needs to be.

The expanded restrictions on advertising and promotion will also make the task of displacing the illicit market harder, or even the objective of gaining market share on traditional products such as cosmetics with infused forms, even those only containing CBD. They also put Canada further at risk of losing what remains of our first-mover advantage, and investment moving to more promotionally-friendly jurisdictions.

Overall, the regulations as they will stand on October 17th are a ‘starting point’, and the more cautious decisions are somewhat to be expected. Given the glacial place of regulatory change, and possible changes made by the Conservatives should they win the election in the fall, they may also unfortunately represent an ‘ending-point’ for Canada’s advantages in the consumer-packaged goods market if other jurisdictions take advantage of the opportunities they have been given by our restrictive regulations.

A slight ray of hope on this front is the announcement that health canada will hold consultations on CBD products being sold outside the current regulated system, however no date has been given for these consultations as of yet.

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