Westleaf Submits Extracts and Edibles Comments to Health Canada Ahead of Legalization
March 19, 2019 MJ Shareholders
Ryan Allway
March 19th, 2019
News, Top News
Recently, Health Canada released draft regulations for the next major phase of cannabis legalization in Canada. Part of that disclosure was an invitation to all parties to submit suggestions and recommendations about improving the regulations and prepare the environment for the legalization of edibles, topicals and other products later this year. The industry consultation was presented in the form of a dozen questions around the regulations.
Westleaf Inc. (TSX-V: WL) submitted what it sees as the key considerations and some recommendations going forward. Westleaf, like others in the industry, supports Health Canada’s overall approach to legalization of cannabis and cannabis infused products, and specifically supports the objectives of the Cannabis Act. These objectives are to protect the health of young people; to eliminate the black market; to provide a safe product; and to increase public awareness of the health risks associated with cannabis use.
Health Canada has specifically asked for feedback on the regulations and specifically in the thirteen areas which were identified in the document. Here are Health Canada’s questions with Westleaf’s responses:
- What do you think about the proposed THC limits for the new classes of cannabis products?
The 1,000 mg maximum of THC per package and 10mg of THC per unit for extracts and topicals makes sensible regulatory sense. One potential issue with the extracts is sourcing dispensing devices to deliver a vaporized product in a 10 mg of THC unit. We are currently unaware of any product in the vaping product category that can accurately and consistently limit the amount of cannabis in a vape pen to the 10 mg level. While such products may be in development and may be available in the near future, currently this does not exist, and regulations should reflect this deficiency and reality that some vape products will be more and some less than the prescribed 10mg dosage.
However, the largest area of concern is with the edibles proposed THC limits. Individually packaging the edibles into separate 10mg packages does not make regulatory nor business sense. The cost and burden on businesses, including, but not limited to, the child safety packaging, labeling requirements, and tax stamp compliance, on such a small unit amount is overly burdensome for the potential risk that is attempting to be mitigated. It is likely that a piece of 10mg chocolate – think Hershey kiss size – would have to be packaged in something closer to the size of a deck of cards to be compliant. This is wasteful from an environmental and cost perspective. This will lead to a price point that most consumer will not purchase the product, which will continue to drive consumers to the black market. A much more reasonable approach is 100 mg per package, but the package must contain individual edibles no more than 10 mg each. Please see an additional solution proposed in response to Question 11, below.
- Do you think the proposed new rules addressing the types of ingredients and additives that could be used in edible cannabis, cannabis extracts, and cannabis topicals appropriately address public health and safety risks while enabling sufficient product diversity?
Yes, we support the restriction of flavouring in certain products such as vaporizers, such as is being implemented in e-cigarettes, to make the product less attractive to minors. We would however support the natural flavor of cannabis additives within limits.
- Do you think that the proposed rules for other classes of cannabis will accommodate a variety of oil-based products for various intended uses, even though cannabis oil would no longer be a distinct class of cannabis?
Yes, Westleaf’s position is that there will be enough room in the proposed regulations to accommodate new oil-based products.
- What do you think about the proposed six-month transition period for cannabis oil? Is a six month transition period sufficient?
It is Westleaf’s position that the proposed transition period is sufficient for producers to adapt.
- What do you think about the proposed new rules for the packaging and labelling of the new classes of cannabis products?
Westleaf’s position is that this may have a medium to long term negative impact on the industry and the stated goals of Health Canada to stamp out the illegal market. It continues to be a concern that the regulations are too restrictive to create brand recognition within the industry. This may, over time, hurt the industry because the long-term value of any consumer-packaged goods business is in the brand recognition and differentiation. If businesses are unable to differentiate with brand elements, the industry may see less and less professional operators in the space. Which in turn, will create compliance issues for regulators and continue to help proliferate the illegal market. Appropriate branding helps inform consumers.
Cannabis is unique in that the consumer cannot really get a sense of the product until the consumer purchases is and consumes it. Compare this to something like clothing that one can look, feel, and try on before purchase. Over time a good brand creates a reputation that lets consumers know what to expect from that certain product in advance. This in turn helps consumers build trust and find the best products for their needs in a product category that is very opaque to a consumer. This is even more prevalent for edibles and other consumables due to the complexity of the product.
Properly executed branding, over time, will help educate and differentiate the products and create a real advantage for legal cannabis over products from the black market. The trust in a brand with respect to safety, consistency and meeting the consumer’s needs is something that the black market is not able to do. It is our opinion that appropriate and consistent branding will help drive out the illegal market. In addition, we would support some middle ground in branding whereby an industry standard could be supported for adding branding such as “organic”, “no artificial ingredients” and that these brand elements could be verified and supported by the producer. In addition, Westleaf is proposing that companies be allowed to provide any non-essential labelling information through referrals to age-gated websites.
- With respect to edible cannabis, what do you think about the requirement for all products to be labelled with a cannabis-specific nutrition facts table?
This is a similar requirement for all food products which are reviewed by the FDA and CFIA every five years. It is Westleaf’s position that this is logical step and that there will be benefits for the consumer and for branded products, however we are concerned that it will increase costs for compliance which will increase the cost of the product and keep the price point so high that the illegal black market will be able to maintain a competitive advantage. In addition, we are concerned about the amount of label space if the products are limited to a 10mg portion (see response to Questions 1 and 5).
- What do you think about the proposal for the labelling of small containers and the option to display certain information on a peel-back or accordion panel?
The concept of flexible packaging and labelling options is an appropriate concession for the individual packaging of 10mg edibles, however, for the reasons stated above (in responses to Questions 1, 5 and 6) it does not go far enough to accomplish the objectives of the Cannabis Act in creating a competitive advantage to eliminate the illegal black market.
- What do you think about the proposal that the standardized cannabis symbol would be required on vaping devices, vaping cartridges, and wrappers?
Westleaf’s position is that we would support this to differentiate the product from e-cigarette vaping products, however, again this should be done with a recognition of the increase costs for compliance and whether or not that increase cost will keep the price point too high to drive out the illegal black market.
- Do you think that the proposed new good production practices, such as the requirement to have a Preventive Control Plan, appropriately address the risks associated with the production of cannabis, including the risk of product contamination and cross-contamination?
The Preventative Control Plan is similar to the Food Safety Modernization Act (FSMA) and the Safe Food Canadian Act (SFCA), and despite creating more paperwork for the producer and is an appropriate plan for businesses and should be periodically checked and verified. Part of good industrial practice and part of our training.
- What do you think about the requirement that the production of edible cannabis could not occur in a building where conventional food is produced?
Westleaf’s position is that while we see the logic to the regulation, however it may be over regulation in an industry, the food sector, that is experienced in dealing with allergens (peanuts for example) within the same facility. As long as the producers maintain proper sanitation practices and dedicated production lines, we believe the fear of contamination can be overcome without having to have separate facilities. We are however not immediately affected by this regulation as we are proposing to develop independent cannabis production lines.
- What do you think about the overall regulatory proposal?
The current proposal accomplishes many of the objectives of the Cannabis Act, such as protecting health of young persons, providing access to quality-controlled supply of cannabis, and enhancing public awareness of the health risks. However, our concern is that parts of the proposal are overly burdensome on the producer on packaging, labeling, and the restrictions on branding, etc. This in turn will make the legitimate legal producers to drive up the price of the product to the consumer, which is counter to three of the seven objectives of the Cannabis Act which is to curb illegal cannabis activities.
- Are there any additional comments you would like to share on the proposed regulations for the new classes of cannabis? Are there any additional comments you would like to share regarding the legalization and strict regulation of cannabis in Canada? For example, are there measures the Government could take to support individuals to be in compliance with the public possession limits for cannabis (i.e. 30 grams of dried cannabis “or equivalent”)? Do you have views on how to minimize environmental concerns associated with packaging, while maintaining key aspects, such as child resistant packaging, that help to prevent accidental consumption?
Safety and child resistant packaging and the reduction of risk of accidental consumption is paramount from Westleaf’s perspective. In an effort to balance this with the environmental impact and cost of “over-packaging” we would point to the Code of Colorado regulations for retail of cannabis (1 CCR 212-2 C.5.5):
https://www.sos.state.co.us/CCR/GenerateRulePdf.do?ruleVersionId=7865&fileName=1%20CCR%20212-2
Notwithstanding the requirement of subparagraph (C.5)(4), an Edible Retail Marijuana Product shall contain no more than 10 mg of active THC per Container and the Retail Marijuana Products Manufacturing Facility must ensure that the product is packaged in accordance with Rule R 1004(A)(2) or the Rules R 1001-1(C)(1) and R 1002-1(D)(1), when:
a. The Edible Retail Marijuana Product is of the type that is impracticable to mark, stamp, or otherwise imprint with the Universal Symbol directly on the product in a manner to cause the Universal Symbol to be distinguishable and easily recognizable; or
b. The Edible Retail Marijuana Product is of the type that is impracticable to clearly demark each Standardized Serving Of Marijuana or to make each Standardized Serving Of Marijuana easily separable. Essentially the Colorado Code requires that a product which may be separated from its packaging and potentially at risk of being consumed unknowingly, must be either stamped with the universal symbol for cannabis product or be in the shape of the universal symbol of a cannabis product or impractical to separate. Westleaf would encourage Health Canada to review this provision and its effectiveness in reaching two regulatory goals, to reduce the risk of accidental consumption and reduce the amount of superfluous packaging. The question about environmental impact and concerns around packaging is an important consideration that Health Canada should take into account when drafting the final regulations. As noted in our response to question 1, we are concerned that the requirement to individually package edibles into separate 10mg packages will create an unwieldy and unnecessary packaging that will be environmentally, and therefore consumer, unfriendly. Westleaf believes that as a new consumer package industry with a suite of brand-new products for the Canadian consumer, we have a unique opportunity to present a forward-looking and environmentally friendly face to the Canadian public and consumer.
As it stands today, the most critical response from the consumer on the current legal cannabis products has been around what they see as excessive packaging both from a convenience point-of-view but also from an example of environmentally sound practices. It would be consistent of Health Canada to review the packaging requirements with a sensitivity towards consumer tastes and wants, while still providing the security with respect to child-proof and tamper-proof packaging. The approach by the Over the Counter drug industry can be a guide to the appropriate level of packaging.
Summary
Westleaf appreciates the opportunity to submit this modest proposal for input into the regulations around the next phase of the legalization of cannabis consumption in Canada. We firmly believe the market for cannabis infused products, edibles, beverages, topicals and other forms of the product will provide the public with more healthy choices on how to consume cannabis beyond the traditional methods associated with combustion, because of this we believe this will be potentially much larger portion of the market, and by definition, a healthier way to consume cannabis in its many forms and we are encouraged by Health Canada’s willingness to hear from the industry.
Contact Information
Bruce Leslie Vice President, Corporate Communications
Westleaf Inc.
1000, 517 – 10th Avenue SW
Calgary, AB T2R 0A8
Mobile: +1.403.801.7612
Email: [email protected]
Website:www.westleaf.com
Disclaimer
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About Ryan Allway
Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.
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