September 22, 2020

European Cannabis: Waking the Sleeping Giant

5min read

The consolidation of fully legalised and regulated cannabis industries in North America has powered hope that the same progressive systems might be implemented as quickly and successfully elsewhere. However, the development of emerging cannabis programs in Europe, Latin America and Oceania has proven not to be as straight-forward. Despite the considerable progress made in the last decade, regulatory change will remain the key market growth factor in the years to come. In addition, driving prescriber adoption of cannabinoid medications will be crucial.

September 22nd, 2020

Arnau Valdovinos


Medical cannabis in the US and Canada reaches around 1% of the population

The burgeoning markets of North America have shown the economic potential of cannabis, with hundreds of thousands of jobs created over the last decade and billions collected in tax revenue, as referendums on medical and recreational legalisation have swept across the US. However, it is not a simple matter to replicate this course of development in the quite different political landscape of Europe.

The progressive attitude to cannabis legislation and the supporting regulations have opened up patient access in states and provinces across North America. The percentage of people accessing medical cannabis in jurisdictions where it is legal now sits around 1%, with the highest being Oklahoma, with over 8% of the population enrolled in their medical scheme. Only Israel, with around 0.7% of the population receiving cannabis treatment, is now on par with North American models, despite having been slowly developing over the last twenty years.

Europe lags behind

Despite having a considerably larger population than the US and Canada put together, patient numbers in Europe show a far more lax growth. In the premier market of Europe, Germany counts barely over 0.1% of the population accessing medical cannabis via their healthcare system, while many countries are yet to allow the therapeutic use of the plant. Leaving aside the immense potential of recreational cannabis, the medicinal-oriented markets of Europe are following a path of development which exhibits the more gradual growth experienced by the Israeli cannabis industry, as both regulations and prescriber adoption evolve little by little and scientific evidence piles up. Cannabis entrepreneurs must take this into account, when considering the larger role that lobbying, R&D as well as doctor and pharmacist relationships is likely to play in the European market.

Sluggish reform holding back patient access

Europe lacks the political and cultural harmonisation exhibited by American States and Canadian provinces. Despite strong public majorities in favour of medical cannabis in many European countries, it has been difficult to build the political will to tackle the issue. The prohibitionist inertia is strong and heavily institutionalised, despite weakening year after year.

Cannabis, as well as drug policies in general, is a topic on which most European governments prefer to take a moderate stance: majoritarian left-wing and right-wing parties often do not have serious policy discrepancies on the issue, and they tend to refer to expert committees and bureaucratic procedures instead of pushing for reform. More often than not, legislative steps follow intense media and activist campaigns that the authorities can no longer ignore, which are usually met with minimal changes and compromise solutions often coming short of patients’ expectations.

We have seen this in the UK, where almost 2 years after medical cannabis was legalised we are still expecting the NHS to act to grant patient access, and most prescriptions are currently obtained through private practices. We have seen this in France, where earlier this year and after long deliberations, a pilot program with just 2,000 patients was approved, but it has already been delayed once and is now awaiting funding.

The direct-democratic heritage of the US has proven more expeditive, by allowing the public ballot, often citizen-led, to take a binding stance on the issue. Lack of political and cultural integration means that the success of a policy in one European country is less likely to be replicated by other states, which have very independent agendas, political traditions, institutional designs and civil societies. However, countries with a strong tradition of direct democracy, like Switzerland, are also at the forefront of cannabis policies in Europe.

The barriers to developing the market are lower than ever

Despite plodding political reform, the infrastructure and industry behind medical cannabis has been building up slowly but surely around the globe. Plenty of producers in Europe and overseas, are now ready to provide medicinal cannabis to any new scheme that gains approval, while supplies in the more established German market are now more secure than ever with imports from. Funding for cannabis research has more than tripled in the last 20 years, and has bolstered the body of scientific knowledge around medical cannabis. Thanks to the gradual development of the European medical cannabis market, we can expect that upon opening, the industry will be more balanced and robust than in the first schemes to open up in North America, which faced instances of both oversupply and undersupply and saw the emergence of grey markets.

Prescriber adoption key to the success of the market

Until recently, the pharmaceutical approach to cannabis of most European regulations entailed a significant entry barrier and favoured a general state of supply crunch. However, both the development of domestic EU-GMP cultivation and importation from a growing number of LPs means that limited supply won’t continue to be the largest constraint of the market.

Instead, prescriber adoption is the most important factor in the long-term, given favourable regulations. Cannabis is only accessible in Europe under strict physician supervision, who define the product, dosages and way of administration in an official prescription. Unlike “recommendations” or applications for a Medical Marijuana Card, doctors in Europe or Latin America supervise a treatment which is generally only accepted as a last resort, and which may have some competing therapies for the same indications. For this reason, serious efforts are wisely addressed towards the establishment of educational platforms for doctors, and there is a burgeoning private cannabis clinic sector developing in the UK or Poland.

As the market matures, we are expecting to see a shift in focus from upstream operations towards ancillary services: data, intelligence, education, lobbying and marketing will become the focus, as the long term success of the market won’t just entail surfing the wave of legalisation, but will require several iterations of regulation in each country as well as wide educational, R&D and lobbying efforts by the players betting on this immense opportunity.

To conduct the analysis on patient penetration trends, we have compared the percentage of the total population that medical cannabis patients have represented over time in different international jurisdictions. We have chosen as Year 1 of each scheme the closer datapoint to the current European penetration, which sits at around 0.04% of the population, a level which was reached in 2010 in Israel, in 2013 in the US and in 2014 in Canada.

Our forecast on the European market is based on historical growth rates as well as on our proprietary assessment on likelihood of political and regulatory change per jurisdiction. Much like the US, Europe is a complex polity with over 500 million inhabitants, with wide disparities in access to medical cannabis: while most countries have yet to see its first domestic sales, other schemes like that of Germany or Luxembourg have already grown to enroll over 0.1% of the population.

For more in-depth information, consumer data and strategic support, contact the Prohibition Partners consultancy team at info@prohibitionpartners.com or download one of our industry-leading reports.

 

European Cannabis: Waking the Sleeping Giant

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