Canadian Licensed producers of marijuana to benefit from cost accounting court battle
In a Vancouver courtroom on February 23, 2015 at 9:30 AM PST, the entire Canadian cannabiz industry and 40,000 licensed medical marijuana users, will hold their collective breath as four people have put and may still put an entire industry at a standstill by challenging the right of the Government of Canada to dictate how individuals can provide for their own medicine cost-effectively.
One of four Applicants in Neal Allard et al v. Her Majesty The Queen, Mr Neil Allard, a patient with legitimate needs for medical marijuana, estimates that to maintain his current dosage through a Licensed Producer at a cost of $8-10 per gram would cost approximately $6,000 per month, and $3,000 at a cost of $5 per gram. Until the implementation of the MMPR regulations in Canada, Mr Allard has a license to produce his own medical marijuana at a cost of $0.5 per gram under the MMAR regulations.
Forcing Mr Allard to buy medical marijuana, he argues in court documents, would compel him to pay costs that far exceed his monthly income either now or upon his retirement, and these costs are not eligible for assistance under any health care plan. Given these increased costs, Mr. Allard fears that he may have to risk imprisonment by continuing to produce marihuana or procuring it through the illicit market.
The Applicants’ case is at the center of a controversy that stalled the progress of marijuana industry since its filing in March 2014 a mere few weeks before the MMPR system was supposed to fully displace the leaky MMAR system. By leaky I mean that the lack of regulatory control of the MMAR system permitted medical marijuana to enter the illicit market.
While the case is scheduled to be heard on February 2015, it was the object of interlocutory relief imposed in March 2014. In practice, this means the old MMAR system continues (albeit partially) to be in place until judgement is rendered from the current case, which may still be six months away and yet many more years.
While Allard et al. were granted interlocutory relief to continue growing their own medical marijuana, albeit with some restrictions, there is no guaranty that they will success in quashing the MMPR system. Based on the datum in rulings of The Honourable Mr. Justice Manson (click here) we can guess how both sides will argue their case.
Get our daily investorintel update
The Applicants (Allard et al.) will most likely center their argument on that the MMPR system is unconstitutional by restricting access to a medicine by patients and forcing them to mail-order products which may or may not sustain their medicinal needs based on the point of view that the chemical profile of marijuana varies with strain and cultural conditions. But the Applicant’s side have an uphill battle at demonstrating that Licensed Producers would not provide the right strains, at the right qualities (The Quality Argument). It is a fact that the Applicants failed to make that demonstration during their injunction hearing per the judgement rendered by The Honorable Mr Justice Manson:
 I am also not convinced that the Applicants have met their burden with regard to whether LPs” [Licensed Producers] “will offer the particular strains necessary to meet their medical needs. While I am sympathetic to the trial and error approach to growing various strains that have apparently served the health interests of medical marihuana users, their affidavits do not provide sufficient evidence that the strains offered by the approved LPs thus far will be inappropriate for their medical needs. I agree with the Respondent that their claims amount to a speculative argument, albeit perhaps a well-founded one”.
If the Applicants fail to successfully argue The Quality Argument their case will rest entirely on The Price-Point Argument, which is rife with pitfalls as I would expect the Respondent (the government) to question the price point of MMAR production by conducting a full review of Mr Allard’s production costs, including Opex and Capex. This is where the Allard et al. argument becomes most vulnerable. The court documents alleges that Mr. Allard’s costs are $200-300 per month from growing his own marijuana, which we calculate at 600 grams per month from the court documents–this is not a typo. This suggests that Mr Allard takes his medicine as tea. However, the court documents also show he has spent considerable sums of money at renovating his dwelling to grow marijuana. Here Allard et al. hit a possible theoretical wall at supporting The Price-Point Argument with credible cost accounting.
Because of this I predict that the case has a great probability to turn into a cost-accounting battle. We would be hard pressed to ask any of the 23 MMPR licence producers (click here; accessed on February 15, 2015) how to grow high quality medical marijuana at $0.50 per gram.
Dr. Luc C. Duchesne is a Speaker and Author with a PhD in Biochemistry. With three decades of scientific and business experience, he has published ... <Read more about Dr. Luc Duchesne>