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‘Edible extracts’ still available in Canadian cannabis market amid regulatory chaos

Click: Time:2023-11-01 00:00:00

Image of a package of Organigram's Edison Jolts lozenges

Some ingestible cannabis products that Health Canada considers noncompliant with federal rules still appear to be widely available in parts of the country, almost a year after the regulator asked companies to stop selling them to consumers because of concerns about overconsumption of THC.

The wide availability of these products on store shelves in some provinces has thrown the market for ingestibles into turmoil, making it harder for producers committed to regulatory compliance to know what is kosher and what isn’t – this at a time when companies are struggling financially.

Ingestible products, such as lozenges and chewable extracts, have been increasingly popular among Canadian consumers.

Experts say their continued availability in the wake of Health Canada’s call for a sales halt in early 2023 boils down to multiple factors:

  • A persistent regulatory gray area between what constitutes an “edible” or an “extract.”
  • A struggling cannabis industry increasingly willing to take on risk in light of deteriorating finances.
  • Significant consumer demand for cannabis edibles in packages with greater than 10 milligrams of THC, which is not allowed under the current rules.

“Until we have a very clear judicial pronouncement on it, we’re going to continue to have what appears to be this chaos in the market when it comes to this category, because there is no certainty and finality about exactly where the line is drawn between the two categories,” Trina Fraser, a partner who leads the cannabis practice at Brazeau Seller Law in Ottawa, Ontario, told MJBizDaily in a phone interview.

Last January, Health Canada began asking federally licensed marijuana companies to stop selling certain ingestible cannabis products that the regulatory agency said were incorrectly classified and labeled as extracts.

Any product classified as an extract has 100 times more allowable THC per package than one classified as an edible – in effect, as much as 1,000 milligrams per container – which made those “edible extracts” products popular with consumers.

But Health Canada also said such products endangered public health – given the sharply higher THC content – and asked at least five companies, including New Brunswick licensed producer Organigram Holdings and Alberta-based Aurora Cannabis, to stop their distribution and sale.

Though the agency stopped short of ordering a recall, all five producers complied with the request to remove their products from store shelves, effectively leaving consumers with few if any options for purchasing the ingestible items.

Health Canada also issued a public advisory alerting consumers about the issue, including information about what people should do when purchasing cannabis to avoid accidental overconsumption of THC.

The comeback

This past summer, however, ingestible extract products started making a comeback.

Until recently, the Ontario Cannabis Store (OCS), the province’s monopoly wholesaler and online retailer, dedicated an entire web page to “Ingestible Cannabis Extracts” – including one product with the description, “edible extract infused with 100mg of rapid-onset THC,” putting it firmly in the gray area between “edible” and “extract.”

Because the OCS labels those products as extracts, not edibles, each package is allowed to contain significantly more than 10 milligrams of THC.

The page was subsequently deleted within hours of MJBizDaily’s queries. The OCS described the situation as “scheduled maintenance.”

Some of the products, which are available elsewhere on the website, contain significantly more than the 10 milligrams of allowable THC per package.

Similar products are available in other provinces across Canada.

Organigram, which was one of the licensed producers that pulled its popular ingestible extract products from the market earlier this year, is planning to relaunch them.

That comes after a federal court sided with Organigram in August, concluding that Health Canada breached its duty of “procedural fairness” when it decided that the company’s THC-infused lozenges should be classified as “edible” cannabis rather than extract. 

The court sent the decision back to Health Canada for a “redetermination.”

As of November, Health Canada said it had yet to issue the redetermination and has no timeline for when it expects to do so.

Organigram isn’t waiting when it comes to the sale of its Jolts lozenges.

In a statement to MJBizDaily, an Organigram spokesperson said, “We have since discussed this matter with Health Canada who acknowledged that it accepts the decision of the Court, and that it considers its March decision on the classification of the Jolts as no longer valid.

“As such, pending any final redetermination by Health Canada regarding Jolts, Organigram has resumed the commercialization of Jolts. Organigram continues to be of the view that Jolts are properly classified as an extract.”

The spokesperson also said that, since Organigram is the only party that pursued the issue in court, “the lifting of Health Canada’s initial decision only applies to Organigram’s Jolts products and does not re-open the market for all ingestible extracts.”

MJBizDaily asked Health Canada how many companies are potentially noncompliant with the 10-milligram-per-package rule for edibles because they’re offering the products as extracts.

Health Canada declined to share a specific number but said the department “has identified a number of edible cannabis products marketed as cannabis extract products and is working with license holders to resolve these issues.”

“We continue to communicate with license holders to make sure they understand the federal rules relating to edible cannabis and cannabis extracts,” the regulator’s spokesperson said.

Provincial confusion

MJBizDaily reached out to some of Canada’s biggest cannabis wholesalers, asking how they determine if a product falls into the extract category or edible category.

At least one government-owned wholesaler was under the impression that Health Canada “approves” products before they’re able to reach the nation’s respective wholesalers.

The only problem: That isn’t true.

In a statement, a Health Canada spokesperson said the agency “does not approve cannabis products before they are marketed or sold. It is the responsibility of the license holder to ensure that their cannabis products are compliant with the Cannabis Act and its regulations.”

That’s news to Cannabis NB, the province-owned cannabis wholesaler in New Brunswick.

A spokesperson for the provincial monopoly told MJBizDaily: “To clarify, Health Canada is the governing body that approves all cannabis products from licensed producers before they go to the market.”

“Cannabis NB manages its portfolio based on customer need and interest and has always distributed products that have gone through Health Canada’s product approval process and products that licensed producers are legally permitted to distribute,” the wholesaler incorrectly stated in an email.

On the other hand, a spokesperson for British Columbia’s monopoly wholesaler told MJBizDaily that the provincial body conducts its own review.

“The (BC Liquor Distribution Branch) undertakes a thorough review of each product submission to assess whether it complies with current Health Canada regulations,” a spokesperson for the cannabis wholesaler said in emailed answers to MJBizDaily questions.

At the time, British Columbia had only one available product within the “ingestible extracts” subcategory that contains more than 10 milligrams of THC per package.

MJBizDaily asked the OCS, the largest wholesaler of cannabis in the world, if it had communicated with Health Canada about the ingestible-extracts issue.

The OCS didn’t answer the question, instead saying it engaged with suppliers in March 2023 and “recently re-engaged with its cannabis extracts suppliers to remind them of their ongoing obligation to ensure that product complies with applicable laws, including the Cannabis Act and Regulations, and requiring attestation as to whether they have heard from Health Canada about any product(s) that may be affected by the compliance statement.”

Gray area

One of the reasons ingestible extracts continue to be widely available in some places is because it isn’t entirely clear what constitutes an edible and what makes a product an extract.

In an email to MJBizDaily, a Health Canada spokesperson said “edible cannabis” is marijuana that is intended to be consumed in the same way as food and is excluded from the definition of a cannabis extract.

If it sounds straightforward, it isn’t.

Fraser, the Ottawa-based cannabis lawyer, said “hairsplitting” is occurring in how businesses determine whether their product is an edible or an extract.

She said some producers are focusing on Health Canada’s position and the way the wholesaler presented its case to the Organigram court case.

Those companies are trying to capitalize on that by launching products they say are compliant with the rules.

“There’s a lot of hairsplitting going on,” Fraser said. “It’s an admittedly facts-driven, case-by-case analysis to make the determination of whether (a product) was intended to be consumed as food.

“Health Canada is saying we need to look at (the product’s) shape, size, instructions for use, promotional materials.

“There’s all these different factors that need to be weighed and assessed to determine how this product should be most appropriately classified.

“So it’s not necessarily a complete carte blanche, like if it’s a lozenge it’s an edible.”

Fraser added that Health Canada “is concerned that certain products that may take a lozenge form are edible, but not necessarily all.”

“So you’re seeing companies focus on those specific factors that were identified by Health Canada as being indicative of an intention to be consumed as food and are specifically designing and tailoring their products and how they’re packaged – and promoted and marketed – to address those issues, and present a defensible position that they are properly characterized as extracts,” she said.

Fraser expects to see a continuous pushing of the boundaries “and trying to see how far (a business) can go, and what you can get away with as far as this still very gray – and still undetermined – question of when does something become intended to be consumed as food.”

Unfair?

Some cannabis producers stopped selling their ingestible extract products earlier this year at Health Canada’s request, only to see competitors quickly fill the void by launching similar products.

Aurora still has no ingestible extract cannabis products on the market in packages exceeding 10 milligrams of THC.

“While we feel strongly that cannabis regulations need to evolve, especially with product limits, we must first have industry fairness and an adherence to all regulations by all parties,” an Aurora spokesperson told MJBizDaily in an interview.

“To achieve this, the cannabis industry needs rules that make sense and a regulator that will ensure compliance.

“If the regulator considers any one product to present risks to youth and be outside of the regulations, producers that abuse the market should be held accountable.”

Risk-reward calculation

Canada’s struggling cannabis industry has brought a lot of companies to the financial brink, which is altering the risk-reward calculations for some when it comes to regulatory compliance.

The country is on pace to see a record number of federally regulated producers exit the industry this year, amid stubbornly high taxes and fees, falling prices and decelerating national sales growth.

In those circumstances, Sherry Boodram, CEO and co-founder of Toronto-based regulatory consulting firm CannDelta, said some companies are more willing to see what they can get away with from a compliance standpoint.

“At the end of the day, this industry has faced a lot of hard times, and that’s why the risk-reward is an actual consideration for a lot of companies and going towards risk,” she said.

She noted that Health Canada has not imposed a mandatory recall for any of the affected products.

It’s unlikely any fines – known as administrative monetary penalties – have been issued.

“I know that there are companies that are balancing the revenue that is coming in versus the risk. It’s risk-reward,” she said.

“We know that Health Canada hasn’t made anybody initiate a recall. They just made them stop sales and distribution so they just sell out and then come up with a different strategy.

“They’re probably just hedging their bets.”




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