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What global LPs need to know about the Australian medicinal cannabis market
By Dr. Sud Agarwal
The Australian medicinal cannabis market is ripe with opportunity, and licenced producers from overseas are taking their first steps here. But before LPs make the leap, it’s imperative to understand a few differences between the Australian market and what they might be used to in Canada and the US. Here are a few points global LPs need to take into consideration before attempting to enter the Australian market.
The health system here is different
Before taking their first steps into the Australian medicinal cannabis market, global LPs need to understand a few key differences between the health system in Australia and those in the US and Canada.
Firstly, unlike in the US and Canada where patients can go directly to a specialist for treatment of various ailments, in Australia, patients access specialist services via referrals from their GPs. Continuity of care is paramount to the Australian health care model. We have a philosophy that your local doctor is the gatekeeper to your health. If you have a problem you go and see your doctor, who will refer you to a specialist to handle any complex problems. That means that unlike in, say, Canada, we don’t have ‘cannabis doctors’ in Australia – patients interested in medicinal cannabis must first visit their GP.
The next thing to take into account is that direct to consumer drug marketing is illegal in Australia. This is the case everywhere except for the US and New Zealand, but uniquely in Australia direct to physician marketing of unapproved drugs, like cannabis, is also illegal. Australian doctors are brand-naïve to cannabis brands as they have never been exposed to them. This obviously makes it difficult to establish a brand, but it also makes the market more of a level playing field, leaving the door open to smaller and newer companies.
And finally, it’s essential to know that the process for obtaining a medicinal cannabis prescription is highly regulated in Australia. This is where a company like Cannvalate can be of value. As Australia’s largest network of medicinal cannabis prescribing doctors, Cannvalate provides access to over 1,000 healthcare professionals and 600 dispensaries in all major states. Cannvalate also takes care of the approvals process and accompanying paperwork, which can be a major asset to a global LP looking to quickly and efficiently enter the market.
The Australian cannabis market is growing – fast
It’s been just over two years since medicinal cannabis was legalised in Australia, but since then the market has been growing exponentially.
Despite the bureaucratic restrictions currently in place on prescribing cannabis treatments, there were just over 1,000 TGA approvals for cannabis patients as at September 2018 and this number had increased to 4,200 by the end of February 2019. (Cannvalate accounts for over 30% of all prescriptions). FreshLeaf Analytics predicts that the patient market in Australia will grow by about 9% per month, with 15,000-20,000 new patients in 2019.
There are over twenty cannabis companies listed on the ASX. The industry is currently worth around $18 million, with FreshLeaf predicting it will rise in value to $43 million by 2020. In October 2018, the federal government’s Office of Drug Control had to hire new staff to handle the influx of licence applications from LPs – they had expected 18 a year but found themselves struggling to process 190 applications.
While there are still obstacles to patients, doctors and producers, the medicinal cannabis market in Australia has reached an inflection point where the next phase is likely to be one of steady, and rapid, growth.
Australian patients are very drug-loyal
An interesting thing about Australian patients is that they are generally very loyal to the pharmaceutical drugs they take.
Perhaps it’s because of the lack of direct-to-consumer marketing, but if a patient starts on a particular drug they will most likely continue with it for as long as they need it, rather than trying out any alternatives. Once they find something that works, they stick with it.
An excellent example of this is Prozac. Prozac was one of the most commonly prescribed anti-depressants in the ‘90s. There have been many generations of anti-depressants released since then, but many patients who started taking Prozac in their twenties are generally still taking it now that they’re in their 50s.
What this means for medicinal cannabis LPs is that patients who start using a product now are unlikely to switch later on. Producers with plans to swoop into the market and capture market share later on are in for a rude awakening. The time to capture doctor and patient loyalty is now.
It takes a while to secure a permit – and they won’t be available forever
There are several licences required for anyone wanting to cultivate, manufacture, import, export or research medical cannabis in Australia.
The first licence to grow medicinal cannabis in Australia was issued to local company Cann Group in 2017, the following year after medicinal cannabis was legalised. Since then, approval of cultivation licences has been slow, with fewer than twenty companies receiving growing licences.
The Office of Drug Control scrutinises every aspect of any business applying for a licence, and it can take 18 months to two years to go from making an application to opening for operation. Last year the ODC reported that they were working through a backlog of 190 applications.
Given that it takes several generations of plants to produce a commercial cannabis crop, there is no time to waste for global LPs wanting to get a foot in the door in Australia. In addition, while LPs might look to importing product while they establish their own operations here, the government has indicated that it may close the door on import licences once Australian production is self-sufficient.
Producers that don’t get their permits and cultivation facilities up and running soon might miss the boat. While we are seeing a wealth of opportunities opening up here, there is a finite window to get into the market.
Global LPs should capitalise on the opportunity available now – this is the optimal time to become a player in the Australian medicinal cannabis industry.
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