Legalization Day in Canada has come and gone in a pretty Canadian manner – polite, cheerful cannabis enthusiasts forming orderly lines at retail outlets (or online), with none of the widely-predicted reefer madness or workplace apotcalypses.
But while recreational consumers in many provinces enjoyed the novelty of going to the weed store or smoking in the street with impunity, medical users are facing the onset of a new budgetary challenge.
Since the legalization of recreational cannabis came into force on October 17, medical and recreational cannabis are subject to an excise tax, which can add upwards of 10% to each sale.
Here’s what you need to know about federal cannabis taxation, including how it will affect medical consumers in Canada and which licensed producers (LPs) are coming forward to absorb the excess cost on behalf of their patients.
Per the federal government, “under the taxation framework, a federal excise duty is paid by a licensed cannabis producer when the cannabis products they package are delivered to a purchaser (for example, a provincially authorized distributor/retailer or final consumer).”
The tax is to be charged regardless of whether the cannabis is used for recreational or medical purposes. Colloquially referred to as a “sin tax,” excise taxes are charged in Canada on all alcohol and tobacco – and now cannabis – products sold within the country.
Almost all prescription drugs are zero-rated in all provinces, meaning they are not subject to GST, HST or PST/QST/RST.
But medical cannabis users pay HST on their pot prescriptions, unlike other prescription drugs in Canada. The excise tax adds an extra 10% of the cost or $1 per gram of cannabis, whichever is higher.
So what’s with the discrepancy?
“Cannabis is not officially a prescription, so there’s a very small but important difference between a prescription drug and a physician-authorized drug,” explains Jordan Sinclair, Vice President of Media & Communications at Canopy Growth. “That essentially boils down to the fact that cannabis is not an ‘approved’ medicine – so it’s not officially prescribed.
“If you look at the regulations, it’s authorized by a physician through a medical document, not a prescription.
“In every other sense, you walk into a doctor’s office, you walk out with a piece of paper saying you can have some narcotic, and then you go and get that filled… if you describe that to a hundred people on the street and ask what you just described, 99% will say a prescription. But it technically isn’t.”
Cannabis does not qualify for coverage by many health insurance policies (although that’s starting to change), so most patients have already been paying for 100% of the cost of their legal cannabis “authorizations” out-of-pocket (plus shipping).
Physicians and patients fear that the additional expense will render the drug less affordable and prevent vulnerable or low-income users from accessing cannabis-based medications.
“We noticed that there was a trend between medical patients and people that were living on limited means,” says Sinclair.
“Mostly this is because [cannabis is] used to treat a lot of chronic conditions that can limit someone from participating fully in the labour force.”
Some LPs are opting to take the financial hit on behalf of their patients.
Some of those that have committed to absorbing the tax include Canopy, Tilray, CannTrust, Organigram, CanniMed, and Tantalus Labs.
Canopy was one of the first LPs to advocate against and commit to absorbing the excise tax for medical users.
“For us [absorbing the tax] is a continuation on a few programs that we’d been working on for the last few years… fast forward 4 years when there were consultations being launched by the government to talk about policy surrounding recreational legalization, this idea began to be floated that there would be excise tax applied to both streams, and that just made absolutely no sense to us,” says Sinclair.
“So we included this in all of our policy documents – basically any excuse we could find to talk about this publicly we would take. And unfortunately, we lost the battle… we felt like we failed. And the follow-up to that is that we [felt we] should do what we could to cover it for patients as we continue to have this public debate.”
“It’s already difficult for many patients to afford their prescriptions and an additional tax could put their treatment out-of-reach,” Dr. Kevin Rod, Director of multi-disciplinary pain management centre the Toronto Poly Clinic, stated in a press release for the CannTrust announcement.
“I am grateful that the proposed excise tax will not affect CannTrust’s medical cannabis customers and I encourage other companies to follow their lead.”
In addition to absorbing the excise tax, some LPs offer compassionate pricing programs for clients in need who meet certain financial criteria (Canopy, Organigram, and Aurora are among them).
Kira London-Nadeau, president of Canadian Students for Sensible Drug Policy (CSSDP) and board member at the National Institute for Cannabis Health and Education (NICHE), says the tax perpetuates the stigma already faced by many medical users.
“What is particularly problematic with the excise tax applied on medical cannabis is that it adds insult to injury,” London-Nadeau told Daily Hive. “Not only does the tax add a financial burden on patients, it also sends the message that their medicine, or simply even their health, is a luxury or worse, a sin.”
“We’ve come a long way with medical cannabis,” she says, “but the application of the excise tax shows that anti-cannabis stigma is still pervasive, and patients are reminded of this every time this tax is applied.”
“There shouldn’t be additional taxes added on to physician-authorized drugs,” he says, citing the German model as a more democratic system with regards to access to and affordability of prescription medications.
“It’s disappointing to see. [The tax is] a negligible sum. This is not something that helps the government in any material way – it really just seems overly punitive on patients, and doesn’t strike me as an actual deterrent when the other structural deterrents that are in the way are sufficient. And what I mean by that is that doctors are trained very early on to recognize drug-seeking behaviour. That should be the only deterrent that’s needed to keep people who are looking to enter the medical stream without a legitimate reason to do so.
“It feels like in the Canadian system every stakeholder is clinging to every rule trying to keep cannabis out. It’s a very, very strange expression of Canadian values, which usually favour universal medical care and access to health care.”