Canada

The price isn’t right for legal pot says consumer group

“It’s time to re-evaluate the taxes on cannabis,” according to a Toronto-based North American consumer affairs group.

The Consumer Choice Center said the growing gap in price between legal cannabis and illegal pot shows that it’s time to re-evaluate cannabis taxes.

Earlier this week, Statistics Canada released data on the price differences between illegal and legal cannabis. It found that over the past three months, the price of a gram of cannabis bought illegally has fallen from $6.23 to $5.93 but over that same time, the average price of a gram of legally purchased cannabis rose from $10.21 to $10.65.

“The data from StatsCan is troubling, because it shows that the legal market is getting less competitive over time,” said David Clement, manager of the Consumer Choice Center.

He said there are some simple solutions that could be enacted to help the legal market compete when it comes to price. Clement said the federal government could get rid of the minimum tax amount, and simply tax cannabis on its wholesale value, which would immediately allow for discount products to hit the shelves and decrease prices. He added the government could also change production regulations to make the industry more dynamic. Clement said shifting production regulations to be in line with food-grade rules, as opposed to pharmaceutical-grade restrictions, would go a long way in terms of reducing costs, which are passed down to consumers through lower prices.

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Legal Cannabis in Canada is More Expensive than the Black Market

“The taxes and fees create prices that are high out of the gate, and then a lack of competition prevents those prices from being slowly pushed down,” David Clement, the North American affairs manager for the Consumer Choice Center, told CBC Radio-Canadaat the time. “It costs half a billion [over five years] to enforce the rules and regulations in the Cannabis Act, so in order to generate the revenues to cover that, they’ve implemented fees and licenses on licensed producers.”

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Continued cap on pot shops draws criticism

The Ford government’s decision to hold a second lottery for retail cannabis store licences is drawing a mixed review from the Consumer Choice Centre.

The centre said it is pleased Ontario plans to open another 50 stores, on top of the 25 operating across the province now, but criticized the decision to maintain a cap on the number of stores.

North American Affairs Manager David Clement said the announcement is both good and bad news for Ontario consumers.

“It is great the government is moving to increase the number of storefronts, but the existing cap, and the prequalification criteria, miss the mark,” he wrote in a release. “We don’t see any justification for the cap to continue to exist when the province has stated that it is committed to uncapping the retail market in the long run.”

The centre said the confirmation of $250,000 in cash or the equivalent, a letter of credit for $50,000, and a secured retail space is “a huge barrier to entry, and significantly increases costs for retail operators. Those costs will ultimately end up being passed on to consumers.”

It pointed out that other businesses like bars, clubs, restaurants, corner stores, and grocery stores that sell alcohol and cigarettes do not face the same heavy burdens.

The centre believes the increased cost for consumers and the limit on locations to buy legal cannabis will drive users to the black market.

“A very simple solution would be to approve all applicants who already have retail space acquired, and do so without a cap on the number of stores — This would ensure that applicants are serious, without the heavy-handed financial requirements,” the statement said. “Doing so would drastically improve Ontario’s retail market for cannabis, which would significantly increase the likelihood of Ontario consumers purchasing cannabis legally.”

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Trudeau’s ‘plastic ban’ won’t help the environment. It could actually harm it instead

Opinion: Alternatives have a significantly higher total impact on the environment, while inflating costs for consumers

By David Clement

This week, Prime Minister Justin Trudeau announced his government will seek to ban many single-use plastics starting in 2021. Although the final list of banned items is still undetermined, it will likely include plastic bags, takeaway containers, cutlery and straws. To further justify the ban, Environment Minister Catherine McKenna cited images of marine wildlife being injured or killed as a result of plastic in our oceans.

It’s a hard-to-resist pitch. No one wants to contribute to marine deaths as a result of plastic, and most of us don’t like the idea of plastic items taking over 1,000 years to decompose in landfills. These concerns ultimately stem from worries about climate change, and the environmental problems that could arise as a result.

Unfortunately for the environmentally conscious among us, a ban on single-use plastics does almost nothing for the issue of plastics impacting ocean marine life, and does very little in terms of environmental impact. Canadians are not significant polluters when it comes to marine litter. Up to 95 per cent of all plastic found in the world’s oceans comes from just 10 source rivers, which are all in the developing world.

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Canada on average, contributes less than 0.01 MT (millions of metric tonnes) of mismanaged plastic waste. In contrast, countries like Indonesia and the Philippines contribute 10.1 per cent and 5.9 per cent of the world’s mismanaged plastic, which is upwards of 300 times Canada’s contribution. China, the world’s largest plastics polluter, accounts for 27.7 per cent of the worlds mismanaged plastic. Canada, when compared to European countries like England, Spain, Italy, Portugal and France, actually contributes four times less in mismanaged plastic. The only European countries on par with Canada are the significantly smaller Sweden, Norway and Finland. A plastics ban might sound productive in terms of plastics pollution, but the evidence doesn’t suggest that Canada is actually a significant contributor for mismanaged plastic, which means that a Canadian ban will do little to aid marine life devastatingly impacted by plastic pollution.

However, proponents will say we should still support the ban on the basis of trying to curb climate change. Although noble, banning plastics doesn’t necessarily equate to better environmental outcomes. In fact, some alternative products, although branded as green alternatives, have a significantly higher total environmental impact once the production process is factored in.

Take plastic bags for example, which are public enemy number one. Conventional thinking suggests that banning single-use plastic bags will result in people using reusable bags, and that this reduction in plastic use will have a positive impact on the environment. Research from Denmark’s Ministry of the Environment actually challenged that conventional wisdom when it sought to compare the total impact of plastic bags to their reusable counterparts. The Danes found that alternatives to plastic bags came with significant negative externalities. For example, common paper bag replacements needed to be reused 43 times to have the same total impact as a plastic bag. When it came to cotton alternatives, the numbers were even higher. A conventional cotton bag alternative needed to be used over 7,100 times to equal a plastic bag, while an organic cotton bag had to be reused over 20,000 times. We know from consumer usage patterns that the likelihood of paper or cotton alternatives being used in such a way is incredibly unlikely. These results were also largely confirmed with the U.K. government’s own life-cycle assessment, which concluded that these alternatives have a significantly higher total impact on the environment.

While Canadians might support the idea of a plastics ban, they don’t want to pay for it. A Dalhousie University study showed us that 89 per cent of Canadians are in support of legislation to limit plastics. However, that same study also showed that 83 per cent of Canadians were not willing to pay more than 2.5- per-cent higher prices for goods as a result of plastic regulations. This creates a significant problem for Trudeau’s ban, because higher prices are exactly what we’d see.

There are simple solutions available to us that don’t involve heavy-handed bans. First, we could focus more strictly on limiting how plastics end up in our rivers, lakes and streams. Better recycling programs and stricter littering prohibitions could go a long way to curbing the plastic Canada does contribute. For those single-use products that otherwise end up in landfills, we could follow Sweden’s lead, and incinerate that waste. Doing so creates a power source for local communities, while capturing airborne toxins, limiting toxic runoff, and significantly reducing the volume of waste.

Good public policy should address a real problem and should make a meaningful impact on the said problem. Unfortunately, Trudeau’s proposed single-use plastics ban would have little to no impact on overall ocean waste, while promoting high-impact alternatives, and inflating costs for consumers. All three of these factored together create a fairly toxic policy mix.

David Clement is the North American Affairs Manager with the Consumer Choice Center.

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More Toronto grocery stores will soon be carrying booze

David Clement, Toronto-based North American Affairs Manager of the Consumer Choice Center (CCC), said that the announcement is a step in the right direction.

“The move helps underserved regions, while maxing out the amount of grocery stores allowed under the Master Framework Agreement (MFA). It is positive to see these changes while the province undergoes the process of scrapping the MFA and allowing for alcohol sales in convenience stores,” Clement said.

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Two big victories for consumer choice and modernized alcohol policy

The warm months are delivering some great news when it comes to increased consumer choice and modernized alcohol policy across North America.

ONTARIO

The first success story comes from the Canadian province of Ontario, where Premier Doug Ford has announced the end of the province’s exclusive contract with The Beer Store, the beer monopoly.

When announcing the policy, Ontario Finance Minister Victor Fedeli quoted the words of Consumer Choice Center North American Affairs Manager David Clement, who has contributed to the debate to open up beer sales across the province.

This positive move comes on the same day the government announced it would be expanding alcohol sales in LCBO stores across the province, after which Clement says “consumers across the province would appreciate more access to alcoholic drinks over the summer months.

The Consumer Choice Center played a pivotal role is shaping the policy debate in favor of modernized alcohol policy and consumer choice, and will continue to do so across the country.

“Today’s alcohol announcement is a step in the right direction,” said David Clement. “The move helps underserved regions, while maxing out the amount of grocery stores allowed under the Master Framework Agreement (MFA). It is positive to see these changes while the province undergoes the process of scrapping the MFA and allowing for alcohol sales in convenience stores.”

“We are hopeful that the announcement could increase access over the summer months, which would definitely be appreciated by consumers province-wide.” said Clement.

NORTH CAROLINA

Following the positive vibes from the Great White North, the state of North Carolina also had a major alcohol policy modernization pass.

Last Thursday Gov. Roy Cooper signed House Bill 363, the Craft Beer Distribution and Modernization Act. The law will allow craft brewers to self-distribute more than twice was allowed previously without a wholesaler.

That measure will allow breweries to expand and ship more product across the state, giving North Carolina consumers greater access to their favorite craft brews.

I have written about this topic for the Charlotte Observer (here and here) and been interviewed about it on the radio on the Joe Catenacci Show and the Chad Adams Show.

Much like above, there is still a lot that needs to be done to have a true modern alcohol policy in the Tar Heel State. Ending the state’s monopoly of ABC stores (that sell liquor) would be prime, and the next would be allowing distilleries to offer and sell their products on site and for delivery.

Regardless, these are two big victories for consumer choice and modernized alcohol policy, giving consumers more of a say, more choice, and better options!

More LCBO ‘agency stores’ to open

The latest move by the Ford government is being met with praise by the Consumer’s Choice Centre. Northern American Affairs Manager David Clement said this agreement signals the provincial government is going to take steps to increase consumer access and choice.

“This is a positive policy from our perspective,” said Clement. “If anyone’s like me [more access] is definitely appreciated because when you’re going up to the cottage or enjoying the outdoors … it will be appreciated from consumers across the province.”

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Almost 300 more Ontario stores to be allowed to sell alcohol, province says

David Clement, of the Consumer Choice Center, praised the expansion announced Thursday, saying consumers across the province would appreciate more access to alcoholic drinks over the summer months.

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A soda tax is a bad idea, and we can prove it

Opinion: A sugary drink tax shouldn’t be dismissed just because it fails to achieve its goals. It is also heavily regressive.

By David Clement

Canada has an obesity problem, both for adults, and for children. When you look at the numbers, they immediately jump off the page. Since 1978, the obesity rate for Canadians has more than doubled. In 1978, the number of adults who were considered obese was 14 per cent. In 2014, that figure was 28 per cent. General forecasts on this trend state that the number of adults who are obese could rise to 34 per cent by 2025. Rates of obesity this high create a myriad of negative health outcomes, and cost the health-care system billions of dollars annually.

There have been a variety of policies proposed to help curb obesity. Most recently was the call for a national soft drink tax by Liberal MP Julie Dabrusin. Specifically, Dabrusin is calling for a 20-per-cent tax on sugar-sweetened beverages. The thought process here is simple: if you excessively tax a product, it will end up discouraging the purchase of that product, which will lead to better health outcomes and lower expenditures on obesity-related illnesses. The problem with this new tax proposal is that these sin taxes almost always fail to achieve their desired outcome, and have the negative externality of being heavily regressive against the poor.

Sin taxes almost always fail to achieve their desired outcome 

Dabrusin’s goal of healthier outcomes is a noble one, but excessively taxing sugary drinks isn’t a serious solution. We know from other jurisdictions that additional taxes on sugary drinks rarely achieve their goal of reducing caloric intake in any meaningful way. For example, Mexico, a country with an obesity rate near 70 per cent, enacted a sugary drink tax with the goal of reducing caloric intake, thus producing better health outcomes. An analysis of the impact of the tax showed that it reduced consumption of these drinks by only 3.8 per cent, which represents less than seven calories per day. A reduction of this size can hardly be considered a success.

Domestically, we have seen several proposals for sugary drink taxes. In the past provincial election in New Brunswick, Green Party Leader David Coon proposed that the province enact a sugary drink tax of 20 cents per litre. The proposed tax would have added taxes on all pop, most juices, all carbonated water, all non-carbonated flavoured water, most teas, drinkable yogurts and flavoured milk. The major issue with this provincial version of what Dabrusin is proposing is that the designers of the tax scheme openly admitted that it was unlikely to make any significant impact on caloric intake. According to the Green Party’s own submission, the 20-per-cent tax was at best going to reduce overall sugary drink intake by two per cent a year.

In the past provincial election in New Brunswick, the Green Party proposed a sugary drink tax of 20 cents per litre. Getty Images/iStockphoto

At the most, the New Brunswick tax would reduce caloric intake for the average resident by a measly 2.5 calories per day. This estimate was created by using full-calorie soft drinks as a reference point, meaning that the total caloric reduction could actually be much less than 2.5 calories per day given that consumers often consume other sugar-sweetened beverages with fewer total calories than full-calorie soft drinks. It is safe to say that reducing caloric intake by, at most, 2.5 calories per day would have no significant impact on public health. We don’t yet have Dabrusin’s projections on caloric-intake reductions, but from what we can see at the provincial level, the impact wouldn’t be significant in any way.

A sugary drink tax shouldn’t just be dismissed because it fails to achieve its goals. It should also be dismissed because it is heavily regressive. Mexico, again as an example, shows that taxes like the one proposed have a devastating impact on low-income families. The majority of the tax revenue generated from the Mexican tax came from low-income families. Specifically, 61.3 per cent of the revenue generated came from households with low socioeconomic status. Thus, the funds raised were derived from the most vulnerable in society. Supporters of Dabrusin’s proposed tax have cited that the revenue generated would be around $1.2 billion per year. If the Mexican regressive trend holds true for Canada, which can be assumed because it was apparent in cities like Philadelphia, then $732 million of that $1.2 billion will come directly from low-income Canadians. This is an uncomfortable fact that supporters of the tax have yet to sufficiently address.

$732 million of that $1.2 billion will come directly from low-income Canadians 

Soft-drink taxes are simply bad policies being used to combat a real problem. These taxes almost always miss their mark, and disproportionately impact low-income consumers. These truths are part of the reason Cook County, Ill. (which includes Chicago) repealed its soft-drink tax. Because of these fairly consistent trends, the New Zealand Institute of Economic Research, in a report to the Ministry of Health, stated that “We have yet to see any clear evidence that imposing a sugar tax would meet a comprehensive cost-benefit test.” It’s clear that obesity is a problem in Canada, but it is also clear that soft-drink taxes don’t pass the cost-benefit test, and shouldn’t be considered as a serious solution.

— David Clement is the North American Affairs Manager for the Consumer Choice Center.

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Liberals want to build their campaign around pharmacare, but ignore where drugs would end up

Fred Roeder is a health economist and the managing director of the Consumer Choice Center. David Clement is the North American-affairs manager for the Consumer Choice Center.

Internal documents from within the Liberal Party recently showed that Ontario Liberal MPs want 2019’s election campaign to be built on a national pharmacare plan.

Specifically, the proposed plan would seek to centralize and consolidate the 46 drug-procurement programs that exist in Canada. The goal would be to give Canada as a whole more bargaining power in the drug-procurement process, which would potentially lower the prices Canadians pay for their medicine. Although pharmacare could lower drug prices in the short run, it could also run the risk of exacerbating Canada’s existing drug shortage, and significantly limit patient access in the long run.

If a national pharmacare plan were to work, as advertised, it would help Canadian patients by lowering the price they pay for medicine. Unfortunately, the Liberals are largely ignoring the issue of where much of these low-priced drugs would end up, which is the United States. It is one thing to lower drug prices for Canadians, but that benefit isn’t realized if Canadian patients never actually have access to those cheaper drugs.

Pharmacare would be an attempt to further control the price of drugs. The problem is that Canada already has price-control mechanisms for prescription drugs at the federal and provincial level. Those price controls lead to much lower drug prices compared with the prices paid south of the border. That said, because Canadian drugs are cheaper than in the United States, several U.S. states have begun looking at importing pharmaceutical products from Canada in an attempt to undercut U.S. prices. For example, the Republican Governor of Florida has recently pushed for federal approval for drug importation from Canada, and U.S. President Donald Trump has already signalled his support of this measure.

And while importation from Canada to the United States could mean lower drug prices for patients in Florida, Canadian patients could suffer as a result of worsening access. U.S. Health Secretary Alex Azar has publicly stated that Canada doesn’t have the appropriate supply to meet patient demand, and that large pharmaceutical companies are unlikely to increase their supply for the Canadian market. Worsening drug shortages are the most likely outcome for Canadians if the federal government adds in more price controls while having large-scale drug exports to the United States. We know that this is the probable outcome because Canada already suffers from a lack of supply, and another measure to intervene on pricing will simply increase the incentive for American states to import from Canada.

Supply is one problem for Canadian patients, but it isn’t the only issue they face, and it isn’t the only issue that could get worse as a result of pharmacare. In addition to poor supply, Canada is significantly lagging in terms of access to potentially life-saving and innovative medicines. Countries such as Germany, Japan and the United States all introduce, and reimburse for, innovative drugs quicker than in Canada. Here, it takes more than 450 days for a new drug to be reimbursable, while that number is only 180 days in the United States. It can be expected that a pharmacare plan would make this innovation problem worse. It is unlikely that the manufacturers of these drugs will want to roll out innovative medicines in Canada, under various forms of price control, if those drugs can then be resold into other markets, undercutting prices abroad.

For cost, it is important to remember that Canadians have lower drug prices than Americans. At the same time, it is important to be aware that because of price controls, Canada is not a significant market for drug manufacturers, especially when compared with the United States, which accounts for more than 50 per cent of the industry’s global profits. If Canada goes too bullish against drug prices, while at the same time allowing American states to import prescription drugs from Canada, we might run the risk of drug companies leaving entirely, or massively delaying the introduction of new drugs in Canada.

Companies leaving the domestic market entirely might sound like a far-fetched concept, but it is something the Canadian marketplace has seen in other industries. Take Google and the recent issue of political advertising in Canada. Ottawa significantly changed its election advertising regulations, and rather than comply, Google decided that it would leave the political advertising market altogether. Thus, we have a large multinational entity cutting itself out of the political advertising market because conditions aren’t ideal, and because Canada’s market is minuscule in comparison to others.

Everyone wants more competitive and better pricing for patients. Unfortunately, the elephant in the room is where these price-controlled drugs end up, and how industry will respond. Our concern, as a consumer group, is that the pharmacare plan, without addressing export, could exacerbate the already serious issue of drug availability in Canada.

If a provider of vital pharmaceuticals were to pull out of the Canadian market as a result of price fixing and undercutting, it would be Canadian patients who pay the ultimate price. Drug access – especially to new innovative treatments – lags in Canada, and without the foresight to correct some of these blind spots, access could either get significantly worse, or be eliminated altogether under a national pharmacare plan. That scenario should concern all Canadians.

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The Growth Op

Health Canada’s new grow-ready demand could squash entry of micros into the cannabis space

Also likely to take a hit are consumers. The U.S.-headquartered Consumer Choice Center (CCC) argues the new licensing process will hurt consumers. “This move is a significant blow for Canada’s cannabis market, especially cannabis consumers nationwide,” David Clement, the CCC’s Toronto-based North American affairs manager, says in a statement.

“The process to qualify as a licensed producer is already incredibly rigid. These changes will simply make it harder for new producers to enter the market, which, ultimately, ends up hurting recreational consumers and medical patients,” Clement argues. “More red tape will translate into higher prices for consumers, and less product availability. Higher prices and poor access will encourage consumers to continue to purchase in the black market, which runs directly against the federal government’s stated goal for legalization.”

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Health Canada shows, again, that it can’t properly regulate cannabis

Just this week, Health Canada announced that it would be making significant changes to the process for approving licensed producer (LP) applications. Specifically, it stated that all new applications will have to have a fully built and regulatory compliant facility at the time of their application. Health Canada has justified the move by citing that 70 per cent of preapproved applications have not ended up having their production site built and compliant with current production regulations. This change is incredibly problematic for the cannabis industry, and more importantly, for cannabis consumers nationwide.

The first issue with this policy change is that it will make it significantly harder for new producers to enter into the cannabis market. Now, because of the change, entrepreneurs and firms looking to enter the market will have to get financing without any indication from government that they will be approved. From a financing side, this makes investment into new cannabis firms extremely risky, with the potential for millions in sunk costs if an applicant doesn’t get approved after already building a fully compliant facility. This will drastically increase upfront costs for those who do enter the market, and those costs ultimately end up getting paid by consumers via higher prices.

The second issue with the change is that by adding more red-tape into the production process, Health Canada is actively limiting supply. Supply issues have been a dark cloud over Canada’s legalization process, and this change will only make that worse. As consumers, we want a free and fair market with appropriate access. This is important because appropriate access and product availability is what will help shift consumers away from the black market. Making it harder for new producers to get approved is yet another example of federal policy tying the hands of the legal market. If the legal market cannot properly compete with the illegal market, it is naive to think that consumers will shift their purchasing behaviours.

The third reason why this policy change is misguided is that it demonstrates a complete and utter lack of self-reflection on the part of federal regulators. One of the biggest issues with Canada’s legal market is that the regulations, for the most part, have not changed since the medical cannabis industry was formalized under the Harper government. When his former Conservative government had to deal with the reality of medical cannabis, they created a regulatory framework that mirrored how pharmaceutical products are produced. Those regulations were over-the-top and heavy-handed then, which makes them downright ridiculous now in the context of recreational production and use.

Unfortunately, the federal Liberal government never picked up on those regulatory mistakes. In fact, their own release on this policy change justifies the change because it bringscannabis production regulations more in line with pharmaceutical regulations. It is baffling that in the face of supply issues, and a prevalent black market, the Trudeau government has decided to further cement Stephen Harper’s mistakes.

The final issue with this change is that the proposed solution does nothing to address the problem that Health Canada was trying to fix. If Health Canada has an issue with the amount of preapproved applicants who end up with approved production sites, then they should address the hurdles these applicants are facing that prevent them from being build-ready. The solution here would be to liberalize the production regulations so that these paper-reviewed applicants can get to the production stage as soon as possible. Instead of going the route of liberalizing, Health Canada has doubled down on red tape, which benefits nobody.

All of this stems from the fact that the federal government has never really known how to properly regulate cannabis. When it comes to production, all the federal government would need to do to help solve these issues would be to have production regulations that mirror how breweries, distilleries, and wineries are regulated. Or, better yet, the government could simply apply food-grade production restrictions on legal cannabis. Simple changes in production regulations, as opposed to more red-tape, would go a long way to creating a more dynamic and responsive cannabis market here in Canada, one that best serves the needs of patients and consumers, while stamping out the black market.

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