Josh Hunt partner at Hopgood Ganim with specialisations across Digital Assets, Resources and Energy and Corporate Advisory and Governance rites…..

Key issues:

  • the Coalition Government commenced the legalisation of medicinal cannabis products in Australia under federal law in 2016.
  • The Commonwealth Parliament’s legislation is in line with a global trend towards medicinal legalisation across the developed world in recognition of a growing medical consensus concerning the therapeutic role that “cannabinoids” can play in treating disease and illness.
  • Cannabis Licence applications through the Narcotic Drugs Amendment Act 2016 (Cth) and its amendments to the Narcotic Drugs Act 1967 (Cth) (NDA) can be a costly and demanding undertaking and sophisticated legal and pharmaceutical advice is recommended before any prospective applicant commences the process.

Through the Narcotic Drugs Amendment Act 2016 (Cth) and its amendments to the Narcotic Drugs Act 1967 (Cth) (NDA), the Coalition Government commenced the legalisation of medicinal cannabis products in Australia under federal law in 2016. The Commonwealth Parliament’s legislation is in line with a trend towards medicinal legalisation across the developed world in recognition of a growing medical consensus concerning the therapeutic role that “cannabinoids” (chemical compounds derived from plants of the genus cannabis) can play in treating disease and illness.

The production, refinement and sale of medicinal cannabis (which is typically low in the psychoactive compound tetrahydrocannabinol, otherwise known as THC) is a high-growth industry and a lucrative emerging market. Nonetheless, the authorisation process under the NDA to lawfully manufacture a medicinal cannabis product remains complex. Medicinal cannabis in Australia is regulated under a mixture of changing international, federal and state laws. Unless manufactured or sold in accordance with the NDA or state licensing regimes, cannabis remains an illegal drug in Australia.

This update is the first in a series on the authorisation process and provides a general introduction to the Commonwealth medicinal cannabis product licensing and permit application regime. In particular, it considers the basic elements of an application under the NDA for a licence to produce or manufacture medicinal cannabis products.

Chapter 2 of the NDA

Chapter 2 of the NDA establishes a federal licensing regime for medicinal cannabis in Australia, which is administered by the Commonwealth Office of Drug Control (ODC). There are two types of licences (Cannabis Licences) available to prospective medicinal cannabis producers under the NDA:

  1. a medicinal cannabis licence, which authorises the growing and production of cannabis and cannabis resin and related processes; and
  2. a manufacturer licence, which authorises the extraction of cannabis and cannabis resin and related processes, including refinement, processing, concentration and transformation into other drugs.

In addition to a licence, a prospective medicinal cannabis producer will also require a medicinal cannabis permit. Educational institutions, pharmaceutical companies and other scientific organisations can obtain, separately, a cannabis research licence.

Licence preconditions

As a threshold requirement before commencing an application for a Cannabis Licence, an applicant must be able to demonstrate to the ODC that the medicinal cannabis product will be produced for the purpose of either:

  1. research into medicinal cannabis products;
  2. clinical trials;
  3. supply as an unregistered medicine under the Therapeutic Goods Act 1989 (Cth) (TGA); or
  4. supply as a registered good subject to the TGA.

Consequently, applicants seeking to produce medicinal cannabis products for sale into the general consumer market will also need to consider registering their product under the TGA.

Fit and proper person obligation

In an effort to combat organised crime and/or the abuse of medicinal cannabis crops, the NDA imposes an exacting character test on prospective applicants. Applicants (including corporate applicants) will need to satisfy the ODC that:

  1. they are a “fit and proper person” to possess a Cannabis Licence; and
  2. they have not engaged in conduct (or in the case of corporate applicants, the directors have not engaged in conduct) “that constitutes a serious offence during the 10 years immediately before the date of the application”.

The fit and proper person obligation extends not only to the applicant, but also to “relevant business associates”, who are required to demonstrate they are fit and proper persons “to be associated with the holder of a medicinal cannabis licence”. Although no definition of “fit and proper” is provided in the NDA, the phrase has a well-established meaning at general law that involves a consideration of the honesty, good character and integrity of a person – including an assessment of any fraudulent and criminal behaviour or disregard for the law.

The ODC has broad discretion to investigate any business associates of an applicant whom it is “reasonable” to take into account in the course of an application.  An applicant’s relevant business associates may include:

  1. persons who have the ability to influence the conduct of your enterprise, either due to having a financial interest or through other means;
  2. immediate family, including parents, siblings, partner and children over 18; and/or
  3. any other connections who have the ability to influence the applicant’s business decisions.

Therefore, both corporate and individual applicants will need to give serious consideration as to the reputation and standing of any persons to be involved in the enterprise that will be the subject of the Cannabis Licence.

Security obligations

The NDA also requires an applicant to satisfy the ODC, that they will secure and closely regulate any cannabis in their possession under the Cannabis Licence. This includes demonstrating there are reasonable grounds for the ODC to be satisfied that the applicant will:

  1. take “all reasonable measures” to ensure the physical security of cannabis in the applicant’s possession/control, or obtained, cultivated or produced under the licence; and
  2. employ suitable facilities and proposed security arrangements at the land or premises where the licensed cannabis manufacture or production is to take place.

Accordingly, any applicant should have a comprehensive risk management strategy and/or appropriately planned and monitored facilities to mitigate security risks before commencing an application. The ODC expects applicants demonstrate that they have given thorough consideration to:

  1. physical/site security of any production or manufacturing plant, facility and equipment;
  2. information security, including proper record management and bookkeeping; and
  3. personnel security, concerning staff and contractors (including criminal background checks).

Each form of security should be demonstrated as an “end-to-end process”, including storage, handling, transport and engagement in third party controlled processes (such as analytical testing of extracts and/or products).

Medicinal cannabis permit

Any Cannabis Licence applicant will also need to obtain a medicinal cannabis permit. A medicinal cannabis permit specifies the amount of cannabis-derived drugs that the applicant can manufacture and hold in stock, and the period in which they may do so.

State laws

Finally, an applicant may also be subject to state-based laws and regulations depending on the jurisdictions in which they intend to operate. These obligations can be in addition to the requirements imposed by the Commonwealth through the NDA and the TGA. Although Victoria is presently the only state with legislation governing the manufacture, sale and distribution of medicinal cannabis, other states will likely follow suite in legislating their own regimes in the near future.

Conclusion

The issues discussed above provide only a general summary of the licence application process, and do not address the nuances or complexity likely to arise in an individual application.

Cannabis Licence applications can be a costly and demanding undertaking and sophisticated legal and pharmaceutical advice is recommended before any prospective applicant commences the process.

For more information or discussion, please contact a member of HopgoodGanim Lawyers’ Corporate Advisory and Governance team.

Source: https://www.hopgoodganim.com.au/page/knowledge-centre/legislation-update/high-standards-an-introduction-to-the-application-process-for-medicinal-cannabis-licences-under-commonwealth-law