Growing acceptance of medicinal cannabis as a treatment for a wide range of conditions including epilepsy, anxiety and chronic pain, has seen regulations around its cultivation amended to support the industry in Australia.

With the number of patients seeking access to medicinal cannabis in Australia expected to reach about 670,000 by 2030 [1], the changes will create new business opportunities and enable cannabis-related enterprises to meet anticipated future demand.

Here we explore the regulations around this expanding sector and what they mean for companies and their leaders in the field.

Regulatory framework

Since 2016, cannabis cultivation has been legalised in Australia through a system of licences and permits administered by the Office of Drug Control (ODC).

The primary legislation in this area is the Narcotic Drugs Act 1967 (Act), which sets out the regulatory framework relating to the application, granting, variation and revocation of licences and permits. The Act also outlines conditions attaching to licences and offences for breaching them. The Narcotics Drugs Regulation 2016 (Regulation) gives effect to the Act by detailing disclosure requirements, further licence conditions and grounds for the suspension or revocation of licences and permits.

In June 2021, the Narcotics Drugs Amendment (Medicinal Cannabis) Act 2021 was enacted to streamline the existing regulatory framework by consolidating multiple activity-specific licences into single licences authorising a range of activities. The amendments also provided for perpetual licences (as previously licences had expiry dates) to provide greater business certainty and reduce duplicative processes.

Licences

Licences authorise individuals or body corporates to engage in cannabis-related activities. The Act provides for three types of licences:

1. Medicinal cannabis licence – for activities related to the cultivation and production of cannabis;
2. Cannabis research licence – for activities related to the cultivation and production of cannabis for research purposes;
3. Manufacture licence – for activities related to the manufacturing of cannabis products.

The application process for licences initially requires the provision to the ODC of information regarding the applicant’s proposed activities, including the scope of the activities and whether they are for commercial or non-commercial purposes. Details regarding the site where the activities will be carried out such as security measures, floor and site plans, and locations for cannabis destruction and waste storage, will also be requested.

Importantly, the ODC will also require disclosure of the applicant’s background information to assess whether the applicant is a fit and proper person (FPP), as required by the Act, to hold a licence. The information to assess the FPP requirement will vary depending on whether the applicant is an individual or a body corporate, but will generally include information such as prior criminal history, financial and business background, connections and associations, and prior licence or permit revocations. Following the submission of a licence application, the ODC will carry out an inspection of the applicant’s site, and if necessary, ask the applicant follow-up questions.

Manufacturers will require a licence to manufacture therapeutic goods (GMP licence), administered by the Therapeutic Goods Administration (TGA), before they can manufacture cannabis products.

Broadly, attaining a GMP licence will require compliance with the Therapeutic Goods (Standard for Medicinal Cannabis) (TGO93) standards, Pharmaceutical Inspection Co-operation Scheme (PIC/S) standards and the TGA’s own data management and integrity standards. If a cannabis product is to be included as a prescription medicine on the Australian Register of Therapeutic Goods, marketing authorisations must also be sought from the TGA.

Permits

A licence-holder may only engage in the activities authorised under the licence if they have a valid permit to do so. A permit is required for each activity undertaken at a particular site. Therefore, the holder of a licence authorising multiple activities or an activity at multiple sites, will require multiple permits to fully utilise their licence.

As a general rule, permits will set out further details relating to the scale and scope of authorised activities beyond what is stipulated within a licence. In addition to the information provided in the licence application, a permit application will require an applicant to provide information such as the types and quantities of cannabis material being dealt with, supply pathways of cannabis material, and active contracts with other entities authorised to deal with cannabis material. Notably, an application for a permit for a new site (that is, a site for which there is no other permit) must be accompanied by a risk management plan and documentation outlining standard operating procedures.

Ongoing compliance

A licence-holder will be subject to conditions prescribed by the Act or the Regulation. Additionally, the ODC may attach conditions specific to the licence as it sees fit. Examples of conditions applicable to a licence-holder include requirements to employ suitable staff, allow ODC monitoring and inspection, and retain records relating to authorised activities.

The ODC may perform unannounced inspections to detect non-compliance with licence conditions. However, the ODC relies primarily on self-reporting by the licence-holder to detect non-compliance. This reliance is supported by the imposition of a statutory condition in licences requiring licence-holders to notify the ODC of matters affecting the licence-holders status as FPPs, breaches of licence conditions, and any other matters which would permit the ODC to revoke a licence-holder’s license.

In the event of non-compliance, the ODC may respond by issuing directions, infringement notices, injunctions or enforceable undertakings. The ODC may also vary, suspend and revoke licences and permits, or even impose civil penalties or instigate criminal prosecutions.

With regards to compliance with permits, it is a statutory condition of a licence that a licence-holder undertakes authorised activities in accordance with a permit. As such, it is possible for non-compliance with a permit to constitute breach of a licence condition, which entitles the ODC to take the above actions against the licence-holder.

Key takeaways

Through the current licensing regime, the ODC has sought to balance the need to support ever increasing consumer demand for medicinal cannabis and cannabis-related enterprises, while ensuring that these enterprises produce high-quality cannabis product and do not become exploited as sources of cannabis for other purposes.

The recent changes also create new business opportunities in the medicinal cannabis sector by creating a more conducive environment for businesses to set-up and operate in this sector. Nonetheless, individuals or companies wishing to establish cannabis-related businesses must be prepared to disclose their background and proposed operations in detail to the ODC to secure a licence or permit.

Even once the requisite authorisations have been acquired, measures must be implemented by licence-holders to ensure that their operations comply with the conditions of their licence and permits.

If you need advice regarding the medicinal cannabis licensing regime and how it applies to you or your business, please contact Thomson Geer’s Intellectual Property team.

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