The German Medical Cannabis Market Could Be Worth 3 Billion Euros

The German medical cannabis program has the potential for significant growth thanks to recent legislative changes. However, the situation looks different when it comes to recreational cannabis.

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New German Cannabis Regulations

In Germany, new regulations allow for personal possession and cultivation of cannabis and the creation of community cannabis clubs, but do not permit the commercial sale of cannabis for adult use.

“At this stage, investors should already understand that ‘legalization’ can mean different things,” notes Pablo Zuanic of Zuanic & Associates in his report, adding that “the new regulations… do not necessarily mean net benefits for most companies in the cannabis industry, and may pose a risk.”

The recent legalization of possession and cultivation of cannabis in Germany, described as “phase 1” by Health Minister Karl Lauterbach, is part of the German government’s cautious approach to cannabis regulation, maintaining a clear distinction between the medical and recreational cannabis markets. Zuanic notes that “phase 2,” which could include pilot programs for the sale of cannabis for adult use, is still under consideration.

“We doubt that phase 2 will be introduced during the current government coalition,” he wrote. “Could pillar 1 be canceled in the future? We doubt it, but it will depend on the composition of future governments.”

Benefits for the German Medical Market

A significant change in German legislation is the removal of medical cannabis from the narcotics list, aimed at simplifying the prescribing process and increasing patient access by reducing legal and bureaucratic barriers for doctors and patients.

Currently, the market serves a relatively small portion of the population, with about 28,000 patients, or less than 0.03% of the German population in 2023.

“It is clear that this segment was on the path to growth, but now, with the new regulations approved by the Bundestag last Friday, it could explode,” Zuanic wrote.

“We try to avoid exaggeration, but if over 3.5% of the population in Florida participates in the medical cannabis program, how many cash-paying patients can we expect in Germany (a country with a population of ~85 million)?”

If 1% of the German population used medical cannabis, Zuanic estimates that the market could grow to 1.7 billion euros by 2025, which would be a significant increase from current levels. This growth would benefit major exporters to the German market, such as Canadian companies Aurora Cannabis (Nasdaq: ACB) and Tilray Brands (NASDAQ: TLRY).

More importantly, the new rules abolish the tender process for growing medical cannabis in favor of a licensing system, as reported by Tilray on Wednesday. These changes aim to increase the supply of medical cannabis in the country and facilitate operations and expansion for companies like Tilray, potentially increasing their production “by about 5x and more than doubling revenue capabilities.”

However, smaller companies and new market entrants, especially online medical cannabis clinics, may experience increased competition and price pressure under the new regulations.

The Numbers Speak for Themselves

Despite significant growth in the import of medical cannabis, which increased by 20% in 2022 to 25 tons and was expected to rise again in 2023, the German market remains limited by strict drug regulations and regulatory challenges. These factors have limited patient access to medical cannabis therapies.

Most of the medical cannabis imported into Germany comes from Canada, which accounted for 47% of the total import from January to September 2023. However, a significant portion of these imports are either re-exported – including to Poland – or destroyed due to quality issues, further complicating the market’s supply chain.

The reimbursed market, where prescriptions for medical cannabis for patients are covered by insurance, saw a slight increase, with sales reaching 208 million euros in 2023, compared to 198 million euros in 2022. However, prescriptions are typically issued only as a last resort and for chronic diseases and conditions, limiting the market size.

Zuanic suggests that changes in German drug laws could change the situation. Currently, patients can receive prescriptions through telemedicine services after a prior in-person visit to a doctor, but the overall number of patients remains low.

Market size forecasts vary, but if 1-2% of the population joins the medical cannabis market, some analysts predict that this market could be worth between 1.5 billion euros and 3 billion euros.

Comparisons with other countries highlight the untapped potential of the German medical cannabis market. For example, 1% of the Canadian population participates in its medical cannabis program, which is significantly higher than the current participation rate in Germany.

“All things considered, the scale and timing of the MMJ market growth (which may be triggered by the new law) are subject to debate, but we believe that the growth estimates presented above are realistic,” he wrote. “However, we are aware that there is a scenario where home cultivation and cannabis clubs could slow the growth of the MMJ market.”

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(Featured image by CRYSTALWEED Cannabis via Unsplash)

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First published in Fakty Konopne, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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