Health Canada Shifts to Fully Built Cannabis Licenses

Even though Canada had legalized recreational marijuana, licensing for private cannabis businesses rolled out slowly, which caused problems for both retailers and cultivators. In 2019, Health Canada made several policy changes to reduce the turnaround time. Going forward, the agency would only consider applicants with a “fully built site” that could show officials everything was in place to begin business once a license was issued.

Lack of Evidence

In Ontario, several stores had won licenses through the license lottery but failed to open on time, or were still in the process. As a result, many owners grew frustrated, having a fully scaled business yet no license to operate. The new policy therefore shifted toward a merit-based system that favored businesses already built and ready to make sales.

The new policy took effect immediately. Moreover, it came in direct response to a recent Health Canada report. That report found that “more than 70 percent of applicants who successfully passed Health Canada’s initial paper-based review of their application over the past three years have not yet submitted their evidence package to demonstrate to the Department that they have a built facility that meets the regulatory requirements.”

Cannabis Licensing Policy

Industry insiders had mixed feelings about the change, seeing both pros and cons. For example, Ottawa cannabis lawyer Trina Fraser noted, “If Health Canada is making these changes so it can significantly speed up the process of licensing, then that’s good. But if this is going to make it harder for new producers to begin growing, I’m not sure if it is going to help with the shortage issue.”

As of May 2019, Health Canada had issued 177 licenses to cannabis businesses at various stages of building. Together, these businesses covered more than 600,000 square meters of cultivation space. The agency’s statement offered some insight into the change, saying, “Building on changes made in 2017 and 2018. The new approach responds to feedback from applicants about the time it can take to become licensed and the fact that there is now a larger number of applicants seeking to enter a growing and maturing legal market.”

Licensing Delays

The end goal was to shorten the time needed to issue licenses so businesses could begin operations. However, reworking the review process tied up significant resources. As a result, it could actually prolong licensing for those submitting more complete applications.

Health Canada also had to sort through hundreds of applications using a high-level review. If a business qualified, it then had to build out its facilities and rejoin the queue. At that point, the department would review the materials in detail, “in priority based on the original application date.” In the short term, this likely led to more frustration. Even so, it was meant to speed up licensing for heavily invested businesses.