Interview: the government's mindset

Andrés López is the former director of the National Narcotics Fund, a crucial government agency charged with regulating the medicinal cannabis industry in the context of narcotics control.

Some companies believe they don’t need the quota if they “self-cultivate” 20 plants per employee. This model is only applicable to an individual, not a company, and this is just cause for us to revoke the license.

CCI: What have been the most important accomplishments for the sector in the past two to three years?

AL: One of the key accomplishments is to have created legal security for investors, because without foreign investors, this industry only exists on paper. In Colombia, we understand the importance of foreign investment and it shows. Some of the biggest companies in the world, including Canopy Growth Corp and Aphria, have taken positions here. Our system has gained recognition overseas, we have provided technical assistance for Peru and we’ve had meetings with the United Nations International Narcotics Control Board (INCB). There is still space for improvement in our regulation, but it is effective precisely because it regulates the entire chain. We have clearly defined the route of where the seeds come from, how we’re going to produce medicine and where medicine can be sold.

CCI: What do you think can be improved?

AL: Control is the central challenge and it is our biggest focus. There’s a confusion amongst companies which have not understood the key difference between having an approved license and earning a commercial production quota. Many companies have requested licenses just so they have them, but I don’t think they have evaluated whether they have the necessary expertise and finances to operate. For example, a requirement for the fabrication quota is to have the data sheets for the products. In order to get these data sheets, companies need to process the plant and have the infrastructure, and this can cost around USD$1-3 million, plus the necessary operational workforce. Some companies say the current licenses are very expensive. It’s clear they don’t understand the cost of a fabrication plant with 100 employees.

CCI: Is there anything in particular you don’t want to see companies doing?

AL: Yes, cultivating psychoactive cannabis without a quota or using the self-cultivation model. Some companies believe they don’t need the quota if they “self-cultivate” 20 plants per employee. This model is only applicable to an individual, not a company, and this is just cause for us to revoke the license.

CCI: At the moment, does any company have an approved commercial production quota?

AL: Not yet, but we are likely to grant some in 2019 because one of the requirements, the finalization of the ICA registration process, is already well under way. With ‘fuente semillera’ we admitted pre-existent strains, but no one can really ensure what the real composition of each variety is. Every seed has to be registered and characterized at the ICA using strict methodologies and data sheets vary depending on the region. So, until companies finish their characterization process, we can’t grant any commercial production quotas. The first companies who have now finalized the process with the ICA started about a year ago. Last year we had around 15 companies, this year we’ve approved some more, so there must be around 20.

CCI: With this license backlog, what are the options to change regulation? Are you thinking about a moratorium?

AL: Some changes are public, the first licenses have a duration of five years. We can’t forget we’re talking about producing drugs, and they depend on doctors’ prescriptions, which is why this system is driven by demand and based on the control of supply. It’s not about a company’s capacity to produce or invest. Firms need to show they have a legitimate end client for their product. Many companies that currently have licenses will never get a quota, and the legislation allows us to remove the license if it’s not used in a certain period of time. The same goes for INVIMA and sanitary registries. In five years, a lot of companies will stop investing in the license, others are going to lose their license after we enforce controls. The reality is there can be around 1,000 license requests in line and approximately 200 licensed companies, but at present we only have close to 20 companies ready to request quotas.

CCI: What barriers do we have to overcome for commercial exports to become a reality?

AL: Meeting foreign sanitary regulations will be the big one. The media’s portrayal of the “cannabis boom” likes to repeat that growing in Colombia is five times cheaper than in Canada, but that’s the case with many agricultural products and they haven’t always been successful. Last year Hass avocados were exported to European markets for the first time. It was big news, but it took years of work to convince importers of the quality and control of the product. The price argument is the easy bit. With cannabis we have to convince importers about a range of factors from solvent residues to pesticide usage, so the main challenge is to work on ensuring the quality of the product. These days the Ministry of Trade and ProColombia tour foreign markets with technical data sheets, not just price lists.

CCI: How can Colombia capture value without alienating international companies looking for revenues?

AL: The prohibition of dry flower exportation already gives us the possibility to create added-value products, but even the extract itself is a raw material. We have a chance to take the next step and create products, because if we don’t, companies will just export extracts so they can be transformed into medicine abroad. The Ministry of Health and INVIMA have been important. In December, INVIMA classified cannabis as a therapeutic plant, which means cannabis products are going to have sanitary registrations. Magistral formulas were the first bet, but you can’t export them and they’re not very profitable, so there’s a new path to export phytotherapeutic products. Also, INVIMA is a reference agency for the region, we have several agreements which we see in cosmetics with CAN: if the product is approved by INVIMA, it can be commercialized in Peru, Bolivia and Ecuador, so this generates more value for the country.

CCI: How can the local industry tackle the shortage of qualified human resources?

AL: The market has begun to react regarding human resources. Universidad del Rosario and Universidad Nacional in Bogotá and Universidad de Antioquía in Medellín, among others, have introduced courses on medicinal cannabis cultivation and use. Medical guilds in Colombia have also been very open to this matter because they’ve seen the government’s seriousness about building the industry.

CCI: What are the restrictions on other CBD products such as edibles?

AL: INVIMA follows a policy that is common in other countries – such as the UK – that recognizes that medical evidence shows cannabinoids are pharmacologically active substances, meaning there have to be restrictions to use in foods and beverages. Why would you put morphine in foods? There is increasing evidence that cannabinoids have a central action so INVIMA is likely to be very strict on using reference lists of existing products before it approves CBD in food products.

The reality is there can be around 1,000 license requests in line and approximately 200 licensed companies, but at present we only have close to 20 companies ready to request quotas.

CCI: What are the main tendencies and challenges for 2019?

AL: To be able to export, companies have to convince the importing country and the Colombian government. I think this is a very important challenge in terms of quality. Banks are also a huge challenge. The government can’t force the banks to open accounts for any sector, and banks have told us they’re analyzing this sector on a case-to-case basis. So, the sector has to be very serious. Some companies exaggerate their progress so they can build investor excitement. It’s our job to remind people that, as of today, no company here has the commercial quotas approved. Also, firms should remember that, although CBD cultivation doesn’t require quotas, it does require a completed ICA registration before the commercial phase.

CCI: In the long-term what are the legal barriers to the export of flowers for recreational use in Canada?

AL: Firstly, there’s a political reason. Colombia, like other Latin American countries, has had a history of producing raw materials for Europe only for it to be returned to us in the form of finished products. From the beginning, our intention has been to create added-value products in this industry. The second reason is that we need acceptance from the medical guild, and the real decision makers are the doctors. If they don’t trust the products, they won’t prescribe medication. You can’t get that trust with cannabis flowers. The third reason is to separate the markets. Since the initiative reached Congress, we wanted medicinal and recreational cannabis to be separate. In Colorado they only cultivate and sell in dispensaries, but here we had to negotiate with all political parties in Congress and show people this was not a recreational initiative.