Ivan Ross Vrána of Aslan Ross Consulting, who, as a former Health Canada employee and long time consultant the Canadian Medical Marijuana Industry, now helps companies like Maple Leaf Green World (TSX.V:MGW) file their MMPR applications, is the guest today on Midas Letter Marijuana Podcast.

Full transcript:

James West: So Ivan you are the found of Aslan Ross Consulting. Why don’t you give me an overview of what Aslan Ross does right now.

Ivan Ross Vrána: Well right now we’re a very small firm in that it’s just me. But we were founded in 2012 and that’s after I left the government, and the whole idea behind Aslan Ross is to bridge that gap between industry and the government. And what I mean specifically by that is, there are thousands of regulations that dominate our daily lives for industry for non-governmental organizations, and it’s trying to be the man who translates both to government and from government so people can have a better interaction. So it benefits generally hopefully the client, but also governments, so everybody understands where everybody is positioned as it were – to provide that clarity.

James West: I see. So is that a service you provide in one industry in particular, or across all levels of government and industry?

Ivan Ross Vrána: Well I like to think it’s across all levels of government, but my specialty is with Health Canada because I spent approximately 15 years working at Health Canada so that’s an organization I know extremely well.

James West: So you are involved principally with the Marijuana for Medical Purposes [MMPR] aspect of Health Canada. How did you come to be involved with that?

Ivan Ross Vrána: Well largely my last job for Health Canada before I decided to leave was I was the policy lead that developed and that set the precedent for the regulations to come. So I was in charge of a team whereby we knew we had to change the current program and before you can actually issue regulations, you have tom come up with a policy to bring to cabinet, and that’s what I was doing. And then after I left I knew it was a niche and I thought I could provide some value to people who wanted to enter the market.

James West: Mm-hmm. So have you got some clients who you are advising in that regard right now

Ivan Ross Vrána: Yes I do. I have a series of clients. I only take on so many because I want to be able to provide them with good service, but out of my client roster they are a majority for sure.

James West: Ok. So then, in your view, what is the state of the Health Canada licensing framework?

Ivan Ross Vrána: Well overall, if we just step back a bit and look at what the regulations state, what Health Canada has put on the web site, when they’ve issued their guidance documents, I think those documents are done extremely well. I think they really hit it out of the park in how they formulated them, how they put them together…this was not something I was involved with. The issue now, comes to implementation, right?

Because it’s one thing to read the documents and its another thing to go forth and interact with the department. And there have been some interesting challenges dealing with Health Canada. And I think part of that to some degree is inconsistency with how those rules are interpreted, and how people are responding to them.

James West: Okay so inconsistent on the part of applicants or on the part of government?

Ivan Ross Vrána: Well I think its my experience, because I like to think that I provide that consistency to all my applicants, but it’s a little bit on the government side, and its not to really point the finger at them – I understand it’s a huge challenge because this is a brand new industry – I would maybe just like to see a little bit more transparency because there are issues about providing information, it’s a lot of information that the applicants have to go through to demonstrate that they meet the requirements. And there’s a lot of understanding that has to go hand in hand and sometimes that communication back and forth between Health Canada and the applicant is lacking, which, on the applicants point of view, that means time, and that means delay. So I think if we could fix that, we should be in a lot better shape.

James West: Okay, so how many licenses do you think Health Canada will issue in 2014?

Ivan Ross Vrána: Well, I guess that’s the million dollar question. There’s only 13 now, and its been like that for a couple of months. If you ask Health Canada that question directly, they’re not going to give you an answer. So the only thing that I can go to is, as part of my work is I look at any documentation that’s out there, and recently with the federal court injunction, and the issuance of Health Canada’s factum on appeal, they’ve kind of given you a sense, right? They say, that if they look at the markets, this year there could be something like 50 to 100 coming in. Now I think those numbers are interesting, I think they’re a bit high. They’ve also claimed in those affidavits that they’re getting something like 25 applications per week. But that they’re screening a lot out for incompleteness, and sending it back to people to say, ‘could you fill this out’. And I think the real sort of hint of clue overall, is if you look at the new amendments that came out just two weeks ago I believe, where applicants now or licensed producers have to provide information to medical regulatory authorities. They have to do a regulatory impact analysis statement, and they base their numbers on something like 50 to 100 applicants overall. I know the numbers kind of seem all over the ballpark, but that’s the rough approximation that I think anybody can distill from these types of numbers these days.

James West: Okay, so when you say 100 overall, are you saying 100 overall over the course of a year, or 100 overall for the whole program?

Ivan Ross Vrána: For the whole program, to a degree. Because there are only so many people who are going to get into this industry that are going to have the capabilities and the infrastructure to meet all the requirements of the MMPR, because it’s quite robust. There’s a lot of stuff when it comes to quality assurance, when it comes to a) physical and personal security, and when it comes to record keeping. And so that takes a large investment on the part of companies to come in, so it’s not like maybe I’ve got a shed in the back yard, and I can start producing medical marijuana, or marijuana for medical purposes and start selling it. It’s not that easy whatsoever.

James West: Interesting. So then, if there are over 800 applications in, and you think that there’s only 100 that are ever going to be issued or be active at any given time, that implies that one in eight will be successful and seven out of eight will be unsuccessful?

Ivan Ross Vrána: Sure, you can look at it that way. But I mean again, people thinking ‘okay this is a brand new industry, and its going to be a walk in the park’ to get that licensed production approval from Health Canada. Because rightly so, the company has to demonstrate that they meet all the requirements of the MMPR, and that’s not an easy task. And that’s meant to make sure the industry is properly regulated, which I happen to agree with. So those who have the investment, are those who are going to be the ones who are able to do it. Like in any industry, there’s only going to be a value up to a certain point.

James West: Okay so, what would you recommend to applicants to make sure that their applications won’t be rejected for deficiencies in the first attempt?

Ivan Ross Vrána: Well I think a) people have to be aware that it’s a learning process both from the government perspective right now, because of course they’ve never went through this process with a brand new industry, and industry has t be aware of that it’s not the end of the line if they are rejected the first attempt. Because what Health Canada has constantly done – at least with applications – is say, ‘Okay, you don’t have this, but can you please send this to us.’

So they’ll try to make it as clear as possible as to what they’re looking for. I think they could be even clearer, but I mean they are trying to meet us half way. And they’ll give you reasonable timelines to meet that. So it’s not the end of the road if their very first application asks for clarification. It’s like any other process within government. Part of my history was I worked with pharmaceuticals, and you go through the regulatory process there, it’s a continuous process asking for clarification on certain documents.

So, that long way about to actually get to the heart of your question is, you have to make sure you’re documentation is extremely detailed, and it meets all of the requirements of the MMPR. And that’s section by section. So you have to demonstrate that, if it comes to a security requirement, you have that or are going to do it, and this is how you are going to do it. If it comes to Quality Assurance, and they’re looking at that person hired to be your Quality Assurance, you have to demonstrate all of their activities that they’re going to undertake, as well as their credentials as it aligns with the MMPR.

So you need to have a very robust paper trail to support your application. And then I think it gets smoother as you go along in the process.

James West: Mm-hmm. Okay that’s interesting. So you advised a company called Maple Leaf Green World and are a consultant to them – an advisor. How did your input affect how they approached the whole application process?

Ivan Ross Vrána: Well I like to think that it’s providing for them a sense of exactly what Health Canada is looking for. So for them – they’re sitting back and these are the guys who are going to produce it, they have the knowledge when it comes to the plant life, the plant itself, how they’re going to produce it and how they are going to package it. But then its filling out and understanding how that applies to the regulations. So I like to think my advice then is saying, ‘Okay let’s look at all your paperwork, let’s look at all of what you need to have in the application, and this is what you’re missing, this is what you need, and this is what you need to demonstrate. And then we can move the process along. And that information is there. It’s just putting it in a package in a way that meets the regulations and that Health Canada will accept. And that’s a skill in and of itself when you’re dealing with government.

James West: Okay so, are you aware of how many licenses [applications] are in progress right now, how many licenses have been rejected completely, and what roughly is the rate per week or per month that new applications are materializing at Health Canada?

Ivan Ross Vrána: Well I can’t speak on that with any authority because I’m not working there. I mean the only information I have is what has been in the government’s affidavits regarding the federal injunction, and they’re saying there are roughly, as of February, they were receiving something like 25 applicants per week. And that as of today, if you go on their website, there are 13 companies approved, but out of that I think as per their affidavit again, they had something like 27 applicants who had ‘ready to build’ letters. And that’s about as much information as I have.

James West: So a ‘ready to build’ letter is basically a first pass authorization from Health Canada that you’ve done everything okay up to this point, and so as long as what you build passes muster with us, you’re going to get your license. Is that accurate?

Ivan Ross Vrána: Yeah. You’re on a very good path if you get the ‘ready to build’ letter. They’re recognizing that you can make the investment now, right?

James West: So then is it safe to say that a ‘ready to built’ letter is a pre-requisite, is a signal that you are in a sort of ‘poll position’ to get one of the commercial growing licenses?

Ivan Ross Vrána: Yes. I think so. Yes.

James West: Okay. Hmm. Well that’s interesting. Okay so the Allard injunction that essentially the federal government sought to force licensees under the MMAR framework, to purchase all of their marijuana going forward under the MMPR framework from the commercial growers licensed there-under. And the Allard injunction was essentially where the judge said, as a response to MMAR licensees who felt that they couldn’t afford the prices that commercial growers were going to force them to pay. They basically got together and challenged the government’s right to force them to buy from commercial growers and Allard agreed with them. And so now…What is the status of all that? How soon is it likely to be resolved?

Ivan Ross Vrána: Well the government has a certain amount of time to appeal. And they just – I think as of June 14th, they issued their factum on the appeal, and the factum is the document from the government saying, ‘this is how we see our appeal going, and this where we see we have strength in our appeal.’ And so I’m very well convinced that the government is going to appeal that decision, because if you read their affidavits, unfortunately the way the program was originally envisioned – it outgrew that. So that’s why you came up with the MMPR. And there’s a valid sort of reason for that whether it comes with the safety, or security, or supplying the market overall. So I think the appeal will be within the year. Or it will be heard by a court and then a decision will be levied.

James West: So then, you think the government will be successful?

Ivan Ross Vrána: Um…that’s like betting on the horses…I have no ideas how the courts sort of regulate that, but you know – I think, reading their factum, and it all depends, because this has been an extremely important issue for the courts over the years. I mean this is how the entire program got started, right? I like to think the government has a strong argument this time around when it comes to allowing personal production to end and allowing industry to take over. I mean cause if you look at this, while its not an improved product for therapeutic use, it’s a controlled substance. The government’s approach has always been ‘Listen – we need to treat this like it is a regulated therapeutic product’. And what that means then is – I mean there’s no other medicine that I know of that you can make in your back yard or in your house. And that’s just one issue. There are a whole host of other issues when it comes to security and safety. I do think the issue that applicants argued against about price is not really sustainable over the long run, because the more competition you have, it’s like anything – the price is going to go down. So their arguments that the price will be anywhere to $12 will put hardship on us, and that they’d be forced to go to the black market, I think is a bit misleading because the black market would probably be the same price. Whereas if you just now take a look at now what companies are offering…I mean there’s a lot of compassionate care prices, and some companies are offering certain strains at $3. And the more LP’s [licensed producers] you get out there, the more competition there’s going to be.

James West: Okay so at what point does the official licensed commercial grower who’s got the extra burden of regulation and security and quality control, I mean there’s got to be a price differential that, where the black market or unofficial grower – illegal grower – should obviously be able to provide a product for cheaper, and do you think that there’s a sort of realistic potential for people who are on disability to say, ‘Well basically the regulatory-quality assurance-legal price tag differential is 2 to 3 to 4 dollars per gram over what I can get it from my local neighbourhood Hells Angels provider…what do you think is going to happen there? Do you think people will opt for unofficial sources if they can save a couple of bucks a gram?

Ivan Ross Vrána: Well I don’t know…I would hope not. I think again, while – fair enough; the guy who’s working in the black market doesn’t’ have the costs that the legitimate guy does, he has other opportunity costs. And the big one is, he’s breaking the law. So than is an inherent danger with that may at the bottom end, deal with the price, but if I was really using this product for therapeutic purposes, I would not want to buy it from them, because you could just analyze half the stuff that people are growing it with on the black market, and it’s not a good product, I would argue. Especially if you’re taking this for your health. And I think overall the price is going to be very competitive it shakes out in the market. So you might save $0.50 a gram if that’s the real case, or maybe a dollar. But then, I think you’re getting an inferior product, I think you’ll be getting a product that you don’t know is very safe overall for your health. And so I think it’s a risk that hopefully a lot of people would not want to take to save in the end what I believe is a few pennies overall.

James West: Okay so where do you see the future of marijuana regulation going in Canada? Do you think this is all a precursor to the legalization of marijuana for recreational purposes or a complete decriminalization of marijuana?

Ivan Ross Vrána: Well I guess that’s up to the politicians to decide. If you listen to Justin Trudeau, he wants to legalize it, so maybe that’s an avenue. I think – you know, any possibilities are there. I think – put it this way: We can’t underestimate this market. I think there is whether its recreational or medical, there will always be a demand for it. The interesting thing is how is the government going to respond to it. And its going to have to controlled in some fashion, just like we do with alcohol, because it’s like anything. I do not want my children drinking until they’re an appropriate age. I do not want them using marijuana until either its legal or at an appropriate age. And there still needs to be a lot more science done with marijuana, so I think the future’s wide open for it. But there will always be a government response on how to regulate it, and I think that’s a necessity to protect us.

James West: Ivan, thank you for participating in this interview.