Earlier this year, Health Canada caused a stir among the country’s recreational cannabis industry, citing that a producer’s cannabis lozenges must be classified as “edible” cannabis instead of extracts. Now, that decision appears to be backfiring on the federal entity.
According to an MJBizDaily report, a federal justice has deemed that Health Canada breached its duty of procedural fairness when it told Organigram Holdings that it needed to alter the classification of its lozenges.
Justice Cecily Strickland shared the decision as she granted the company’s application for judicial review, kicking it back to the Canadian health department to review its initial decision and make a new determination surrounding the lozenges, known as Jolts.
Specifically, the justice said that the government failed to give Organigram an adequate opportunity to respond to a factor contained in the Compliance Promotion Statement. As a result, the company didn’t have a meaningful opportunity to respond to the concern, Strickland said.
According to Strickland, Health Canada made the decision based in part on an internal document called the Classification Policy, though the document wasn’t referenced in the federal agency’s decision surrounding Jolts.
Health Canada also said that Jolt’s size and shape was not suitable for sublingual use, one of its key reasons to reject the lozenges’ classification as an extract. The justice “found no evidence in the record before me to support (Health Canada’s) inference that the size and shape of the Jolts may cause consumers to not follow the instructions for use.”
Additionally, she flagged Health Canada’s procedures, saying that its classification system of edible cannabis or extracts is “relatively new” and appears to have been made in transition during the time that the decision was made.
In an interview with the publication, Organigram CEO Beena Goldenberg called the decision a “win” for the company, calling the company’s decision to seek a judicial review “unprecedented in the cannabis industry.” Still, Health Canada could technically return with the same decision.
The federal court did not address one of Organigram’s main arguments, that Health Canada treated the company unfairly by deciding it must pull all Jolts from shelves years after they had already been on the market. Jolts were first launched in August 2021, and the crackdown from Health Canada didn’t truly gain momentum until earlier this year.
Strickland also didn’t give an opinion on the level of reason involved with Health Canada’s initial decision.
Organigram asked the court to reject the Health Canada decision, citing the previous popularity of the products and that the ruling effectively halted the market for such products.
Regardless of how the dispute pans out, it is indeed a historic move in the cannabis industry as Goldenberg points out; namely, it’s the first time that a licensed producer applied for a judicial review of a decision made by the Canadian federal government.
The dispute centers around the distinction between a cannabis edible and extract, which greatly alters the way products are marketed in the country. In Canada, there is a 10 mg THC cap on edibles. When it comes to extracts, an entire package can contain up to 1,000 mg of THC — the same classification as concentrates like shatter, wax and live resin.
According to Trina Frader, a partner at Brazeau Seller Law in Ottawa, Ontario and leader of the firm’s cannabis practice, Health Canada will need to reissue the compliance letter, at which time Organigram will have the opportunity to respond.
“And then you have to make the decision over again,” Frader told MJBizDaily. “Organigram went to the federal court with a plea that the minister’s decision was unreasonable. But. unfortunately, we didn’t get a decision on that issue.”
A similar dispute arose with Indiva earlier this year, as Health Canada similarly deemed that the company needed to cease production on its 100 mg, 250 mg, and 500 mg lozenges. CEO Niel Marotta had previously stated that the low THC threshold for edibles is aiding the illicit market, calling the limit a “half-a-billion-dollar market failure and a public safety problem.”
Goldenberg said that Organigram is assessing a number of options, whether Health Canada comes back with the same or a different decision.
“At this point, we don’t want to go down that path until the door is (fully) shut on what was a successful product,” Goldenberg said. “Depending on how quickly this reassessment happens, we will have an action plan in place.”
