Germany is the market leader in medical cannabis in Europe, as the country drives nearly three-fourths of legal cannabis sales in the region due to its large population, high per capita income, lenient regulations, and ease of access to medical cannabis products that are – in the majority of cases - covered by insurance. The German cannabis market is expected to be worth nearly $270 million in 2020 despite the backdrop of a global pandemic and its complete dependence on imports to supply the market. In fact, the country is on track to import up to 40% more flower than it did in 2019.

Since 2017, doctors have had the authority to prescribe medical cannabis to patients as they see fit. The products are reimbursed for roughly 60% of applying patients covered by statutory health insurance, and the resulting affordability of medical cannabis has driven many patients to turn to the legal cannabis market in order to meet their various medical needs. Patients whose product is not covered often pay out-of-pocket, and some 10% of the population under private insurance plans may alternatively look to them for coverage. In 2022, Germany's Federal Joint Committee will use the results of an ongoing survey on medicinal cannabis products to determine which forms should be covered by statutory health insurance. This will bring much-needed additional legitimacy to the industry as well as credibility to patients and physicians, helping to reduce the stigma surrounding cannabis as a medicine and catalyze growth in subsequent years.

The German cannabis market was expected to take a hit in 2020 due to COVID-19 related shortages, though this has largely not materialized and no logistical issues of note have impacted the market or product availability in any major way. The only delay resulting from the pandemic has been related to the launch of domestic cultivation operations, though setbacks have been minor and first harvests are still expected in early 2021. As a result, it is hoped domestic supply will truly begin supplanting imports in 2021.

Germany's historical medicinal cannabis market sizing reflects the nation's continued reliance on imports, which have kept prices high and limited access. Following the ramping-up of domestic supply as well as newly-implemented reimbursement caps for pharmacies, however, lowering prices will draw more consumers into the market, and with continued research, de-stigmatization and adoption taking place, German medical cannabis is on a very positive trajectory over the longer term.

In March 2017, the German parliament (The Bundestag) passed a law amending provisions of the Narcotics Drugs Act and related regulations, expanding the options for prescribing medicinal cannabis products. This change in the law allowed physicians to prescribe medical cannabis to any “seriously ill” individual, regardless of other treatment options that might be available. As the term “seriously ill” is not defined by the law, it gives the doctors the authority and freedom to decide on a case-by-case basis by assessing risk factors, alternative treatment options, and the likelihood that cannabis products will provide relief from symptoms of illness. The legislation also permitted physicians to write prescriptions without holding a special license or permit, which was required prior to the amendment. These changes opened the market to a great deal of additional patients.

The law also made it possible for patients to apply for reimbursement of medicinal cannabis products from health insurers in certain cases. This change caused a rapid increase in demand for products, despite high prices and, in 2018 alone, German public insurance covered more than $83 million worth of medical cannabis. In 2019, this rose to about $131 million in reimbursements. Beyond flower and preparations, a small portion of insurance refunds went toward finished pharmaceutical products like Sativex.

A new reimbursement scheme was agreed upon by German pharmacies and insurers in March 2020, which has reduced the average retail price to as low as €13 per gram depending on the quantity prescribed. Rather than pharmacies charging a mandated markup close to 100% of the wholesale price (driving prices up), insurers now pay a fixed amount based on quantity, and prescriptions of more than 15g will be reimbursed at a lower cost per gram. This was designed to encourage pharmacies to use lower cost suppliers to reduce the financial burden on GKV statutory health insurance, removing the incentive to dispense expensive products for a greater markup. This has, in turn, led to lower prices for not only GKV insurers but for those paying for uncovered product out-of-pocket thanks to wholesale price pressure across the board.

The German Federal Institute for Drugs and Medical Devices (BfArM) previously established the German Cannabis Agency, which is responsible for monitoring and managing the domestic cultivation of cannabis for medicinal purposes. To export medicinal cannabis to Germany, companies must achieve a European Union Good Manufacturing Practice (EU-GMP) certification and fulfill certain quality requirements. In April and May 2019, BfArM confirmed that German subsidiaries of Canadian companies Aphria and Aurora, along with the German cannabis company DEMECAN, were the only three domestic growers to meet their qualifications and receive cultivation licenses. The first delivery from these growers is expected in early 2021. In August 2020, Cansativa GmbH was awarded the sole distribution contract by BfArM, and will be responsible for facilitating storage, logistics and shipping domestically produced medical cannabis flower to pharmacies. The contract is valid for four years for an expected total volume of 10.4 tons.

Despite progress from German regulators, the country’s cannabis market is still dependent on imported supply today, and the country will continue fueling a significant share of the market with imports at least through 2021 – and likely well beyond – based on current demand trends. Since no domestic growth operations have produced a cannabis harvest as of yet, Germany remains dependent on imports predominantly from Canada and the Netherlands as a source of medicinal cannabis products. Several cannabis companies have either acquired German businesses, received licenses to operate in Germany, or have made an impact importing product and selling on the German market.

European Producers:

Bedrocan

The Dutch company Bedrocan has a monopoly on producing medical cannabis in the Netherlands and has been successfully supplying the German market since 2008. In 2018, the Netherlands authorized Bedrocan to double its export of medical cannabis to Germany in response to growing demand, increasing annual shipments to 1,500 kilograms.

Bedrocan was the first exporter of medical cannabis in the world and is still Europe’s largest producer of medical cannabis, with no intention to pursue adult-use. The company’s share of the German flower market is likely to decrease, however, as the three companies awarded German lots in April 2019 come online and begin to provide the market with generous amounts of flower in the coming months.

Cannamedical Pharma GmbH

Based in Cologne, Germany and with subsidiaries in Canada and the UK, Cannamedical Pharma GmbH is an independent specialty pharmaceutical cannabis company and one of the leading cannabis wholesalers in Germany. The company was an early mover in Germany’s medical cannabis market, beginning its operations in early 2017. In 2019, the company raised €15 million in investment capital and later that year, imported the first medicinal cannabis from Portugal to Germany. In 2020, it raised another €12 million to help expand its German and European operations and launched CannAcademy, which provides online modules designed to give doctors and pharmacists a better understanding of how cannabis treatment works, helping drive professional education and support of medical cannabis in the country. Cannamedical imports, processes and distributes products under its own brand name to approximately 2,500 pharmacies and clinics across the country, supplied through nine international supply agreements.

DEMECAN

DEMECAN, based in Berlin, was founded in 2017 with the mission of guaranteeing patients in Germany access to medical cannabis of the highest pharmaceutical quality. The company is the only German medical cannabis firm that was granted access to supply the market. In April 2019, the Federal Institute for Drugs and Medical Devices (BfArM) awarded DEMECAN one of three licenses and three of thirteen available lots to grow medical cannabis, allowing them to begin cultivation and processing at their site near Dresden. The company’s operations cover the entire production chain, from cultivation through processing and storage to distribution in pharmacies. Today, DEMECAN also imports medical cannabis to Germany as a pharmaceutical wholesaler, sourcing from Bedrocan (Netherlands) and Little Green Pharma (Australia).

Cansativa

Founded in 2017, Cansativa is a GMP-certified company that holds a GDP pharmaceutical wholesale license to trade in controlled substances. The company is headquartered in Germany and is one of the largest independent manufacturers, importers, and distributors of medical cannabis in the country, uniquely positioned as a “one-stop shop” with a comprehensive multi-brand portfolio in the German market. The company has a direct connection to 20,000 pharmacies via an enterprise resource planning system, and received the only contract from the Federal Institute for Drugs and Medical Devices (BfArM) to roll out distribution, logistics, and general services for the wholesale of cannabis flowers produced by domestic German cultivation, likely to begin in 2021.

Canadian Licensed Producers:

Canopy Growth Corporation (Spectrum Therapeutics)

Canopy Growth became the first Canadian company to enter the German market with its acquisition of MedCann Gmbh Pharma and Nutraceuticals in 2016. MedCann Gmbh, since re-branded as Spectrum Therapeutics, was a key component of Canopy’s growth in the nation, as it was the first company to obtain a license to import whole flower medical cannabis. Spectrum Therapeutics is a German-based pharmaceutical importer and distributor which had proven its ability to effectively navigate German regulations by being one of the leading importers in a market exclusively limited to imported products, successfully placing Canopy Growth’s cannabis strains in German pharmacies throughout the country. In addition, this subsidiary has allowed the company to double down on its commitment to advancing clinical research in medical cannabis and improving education programs for healthcare providers on the benefits of their medicines – a key to organic consumer growth and brand loyalty.

The company also purchased German-based vaporizer manufacturer Storz & Bickel in December 2018. This acquisition allowed Canopy to sell medically approved delivery devices on the European market in a move designed to help with end-to-end customer service and European sales, as dried flower is recommended for vaporization across major European markets.

Despite the advantages of having had early success on the German market and 4.3 million square feet of licensed growing space available to supply inventory, Canopy was not granted one of the much-coveted licenses for domestic German cultivation in April 2019 - putting it at a disadvantage when it comes to the costs of production and transport as compared to some of its competitors.

But despite the licensing setback, Canopy Growth has significantly increased its footprint in Europe’s medical cannabis market while maintaining a special focus on Germany. The May 2019 acquisition of C3, a German producer of natural and synthetic cannabinoids, expanded the company’s portfolio of medicinal cannabis products by providing them with a leading manufacturer of dronabinol, a well-established anti-nausea cannabis-derived medication increasingly used in magistral preparations in Europe. Between the company’s fiscal Q4 2019 and Q4 2020, revenues from international medical cannabis sales increased more than ten-fold, driven largely by the company’s acquisition of C3.

Aurora
Aurora Cannabis was founded in 2006, secured its license to legally grow cannabis in Canada in 2014 and has supplied Germany with dried cannabis flower since late 2015 through Aurora Deutschland (formerly Pedanios). This early entry into the market, partly driven by Aurora’s acquisition of German wholesale distributor Pedanios in May 2017, has helped the company secure its place as a medical cannabis leader in the German market. Aurora’s Pedanios cannabis oil extracts were approved for sale by German regulatory authorities in March 2019, allowing the company to grow a large stake in the country’s extract market as well.

It was announced April 2019 that Aurora's subsidiary, Aurora Deutschland, was one of only three cannabis companies among 79 applicants that was selected by the German Federal Institute for Drugs and Medical Devices to domestically produce and distribute medical cannabis in Germany. The deal granted the company five of the thirteen available lots, the maximum allowed, and will permit Aurora to supply at least 4,000 kilograms to the German government over a four-year period beginning in 2021. This license is expected to give the company an additional competitive advantage in Germany’s medical market.

Aphria Inc.

Founded in 2014, Aphria is an important Canadian player (among the few gaining market share domestically throughout 2020), but it has also been strategically expanding its international operations recently, primarily in Germany through its subsidiary Aphria Deutschland.

The company acquired CC Pharma, one of Germany’s largest pharmaceutical importers and distributors, in January 2019, giving it the capability to distribute to 13,000 pharmacies across the country and access to a pharmaceutical-processing facility, strengthening its end-to-end operations in Germany and laying the foundation for rapid scaling in the cannabis sector. In late 2020, Aphria completed its first certified EU-GMP shipment of dried flower from its Aphria One facility to CC Pharma, indicating the infrastructure is now established to support expanded future importing. The company’s acquisition of CC Pharma gave it access to a majority of the medical distribution market and likely contributed to the company’s subsequent win of the German government’s medical cannabis cultivation contracts.

Aphria Deutschland is one of the few companies awarded contracts by the German government in April 2019, granting the company five of thirteen available domestic cultivation lots to supply medical cannabis to Germany over a four-year period. The strategic contracts with Germany are part of Aphria’s plan to develop a robust inventory of cannabis products in the country, along with the importation of additional flower and oil from its facilities in Canada and Denmark in order to provide a more complete medicinal cannabis offering to the German market.

Finally, through its German subsidiary, Aphria acquired a 25.1% interest in Berlin-based Schoneberg Hospital in May 2018, which aligns with the company’s long-term strategy to educate German physicians and patients on the therapeutic effects of medical cannabinoids. The move also represented the first step in Aphria’s plans to build and operate pain treatment centers in Germany.

Today, between CC Pharma’s distribution network, its global infrastructure and pending local cultivation lots, and various strategic medical educational initiatives, Aphria has significant potential in Germany’s medical cannabis market.

Tilray

Tilray, a Canadian producer of dried cannabis flower and extracts, such as oil and capsules, is also looking to expand its hold in Germany. In 2019, Tilray announced it had begun manufacturing cannabis for the European market in the lower-cost Portugal, a marked departure from its rival companies, many of which primarily hold operating facilities in Denmark or are still exporting largely from Canada. The company’s Portugal plant is EU-GMP certified and Tilray has successfully exported products to Israel and Germany from this location. In Germany, Tilray has access to a network of 16,000 pharmacies through its various distribution partnerships, such as those with NOWEDA, GEHE, Alliance Healthcare, Pharma Privat and Phoenix. Tilray is one of few producers to have successfully registered full spectrum extracts in Germany, with three oils available for prescription across German pharmacies.

Cronos Group

Cronos is an investment firm operating mainly in the Canadian cannabis industry, although the company has worked to increase its international reach through joint ventures and acquisitions abroad. Cronos Group has signed an exclusive five-year distribution agreement with G. Pohl-Boskamp in Germany, which allows for Cronos Group’s Peace Naturals dried cannabis and oil extract products to be sold in 12,000 pharmacies throughout the country. Furthermore, in early 2019, Altria bought a 45 percent stake in Cronos Group, a relationship which has the potential to help Cronos build its consumer brands and expand further into international cannabis markets such as Germany’s in the near future.

Since German legalization of medical cannabis use in 2017, demand for medical cannabis has exploded in the country, due in part to a national mandate for affordable access as well as insurance carriers being required to provide coverage for medical cannabis, except in exceptional circumstances (notably, coverage rates have remained closer to 60% than 100%, an ongoing issue in the country). Supply, however, has been a different story.

While Germany initially set up a tender process to allow companies to apply for domestic cannabis cultivation licenses, there weren’t any local companies with the necessary experience to qualify alone, necessitating a change in conditions to allow collaboration with international companies that could import product to Germany. Despite these efforts, the first three years of legal medicinal cannabis in Germany were mired in supply shortages, followed by a lack of product diversity and consistently high price points.

The public tender process reopened in mid-2018, accepting applications from companies with the experience and facilities necessary to safely produce medical cannabis in Germany. Finally, in April 2019, the country awarded contracts to three companies to produce medical cannabis domestically, meant to supply the German government with up to 2,600 kilograms of dried flower per year over four years. The companies awarded licenses, Canadian-based producers Aurora Cannabis and Aphria Inc., and Berlin-based DEMECAN GmbH (as well as local distributor Cansativa) will be able to use the opportunity to solidify their foothold in the German medicinal cannabis market. However, domestic cultivation is not expected to begin supplanting imports until 2021, and the initial costs to establish and maintain local grows (including pricey labor costs) will be steep. For these reasons, these are long-term plays and competitors – especially those supplying the market with product from Portugal – are likely to remain price competitive for some time, despite costs associated with importation.

Though many new prospects for supply are appearing and look promising, the market continues to be exposed to risk on this front. For example, the Dutch supplier Bedrocan, which has historically supplied nearly 40% of medical cannabis to the German market, had a shipment delay in mid-2020, leaving the market (albeit briefly) exposed to the risk of shortages while it resolved a testing issue. While this was addressed quickly and did not lead to wider shortages, it highlights the fact that the German market’s continued dependence on imports leaves it highly vulnerable to regulatory delays and cross-border shipment challenges, especially with the backdrop of an ongoing global pandemic. These issues will continue to pose a threat until the supply chain further diversifies and local production ramps up.

Today, pharmacies are the only legal dispensing outlets for medical cannabis in Germany. All of the country’s roughly 20,000 pharmacies are permitted to create and dispense medications to fit prescriptions, including cannabis-based medications. Because cannabis is still illegal in Germany outside of strictly-controlled medical channels, at-home cultivation is not permitted for adult-use or medical consumption.

According to data released by the BfArM in October 2019, patients were most likely to be reimbursed for medical cannabis prescriptions as a treatment for pain, spasticity, anorexia, epilepsy, ADHD, and Tourette Syndrome, among others. Meanwhile patients were less likely to be covered for a prescription to treat ADHD, which accounted for 14% of insurance coverage in 2017, but only 1.5% in 2019. Since 2017 the total percentage of patients reimbursed for medical cannabis by GKV insurers has hovered around 60-65%, despite that it should by law be nearly universally covered. Though patients can appeal insurance coverage rejections on an individual basis (and have done so successfully), as yet there has been no global effort to address the discrepancy between legal provisions and de facto state insurance coverage for medical cannabis.