Spain's cannabis market is unique in nature. The country lacks a formal, legal medical cannabis program, making only Sativex and (soon) Epidyolex available for patients with certain limited conditions, which has led many to turn to its non-profit Cannabis Social Clubs (CSCs) in search of product. Spain's CSCs offer members - who join by invite-only and pay membership fees - cannabis cultivated on-site, but clubs have membership caps and are largely limited to three autonomous regions of Spain. Even within those confines, they operate in ambiguous legal territory as licensed cultivation of medical cannabis is approved by the central government solely for export and not for domestic consumption.

Under this regime, very limited commercial opportunities exist for cannabis companies today given medical sales are composed exclusively of authorized pharmaceutical products prescribed on an exceptional basis, and the much more heavily-trafficked and accessible CSC market operates in a legally gray area. Though not accounted for in formal medical market sizing, informal sales through CSCs have been widely successful, thus the lockdown order put in place due to COVID-19 – which temporarily closed CSCs – impacted Spain's cannabis consumers significantly in 2020.

Further, considering the country's recent economic struggles and unemployment rates, it can be assumed that Spain will witness COVID-19 aftermath worse than that of many of its European counterparts, as it will decrease disposable income and non-essential spending. But despite that cannabis legalization and the creation of formal, taxed medical and adult-use markets could be a boon to Spain's ailing economy, it is unlikely any significant shifts will occur prior to 2024, after the next election takes place. The current ruling Spanish Socialist Workers' Party (PSOE) has not seen legalization as a priority, and with the introduction of an entirely new set of challenges relating to the pandemic, this is unlikely to change.

Spain has an idiosyncratic legal landscape when it comes to cannabis regulations, lacking clarity with regard to medical and recreational cannabis use and possession. According to Spanish Law, developing, selling, producing or encouraging the consumption of any of the substances from the 1961 Single Convention on Narcotic Drugs (including cannabis) constitutes a criminal offense. However, the Spanish government is very lenient and does not prosecute cases of personal and private consumption of cannabis.

The private consumption aspect of this tolerance led to the creation of Cannabis Social Clubs: private organizations where cannabis is cultivated on-premises for the consumption of paying members only. This allows for regional government-sanctioned, controlled environments for cannabis use, where product could be provided to members at fair price points under a non-profit model. It is estimated that there are hundreds of CSCs in Spain, which have a large target market from high-end consumers to the eco-friendly crowd, but because these Clubs are not nationally supported and continue to be subject to raids, they do not constitute a legally viable commercial cannabis market.

While the Spanish government has approved the research and production of medical cannabis for export to various European markets, domestic medical sales are still prohibited. The only regulated medical cannabis market found in Spain is that of finished pharmaceuticals that have existed since 2005, when Catalonia's government authorized Sativex (a 1:1 THC to CBD pharmaceutical) to treat 600 patients suffering from multiple sclerosis and other conditions under a compassionate access program. This was the first ever use of Sativex - a GW Pharmaceuticals product - in Spain, as well as the first time it was used by patients outside of a clinical trial.

In 2011, the product was made available to health professionals and patients in pharmacies across Spain, and today Sativex is financed by the country's National Health System with 100% reimbursement. GW Pharmaceuticals' Epidyolex - a CBD formulation used to treat rare forms of epilepsy - is also expected to launch in Spain in 2021, providing access to a number of additional patients. Thus, the medical market in Spain is largely dominated by the British pharmaceuticals company, and mostly limited to patients who suffer from a short list of medical conditions. In addition, the cultivation of cannabis for research, medical and/or scientific purposes is forbidden unless an authorization from the Spanish Agency of Medicines and Medical Devices (AEMPS) is obtained.

Beyond two specific legally-authorized medical products manufactured by GW Pharmaceuticals, the competitive landscape in Spain's cannabis industry is dominated by upwards of 1,000 vertically-integrated, non-profit Cannabis Social Clubs operating on the gray market, primarily across the regions of Catalonia, Basque and Navarra. Given these CSCs’ size limitations as well as the non-profit nature of the industry, opportunities are quite limited even when taking aside important concerns about the market’s legal status, as there is no infrastructure or incentive in place to allow businesses to scale or build national (or ultimately, international) brands.

While commercial opportunity is extremely limited under the current framework, Spain still boasts the highest cannabis usage rate of all European nations. This will provide a great opportunity for companies to enter the space once more business-friendly and formal regulatory systems are put into place, as they will not face competition with entrenched brands and licensed producers.

Though they are not permitted to sell product in Spain, global cannabis companies see the country as an advantageous location from which to source cannabis for export to markets within Europe. For example, Linneo Health, a Spanish EU-GMP certified supplier of medical cannabis, has several partnerships including a multi-year supply agreement with VIVO Cannabis and a strategic supply agreement with IM Cannabis Corp to enable medical cannabis exports to Israel and Europe. The Spanish Agency for Medicines and Medical Devices (AEMPS) has granted authorization to five companies for the purposes of growing 20,000 hectares’ worth of cannabis, designated for either domestic research or export to other countries for medicinal use.

Domestically, highly limited cannabis pharmaceuticals are available by prescription and can be accessed in pharmacies. However, there is a dearth of physicians who are willing to prescribe even these licensed medications, and sales remain extremely limited through the pharmacy channel.

In the absence of an accessible, regulated formal market, hundreds of thousands of Spanish consumers (both medical and adult-use) continue to source product from gray market CSCs, both for their more affordable price points, variety and convenience.

GW Pharmaceutical’s Sativex, an oral spray designed to help with muscle spasticity as a result of multiple sclerosis, has been available for prescription in pharmacies across Spain since 2011, and was granted reimbursement from Spain’s national health insurance program in the same year. The company’s CBD-based medicine, Epidyolex, which is used to treat rare and severe forms of epilepsy, is slated for a 2021 release in Spain as well. Because licensed pharmaceuticals are the only legal, regulated medical cannabis products available, they make up the entirety of Spain's formal cannabis market today.

Outside of pharmaceuticals, those seeking the medical benefits of cannabis have turned to CSCs for product, which grow their own cannabis flower and develop their own extracts (such as oils, hash, or resins). Edible products are also sold in CSCs but are significantly less common than flower and concentrates.