The global legal marijuana market was valued at USD13.2 billion in 20217.
Australia’s legal marijuana industry was valued at USD51.8 million in 20216, with an expected CAGR of 30.1 per cent from 2022 to 2030.
Despite recent regulatory developments that legalised the growth of cannabis for medicinal and scientific purposes, pathways to access and pricing remain closed and cost-prohibitive compared to those in more developed markets.
Hemp was the largest segment of Australia’s legal marijuana industry in 2021, making up 83.2 per cent of revenue.6
Major opportunities in the domestic market are the development of cannabinoid products for therapeutic use and the export of medicinal cannabis to overseas markets.
Australia’s legal marijuana (cannabis and hemp) industry is in its infancy. While policy developments since 2016 have created a market for manufacturers to grow and produce cannabis products for scientific research, therapeutic use or export to overseas markets, the lengthy process for getting medicinal products registered in Australia makes progress slow. Over time, as the regulatory landscape and access pathways become more straightforward, the legal marijuana industry in Australia will continue to mature. This article provides an overview of Australia’s legal marijuana industry, where it fits within the global market, and key threats and opportunities that companies in the sector should address. Given the lack of policy development around recreational marijuana use in Australia (with the exception of the ACT), this article focuses on legal marijuana in the context of medicinal and industrial use.
The history of legal marijuana in Australia
By global standards, Australia’s legal marijuana industry is still in its infancy, with the industry becoming more established following policy developments over the last seven years. In 2016, the growth of cannabis in Australia6 for medicinal and scientific purposes was legalised by the Federal Government. The legalisation occurred through amending the Narcotic Drugs Act 1967 (Cth).12 Further, on 20 January 2020, the Australian capital Territory (ACT) Government decriminalised the possession, use and cultivation of cannabis4 for recreational use for people aged 18 years and over. The ACT’s decriminalisation allows people over 18 to possess up to 50 grams of dried marijuana and own two marijuana plants.6
Following the 2016 legalisation of cultivating and manufacturing cannabis for medical and research purposes, the biggest regulatory development was the Therapeutic Goods Administration’s (TGA) change of cannabidiol (CBD) to be down-scheduled to Schedule 3 substance18 on the Australian Register of Therapeutic Goods (ARTG). The change17 took effect on 1 February 2021 and means that CBD products with at least 98 per cent CBD and a maximum daily dose of 150mg or less of CBD can be sold over-the-counter (OTC) in pharmacies. While this is a significant development in the therapeutic use of CBD in Australia, pharmacies aren’t expected to begin selling CBD products OTC until at least 2023.9 This is due to the lengthy testing and research process required to determine the efficacy and safety of products.
Despite regulation becoming more accommodative in recent years, there are only two medicinal cannabis products registered on the ARTG.15 These products are Epidyolex (cannabidiol), which is intended for use as an adjunctive therapy for seizures for people over two years old with Lennox-Gastaut or Dravet syndrome. The other product registered on the ARTG is Sativex Oromucosal Spray (nabiximols), which is intended for multiple sclerosis patients with moderate to severe spasticity caused by their condition. People with other illnesses and diseases must obtain medicinal cannabis products through one of four access pathways.12 These pathways are:
The Special Access Scheme (SAS)18
Authorised Prescriber Scheme18
Each pathway has its limitations in both product availability and accessibility. The SAS pathway, for example, involves seeing a general practitioner (GP) who will assess your eligibility and then write a prescription (only if they are an authorised prescriber) or apply to the TGA via the SAS if they are not an authorised prescriber. Approval turnaround times average 1.5 days,12 and the appointment is around AUD200 plus the cost of filling the prescription, which can be quite high. For example, it’s estimated that CBD oil costs about AUD10 to AUD15 per day19 for prescriptions sourced through SAS channels, making it cost-prohibitive for many people.
The legal marijuana (cannabis and hemp) industry in Australia was valued at USD51.8 million in 2021.6 The sector currently employs 1,300 people,10 with this number expected to grow to 1,500 people by 2025-26. With an expected compound annual growth rate (CAGR) of 30.1 per cent from 2022 to 2030, Australia’s legal marijuana market is at a turning point from its infancy to potential widespread legalisation such as that experienced across many US states from 201216 and nationwide from 2018 in Canada.8
Hemp is the largest segment of Australia’s legal marijuana industry, making up 83.2 per cent of revenue in 2021.6 This revenue was driven by increasing rates of illnesses such as epilepsy and sleep disorders among the population and the growing use of hemp CBD products in the medicinal segment of the market. Industrial purposes also drove revenue growth for hemp products.
The use of hemp in construction has been driven by the demand for more sustainable buildings and building materials.6 Hemp crops provide inputs for “hempcrete20,” a material used to construct building walls, while lighter forms are used for roofing and installation. With a short growth cycle (usually three to four months) and roots that can be left to compost and deliver nutrients to the soil, hemp is a crop with low overheads20 that can deliver strong returns to farmers.
Cannabis makes up the minority of the country’s legal marijuana market (16.8 per cent of revenue in 20216), though this is expected to change as more products approved for therapeutic use become available. Since the Federal Government’s legislative changes in 2016, over 50 medicinal cannabis businesses have been established in Australia.12 More than half of these businesses hold one or more of the range of medicinal cannabis licences12 available in the country:
Medicinal cannabis licence for cultivation and/or commercial production (33 per cent of companies).
Cannabis research licence for cultivation and/or production for research purposes (5 per cent of companies).
Narcotic manufacture licence for extraction and purification of cannabis plant material or a combination of this and the above licences (18 per cent of companies).
The key drivers of the Federal Government’s legalisation of cannabis for medicinal and scientific purposes are growing research and interest from both the medical industry and patients in using alternative substances to treat a range of conditions. Recent research suggests patients are being prescribed medicinal cannabis to treat a range of illnesses and diseases.6 These include alternative pain relief to opioids, easing nausea in cancer patients, addressing sleep disorders, and treating people diagnosed with epilepsy. The type of cannabis or hemp-based product prescribed to a patient will differ based on their condition and access pathway used through their GP.
The other key economic contribution of Australia’s legal marijuana industry is research and development (R&D) expenditure. A recent survey12 of 22 publicly-listed Australian medicinal cannabis companies found they spent AUD62 million on R&D projects in the 12 months to June 2020. R&D projects not only drive better outcomes across the industry but also contribute to the broader economy through employment opportunities.
Opportunities and threats in Australia’s legal cannabis industry
The legalisation of marijuana for recreational use in Australia would raise an estimated USD3.6 billion over four years from July 2019.6 This is based on a 25 per cent excise tax. With access pathways and the regulatory landscape slowly shifting and becoming more accommodative, companies with a long view to domestic commercialisation (medicinal and recreational) in Australia could be part of an industry that is overdue for maturation.
Based on TGA data for the 12 months to May 2021, the top 10 indications approved12 for medicinal cannabis under the SAS-B pathway18 are chronic pain, anxiety, insomnia, cancer pain and symptom management, neuropathic pain, post-traumatic stress disorder, autism, epilepsy, seizure management, fibromyalgia, migraine, and depression. Developing medicinal cannabis treatments for these conditions, along with cultivating crops that meet the United Nations' high-quality Good Manufacturing Practice (GMP) standards to capitalise on export opportunities,12 are the key opportunities available to Australian medicinal cannabis producers in the current regulatory landscape.
Australia’s first export of medicinal cannabis was shipped to Germany in September 2019. Since then, further export deals have been struck, with the first batch in a decade-long AUD92 million export agreement14 shipped to Germany in early 2021. This is timely given recent instances where manufacturers that didn’t comply with European Union (EU) requirements12 have been banned from importing their products to Malta, Italy and Denmark. It’s also important to note that higher education and medical research institutions could continue to capitalise on the current infancy of Australia’s legal cannabis industry by conducting further research and clinical trials with the objective of developing therapeutic products for the domestic market.
Further growth in Australia's legal marijuana industry is contingent on more accommodative policy and better domestic commercialisation opportunities, which could improve pricing and access. This would also develop the potential for wider-scale legalisation for recreational use, similar to Europe, the USA and Canada. However, the opposing views3 of various stakeholders, including regulators, policymakers, patients, and the medicinal cannabis industry, continue to be a major roadblock to increased adoption and the use of legal pathways to purchasing and using marijuana in Australia.
Where Australia fits within the global legal marijuana and medicinal cannabis industries
The global legal marijuana market was valued at USD13.2 billion in 2021,7 with an expected CAGR of 25.5 per cent from 2022 to 2030.7 This means that Australia makes up just 0.40 per cent of the global market, which is to be expected given the country’s industry size and infancy compared to other regions around the world.
The global medicinal cannabis market is expected to be worth USD62.6 billion by 2024,13 equating to 4 per cent of the worldwide pharmaceutical market at the time. This growth will be driven by the continuation of more accommodative medicinal cannabis regulation. To date, regulation change has predominantly occurred across Europe, North America, South America, and the Asia Pacific. The map below outlines current medicinal cannabis legality globally.
For Australia’s legal marijuana (cannabis and hemp) to truly compete on the global stage, pathways to prescribing and accessing products and affordability need to improve drastically. And for these to improve, complex and burdensome regulatory systems will require change, which can be a slow process. According to some stakeholders,3 two of the most powerful ways to drive the industry forward in Australia would be decoupling recreational cannabis from medicinal cannabis and education to shift societal and health professionals’ views.
The slow-moving nature and closed regulatory environment in Australia’s legal marijuana industry doesn’t mean there aren’t opportunities for enterprising companies seeking to develop products for research and scientific purposes. It does, however, mean that companies should carefully consider how the regulatory landscape in the country could impact domestic commercialisation opportunities. These impacts should also be managed by identifying potential export and commercialisation opportunities available to generate revenue as the domestic industry grows and matures.
Nicola is the owner of NS Consulting, a corporate communications and copywriting consultancy that works with businesses experiencing exciting periods of growth and change. Her clients value her calm, measured and analytical approach along with a safe pair of hands to deliver a range of communications strategy projects. When Nicola isn’t typing at her computer, you’ll find her reading, writing, or at the beach.
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West coast to the East coast we will have it delivered to you quickly and safely and it won’t cost you a cent more.
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