Vertical business integration is legal, but it’s raising medical regulator eyebrows.
In 2018, two years after medicinal cannabis was legalised in Australia, it remained a medicine in the shadows: products were scarce, doctors weren’t interested and patients barely knew it was a treatment option.
In that year, just 2560 medicinal cannabis prescriptions were approved through the “B” pathway of the Special Access Scheme (SAS), the mechanism by which unapproved medicine is supplied in Australia.
That was then. The story now is very different.
In 2023, the Therapeutic Goods Administration rubber-stamped 132,000 SAS-B applications from 2565 medical practitioners. Many more prescriptions not captured by the SAS data were written by more than 2500 Authorised Prescribers of medicinal cannabis. In 2019 there weren’t even 30.
All told, anywhere between 300,000 and 500,000 Australians are estimated to have received a prescription for medicinal cannabis.
Multiple factors lay behind the growth, not least the tireless campaigning of advocates. Indeed, it was they, not then-health minister Greg Hunt, who could legitimately claim responsibility for its legalisation in 2016. The Turnbull government may have written the new laws, but it was campaigners who provided the pen.
Yet even though prescription numbers were subdued in those early days, and a 2020 Senate inquiry explored the reasons why, an industry was taking shape. Legal access to medicinal cannabis may have escaped the attention of Australians – advertising its legality and availability was, and remains, off limits – but business brains were whirring.
Before long, specialist clinics started to open. Product sponsors sprung up, facilitating the import of overseas products. Meanwhile, Australian cultivators slowly came online, producing homegrown medicine. Furthermore, and critically for the nascent industry, consumers woke up to the possibilities of medicinal cannabis.
The industry that has evolved over the past five years, though, has not been without its issues and controversies. And as the sector continues to expand, and prescription numbers keep rising, those issues are becoming endemic.
Vertical integration
Notwithstanding the conflicting opinions on the therapeutic merits of medicinal cannabis – the GP colleges remain generally sceptical – the vertically integrated business models which have developed have raised eyebrows. And that’s putting it mildly.
Critics, of whom there are plenty from within the sector itself, observe with alarm the practices and behaviours that are widely understood to take place. Manufacturers and producers own clinics, they control distribution, prescribe their own products and, in some cases, dispense it. There are no regulations preventing such business models, but it’s a model that raises clear conflicts of interest and, as some have argued, is the antithesis of patient care.
Furthermore, the sometimes rapid and low-cost nature of patient consultations has fuelled suspicions that some clinics are facilitating a quasi-audit use market rather than treating patients with genuine medical needs.
At an industry conference last August where the subject of ethics took centre stage, former Victoria state MP and cannabis advocate Fiona Patten warned that the industry risked a day of reckoning if it continued along its current path.
“When legalisation was passed we said we didn’t want a situation where an 18-year-old could walk into a clinic, say he’s got a sore thumb and score 10g of high-THC flower,” she told the conference. “But we are fast going down that track and it will negatively affect us for a long time to come.”
And maybe that day of reckoning isn’t so far away. Regulators, after constant nudging from some in the sector, recently met in Melbourne. It was, AHPRA said, the “first step” in dealing with the “challenge of protecting the public from harm and inappropriate prescribing while allowing for legitimate access to medication”.
Scripts with strings attached
One of the issues regularly raised on social forums – Reddit in particular lights up with discussion of medicinal cannabis – is that of prescriptions. Stories of patients being charged a fee to release their scripts are plentiful as clinics adopt measures to keep them in their vertically integrated family of brands and the financial benefits that flow from that.
It is a practice clearly at odds with guidelines and codes of conduct published by the AMA and AHPRA, which stress the importance of patients’ freedom to take their script wherever they choose.
Not that cannabis clinics own pharmacies outright – that is strictly forbidden – “but there are various ways to skin a cat as far as commercial arrangements with pharmacies are concerned”, as one commentator tells The Medical Republic, Health Services Daily’s sister publication.
Over the past couple of years, the word “dispensary” has emerged, some operating in tandem with clinics. It is a term heavily associated with the North American recreational market.
Dr Joel Wren, president of Cannabis Clinicians Australia, an education and scientific body which furthers the use of cannabis medicine, suggests the rise of the dispensary is “a way of advertising medicinal cannabis services without actually advertising” – a reference to the strict TGA rules governing the marketing and promotion of medicinal cannabis.
“Dispensary has very specific connotations that some patients and certain parts of the community understand,” he says. “It’s a US-centric recreational term and people who have used cannabis are likely to make that connection.”
Dr Wren, who contracts for Polln, a telehealth platform specialising in natural remedies, says the business uses a “preferred pharmacy” to dispense medicine. Along with its familiarity with cannabis, the pharmacy dispatches products promptly and does not stray from the recommended retail price, something not all pharmacies adhere to.
Where Polln differs from some vertically integrated groups, Dr Wren says, is that transparency is guaranteed and patients can take full control of their prescriptions. Charging a fee for such a fundamental patient right would be “crazy and unethical”, he adds.
“There is no reason that should occur. I routinely say to patients, ‘hey this is our preferred pharmacy and it honours RRP’. But we’re equally happy to outsource the script if that’s what the patient wants. If we do that, we can’t control pricing and we can’t control the ordering or how long it will take. That’s what I tell patients. But it’s their choice.”
The practice of “channelling”, where patients are essentially prevented from using their regular pharmacy, is opposed by industry bodies whether it’s done “deliberately or unintentionally”, according to the Pharmacy Guild of Australia. Yet when left to navigate on their own, patients can have difficulty finding a community pharmacy capable of efficiently and effectively filling a medicinal cannabis prescription.
“There is a wildly different experience and level of knowledge of medicinal cannabis among pharmacies,” Wren says. “Many may only have a single staff member who has the knowledge and is familiar with how and where to order products, so I feel comfortable with Polln where it lends itself to enhancing the patient experience.”
Dr Jim Connell, who started treating patients with medicinal cannabis in 2017, says practitioners at his Heyday Medical clinic recommend a number of pharmacies who are well-versed in dispensing cannabinoid medicine. To do otherwise, he says, would inflict on patients a potentially uncomfortable experience.
“We will send scripts anywhere if the patient has a pharmacy they want to work with,” Dr Connell says. “But there are many pharmacies who aren’t comfortable with medicinal cannabis. They don’t have registered accounts with distributors and can make the patient feel awkward and uncomfortable. They also charge above the RRP because it’s an extra admin burden and an onerous task if they’re not prescribing medicinal cannabis regularly.
“But there are other pharmacies who are doing it well, provide consistent information and are able to get product to patients quickly.
“We certainly don’t channel but I believe there are companies who do and I think there’s often financial ties to that.”
No separation of powers
Another curiosity of the medicinal cannabis ecosystem is how some clinics double as the pharmacist, prescribing and then dispensing the medication. While it’s a practice that again throws up ethical issues, it is permitted in the three states where the vast majority of medicinal cannabis is prescribed: Queensland, New South Wales and Victoria.
NSW Health tells TMR a doctor is able to supply scheduled medicines to a patient on condition it is labelled in the same way a pharmacist would and a record is made of the supply.
“In the case of a Schedule 8 medicinal cannabis medicine, a drug register entry reflecting the supply must also be made,” a spokesperson adds.
Queensland also confirms that a medical practitioner can “sell a medicinal cannabis product directly to a patient” as under the state’s regulations “this is not dispensing”.
In Victoria, a doctor or nurse practitioner can supply medicinal cannabis directly to the patient on condition the same practitioner prescribed the medicine.
However, according to the AMA, that is not best practice. In its guidelines, the AMA notes the “long-held tradition of the separation of prescribing … and dispensing”. Urging doctors to avoid the dual role “unless the benefits to the patient outweigh any potential safety concerns”, the AMA states that separating prescribing and dispensing “provides a safety mechanism as it ensures that independent review of a prescription occurs prior to the commencement of treatment by the patient”.
Perhaps the most contentious of issues in this vertically integrated model – certainly among those who approach cannabis with a purely medical mindset – is the ownership of clinics by product suppliers where the bottom line is often said to take precedence over patient care.
The potential conflict where doctors may favour in-house products, or are rewarded for rattling through consultations and channelling prescriptions to the ostensibly in-house pharmacy, are obvious. With speculation rife over such prescribing practices, the gathering of regulators, health agencies and the competition watchdog in the Victorian capital may will be a precursor to a full-blown, under-the-bonnet examination of the industry.
“Doctors are employed and paid handsomely to give patients whatever it is they want and that in most cases is 4g a day of cannabis flower,” says Dr Jamie Rickcord, a Byron Bay-based GP who specialises in medicinal cannabis.
“It’s not even semi-recreational any more, it’s recreational. It’s a case of ‘hey, what do you want? Sure, here you go, 4g a day. They hold three-minute consults for $100, thanks very much.”
While that might appear to be sub-optimal care, Dr Rickcord acknowledges it’s what many patients want. It has also been argued that swapping illicit products for medical grade cannabis – which is driving some of the overall industry growth – can only be positive if it brings users who might never have presented to a doctor into the healthcare system.
Despite the uneasiness felt in some quarters, suppliers operating in this space are not flouting any regulations by owning clinics. And in the main, little attempt is made to hide supplier/clinic relationships. What is not so clear, however, is the transparency at a prescriber level. And it is doctors who are responsible for ensuring any financial interest is declared to patients in their prescribing practices.
Dr Laurence Kemp, the medical lead at Cann I Help, a network of doctors which is operated by a product supplier, Medcan, says he is explicit in divulging his financial interest in the company. Failure to do so would contravene AHPRA’s code of conduct, he says.
“The good medical practice code of conduct for doctors in Australia talks about managing conflict of interest and ensuring you are acting in the patients’ best interests. I am totally upfront with every single patient I talk to if I’m considering prescribing a medcan product. I will make them aware that I have a financial interest in medcan and Cann I Help and that I am essentially recommending my own product.”
He stresses that doctors working for Cann I Help are “completely insulated” from any prescribing bias.
“None of our doctors are incentivised to prescribe. They are not given targets or bonuses. Whether they prescribe or not, or whatever product they choose to prescribe will have no effect on their income in any way.”
Heyday Clinic also has a suite of cannabis medicines, developed in collaboration with Dr Connell to plug gaps in the market. With products carrying the same Heyday branding as the clinic, the affiliation between the two is clear. Other groups may not be so transparent, he says.
“Some of them are working in a closed loop where they’re pumping out their own products, and they have a financial interest in the distribution and pharmacy,” Connell says. “Our mission at Heyday was to create new and novel medications that weren’t available on the market. That I feel is a valid reason for a doctor to be involved in the product creation side of things. There is a conflict but we’ve been open and upfront about that conflict and there are no incentives for our prescribers to prescribe Heyday products.
“We want our doctors to prescribe the most appropriate product for the patient. Sometimes it’s Heyday, sometimes it’s not.”
Getting in its own way
Proponents of cannabis as a treatment option have long called for the GP colleges to get onboard and recognise its therapeutic value. Realistically for that to happen, more evidence of its efficacy will be required – such is the stance of the Royal Australian College of General Practitioners and the AMA.
But while the evidence gap is the chief concern, the vertically integrated structure that exists is also problematic.
“The reason these models exist is because they are business models, they’re not patient healthcare models,” RACGP president Dr Nicole Higgins says. “Those who are importing products are consulting and dispensing and there is no separation. There are inherent conflicts of interest every step of the journey.”
Since being legalised in 2016, medicinal cannabis has experienced a rollercoaster ride. It was slow to take off, but once the pieces slotted into place – accessibility, product choice and awareness – it has gathered pace. The problem, though, is whether it may be careering out of control. If the recent gathering in Melbourne is anything to go by, regulators may soon come calling. And it may not be a friendly visit.