The German Medical Cannabis Market Could Be Worth Three Billion

German medical cannabis market is poised for significant expansion thanks to recent legislative changes. However, the situation is different when it comes to recreational cannabis. The new regulations allow personal possession and cultivation of cannabis and the creation of community cannabis clubs, but do not allow the commercial sale of cannabis for adult use.

“At this point, investors should already know that ‘legalization’ can have different meanings,” Pablo Zuanic of Zuanic & Associates notes in his report , adding that “the new regulations… do not necessarily mean a net benefit for most cannabis companies, and may constitute a source of risk.”

The recent legalization of cannabis possession and cultivation in Germany, described as “phase 1” by Health Minister Karl Lauterbach, is part of the German government’s cautious approach to cannabis regulation, which maintains a clear distinction between the medical and recreational marijuana markets. Zuanic notes that “Phase 2,” which could include adult-use marijuana sales pilot programs , is still under consideration.

“We doubt Phase 2 will be introduced under the current government coalition,” he wrote. “Could Pillar 1 be canceled in the future? We doubt it, but it will depend on the composition of future governments.”

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Benefits for the German medical cannabis market

A significant change in German legislation is the removal of medical cannabis from the drug list, which aims to simplify the prescribing process and increase patient access by reducing legal and bureaucratic barriers for doctors and patients.

Currently, the German medical cannabis market serves a relatively small part of the population, with approximately 28,000 patients, or less than 0.03% of the German population in 2023.

“It is clear that this segment was on the way to growth, but now, with new regulations approved by the Bundestag last Friday, it is poised to explode,” Zuanic wrote.

“We try to avoid exaggeration, but if Florida has over 3.5% of the population participating in a medical cannabis program, how many cash-paying patients can we expect in Germany (a country with a population of ~85 million)?”

If 1% of Germany’s population used medical cannabis, Zuanic estimates the market could grow to €1.7 billion by 2025, a significant increase from current levels. This growth would benefit major exporters to the German market such as Canadian companies Aurora Cannabis (Nasdaq: ACB) and Tilray Brands (NASDAQ: TLRY).

More importantly, the new rules abolish the bidding process for growing medical marijuana in favor of a licensing system, Tilray said Wednesday. These changes are intended to increase the supply of medical cannabis in the country and make it easier for companies like Tilray to operate and expand, potentially increasing their production “by approximately 5x and more than doubling their revenue opportunities.”

However, smaller companies and new market entrants, particularly online medical marijuana clinics , may experience increased competition and pricing pressure under the new regulations.

The numbers speaks for themselves

Despite a significant increase in medical cannabis imports, which increased by 20% in 2022 to 25 tonnes and were expected to increase again in 2023, the German market remains limited by strict drug laws and regulatory challenges. These factors have limited patient access to medical cannabis therapy.

The majority of medical cannabis imports into Germany come from Canada, which accounted for 47% of total imports from January to September 2023. However, a significant proportion of these imports are either re-exported – including to Poland – or destroyed due to quality problems, further complicating the market’s supply chain.

The reimbursed market, where medical cannabis prescriptions for patients are covered by insurance, saw modest growth, with sales reaching €208 million in 2023, compared to €198 million in 2022. However, prescriptions are typically written only as a last resort and for chronic diseases and conditions, limiting the size of the market.

German medical cannabis market size forecasts vary

Zuanic suggests that changes to German drug law could change the situation. Currently, patients can receive prescriptions via telemedicine after visiting a doctor in person, but overall patient numbers remain low.

German medical cannabis market size forecasts vary, but if 1-2% of the population joins the medical marijuana market, some analysts predict the market will be worth between €1.5 billion and €3 billion.

Comparison with other countries highlights the untapped potential of the German medical cannabis market. For example, 1% of Canada’s population participates in its medical cannabis program, which is much higher than the current participation rate in Germany.

“All that said, the scale and timing of the growth in the cash-paying MMJ market (which may be triggered by the new law) is a matter of debate, but we believe the growth estimates presented above are realistic,” he wrote. “However, we recognize that there is a scenario where home cultivation and cannabis clubs could slow the growth of the MMJ market.”

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(Featured image by tvjoern via Pixabay)

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