The provincial government in Ontario is currently considering setting the price for cannabis in the province at $10 per gram. At the moment, the plan is to create a series of government-controlled stores too

This means, in effect, that the government will be setting a price floor, and controlling distribution from LPs. The idea at least, is to deter the black market.

How well will this work? According to recent polls on the issue, the government’s plans seem to suit about half of the population. The other half is busy coming up with arguments against the idea. These range from killing the entrepreneurial start up industry on the verge of blossoming in Canada to arguing that the government price is set too high. Black market cannabis here goes for less than $10 a gram.

A Medical Focus

For all the whinging about the idea, the current government appears to be charting this course for several reasons, apart from a popular public mandate. The first is to insure that patients have guaranteed access during a transition period to recreational. This alone is likely to create at least periodic shortages for the next several years. And not just in Canada.

The second is that the government also appears to want to be in a position to collect as much revenue as possible from its newest start up industry. This model, very much like ABC stores throughout the American South that sell alcohol, absolutely creates a highly regulated distribution system that can effectively control prices. And for the next two to three years, that is also going to be essential to one group of people.

Patients


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Down the road, of course, this is also going to be important for another large group – with decidedly more business interests in mind. The question of insurance coverage is one that looms large in several countries, Canada being one of them. By setting the price domestically, Canada does two things. It creates a price point for insurers. It also then creates a wholesale price for exports to other medical only countries. And that is a guarantee most legalizing countries who are either now or lining up to import from Canada, not only want to hear, but take to the bank.

The fact that the Ontario government is setting the bar is also an attempt to create dialogue with other Canadian provinces on the eve of full-boat recreational legalization, which goes into effect on July 1 of next year, along with the new proposed pricing scheme.

[Image credit: Flickr]

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