Research for a legal cannabis market - TOP

Minimising Harm from Cannabis Use – Policy Detail

Evidence shows that use of cannabis is a predictor for a number of serious health problems^[i]. However, as discussed in the main policy, this remains the case whether cannabis is legal or not. Legalising allows for these harms to be reduced by education, regulation, taxation and greater investment in drug rehabilitation.

The Harm from Cannabis in Context

The estimated social cost of drug-related harms and intervention in 2014/15 was $1.8 billion (this does not include alcohol harms which have been estimated at $5.3 billion per year^[2]). Of this, almost $1.3 Billion can be attributed to cannabis, compared to $370m for amphetamine-type stimulants (including P/meth). The high overall cost associated with cannabinoids is due largely to the extent of consumption in New Zealand. It is clear that prohibition has had little effect on reducing its usage rates.^{[3] [4] [5] [6]}

Once the high usage is taken into consideration, the harm per user of cannabis is much smaller. The estimated harm caused per casual user of cannabis is $2,100, compared to $8,300 for each casual user of amphetamines. Even for dependent users the total cost is much lower; in fact cannabis has the lowest cost of personal harm out of the major drug groups, at $9,900 per annum per dependant user (there are an estimated 26,000 dependant users). In contrast amphetamine-type stimulants personal harms amounted to $184,200 per dependant user (there are an estimated 1,400 dependant users).^[7]

Comparatively, cannabis causes significantly less harm than legal drugs such as alcohol and tobacco as shown by the work of the UK’s David Nutt which was published in the Lancet.

The Costs of Prohibition

As we have discussed in the policy document, the prohibition of cannabis has resulted in significant costs that extend far past the financial. The largest group of cannabis users are 18-24 year olds, and unfortunately, this is the group that is exposed to many of the negative externalities that prohibition has created.

Almost half of all people convicted of possession and/or use of an illicit drug or drug utensil are aged between 17 and 25, of which a majority is for cannabis use. Of those 12% that are convicted are given jail sentences. Between 2007 and 2011, there were 12,895 convictions in this age range. Over this period, New Zealand has spent more than $59 million imprisoning those who are convicted of minor drug offences and have to serve custodial sentences. This money is spent on imprisonment costs alone – it does not include costs to police, the courts, treatment or probation.^[8]

This does not even begin to account for the ongoing societal costs that exposure to the criminal justice system has caused. It severely narrows opportunities: it’s harder to get a job, harder to travel, harder to get credit, and harder to do many things most of us take for granted. It also exposes these kids to a negative environment, and it puts them in prison – a university of crime where drug use is rampant and joining a gang is often necessary for protection. All of this occurs at a time when their brains and identities are forming.^[9]

These issues are felt even more significantly for the Māori population who have much higher levels of cannabis consumption and dependence than non-Māori. A Christchurch Health and Development study found that Māori at age 25 had nearly twice the rate of cannabis dependence (20.2 percent, against 11.9 percent for non-Māori). The risk of dependency is particularly high for Māori males.^[10] Despite the fact that Māori make up 15 percent of the population, Māori aged 17-25 make up 37 percent of those convicted of possession and/or use of an illicit drug or drug utensil. Again, these are predominantly for the use of cannabis. ^[11]

For cannabis, the main two sources of harm appear to be underage use and addiction. Again, these are both prevalent regardless of the legal status of cannabis.  Early indications from Colorado suggest that underage (below 18 years old) use has actually reduced, which is a promising sign.  Outside this, the key point is preventing an increase in consumption post legalisation. We will look at each of these issues in turn; addiction, underage use and preventing an increase in consumption.

Addiction and Treatment

The evidence shows that about one in ten lifetime users of cannabis will, at some point, meet the criteria of being dependant, increasing the risk of harmful health impacts. ^[12]

One key driver of susceptibility to addiction is the stress caused by poverty, particularly during the early years.^[13] The Opportunities Party (TOP) will deal with poverty by improving housing affordability and cutting income tax rates for working people through our Fair Tax Policy (www.top.org.nz/top1) and providing everyone with a basic income, starting with parents of small children (www.top.org.nz/top7).

The other key issue with addiction is access to effective treatment. In a recent report on combating addiction, the New Zealand National Committee for drug treatment^[14] established four key actions that are crucial in improving the functions of the addiction sector:

-   All people to have easy access to addiction services when they need them

-   Addiction services must be evidence-based and be provided by a highly skilled, flexible and responsive workforce

-    Addiction services must be embedded in a wider system of care and support

-   A national drug policy that is fully implemented with resources allocated based on a health approach.

In 2014/15 the government spent around $152 million on addiction treatment services. Currently, one of the most pressing issues is the waiting lists for those who need treatment, which in some parts of the country can be up to 6 months^[15] . Those who are at this point often pose an extreme risk to themselves, their families, and society. Having to wait for help only makes this worse. Extra funding would allow these key functions to operate more effectively, and increase staffing and resources, helping those in immediate need. The total return on investment for alcohol and drug treatment is between 1:4 and 1:7, therefore every cent we invest here helps reduce dependency and costs down the track. ^[16]

TOP will increase this spending, funded through revenues gained from the legal sale of cannabis.

Youth Consumption of Cannabis

Studies have consistently found that the earlier cannabis use begins, and the more frequently and longer it is used, the greater the risk of potential developmental harms, some of which may be long-lasting or permanent.^[17] These studies have shown that there is less impact on the brain once it is fully matured at around the age of 25. Some health experts argued that there was no clear scientific evidence to identify a "safe" age of consumption, but agreed that having a minimum age would reduce harm.^[18]

One of the biggest risks with legalisation comes from increasing exposure of youth to cannabis. Different regulatory approaches present different impacts on the various risks around cannabis use. A particular regime may reduce some risks compared to the status quo (such as all those risks of damage arising from criminal records, prison sentences etc.) but increase others (such as addiction if the price setting and minimum age aren’t an effective deterrent). The challenge is dealing with the reality that the biggest user group of cannabis are those aged 18-24. If a regime is too restrictive on this group it could lead to the re-entrenchment of the illicit market.^[19] On the other hand if it’s too accommodative, it could lead to more physical and mental damage, and addiction.

Early indications from Colorado, one of the first American states to legalise cannabis, have shown that usage has actually decreased amongst those below the legal age (which in their case is under 18).  

The age vs harm trade-off is important to consider; would youth be exposed to more potential harms if restrictions forced them to obtain cannabis illegally, or through a legal, regulated market? The 18-24 age group is the largest user of cannabis, and some survey evidence from overseas suggests that restriction with a higher minimum age will not stop those who wish to obtain cannabis.^[20] Considering the potential harms that illegal exposure can bring, it seems prudent on one hand to allow this age group the ability to purchase legally.

On the other hand, experience with alcohol has shown that policy restrictions on purchase age are associated with lower levels of use,^[21] as well as some evidence of the ‘halo’ effect – that lowering the drinking age increases harmful drinking amongst those below the legal drinking age.^[22] While we accept that comparisons between cannabis and alcohol have their limitations, it was considered in this regard that this finding was transferable to cannabis. Therefore, in the interest of overall harm reduction, and accounting for the relationship between these factors, TOP promotes a legal purchase age of 20 for cannabis, to limit both the exposure to illicit markets as well as excessive exposure to youth, while still enabling a large portion the ability to purchase through a legal market.

Mitigating harms between the ages of 18 and 24 requires robust preventive measures, including advertising restrictions and public education systems funded by tax revenues from cannabis. We also advocate an extremely active educational and diversion programme targeting this age group, funded by the revenue from legalising cannabis.

Preventing Legalisation from Increasing Consumption

Promotion, Advertising, and Marketing Restrictions

Society's experience with the promotion of tobacco and alcohol is instructive, since the promotion of these products is recognized as an important driver of consumption and of the associated harms. In response, many governments have restricted how tobacco and alcohol may be promoted. 

TOP’s policy to prevent all forms of advertising of cannabis is intended to reduce as much as possible the demand for the drug so our policy repeats the approach taken to tobacco rather than the more relaxed arrangements around alcohol.

Under TOP’s production model there is a near-comprehensive ban on cannabis advertising and promotion, as well as restrictions on cannabis sponsorship – see current tobacco legislation as a guide. This is again to mitigate the issue of industry promoting consumption, particularly among youth. Concerns that companies will market cannabis products to heavy users or encourage heavy use, and exploit any exceptions that are left open, lead us to the view that the restrictions on any sort of cannabis promotion needed to be strong.

In our online consultation with party members, some were opposed to tobacco-style advertising restrictions for cannabis because, in their opinion, cannabis is less harmful than either tobacco or alcohol. In-store advertising was considered a compromise which would restrict such advertising to those who were above the legal age. Also considered was only prohibiting advertising to youth, however the challenges with creating partial restrictions (i.e. only prohibiting advertising targeting youth) are well documented. In practice, it is difficult to separate marketing that is particularly appealing to youth from any other marketing; as we see with junk food.

Tax and Price

Used appropriately, price controls can discourage the use of cannabis and provide government with revenues to offset related costs. The tax should be based on potency levels of THC to discourage the use of highly concentrated THC products.

It is important the tax level is set correctly. As an example, when cannabis became legal in Washington, a high tax combined with a shortage of legal product strengthened the existing illegal market. In contrast, the Colorado experience is one of oversupply, leading to a price crash and increase in consumption.

To overcome these weaknesses with taxation, TOP supports a minimum price in addition to a tax. Using regulations for minimum pricing as well as taxation will allow the government to set the price level similar to existing black markets. This will ensure there is considerable flexibility built into the system in order to contend with market forces.

Minimum prices can act as a profit windfall for the retailer. Using the cannabis licencing trusts system allows for decisions on profit to be made that are ultimately in the best interests of the community. Instead of profits being paid to private owners or shareholders, any surplus profits are funnelled back into the community, e.g. providing diversionary activities for teenagers in poor areas. The trusts are accountable to the public, and are governed by trustees – local people elected by the community to ensure that cannabis is sold responsibly, and in a way that maximises the social enjoyment and benefits to the community, while minimising the harm that comes with irresponsible sale and consumption. 

THC Potency

Over the last few decades, changes in growing and production techniques have resulted in cannabis products with higher levels of THC.

Despite studies showing that a typical user does not actually require large amounts of THC to experience the psychoactive effects of cannabis, the demand for and availability of products with higher levels of THC has persisted in jurisdictions that have legalised cannabis.^[23]

Products containing higher levels of THC may trigger psychotic episodes in individuals at risk, and may further increase the risk of harms to vulnerable populations, such as those with illnesses associated with psychosis. There are also significant risks involved in the illicit production of high potency THC due to the use of highly-flammable solvents such as butane to extract cannabinoids. To mitigate this, investigations have been made into THC limits. However, studies rarely specified what those limits should be. It is generally accepted that there is insufficient evidence to identify a "safe" potency limit. Nevertheless, some experts argue that a THC limit is a necessary precaution.^[24] 

On the other hand, some experts oppose the use of THC limits on the grounds that any such level would be arbitrary. Neither Colorado nor Washington, for example, has set limits on the amount of THC in concentrates. There is also the argument of too strong a restriction re-entrenching a black market.

While there may be risks of consuming high-potency concentrates, the dangers present in their production strongly suggest that they be included as a part of the regulated industry, subject to effective safety and quality-control restrictions. The harms associated with high THC potency remain a concern, and should be minimised. However, we do not believe that limiting THC content in concentrates is the most effective way to do so, based on current information. We agree that, due to a lack of evidence, any chosen threshold would be arbitrary and a challenge to enforce.

To mitigate the anticipated issue we suggest

• variable tax rates linked to THC potency
• work with the trusts selling cannabis to work through appropriate regulation over THC strength in serving sizes and what kind of products can be sold
• Clear labelling with appropriate health warnings, similar to those placed on cigarettes

• Random lab testing of products as part of the regulatory regime

There is research that suggests that the presence of CBD buffers some of the adverse effects of THC, e.g. anxiety and panic attacks, however this remains at this point empirical.  If this theory is confirmed by more robust evidence, there is the possibility to create a more specific taxation and regulation systems around THC levels and its ratio with CBD. Scope for this sort of regulation should be left within a Cannabis Legalisation Act.

Public Education

Public opinion research shows that youth and some adults do not understand the risks of cannabis use. Typically, they are either exaggerated (echoing the era of ‘reefer madness’) or understated (‘cannabis is benign’).

Legalisation of cannabis will go some way to removing the stigma attached to its use, which in turn will allow for more mainstream education surrounding the subject. TOP will develop an education campaign that will draw on the learning from the current Drug Foundation’s drug education pilot to ensure that we

• Communicate information on the new system and its objectives
• Help young people in particular understand the potential harms from cannabis use
• Inform on the risks of mixing cannabis and alcohol, and the risks of impaired driving
• Offset potential pro-consumption messages from industry and advocates, particularly those directed at children and vulnerable populations (although the Trust model and bans on advertising should alleviate many of these messages).
• Provide information on dependence and other risks of heavy consumption
• Help people access drug treatment if they need it
• Provide reliable information to customers at point of sale
• Provide parents with information

Education should be both youth and culturally appropriate to help deal with the higher levels of use associated with young people and Maori.

In Washington and Colorado, funding for their respective education campaigns came from the states' cannabis revenues, however as a result of this, campaigns in these states did not begin until two years after legalisation. To mitigate this, funds from initial grower licencing fees will be directed at early education.

Establishing a Safe and Responsible Supply Chain

The principal interest when establishing the supply chain is for an efficient, accountable, and transparent system that emphasises the protection of health and safety and reducing diversion to the illicit market.

The supply chain ranges from the cultivation and harvest of the plant material, to the manufacture of products using cannabis as a raw material including concentrates and other derivatives.

TOP will implement a competitive private-sector production model, with the final retail being controlled by the regional licencing trusts. Having a minimum price will avoid situations like in Colorado and Washington, where excessive supply has led to a decrease in prices and an increase in consumption.^[25]

It is also crucial that we acknowledge the overrepresentation of Maori in cannabis crime statistics. Along with targeted education programs, it is important that iwi are involved in the regional trusts model; there is potential for some of these to be established by local iwi.

Local authorities will have the ability to make decisions including whether or not they actually wish to allow the sale of cannabis within their region. So as to not disadvantage those that wish to purchase cannabis in areas that decide against retail outlets, TOP will create an online platform that can be used for the sale of cannabis. This will still be run under the same not-for-profit model as the trusts, and operated under the same controls ensuring it cannot be manipulated. Online forums already exist for alcohol purchase and their controls can be applied as a framework.

A private sector production model will allow for a greater variety and diversity of products with fair pricing, although these products would be limited in the way in which they can be commercialised, due to advertising and retail restrictions. 

TOP sees the legalisation of cannabis as an opportunity for industry to develop in smaller regions where niche products can be grown and supplied, similar to how craft beer has developed in places like Nelson. While advertising restrictions will limit the ability to market these products, differentiation can still develop, allowing the development of a boutique market. As the trusts are tasked with controlling the best outcomes for their respective regions, they will be able to facilitate small business growth.

Government control over supply allows for a national regulatory system of quality control, much like the laws surrounding the production of alcohol. Companies wishing to supply the licencing trusts must comply with a set of strict rules to meet safety and quality standards and security provisions. For example 

• Only approved fertilizers and pesticides should be allowed
• Potentially hazardous moulds should not be present
• Product-specific THC and CBD potencies, including serving sizes, should be established
  and verified
• Potentially hazardous extraction processes should be undertaken with the proper safety measures in place

We intend to leave room in the legislation for further regulatory measures to enable greater control over the supply chain such as

• Seed-to-sale tracking system to prevent diversion and enable product recalls
• Regulated CBD and other compounds derived from hemp or from other sources

Retail

One of the key elements of a plan for implementing legalisation is determining how cannabis will be supplied. Specifically, what kinds of organizations will be allowed to produce and distribute cannabis. States such as Colorado and Washington have opted for a for-profit commercial industry, skipping past many intermediate options, such as barring for-profit businesses. TOP advocates a system using a local trust to operate the retail part of the supply chain (near monopoly). This offers several potentially beneficial effects.

Firstly, it allows for reversibility. As mentioned, the evidence is always developing.  If a monopoly proves the best method of legalisation, it will be easy to retain. If models such as commercial legalisation, like those adopted in Colorado and Washington, prove to be a better choice it will be relatively easy to switch from monopoly to private commerce (as we have seen with alcohol). However, adopting commercial legalisation from the beginning and later changing to another supply model may be more difficult, as commercial interests would presumably oppose any proposal to take away their profits. In light of information yet to be obtained, a monopoly is a more adaptable method of legalising than private commerce.^[26]

In a normal market, we would expect that in the medium to long run, a free-market industry would innovate in ways that drive down production costs, and competition would force companies to pass savings to consumers in the form of lower prices. Normally, this is good for consumers but, if consumers are vulnerable to overindulging, low prices can be problematic. For example, innovation that has led to very low prices for fizzy drink, junk food, and candy. This is generally considered to be a curse, not a blessing.

Amnesty

The current system will also leave a legacy of minor drug offences. TOP will implement an amnesty for people who are in prison (or have a minor charge) purely on cannabis related offenses.