MEDICINAL CANNABIS Helping you entry the market
NJORD LAW FIRM NJORD is continuously monitoring the changes in the industry, and we can assist you with all matters related to the process of establishing and managing the business. Our services ex-tend beyond obtaining the relevant licenses for medical cannabis production in as much as our expertise is available during the entire process – from entering the market to securing a stable position in the cannabis market. Our lawyers also provide guidance on what the future might hold in respect of the possible changes to legislation. NJORD can assist your company in matters including, but not limited to:
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Establishment of a local business entity
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Obtainment of licenses and authorisations
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Commencement operations, including, e.g. investments, facilities, people, technology, etc.
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Development of products and procedures
With NJORD as your legal adviser, we ensure that you get highly specialized assistance and tailored solutions. To display our approach for your business to enter the medical cannabis market in Denmark, we have created a five-step framework of the process.
JEPPE BROGAARD CLAUSEN Partner, Attorney at law (+45) 77 40 11 22 jbc@njordlaw.com
HEIKKI SELIN Assistant attorney (+45) 77 40 11 42 hjs@njordlaw.com
INTRODUCTION
DENMARK AS AN ENTRY-POINT TO THE EUROPEAN MEDICAL CANNABIS MARKET There has been a rapid development in the medical cannabis market in Denmark. In 2018, the Danish Government introduced new legislation offering a safe entry-point for entities wishing to enter European medical cannabis market. The Act on a Medicinal Cannabis Pilot Programme together with the Development Scheme enables companies to obtain a license to cultivate cannabis, manufacture primary products, manufacture and import primary products, manufacture intermediate products, and to sell and export bulk and primary products. Denmark is one of the first European countries, offering an attractive legal framework with strong government support for the cultivation of medical cannabis.
A SOLID STRATEGY MAKES THE FOUNDATION The Danish model requires serious planning and strategizing to achieve the minimum standards. The manufacturers of medical cannabis must follow a procedure of the highest pharma standards both for cultivation and processing. As there are currently two distinct schemes running parallel to each other and licenses are granted for entirely different activities, it is essential for an entity wishing to enter medical cannabis business to carefully assess and plan for which scheme they wish to opt into. The Development Scheme allows companies to obtain a license to grow, develop, and test their medical cannabis cultivation methods but does not include a license to sell or export the production. After complying with the regulatory standards, the Pilot Programme allows for the export of bulk and Danish-grown primary products. The Pilot Programme recognizes two types of medicinal cannabis products:
1)
Danish-grown or Danish-produced medicinal cannabis product and
2)
imported medicinal cannabis products.
Imported cannabis primary product cannot be exported. Instead, the entire process of producing cannabis primary products must take place in Denmark to qualify as a Danish-grown primary product which then can be exported. As the standards are high, and there is a possibility to apply for several licenses simultaneously, it is crucial to draw up a solid plan to obtaining correct the licenses and complying with the requirements successfully.
LEGAL EXPERTICE IS KEY NJORD Law Firm is one of the front-runners in assisting clients with successfully starting their operations under the current and constantly evolving medical cannabis legislation. Our cannabis lawyers advise both Danish and international companies on overcoming the legal and practical hurdles when accessing the Danish medical cannabis market. We assist in every step of the process and have already assisted several clients successfully in starting their operations under the medical cannabis Development Scheme in Denmark. Our multidiscipline team at NJORD has expertise in all relevant fields of law, for instance, in finance, insurance, commercial lease, real estate, transportation, employment, tax, IP, AI, and robotics. We strive to deliver innovative and solutionoriented advice, and we are dedicated to developing and securing the future of your business in the medical cannabis industry.
STEP
STEP 1
CLEARANCE AND DUE DILIGENCE Before establishing a local business entity in Denmark to enter the medical cannabis industry, the company wishing to establish a business within that field shall be investigated to enable us to get a comprehensive picture of the company’s suitability for medicinal cannabis business and to prepare us for establishing a viable and profitable strategy. Thus, the process starts with clearance and due diligence checks. This step includes an investigation of the company background and clearing of the process, know-how, organisation, and wishes of the company to start up a medicinal cannabis business in Denmark.
CLEARANCE
DUE DILIGENCE
It is of importance to clarify the wishes of the company wanting to set up a medicinal cannabis business in Denmark. The clearance stage includes, for instance, getting to know the processes used within the company, know-how and the composition of the organisation. This enables us to draw up a tailored strategy that suits the aims and needs of the company and avoid subsequent complications. At this stage, we provide a detailed memo with information about medicinal cannabis market in Denmark, including relevant legislation, a Q&A, and the result of the investigation comprising a proposed project plan and structure to start up.
The purpose of receiving information about the primary company is to comply with the mandatory KYC (Know Your Customer) and AML (Anti Money Laundering) rules and to secure that there are no conflicts of interest. Therefore, at this stage, we would require basic information, such as company name and business ID (in the form of an official receipt from the company registry), company address, and details of the person responsible of the project. In addition, in compliance with the above rules, KYC and AML checks are conducted, including a risk assessment, and requests for necessary documents.
STEP
STEP 2
ESTABLISHING A DANISH COMPANY AND CLEARANCE OF APPLICATION FOR THE FIRST LICENSE Based on the clearance and due diligence checks conducted during step 1, this step begins with establishing a local business entity in Denmark. Although setting up a company in Denmark is rather straightforward, it the Ministry of Foreign Affairs of Denmark recommends requesting assistance from an attorney to ensure compliance with national rules and to obtain complete assessment and advice during the process. For medical cannabis business, the Danish company can be in the form of a public limited liability company (A/S) or a private limited liability company (ApS). It is no longer possible to establish entrepreneur companies (IVS). The establishment of an A/S and ApS requires the drafting of documents such as a Memorandum of Association (MOA) and Articles of Association (AOA), and the share capital must be paid into the company’s bank account or to the client account of the company’s attorney. The company must then be registered with the Danish Business Authority. To comply with the national rules of setting up a company in Denmark, this stage includes selecting of a suitable company form
(APS or A/S), the preparation of the required documentation, and the arranging of share capital. All necessary correspondence and clearance with the local authorities shall be conducted. After the company has been established, the organisational structure of the company shall be outlined. This includes, for instance, defining the ownership, management, and the executives of the company. An A/S must be managed by a board of directors and an executive board, whereas an ApS may be managed solely by an executive board or a single executive manager. This step also includes drawing up a budget and making necessary investments.
STEP
STEP 3
DEVELOPMENT SCHEME When the local company has been established and cleared, it is time for the first application for a license under the Development Scheme. Developing cannabis growth in Denmark re-quires a good set up of local and technical advice. This includes consulting with good scientific practice (Good documentation practice), Quality Management Systems (QMS), process risk management as well as commissioning, testing, and qualification ending up in a GAP analysis (mock inspection). If the company already has experience of the application process, i.e. from other countries, a simple review can be performed. Under the Development Scheme, a company obtains a license to cultivate and produce cannabis for medical purposes. This means that a company may cultivate, develop, and test their medical cannabis, but the production cannot be dispensed to pharmacies and patients. The Development Scheme alone, thus, does not yet allow a company to conduct business in the industry. The cannabis produced in accordance with the development scheme can be distributed only to companies authorised to handle euphoriant substances which have a license under the Development Scheme. The export of medicinal cannabis under the Development Scheme is only permitted for analysis purposes.
However, the Development Scheme runs in parallel with the four-year Pilot Programme, and if the wish is to also sell and export medical cannabis, and not only cultivate, it is advised to apply for a license to cultivate medical cannabis for inclusion in the Pilot Programme. Indeed, the Danish Medicines Agency’s advice is to apply for a cannabis bulk cultivation license through the Development Scheme that runs in parallel with the Pilot Programme. It is important to understand that cannabis produced solely under the Development Scheme cannot be used in the Pilot Programme.
APPLICATION The application process starts by submitting an "Application for a cannabis cultivation and handling license with a view to producing cannabis suitable for medicinal use", including a detailed project description, to the Danish Medicines Agency. The project description must include a detailed account of the plans for cannabis cultivation and production. It must demonstrate that the produced cannabis is a consistent and standardised product of the required quality that can be included in the medicinal cannabis Pilot Programme. The description must also describe the planned safety measures in connection with the cultivation and processing of cannabis. The application process usually takes 2-3 months.
To maintain the license granted under the Development Scheme, no changes must be made to the circumstances of the company on which the license was issued, without the Danish Medicines Agency's prior approval. Entering the Pilot Programme is covered in step 5. As a notable remark, a direct application for the Pilot Programme is also possible. However, none of the current license holders has received their license following this path, since the licenses under the Pilot Programme is conditional upon the company having previously obtained permission from the Danish Medi-cines Agency to cultivate medical cannabis products.
CONDITIONS FOR OBTAINING A LICENSE FOR CULTIVATION 1. Application submitted correctly with sufficient information and detailed project description 2. The Danish Medicines Agency inspects the application based on pharmaceutical assessment and determines if the project can contribute to the production of cannabis products for the medicinal cannabis Pilot Programme or possibly for the manufacture of medicinal products 3. The Danish Agricultural Agency does not object 4. The Danish National Police does not have any reservations in granting the license 5. The Danish Medicines Agency has carried out an inspection with satisfactory results
STEP
STEP 4
REAL ESTATE / LOCATION Step 4 is often applied simultaneously with steps 2 and 3. Step 4 includes advising and assisting with location and real estate while waiting for required license. This stage often includes assisting with potential prospect locations, cultivation and manufacturing facilities and contacts in this regard. When the desired premises are found, it includes assistance with building permits and correspondence with the authorities and municipalities, preparation and assistance of lease agreements, and preparation and assistance with purchasing of buildings or other real property. Denmark, as a location offers access to expertise in pharmaceutical production, including the availability of expertise in developing GMP (good manufacturing practice) compliant facilities and processes. In Denmark, in addition to the wellfunded healthcare system offering partial reimbursement for medical cannabis-based products, there is also an efficient retail
pharmacy network for product distribution. Setting up a company in Denmark in the proximity to main EU markets, including Germany, offers an excellent infrastructure for exports, transport, and shipping of medical cannabis products. The following maps show where to find medical cannabis companies, which either are a part of the Development Scheme or the Pilot Programme.
STEP
STEP 5
ENTERING THE PILOT PROGRAMME – ACTUAL PRODUCTION, IMPORT, EXPORT, COMMERCIAL ACTIVITIES After successfully obtaining the license to cultivate, a company may apply to enter the Pilot Programme. The high standards set by the Danish Medicines Agency and the possibility to apply for several licenses simultaneously makes it essential to carefully fill out the correct applications and supplementary documents to obtain correct licenses and to comply with the requirements. AUTHORISATION OF ACTIVITIES WITH EUPHORIANT SUBSTANCES A company wishing to engage in activities with euphoriant substances must first submit an application for authorisation to handle euphoriant substances. Cannabis is covered by the executive order on euphoriant substances and the euphoriant substance in medicinal cannabis products is THC. Under current legislation, it is possible to produce and sell cannabis-based products containing up to 0.2% THC without contravening the executive order on euphoriant substances. The application must include information on planned activities with the euphoriant substances, storage and distribution, and information on the responsible person for activities concerning euphoriant substances.
TECHNICALITIES Under the Pilot Programme, the applicant may apply for: 1)
license to manufacture cannabis bulk, and/or
2)
license to manufacture cannabis intermediate products.
Cannabis bulk is processed cannabis (e.g. cannabis herbal substance, extract or other herbal preparations) ready for further processing or for packaging in consumer-ready packs so it can become a cannabis primary product. Cannabis primary product is a finished cannabis product imported from another country under
Cannabis intermediate products are products produced by labelling a primary product according to the rules. Cannabis intermediate products may be sent to wholesale distributors and pharmacies. It is the cannabis intermediate product manufacturers who have their products admitted to the Danish Medicines Agency's list of products admitted to the Pilot Programme, and who apply for a name for each product. Hence, the license to produce cannabis bulk permits the cultivation of cannabis for medicinal use and production of cannabis bulk. The license to produce cannabis intermediate products, on the other hand, permits the import, production and export of cannabis primary products, and production of cannabis intermediate products.
EXPORT The Pilot Programme allows the export of cannabis bulk and Danish-grown primary pro-ducts, and it recognises two types of medical cannabis products: 1)
Danish-grown or Danish-produced medicinal cannabis product and
2)
imported medicinal cannabis products.
Cannabis bulk: Companies exporting bulk cannabis are subject to the obligation to ensure that their products are solely exported and delivered to companies, which have complied with the import country’s laws regarding cannabis intended for medicinal use. Additionally, the exporters of bulk cannabis are obliged to ensure that the exported products are traceable and that any errors or deficiencies are investigated and recorded. Cannabis primary product: Distinct rules apply to Danish-grown or Danish-produced cannabis primary product and cannabis primary product manufactured from imported cannabis products. Imported cannabis primary product cannot be exported, rather the entire process of producing cannabis primary products must take place in Denmark to qualify as a Danish-grown primary product which can be granted a license to be exported. For instance, if a product based on Danish-grown cannabis bulk has been processed outside of Denmark and is imported back to
Denmark, it may not be exported again – neither as a cannabis primary product nor as a cannabis intermediate product. I.e. products based on imported cannabis bulk cannot be exported. Export of Danish-grown cannabis primary products is limited only to those countries, which permit the import of cannabis for medicinal use. Further, while companies may be granted authorisation to export certain cannabis primary products, such products must not have any affiliation – neither through name nor admission - to the list of cannabis primary products, which is produced by the Danish Medicines Agency. Cannabis intermediate product cannot be exported under the current legislation.
GACP, GMP, and GDP The Danish model for medical cannabis is based on the pharmaceutical paradigm that requires manufacturers to follow procedures of the highest pharma standards, established by the World Health Organization (WHO) and The European Medicines Agency. The cultivation of medical cannabis must follow the Good Agriculture Collection Practices (GACP), and the manufacturing of medical cannabis in Denmark must comply with the rules of good manufacturing practice (GMP). To ensure a sufficient quality of the plant material, GACP is a set of rules regulating the cultivation, harvesting, and subsequent handling and processing of the plant material. The cultivation also requires consulting on QMS and authoring QMS/procedures as well as GAP analysis and application for company approval. GMP rules, on the other hand, ensure that medicinal cannabis is manufactured according to current quality standards, in relation to the use of the product. The processing also requires qualification and validation, supplier audits, and GAP analysis. Initially, these pro-duction concepts must be complied with to secure the highest possible degree of patient safety and to minimise any risk associated with the production of pharmaceutical products. The cannabis product developed under the Pilot Programme is not considered as medicine, rather it is medicinal canna-bis which may be in the form of dried cannabis flowers, cannabis oils, capsules, tablets, etc.
In addition to the production concepts, the rules of good distribution practice (GDP) must be maintained throughout the distribution chain. GDP rules ensure the level of quality of the medical cannabis product by controlling the transport and storage, and by establishing a traceability system to identify any counterfeit products.
APPLICATION FOR A LICENSE AND ADMISSION OF PRODUCTS TO THE LIST Once the company is ready to comply with the rules on GACP and GMP, it can apply for licenses under the Pilot Programme for dispensing to patients. The manufacturers of cannabis may decide which cannabis products they wish to include in the application for admission to the Pilot Programme. A separate license to import, cultivate, and produce cannabis products is required, and every license must be tailored to the activities of the company. The following licenses allow for the following activities:
Cannabis Intermediate Products, and the Agricultural Agency’s executive order on the import of plants and plant products, the Medicines Agency may permit the importation of: •
Cannabis from countries within the EU
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Cannabis from countries outside the EU
Cannabis seeds from the cannabis plant are not regarded as euphoriant substances under Danish law. Therefore, cannabis seeds may be imported without certifications or licenses. However, import of cannabis seeds is regulated under the Danish Agricultural Agency’s executive or-der on import of plants and plant products, etc. According to said executive order imported cannabis seeds shall be free of quarantine pests.
3. Application for distribution in Denmark A company licensed to manufacture cannabis intermediate products may apply to have its products to be admitted to the Danish Medicines Agency's list to be admitted for sale at Danish pharmacies. Companies without a Danish CVR number must be issued a Closed User Group (CUG) certificate by the Medicines Agency. Admission to the list includes an assessment of:
1.
License to produce cannabis bulk
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Cultivate cannabis for medicinal use
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Produce cannabis bulk from cultivated cannabis
Labelling, strength, product form, and package size
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Documentation that cultivation and production follows GMP and GACP
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Products assessed based on their THC and CBD rates and the rates of other components and impurities
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Product names not causing confusion or unclearness
According to the Executive Order on Euphoric Substances, the Medicines Agency may permit the professional cultivation of cannabis for one year at a time, and in specified areas, which individually constitute an adherent area of at least 0.3 hectares.
2.
License to produce cannabis intermediate products
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Import, produce, and export cannabis primary products
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Produce cannabis intermediate products
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Import cannabis for the Pilot Programme
According to the Executive Order on the Import of Cannabis Primary Products and Production of
After the successfully being granted all required licenses, this step includes assistance in import to and export from Denmark, covering advice in storage, preparing of re-packaging facilities, supplier audit, transportation, etc.
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