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Late last year, Minister Greg Hunt appointed Professor John McMillan AO to conduct a Review and Report on the operation of theNarcotic Drugs Act 1967( the Act) in accordance with section 26A of the Act.

Professor McMillan’s Final Report  on the Review of the Act was tabled in Parliament today, Thursday 5 September 2019.

The Final Report contains 26 recommendations to improve the regulatory framework for the cultivation, production and manufacture of medicinal cannabis in Australia. Minister Hunt has accepted all 26 recommendations put forward by Professor McMillan, which broadly aim to reduce the regulatory burden on industry, promote and allow greater flexibility in the administration of the legislation to support industry innovation and development.

A two stage reform process is proposed to be undertaken to ensure that the recommendations are appropriately implemented with some reforms being implemented as early as later this year. Further details on the implementation of these reforms will be published in due course.

Further details on the Review process are available:Review of the Narcotic Drugs Act 1967.

Here is the full Executive Summary

Adoption of a national medicinal cannabis scheme in Australia

Australia ratified the United NationsSingle Convention on Narcotic Drugs, 1961in 1967.[1]The same year the Commonwealth Parliament enacted theNarcotic Drugs Act 1967(Cth) (ND Act) to give effect to certain of Australia’s obligations under the Convention.

The Single Convention declares that the medical use of narcotic drugs is indispensable for the relief of pain and suffering and that they should, accordingly, be available for medical and scientific use. At the same time, the Single Convention recognises that effective measures are necessary, both nationally and internationally, to guard against addiction to and abuse of narcotic drugs. Among the measures that will be necessary are national control and licensing of the cultivation, production and manufacture of narcotic drugs.

The ND Act initially gave effect to the Single Convention in a limited way. The Australian Government Minister for Health (the Minister) administering the ND Act could grant licences to manufacture narcotic drugs, and the ND Act regulated the movement of narcotic drugs through Australia (for example, on vessels). Until 2016 the manufacture licensing provisions in the ND Act were applied to the control of narcotic drugs obtained from the opium poppy.

In 2016 the ND Act was extensively amended to establish a national regime permitting the cultivation and production of cannabis and cannabis resin in Australia (described in this report as the medicinal cannabis scheme). This came after an active debate that had been occurring both publicly and in Australian legislatures to allow expanded patient access to medicinal cannabis products.

The central feature of the medicinal cannabis scheme established in 2016 was a licensing scheme applying to the cultivation of cannabis plants, the production of cannabis flower and plant resin, the conduct of research relating to medicinal cannabis, and the manufacture of medicinal cannabis drugs. Licences could be granted separately for each of those processes – cultivation and production (combined), research and manufacture. An allied feature of the three-licence scheme was that the specific activity a licence holder could undertake would be spelt out in one or more permits, for which an application would be separately made.

The licensing and permit system enabled the Commonwealth to control the number and types of cannabis plants that could be cultivated, the size of cannabis crops, research activities, the permitted uses of manufactured drugs, the eligibility and conduct of licence holders, and the overall security and integrity of licensed activities. Commonwealth regulatory control enabled it to meet its obligations under the Single Convention to report on Australian activity to the International Narcotics Control Board.

Commonwealth regulatory functions and powers were formally vested by the ND Act in the Secretary of the Australian Government Department of Health (the department), but would be exercisable by a new office established within the department – the Office of Drug Control (ODC). The ODC became part of the Health Products Regulation Group in the department, alongside the Therapeutic Goods Administration (TGA). The TGA was an established part of the Department that regulates therapeutic goods to ensure they are of an acceptable standard.

Review of the operation of the medicinal cannabis scheme in the ND Act

The 2016 amendments to the ND Act required the Minister to cause a review of the operation of the ND Act to be carried out during the third year of operation of the medicinal cannabis scheme. This Review commenced in January 2019. The Terms of Reference for the Review are inAppendix Ato this report. The report of the review is to be tabled by the Minister in both houses of the Commonwealth Parliament by 29 October 2019.

Public consultation with key stakeholders has been a major element of this Review. This has included the publication of a Discussion Paper in March 2019, consultation forums in three cities, receipt of written submissions (many of which are published on the TGA and ODC websites), and meetings with industry bodies, government working groups and the Australian Advisory Council on the Medicinal Use of Cannabis.

This report makes 26 recommendations for:

  • amendment of theNarcotic Drugs Act 1967(the ND Act) and theNarcotic Drugs Regulation 2016(ND Regulation)
  • publication by the ODC of expanded guidance on key features of the ND Act and ND Regulations and the ODC’s regulatory approach
  • ongoing review of specified issues by the department, the Australian Advisory Council on the Medicinal Use of Cannabis and government working groups

This Review is restricted to the operation of the ND Act. It is not a review more broadly of cannabis regulation in Australia, patient access to medicinal cannabis or scheduling and other decisions of the TGA in relation to cannabis products. There is nevertheless a mention of those issues at various points in the report as they are aspects of the broader setting in which the medicinal cannabis scheme operates.

Key findings of this Review

The establishment of the medicinal cannabis scheme in the ND Act in 2016 was an important milestone in the Australian Government’s approach to the treatment of personal pain and suffering.

The medicinal cannabis scheme built on steps that had already been taken both at national and at State and Territory level to allow patient access to medicinal cannabis products and to support research. The ND Act amendments, however, went much further in establishing a comprehensive framework to facilitate and support an Australian industry dedicated to the supply of medicinal cannabis therapies.

It was described by the Minister at the time as a scheme that would ensure patient availability of a safe, legal and sustainable supply of cannabis-derived products – a ‘farm to pharmacy’ cannabis supply chain. The establishment of the Commonwealth scheme also led to State governments drawing back from plans already partially legislated to establish State-level schemes regulating cultivation, manufacture and supply of medicinal cannabis products.

A great deal has occurred since October 2016 when the new ND Act scheme commenced. An administrative structure and procedures have been developed and administered by the ODC and the department. The framework is notable for the careful balance it strikes between facilitating cultivation and production of medicinal cannabis products, implementing Australia’s obligations under the Single Convention to safeguard against illegal practices, and facilitating cooperation with State and Territory governments to administer safe and sustainable pathways for patient access to medicinal cannabis therapies.

The ODC has received (at 30 June 2019) 246 licence applications, and granted 63 licences (24 medicinal cannabis licences, 16 cannabis research licences and 23 manufacture licences). This is a far higher number than expected. It points to strong commercial interest in the Australian medicinal cannabis industry. This is supported by an active research program in Australia, and the formation of two representative industry organisations. Informal indications point to firm international confidence in the integrity and effectiveness of Australian regulatory processes and the reliability of Australian medicinal cannabis products.

A direct correlation cannot be drawn between, on the one hand, increased cultivation and manufacturing activity by ND Act licence holders and, on the other hand, improved patient access in Australia to medicinal cannabis therapies. There has, nevertheless, been a steady and accelerating increase in patient access that points to a parallel and consistent trend. For example, under one of the patient access pathways described in this report (Special Access Scheme Category B) the number of monthly approvals for the supply of a medicinal cannabis product rose from 132 approvals in May 2018 to 1,374 in May 2019. Increased patient access is also recorded under other pathways.

The medicinal cannabis scheme was established in the ND Act in 2016 and is still in its early days. To date, the establishment of the scheme has overall been resoundingly successful. The ODC has played a central role in this success. It is well respected throughout government and industry for its expertise and professionalism. Additional budgetary funding was provided to the department in 2018 to administer the medicinal cannabis scheme.

These developments are encouraging for Australia. There is growing public and international interest in medicinal cannabis therapies. Proposals have also been developed by the World Health Organisation (WHO) (but not yet considered by the United Nations Commission on Drugs) to adjust the cannabis settings in the Schedules of the Single Convention.

Improvement of the medicinal cannabis scheme in the ND Act

Strong interest was expressed in submissions and consultations during this Review for legislative and administrative reforms to improve the operation of the medicinal cannabis scheme. There was an equally keen interest in the ODC and the TGA to evaluate the reform proposals. An independent business review of ODC administration was commenced internally during this review and is considering many options for administrative improvement.

Generally, there is an aspiration at different levels within government to ensure that the medicinal cannabis scheme functions according to best practice principles of regulation that are consistent with Australia’s obligations under the Single Convention.

Five themes stand out in the analysis undertaken by this Review.

Unexpected administrative challenges

Numerous unexpected challenges have been encountered in implementing and administering the medicinal cannabis scheme.

Partly this stems from receipt of a substantially larger number of licence applications than was anticipated from the independent expert modelling that was done at a preparatory stage. Licence applications can be lengthy and intricate and require time-consuming consultation with applicants. The ODC was not resourced to process so many applications. This has contributed to processing delays in the ODC and to frustration and criticism on the part of licence applicants and holders.

Another contributory factor to the unexpected administrative challenges was the phrasing of some of the legislative standards in the ND Act and ND Regulation. Some standards are ambiguous, inexact or inordinately demanding. This, too, adds to the ODC’s administrative burden and to the obligations imposed on licence applicants and holders.

Similarly, a couple of provisions in the ND Act and ND Regulation go further than the Single Convention requires (for example, on the definitions of ‘ cannabis plant’ and ‘drug’). This has extended the regulatory reach of the medicinal cannabis scheme further than seems necessary.

Recommendations are made in this report to address those unexpected challenges. There are recommendations to amend the ND Act and the ND Regulation to delete or rephrase some legislative standards and to introduce simpler administrative processes (for example, to allow notification rather than formal approval of permit variations that are not substantive in nature or do not pose a material risk).

It is also recommended that the ODC provide extended guidance on the meaning of some terms in the legislation that have given rise to queries and uncertainty in the licensing process (such as the terms ‘manufacture’ and ‘research’).

Regulatory focus on risk minimisation

The first two years of the medicinal cannabis scheme were marked by a strong focus on minimising the risk of criminal incursion in the scheme. This was to be expected initially, because of the requirements of the Single Convention and the improbabilities faced in regulating a new industry that is handling a narcotic drug that is susceptible to abuse. The risk minimisation focus runs through the ND Act, the ND Regulation and the regulatory method of the ODC.

A view forcefully expressed during this Review is that the same intensity is no longer required on risk minimisation in the design and administration of the medicinal cannabis scheme. The risk of criminal infiltration and diversion within the scheme has been controlled. Licence holders have a strong commercial interest to manage risks effectively and to safeguard the integrity of the industry. The ND Act operates alongside other Commonwealth, State and Territory laws that control the risks. There is general acceptance of those points within the department.

This report makes recommendations of two types dealing with the risk minimisation focus. First, the report recommends that the number and breadth of requirements imposed by the ND Regulation on licence applicants to provide information and documents in support of applications be reduced. An alternative regulatory approach is for some of the application requirements to be phrased more generally and to be supplemented by either formal guidelines issued by the Minister under s. 26C of the ND Act, instructions issued by the Secretary under similar statutory powers, or informal guidelines published by the ODC.

Second, the report recommends that the ODC, following public and stakeholder consultation, develop and publish a more contemporary and comprehensive regulatory guide. The purpose of the guide would be to explain the ODC’s regulatory powers, when and how they can be exercised, regulatory goals and priorities, and procedural fairness and other protections available to those affected by regulatory action.

Licence and permit system

The medicinal cannabis framework in the ND Act is structured around three separate licence categories – for cultivation and production (jointly), research and for manufacture. Permits are also issued separately for each licence.

The three licence structure is not a requirement of the Single Convention. It requires only that cultivators be licensed by a government agency and that the parties to the Convention control under licence the establishments and premises in which the manufacture of drugs takes place.

The current three licence structure has been vexing for licence applicants and holders, and adds to the ODC’s administrative and regulatory compliance burdens. Licence applicants must submit separate applications for each licence, provide information and documents of a similar kind in support of each application and liaise with the ODC (and possibly different ODC staff) on each application. Doubts can arise as to which activities (such as research and product development) fall within each licence category.

Separate licence categories can also add complexity for licence holders in other ways – such as demonstrating the supply chain arrangements for medicinal cannabis product, transferring or supplying product from one licence or permit to another, or applying for a variation of a licence permit or condition.

This report recommends that the ND Act be amended to establish a single licence structure. A single licence could authorise some or all of cultivation, production, manufacture and research. This would enable adoption of a simpler and more streamlined process for licence application and approval. There would be more flexibility for licence applicants and holders to tailor a required licence to their business intentions and development plans. Managing medicinal cannabis product under a single licence and complying with licence and permit conditions and notification requirements may also be more straightforward.

A single licence structure will require supplementary changes to the ND Regulation and to administrative procedures and forms. The restructure would also provide an opportunity to review how licences and permits interrelate in achieving the objectives of the medicinal cannabis scheme in the ND Act.

Hemp cultivation and supply

The report notes many cross-over points between the medicinal cannabis scheme in the ND Act and activities occurring in the cultivation and commercial sale of low-THC hemp.

For the most part those other activities are controlled by State and Territory laws. Hemp, a specially cultivated cannabis plant that contains little or no psychoactive cannabinoid content, is usually cultivated for industrial and horticultural purposes and as a food ingredient.

The Single Convention declares that it does not apply to the cultivation of the cannabis plant exclusively for industrial or horticultural purposes. The focus of the Convention is upon the control of narcotic drugs for medical and scientific purposes. Commonwealth laws can nevertheless apply to low-THC hemp products. An example discussed in the report is that an extract of a cannabis plant that is used in a non-therapeutic product may need to be covered by a ND Act manufacture licence if it is to be exported from Australia.

The potential cross-over of Commonwealth law and State / Territory law in relation to hemp cultivation was an issue that was frequently discussed in the consultations and submissions in this Review. A general complaint was that Commonwealth law can have an overlapping and inhibiting effect on the cultivation and production of low-THC hemp.

It was not within the scope of this Review to examine those complaints. The report observes that the issues can be more complex and nuanced than at first glance. That said, it is important that the distinctions drawn in the Single Convention between the regulation of narcotic and non-narcotic cannabis derivatives is not blurred.

The report recommends, as a precautionary measure, that the department continue to monitor and advise Government on the options (if any) for altering the operation of the ND Act to remove any obstacles to the cultivation and commercial sale of low-THC hemp under State and Territory law. A related recommendation is that the definition of ‘drug’ in the ND Regulation, that applies to the manufacture licence provisions in the ND Act, be amended to remove pure cannabidiol from the definition.

Patient access

Patient access to medicinal cannabis therapies does not fall within the scope of this Review of the ND Act. It is a broad subject that is controlled by other Commonwealth, State and Territory laws and administrative arrangements.

The submissions to this Review understood that limited scope. They nevertheless took the opportunity to point out that a declared expectation when the medicinal cannabis scheme was being introduced into the ND Act in 2016, was that medicinal cannabis would be more readily and easily available to Australian patients. There are statements on the parliamentary record that confirm that expectation.

It was claimed in some submissions that the expectation has not been fulfilled. A relatively small number of patients are receiving prescribed medicinal cannabis, it is mostly imported and it is expensive. There are also claims that obtaining medicinal cannabis through illicit channels is the easier path for many patients.

This Review has not examined those claims and cannot express a view. However, the Review is aware that industry regulation has been a dominating focus in the establishment of the medicinal cannabis scheme in the ND Act since 2016. Further, the objects clause in the ND Act provides no illumination beyond declaring that the object of the ND Act is to give effect to certain of Australia’s obligations under the Single Convention.

The statutory objects clause should be an important element in signifying how the ND Act should be understood, administered and construed. To achieve that purpose, the report recommends that the objects clause include a statement that an object of the ND Act is to enable cannabis cultivation, production, manufacture and research, in order to ensure that medicinal cannabis products are available to Australian patients for therapeutic purposes.

Implementation of recommendations

The 26 recommendations in this report span amendment of the ND Act, amendment of the ND Regulation, and administrative-level reforms.

The most far-reaching recommendation – and, in that sense, the prominent recommendation – is to replace the current three licence structure in the ND Act with a single licence structure. Implementation of that recommendation would require extensive changes not only to the ND Act but also to the ND Regulation and to ODC publications, forms and administrative procedures.

It is important that other improvements to the medicinal cannabis scheme are not postponed until a new licence structure is adopted. To do so would maintain practices that detract from the opportunity to make a well-regarded medicinal cannabis scheme work far better.

The licence and permit application requirements in the ND Regulation could be amended and simplified ahead of any change to the three licence structure. Some application requirements in the Regulation could be deleted or revised, and others could be merged or consolidated so that single forms could be used for multiple application purposes.

Many other recommendations in this report could be implemented in a short timeframe by amendment of the ND Regulation or administrative reforms – for example, to extend the standard licence terms, reduce the number and difficulty of licence conditions, institute simpler procedures for notifying and approving routine permit variations, and lessening the frequency and scope of the reporting obligations on licence holders.

Early steps could also be taken within the ODC and the department to act on other recommendations that require publication of an expanded regulatory guide and guidance material, and refinement of existing review and consultation arrangements.

Acknowledgements

This Review has benefited greatly from the input and assistance of many people.

The discussion at three public consultation forums attended by over 200 people was lively and constructive. Many thoughtful submissions were received that provided commentary and examples that were drawn from heavily in preparing this report.

Staff in the department, particularly the ODC and the TGA, gave excellent support to the Review and readily shared their considerable knowledge and experience in the regulation of therapeutic substances. Many other officers in Commonwealth, State and Territory government agencies were similarly keen to be consulted and to render valuable assistance during the Review.

The Australian Advisory Council on the Medicinal Use of Cannabis took great interest in the Review and held lengthy and constructive discussions with the Reviewer at three meetings of the Council.

Special acknowledgement and thanks are owed, most importantly, to a small and talented team within the TGA who provided expert assistance throughout – Danielle Chifley, Tristan Dimmock and (for part of the review) Kieran Proctor. They brought to the Review great energy, enthusiasm and a deep intellectual grasp of complex issues.

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