Pot pro­duc­ers pay­ing mil­lions for pa­tient re­fer­rals

CANNABIS PRO­DUC­ERS PAY MIL­LIONS IN FEES IN EX­CHANGE FOR PA­TIENT-CUS­TOMERS

Windsor Star - - FRONT PAGE - Tom Black­well

Some in the in­dus­try call them “re­fer­ral fees,” oth­ers “ed­u­ca­tional grants.” To at least one bioethi­cist, they are sim­ply kick­backs. Li­censed pro­duc­ers of med­i­cal cannabis are pay­ing mil­lions of dol­lars to cannabis clin­ics across the coun­try in ex­change for pa­tients who reg­is­ter their mar­i­juana prescriptions with the com­pa­nies, cor­po­rate doc­u­ments and in­ter­views re­veal.

What just three years ago was a con­tro­ver­sial, but spo­radic, prac­tice seems to have be­come a rou­tine part of the pot busi­ness, where medicine and com­merce are in­creas­ingly in­ter­twined. For some clin­ics, in fact, pay­ments from li­censed pro­duc­ers (LPs) rep­re­sent the bulk of their in­come.

“LP rev­enue pro­vides the high­est mar­gin of all the com­pany’s rev­enue streams,” says a doc­u­ment filed with reg­u­la­tors by Sun­niva Inc., which owns both Nat­u­ral Health Ser­vices (NHS) clin­ics and a pot pro­ducer.

When some­one files their pre­scrip­tion with a pro­ducer, that com­pany usu­ally pays the clinic 15 to 20 per cent of the cost of each dose of cannabis the pa­tient buys over time, re­port in­sid­ers.

The op­er­a­tors say those pay­ments enable the fa­cil­i­ties to of­fer in­ten­sive coun­selling that would other­wise have to be paid for by pa­tients. And the fact they have con­tracts with mul­ti­ple pro­duc­ers, they say, means the fees do not en­cour­age favouritism to­ward any one firm.

But health-pol­icy and med­i­cal-ethics ex­perts ar­gue the pay­ments still make it near-im­pos­si­ble for health pro­fes­sion­als to put the pa­tient’s in­ter­ests first.

“These are kick­backs. Let’s be blunt — that’s what they are,” said Bryn Wil­liams-Jones, a Univer­sity of Mon­treal bioethics pro­fes­sor who has trained doc­tors on con­flict of in­ter­est for years. “Re­gard­less of whether the physi­cian thinks they’re in­de­pen­dent, they’re no longer in­de­pen­dent.”

Le­gal­iza­tion of mar­i­juana for recre­ational use has, in some ways, made ac­cess to the drug as easy as buy­ing a bot­tle of Chardon­nay. But many Cana­di­ans still seem to want a health pro­fes­sional’s help get­ting mar­i­juana treat­ment, and the med­i­cal cannabis sys­tem re­mains pop­u­lar, say in­dus­try rep­re­sen­ta­tives.

Spe­cialty clin­ics as­sess pa­tients and is­sue “au­tho­riza­tions” for mar­i­juana, then of­ten help the pa­tient reg­is­ter that pre­scrip­tion with a par­tic­u­lar pro­ducer, typ­i­cally one of those con­tracted with the fa­cil­ity.

The then-CEO of Til­ray, a ma­jor B.C.-based cannabis com­pany, com­plained in 2015 about clin­ics and doc­tors who were start­ing to de­mand re­fer­ral fees, say­ing it “taints the whole in­dus­try,” and pulling out of a trade group in protest. No one at the firm, un­der dif­fer­ent lead­er­ship to­day, was avail­able to com­ment, a spokes­woman said.

But other com­pa­nies’ ex­ec­u­tives say the pay­ments are now stan­dard prac­tice, and help fund the care clin­ics pro­vide, in­clud­ing ap­point­ments that can last as much as an hour. “There’s rent and there’s staffing and pay­roll and in­sur­ance, and all the other things that go into run­ning the busi­ness,” said Barry Fish­man, CEO of Vivo Cannabis, which owns two clinic chains. “There needs to be a way to have a sus­tain­able busi­ness … and it doesn’t ap­pear the gov­ern­ments are pro­vid­ing ad­e­quate fund­ing.”

In one cor­po­rate fil­ing, Vivo says that it re­ceives “ed­u­ca­tional grants” from pro­duc­ers, but stresses that its pa­tient ed­u­ca­tors are not in­formed about the con­tracts with those com­pa­nies, and make ob­jec­tive rec­om­men­da­tions.

Clin­ics do re­ceive in­come from the fees that some prov­inces, though not all, pay their doc­tors, but the largest chunk of rev­enue comes from pro­ducer pay­ments, said Fish­man.

Based on the few com­pa­nies that re­port the trans­ac­tions to reg­u­la­tors, the money can add up.

All but $100,000 of the $1.2 mil­lion in rev­enue earned by the Canada House chain of cannabis clin­ics in the three months end­ing July 31 came from pro­ducer fees, the com­pany re­ported.

From the other side, med­i­cal-pa­tient re­fer­ral pay­ments ac­counted for about half the $3.5 mil­lion in sales and mar­ket­ing costs over a three-month pe­riod for pot pro­ducer MedRe­leaf, par­ent com­pany Aurora Cannabis in­di­cates in a re­cent re­port.

Aurora also owns the Can­vasRx chain of clin­ics, and says in an­other doc­u­ment the clin­ics’ rev­enues jumped by $1.8 mil­lion in the 2018 fis­cal year thanks to a surge in pro­ducer fees. Sun­niva Inc. re­ports that its gross profit mar­gin (be­fore op­er­at­ing ex­penses, in­ter­est pay­ments and taxes) soared by $2.4 mil­lion in the six months ended June 30, pri­mar­ily due to in­creases in pro­ducer rev­enues at its NHS cannabis clin­ics.

But just be­cause clin­ics re­ceive those pay­ments, doesn’t mean the health pro­fes­sion­als who work in them are any­thing but im­par­tial, said Jor­dan Sin­clair, a vicepres­i­dent of Canopy Growth, one of Canada’s big­gest cannabis firms.

“There is still a doc­tor who has to make an as­sess­ment of the pa­tient,” he said. “He has to demon­strate you have an ac­tual need for the medicine.” Wil­liams-Jones is not con­vinced. Clin­ics say their doc­tors and nurse prac­ti­tion­ers do not per­son­ally re­ceive re­fer­ral fees, but their em­ploy­ers’ fi­nan­cial re­la­tion­ship with pro­duc­ers is still a pow­er­ful force, the bioethi­cist says.

Clin­ics need to fund their ser­vices some­how, but do­ing it with a slice of sales of the prod­uct they pre­scribe should not be the an­swer, echoed Marc-An­dre Gagnon, a health-pol­icy pro­fes­sor at Car­leton Univer­sity.

“You have this clear con­flict of in­ter­est in place: the more you pre­scribe, the more you get,” he said. “In prin­ci­ple, this is sim­ply un­ac­cept­able.”

THE MORE YOU PRE­SCRIBE, THE MORE YOU GET. IN PRIN­CI­PLE, THIS IS SIM­PLY UN­AC­CEPT­ABLE.

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