The Canadian government is getting gouged on its veteran medical marijuana program, and a VICE News investigation has revealed the likely culprits.
According to figures provided by Veterans Affairs Canada, the number of retired soldiers obtaining medical marijuana from the government saw a staggering 15-fold increase over just three years, with a corresponding 50-time increase in cost.
From just 112 veterans on the plan in 2013, the federal government now covers the medical marijuana prescriptions for 1,762 veterans nation-wide. The cost has gone from $400,000 to $20 million in that time. That’s a jump of 5,000 percent.
The problem, first highlighted by a report in 2015 by the Auditor General, appears to be the result of an aggressive campaign to sign-up veterans and prescribe them expensive strains of marijuana, the cost of which is billed directly to the government.
“Marijuana for medical purposes became the highest-cost item paid for under the drug component of its Health Care Benefits Program,” the report reads, adding that costs are estimated to rise to $25 million in this fiscal year — “which would amount to almost a third of the drug costs under its Health Care Benefits Program.”
VICE News has now learned that government regulators are looking at closing loopholes and potentially going after the groups responsible. That new policy is anticipated by May of 2017.
A statement provided to VICE News from Veterans Affairs did not address the source of the rising costs, except to say that there are three broad reasons at play: “The total number of beneficiaries accessing the marijuana for medical purposes, the amount of marijuana they are accessing and the cost paid for the product they are using,” a departmental spokesperson wrote in an email.
Inside the department, there are also concerns that, beyond just the huge cost, doctors and marijuana producers are doling out the drug too liberally to those who may be suffering from Post-Traumatic Stress Disorder and are already on other medication.
When Kurt first heard of Aphria, he was a bit skeptical. The Canadian Forces vet was taking powerful painkillers to manage his hip and back pain, but he was tired of being “wired up” on the drugs. So he turned to medical marijuana, which was new to him.
A local clinic in Ontario, in conjunction with his doctor, prescribed him 10 grams a day and referred him to Aphria, a licensed medical marijuana producer and vendor that specifically marketed itself to veterans. Their strains were selected “by veterans, for veterans,” according to the company website. Veterans identify themselves as such when signing up, and see a specialized veteran shop.
Kurt logged onto the Aphria site, which offers a sleek, easy-to-navigate online shop, and chose several strains, paying upwards of $12 per gram.
Later, his wife stumbled onto Aphria’s main site, the one available to the general public. It turns out that, as a veteran, several products were hidden from view entirely.
“Kurt, this is beyond cheaper,” she recalls telling him. Strains were offered for as low as $4 per gram. Some of those strains were exactly what Kurt was looking for — lower in THC, the psychoactive ingredient in marijuana. When they called Aphria to ask if they could switch to the other site, they were told it would be impossible.
“What do you care?” Kurt recalls the Aphria representative telling him over the phone. “You don’t pay for it anyway.” Kurt, partly in protest, switched vendors and says he’s charging $800 to $1,000 less per month now on the public health plan.
Leon, another vet, has a similar story. He was referred to CannWay, another vendor which has since been acquired by Aphria. He says they refused to provide less potent, and coincidentally cheaper, strains.
“They basically told me: ‘What’s it to you? You’re not paying for it,” he told VICE News.
His complaints and threats to refer the issue to Veterans Affairs Canada eventually led CannWay to provide him some of the other strains to try, but he said they still refused to allow him to purchase marijuana from the main, non-veteran targeted, site. So he got a referral for a different producer.
“That $3 [difference in price, per gram] might mean the difference in the service that another vet needs, and not getting,” Leon says. “That’s not right. That’s not fair.”
Aphria did not return multiple requests for comment on this story.
VICE News is keeping both veterans’ names private, at their request.
Their experiences are backed up by a video provided by a source in the medical marijuana industry — an employee at a competing company who blew the whistle on the practise of allowing veterans to only purchase the more expensive marijuana products — showing two users logging onto the webpage of MedReleaf, another vendor which sells dozens of strains at a cost of $5 to $15 a gram. But when the user logged in on a veteran’s account, many of those options disappeared. The only remaining strains run between $12.50 and $15 per gram.
Brad Cotton, a spokesperson for MedReleaf, told VICE News that his company does hide certain strains from veterans on their main site, but insists that it is because veterans had been unhappy with the cheaper options, and because they are not produced in significant enough quantity.
“We don’t withhold anything from any of our patients,” Cotton said, adding that MedReleaf representatives are trained to offer veterans the cheaper options if they call in and ask.
But what might seem like a simple $3 dollar disparity for pot can make a huge difference in the cut-throat, tight-margin world of medical marijuana. And more players are getting in on the action. The industry has spawned a branch of consultant clinics that help register patients and can rake in big bucks in referral fees.
One that has had particular success goes by the name of Marijuana For Trauma, which started outside the Canadian Forces Base Gagetown, in New Brunswick.
According to the mission statement posted to their website, the group is “not going to stop until all 15,000 [veterans in Canada] have had the option to try cannabis. When that day comes we can tip our hat and say ‘we’ve done our best.’”
Led by founders Fabian Henry and Michael Southwell, Marijuana For Trauma has been publicly lauded for demystifying medical marijuana for veterans. It now operates 12 consultant centres across the country, several of which are nearby major Canadian Forces bases. There is no other group of similar size or scope performing the same service.
Once Marijuana For Trauma identifies a new patient, it refers them to a small ring of doctors who will conduct a consultation over Skype and, if medically justified, write a prescription. The doctor usually refers the patient to a licensed producer like Aphria or CannWay. Marijuana For Trauma then works with the vendor to ensure everything is billed directly to the federal government.
Henry confirmed that process, although he wouldn’t get into specifics on exactly which vendors have relationships with Marijuana For Trauma, or give details about any referral fees for his group or the doctors.
“I’m not really privy to talk to you about that right now,” he told VICE News in an interview.
Before the first Marijuana For Trauma location opened, the postal code in which it was located — outside Oromocto, New Brunswick — had just seven veteran medical marijuana patients. They were prescribed, in total, 1,560 grams of marijuana for a total cost of $7,800, according to documents that break down the number of medical marijuana claims to the veteran drug benefit program. Two years later, after the first Marijuana For Trauma shop opened in that same postal code area, there were 115 patients, and more than 200,000 grams of marijuana prescribed, for a total cost of $2.5 million. Numbers from the first four months of 2016 show that more veterans are already being prescribed medical marijuana in that postal code, and that the total cost is on track to be higher than the year prior.
Marijuana For Trauma’s Oromocto postal code has easily the highest number of veteran medical marijuana patients in the country, and is definitely the most expensive.
The costs to the program at Gagetown are eight times higher than the Greenwood base in Nova Scotia, which is of similar size but which does not have a Marijuana For Trauma location.
This business was so good that Henry and Southwell opened up their own medical marijuana vendor in 2014, separate from Marijuana For Trauma, according to corporate registry documents obtained by VICE News. They named it CannWay, the same store that Leon says he had trouble with.
“We did own CannWay,” Henry told VICE News, adding that it was Marijuana For Trauma’s “white label” property that simply rebrands Aphria’s existing products.
Henry and Southwell sold CannWay to Aphria in early 2016 in exchange for an ownership stake in Aphria. A company press release from January said that Aphria issued up to 3.6 million in shares to the CannWay shareholders, and the final amount will be determined by how the company performs. CannWay currently trades at just under $4 per share. That means Henry, Southwell, and anyone else with a financial stake in CannWay likely made a profit off the deal.
Asked directly about the higher prices charged by CannWay to veterans, Henry stressed that his company didn’t set the price for each strain — that was done by the producer, Aphria — although his company did select which strains were available for veterans to buy.
“The cheaper the prices, the shittier the quality,” Henry said. “We don’t necessarily need the most expensive on the menu…whether it’s $6, $3, or $18, it doesn’t matter to us.”
Marijuana For Trauma, too, was bought out. This summer, the group was acquired by the Abba Medix Group, a pharmaceutical company that has been looking to break into the medical marijuana market.
Under the deal, according to corporate filings, Abba Medix paid Marijuana For Trauma shareholders $250,000 and promised as much as $4 million in cash within three years, based on “performance targets.” Marijuana For Trauma, under the deal, will be trying to obtain a license to establish itself as a marijuana producer.
When Henry spoke to the Globe & Mail about this in 2015, he was up-front about his effort to take fees from certain marijuana producers, in exchange for his group’s patient referrals.
Henry added that he works for free and says he intends to direct all of Marijuana For Trauma’s profits into a veteran-focused charity.
Asked by VICE News whether he’s spoken to Veterans Affairs Canada or Health Canada about his distribution and profit model, Henry suggested that he had not.
“I got no need to contact those people,” Henry said, adding: “Because I know how to make them pay the bill anyways.”
While business has been good for Henry’s group, business has been even better for Aphria.
In its most recent financial statements, Aphria boasted that CannWay brought an “established patient-base” and that it “has a significant market share in the veterans market, such as strong ties to the Marijuana For Trauma (MFT) community, where Aphria stands to see earnings gains.”
From 2014 to early 2016, when Aphria purchased CannWay, it went from 10 customers to more than 4,600. Now, roughly one-in-four of its customers are veterans.
A financial report prepared by Aphria for investors on “veteran market penetration” boasts that “veteran patients are heavy users consuming on average five times more than the average…patient.”
Joint CannWay-Aphria leaflets advertising the organization’s loyalty program read: “Refer a veteran and you are credited with 250 points.” Under the program, 1000 points is worth a brand new biometric safe.
Multiple calls to Aphria were not returned.
A Veterans Affairs Canada source told VICE News that the federal government is paying particular attention to the small number of doctors at the heart of this system.
An analysis of the program from the Auditor General of Canada found that, as of 2015, more than a quarter of all veterans had obtained their medical marijuana prescriptions from a single doctor. The following year, more than half of the prescriptions had come from just four physicians.
Henry himself admitted that two of the doctors who work with his organization had come under scrutiny by the government because they write so many scripts.
One of those doctors faced a formal complaint, filed by a patient’s family, after he prescribed 10 grams a day to a patient* with a history of addiction issues who later took his own life. Another one of those doctors appears to be the director of a group that was also acquired by Abba Medix in the same deal.
While it is generally accepted that marijuana can be helpful for a variety of illnesses, there is skepticism that high doses, like 10 grams a day, is appropriate, at least without supervision.
According to a Health Canada report, the clinical research available recommends a maximum prescription of just two or three grams per day. The Auditor General report looking into the medical marijuana program noted that in “an internal departmental briefing document, Health Canada indicated that more than five grams per day may increase risks with respect to the drug’s effect on the cardiovascular, pulmonary, and immune systems, and on psychomotor performance, and may increase the risk of drug dependence.”
Nevertheless, the audit notes, Veterans Affairs “set the limit at 10 grams per day per veteran, and that in rare circumstances it could increase this limit after consulting with a veteran’s health care provider.” The official policy of Veterans Affairs, however, is that while doctors may prescribe marijuana to their patients, the department doesn’t recognize the medical purpose of the drug.
Henry balked at the idea that veterans should be limited to two or three grams, arguing that there are no prescription guidelines for PTSD and that 10 grams per day may, in fact, be appropriate.
He touted his group’s work, saying that spikes in veterans switching to medical marijuana could be chalked up to many ex-service members dropping pharmaceuticals in favour of the plant.
*An earlier version of this story incorrectly identified a medical marijuana patient as a veteran.