Medical cannabis producer Bedrocan lowers its prices to $5 a gram
A juvenile plant at Bedrocan Canada, a medical marijuana facility, in Toronto on Monday, August 17, 2015. (Darren Calabrese/THE CANADIAN PRESS)
Alexandra Posadzki, The Canadian Press
Published Monday, January 25, 2016 2:08PM EST
Last Updated Monday, January 25, 2016 5:42PM EST
TORONTO -- Medical marijuana producer Bedrocan is looking to help patients light up without burning too big a hole in their wallets.
The company is slashing the price of all six of its medical cannabis strains to $5 a gram from $7.50 previously.
Bedrocan president Marc Wayne says the licensed producer will still be able to turn a profit, even after price cuts that amount to roughly 33 per cent.
"We're very good at producing cannabis at a low cost," said Wayne.
"After spending the last six months perfecting production techniques in Canada from our Dutch partners in Holland, we now have the ability to reduce our cost."
Bedrocan Canada Inc. is a subsidiary of Canopy Growth Corp. (TSXV:CGC), a combined company formed when Bedrocan merged with Tweed Marijuana Inc.
The company is also launching a letter writing campaign to the Canada Revenue Agency and the minister of finance, urging them to remove the 13 per cent sales tax that is currently charged on medical marijuana -- but not on other drugs.
Bruce Linton, CEO of Canopy Growth Corp., says the sales tax and the fact that insurance plans don't cover medical marijuana on a routine basis can make accessing the drug pricey for patients.
"This is medicine and should be treated . . . (as such)," said Linton. "That means there shouldn't be a sales tax on this that you wouldn't expect to pay on any other medicinal product."
Khurram Malik, the cannabis lead at Jacob Capital Management, said most licensed marijuana producers have at least one strain that costs $5 a gram or less, but he doesn't know of any others with that pricing across all strains.
The fact that most patients pay out of pocket for medical cannabis -- rather than having the drug paid for by a health insurance plan -- makes them more sensitive to prices, according to analysts.
"The lower you go, the more you'll sell," Malik said.
Dundee Capital Markets analyst Aaron Salz says it costs the average consumer of medical cannabis between $1,400 and $2,800 a year to access the drug.
That's based on consumption of 0.5 to one gram per day at an average cost of $7.50 per gram.
"We know of a peer that dropped pricing once and saw a material uptick in demand, showing that patients are price elastic," Salz said in a statement.
"The tactic is both strategic in attracting patients with competitive pricing and ethical in that it sends a message to regulators to act on insurance coverage and other affordability measures."