Chapter 6: Medicinal cannabis licences and permits

The central feature of the medicinal cannabis scheme introduced into the ND Act in 2016 was a licensing and permit framework to regulate cannabis cultivation, production and manufacture for medicinal and scientific purposes. The framework is explained in Chapter 4.

The Discussion Paper for this Review invited submissions on specific aspects of the licensing and permit scheme, among them:

• Is it an appropriate structure in the ND Act to have three categories of licences and permits - for cultivation/production, research and manufacture?
• Should there be greater flexibility as to the activities that can be conducted under a licence?
• Are the criteria for the grant of licences appropriate?
• Is change needed as to the term, renewal or variation of licences?
• Are the conditions imposed on licences appropriate?
• Are the special licensing requirements in the ND Act appropriate, such as that in s 11K applying to manufacturing licences?

For the most part those questions relate to the terms of the ND Act and the ND Regulation. Other questions asked in the Discussion Paper about the administration of the licensing and permit provisions are examined in Chapter 9.

Many submissions to the Review addressed those questions, particularly the submissions from existing licence holders and industry associations.

There was an underlying acceptance in most submissions that a medicinal cannabis cultivation scheme will necessarily be framed around a licensing and permit system - though some submissions contended that an entirely different approach was required, without spelling out what it would be.[144] The Single Convention requires a Party that permits the cultivation of cannabis plants and the manufacture of narcotic drugs to do so through a licensing scheme.[145]

Another underlying theme in submissions was that the licensing scheme could be improved and could work better, through both legislative and administrative reform. There was a call generally for greater flexibility in licence categories and licensing requirements.

This chapter considers six aspects of the licensing and permit framework in the ND Act:

• the existing framework of three separate licences and related permits: this Review recommends that the existing licence categories applying to cannabis be replaced with a single licence category that could authorise all or some of cultivation, production, manufacture and research
• the licensing requirements, including the information and documents an applicant must submit in support of a licence application: the Review notes some licensing requirements in the ND Regulation that may no longer be necessary, are inappropriately phrased or are too prescriptive. Reform options that are considered are to delete, simplify and consolidate the requirements, supplemented in some instances by explanatory guidelines issued by the Minister under the ND Act
• the term of a licence, and the absence of a power in the ND Act to renew a licence: the report recommends that licences ordinarily be granted for a period of three years, and that a renewal power be inserted in the ND Act
• the procedure for applying for a permit and a variation of a permit: the report recommends that a plainer procedure be adopted for both
• the scale of fees and charges imposed on licence applicants and holders, as part of a partial cost recovery scheme in the ND Regulation: the report does not recommend change to the current scale of fees and charges, which are annually reviewed
• the review and appeal mechanisms in the ND Act that are available to aggrieved licence applicants and holders: the report does not recommend any change to current arrangements.

The scheme in the ND Act for three categories of licence has been vexing for licence applicants and holders, as illustrated in the following points:

• A licence applicant may have to submit three separate applications for a medicinal cannabis licence, cannabis research licence and manufacture licence. It can be time-consuming to prepare multiple applications and there can be duplication in the information provided in each application.
• Each licence application may be the subject of separate liaison with different ODC staff. Multiple requests may be received under s 14J of the ND Act for further information relating to each application. There can be added complication if there is duplication or overlap in those information requests. The chance of this occurring may be greater if the licence applications are submitted at different points in time.
• It can be unclear as to what activities fall within each licence category. Much will depend on the terms of a licence, and whether the licence holder has only one type of licence. Questions have been raised, for example, as to the research (including product development and testing) that can be undertaken under medicinal cannabis and manufacture licences, and as to the training and analytic testing that can be undertaken under a cannabis research licence.
• An applicant for a medicinal cannabis licence must demonstrate a supply arrangement with a licensed manufacturer, and an applicant for a manufacture licence must demonstrate a supply chain to a patient consistent with the requirements of the TG Act. The separate licence categories can make it more complex to comply with those licensing requirements.
• Licence and permit conditions commonly restrict the uses that can be made of cannabis product during production, research and manufacture, and the transfer or supply of that product from one licence or permit to another. The system of separate licences and permits may make it more complex for licence holders to navigate the conditions that apply in a particular instance.
• The system of separate licences and permits may also accentuate the complexity that a licence holder faces in applying for variation of a licence or permit condition and, in turn, the delay for the licence holder in obtaining approval of the variation.
• The holder of a manufacture licence under the ND Act may also need a manufacturing licence under the TG Act. Some licence holders claim to have been burdened and unsure as to the separate but overlapping licence requirements.
• A research licence does not authorise medicinal cannabis to be supplied for human use, such as the use of a medicine in a clinical trial.
• The three licence structure adds to the number of separate applications (and associated queries and administrative steps) that the ODC must handle. Administrative delay, which has been a chief complaint about the administration of the medicinal cannabis scheme, could be lessened if the application framework and procedure was less complex.

Those complications could be lessened - though not removed altogether - if a different licensing framework was adopted in the ND Act. There are four broad options to consider (the options are not mutually exclusive):

• Abolish the separate licence categories in the ND Act and replace them with a single licence category that authorises some or all of cultivation, production, manufacture and research. Different licensing criteria and requirements would apply depending on the range of activities that an applicant sought authority to undertake. Application fees and licence charges would also vary according to the nature of the application being lodged and the activities authorised in any licence that was granted.
• Retain the existing licence categories but add a fourth category that could authorise some or all of cultivation, production, manufacture and research. The purpose behind this proposal is to retain the greater simplicity for an applicant for a single category licence (particularly a research licence).
• Broaden the scope of medicinal cannabis and manufacture licences to permit research under those licences. This proposal addresses a limitation that was commonly criticised in submissions and consultations. The possibility of implementing this option by administrative rather than legislative change was raised in Chapter 5 of this report.
• Leave the manufacture of medicinal cannabis products to be regulated by existing State and Territory laws and the TG Act. Appropriate arrangements would have to be put in place to ensure the Commonwealth met its obligations under the Single Convention to control and supervise aspects of manufacturing that were not controlled by other laws (for example, national stock and manufacturing levels) and to the report to the INCB.

The most appealing of those options is the first option to adopt a single licence structure. It is admittedly the most far-reaching option and would require substantial revision of Chapter 2 of the ND Act to set out an integrated framework applying to cannabis cultivation, production, research and drug manufacturing. Chapter 3 of the ND Act would continue as at present to apply to the manufacture of drugs within the meaning of the Single Convention, but not the manufacture of cannabis, cannabis resin and extracts and tinctures of cannabis or medicinal cannabis products, which would fall within the revised Chapter 2. Chapter 4 of the ND Act, relating to monitoring and enforcement, would continue to apply to all licensing under Chapters 2 and 3.

There would be an associated need in adopting a single licence structure to revise related provisions of the ND Regulation as well as administrative procedures and forms. A review may also be necessary of the provisions of the ND Act and ND Regulation relating to permits, and in particular whether conditions and requirements that are currently specified in permits should instead be specified in licences or dealt with at an administrative level.

A single licence structure would have numerous potential benefits:

• The licence application process could be simplified and streamlined. Only a single licence application would ordinarily be required that spelt out the range of activities the applicant sought authority to undertake, either immediately or on an incremental basis.
• It would be more straightforward for the ODC to handle a single licence application rather than multiple applications from the same applicant. This would potentially address some administrative concerns that applicants have raised, such as delay, duplication and dealing with multiple ODC staff in the licence application process.
• The current uncertainties about which activities can be licensed under each of the three licence categories would be answered. An applicant could seek a licence that authorised all or any of cultivation, production, research or manufacture.
• There could be more flexibility for a licence holder to manage cannabis product under the single licence, and to notify licensing activity and changes to the ODC, rather than applying for a licence variation or a new licence in response to unanticipated developments.
• Individual licences could be tailored to an applicant's plan of developing a business in stages. A single licence that underpinned planned future growth or adaptation would provide greater commercial certainty for a licence applicant.
• It would be potentially more straightforward for an applicant to substantiate that an acceptable supply chain arrangement was in place to link production, manufacture and patient supply.
• A licence holder would be better placed to decide if its licence should extend to manufacture, or whether a separate TG Act licence would adequately provide authority for the licence holder's planned manufacturing activities.
• A single licence structure would enable fresh consideration of regulatory options for ensuring effective alignment and integration of ND Act licensing and State and Territory regulation, particularly of industrial/low-THC hemp.

The other three licence restructure options also have merit, but with qualifications. The principal merit of the second option (a fourth licence category) is that it is a more cautious and qualified response to the concerns that have been raised in this Review. On the other hand, it could complicate the existing structure to have four licence categories.

The principal merit of the third option (permitting research in all three licence categories) is that it retains a simpler structure for applicants that intend only to undertake research. However, there is no reason in principle why that simplicity could not be retained as a separate stream of a single licence structure. This option also fails to address some non-research concerns that were raised about the existing licensing structure.

The fourth option (dispensing with ND Act licensing for manufacture of drugs derived from the cannabis plant) does not take full account of the different criteria and additional requirements that can apply to an application for a manufacturing licence under the TG Act.[146] The differences may not directly concern a manufacturer who already has a GMP licence, but are squarely relevant to other applicants who may be better suited to applying only for an ND Act manufacture licence.

A final issue to consider is whether a single licence structure for cannabis products would be consistent with Australia's obligations under the Single Convention. The current three licence structure is not a requirement of the Single Convention. It requires only that cultivators be licensed by an Australian Government agency and that the parties to the Convention control under licence the establishments and premises in which the manufacture of drugs takes place.[147]

No official explanation was given at the time the medicinal cannabis scheme was before the Parliament in 2016 as to why a system of three separate licences was chosen. The most likely explanation is historical and practical: that a three licence structure built on the separate provisions in the Single Convention relating to cultivation and manufacture, and on the existing provisions in the ND Act relating to manufacturing; and a new category of research licence would be simpler for research organisations and could authorise cultivation for research without the need for a separate medicinal cannabis licence. Those are not compelling reasons to retain the present three licence structure.

Recommendation 7: The Narcotic Drugs Act 1967 be amended to establish a new licence structure applying to medicinal cannabis products. The Narcotic Drugs Act 1967 should provide for the issue of a single licence to authorise all or some of cultivation, production, manufacture and research of such products.

The ND Act and the ND Regulation impose many licensing requirements that reflect an underlying premise of the medicinal cannabis scheme - that it must neutralise a major risk of diversion and criminal infiltration inherent in a scheme that permits cultivation, research and manufacture of cannabis products. Many licensing requirements are directed at whether an applicant is fit and proper to hold a licence or has implemented effective measures to minimise risks of diversion and criminal infiltration in undertaking activities authorised by a licence or permit.

The licensing requirements in the ND Regulation in particular are highly prescriptive. Many of the submissions to this Review were critical of the level of prescription, the administrative burdens it imposes on applicants and the uncertainties it gives rise to in the licence and permit application process. Examples that were given in submissions of issues relating to the licensing requirements include the following:

• An application for a manufacture licence under the ND Act relating to cannabis must provide details of the drugs to be manufactured and their proposed end use; depending on the level of detail required, it is said that this can constrain the industry from undertaking pharmaceutical development activity, contrary to accepted international practice which aims to ensure that a manufacturing process is underpinned by quantitative and qualitative data about the process and the product.
• The manufacture licensing provisions in the ND Act apply to cannabidiol in a pure form. This is not directly a requirement of the Single Convention and can impose ND Act controls unnecessarily on the manufacture of cannabidiol.
• The supply chain requirements are complex and difficult to satisfy because of the detailed agreements that are required to have been entered into with manufacturers or prescribers in advance of any activity occurring. The supply chain requirements are not a requirement of the Single Convention in the form adopted in the ND Act and ND Regulation. One effect is that a licence holder may find the easier path is to produce and manufacture medicinal cannabis products for the export market.
• It can be unclear as to the matters that must be covered by licensing, for example, molecules prior to creation, or the application of analytic method to a product sourced from a third party.
• Over time more detailed and comprehensive information has been required in licence applications.
• It is unclear what information must be provided in licence applications, as illustrated by the range of questions that are raised in requests under s 14J of the ND Act to provide additional information; this can lead to substantial delay in the licence approval process.
• Duplicate information can be required when multiple licence applications are lodged by the same applicant, including as to police checks.
• Some conditions that are imposed on licences can be onerous. For example, the requirement in s 8M(e) of the ND Act to specify in a medicinal cannabis licence 'the persons authorised by the licence to engage in activities authorised by the licence' has meant that physical rather than supervisory presence of an authorised person has been required when licensed activities are being undertaken.[148]
• The ND Act requirement that regard be had during the licensing approval process to whether an applicant 'has a sound and stable financial background' and is able to comply with licence obligations[149] has given rise to complaints that the approval process can delve further into an applicant's commercial business model than is necessary to address security or risk management concerns.
• Restrictions have been imposed on the employment and monitoring of staff that are also said to go further than the ND Act requires and that can be impracticable.

The ODC has acknowledged those concerns, in consulting with applicants and industry representatives to explain the nature and purpose of the licensing requirements and to examine options for simpler compliance. Generally, there is an acceptance within the department that the risk of criminal infiltration and diversion within the medicinal cannabis scheme has been controlled through current measures and that licence holders have (and can be expected to play) an effective role in managing those risks.

The purpose of the licensing requirements is both understandable and generally apparent from their face. On the other hand, many requirements go further than may be necessary. The reform options include deleting, simplifying and consolidating some of the requirements, possibly supplemented with information requirements specified by the Secretary, guidelines issued by the Minister or administrative guidance published by the ODC. To explain:

• The ND Act requires an application for a licence to be made in the form or manner approved in writing by the Secretary and to include the information or documents required by the ND Regulation or 'specified in writing by the Secretary'.[150] If the detailed requirements that are currently in the ND Regulation are scaled back, greater reliance could be placed on the Secretary's power to specify information and document requirements either in a template licence application form or in supplementary guidance.
• The ND Act confers powers on the Minister to issue guidelines for the purposes of the Act.[151] The guidelines are not a legislative instrument, though a decision maker under the ND Act is required to have regard to any such guidelines.[152] Guidelines provide a model for industry regulation that is frequently adopted as they lay down a regulatory framework that is both formal but flexible and readily adjustable as circumstances or objectives change.
• The ODC currently publishes informative guidance on the operation of the licensing and permit provisions in the ND Act, including on the meaning of key terms in the ND Act and ND Regulation. Several recommendations in this report are for the ODC to supplement and develop that written guidance. This role can be expanded and tailored to the structure and detail of a revised ND Act and ND Regulation.

Following are prime examples of features of the ND Regulation that warrant amendment or revision by one or more of the preceding options.

• Consolidating information and document requirements: The ND Regulation deals separately with applications for medicinal cannabis licences and permits,[153] cannabis research licences and permits[154] and manufacture licences and permits.[155] While there are different criteria to be satisfied for each licence, there are also many common criteria and standard conditions to be met (for example, the fit and proper person requirement). The consequence is that an applicant for multiple licences or permits may have to separately submit similar or identical information and documents for each application.
• The information and document requirements for all licences and permits could be combined in a single set of provisions that apply to all applications, with sub-categories for requirements that are specific to only one type of licence or permit activity. These regulations could, as explained above, be supplemented by instructions issued by the Secretary, guidelines issued by the Minister or informal guidance published by the ODC.
• The adoption of a single licence structure in the ND Act (see Recommendation 7) would require consequential changes to the licence application process, and the information and documents to be provided. So, too, would adoption of the following proposal for deletion or simplification of some information requirements.
• Simplifying information and document requirements: The ND Regulation contains a highly detailed list of the information and documents that must be provided in support of a licence or permit application. For example, the list of items in regs 5, 6 and 8 relating to medicinal cannabis licences and permits is approximately nine pages long. As a legislative requirement, strict compliance with the items in that long list is required before a licence or permit can be granted. It appears this is a contributory factor to both the volume of s 14 J information requests made by the ODC to applicants and delays in processing licence and permit applications.
• The information requirements may individually be relevant to some but not all licence and permit applications. As part of the revision and consolidation of the information submission requirements, each individual requirement to provide information and documents should be reviewed to assess if it should remain a mandatory requirement or could instead be cast as a discretionary requirement that can be imposed in appropriate circumstances by the ODC, and supplemented by instructions issued by the Secretary, guidelines issued by the Minister or informal guidance published by the ODC.
• Another similar example of a regulation that appears to be unnecessarily prescriptive is reg 5(5) which requires a licence application to provide specific details regarding the cannabis plants, cannabis and cannabis resin that the applicant will deal with under the licence. It would be appropriate and less onerous to require an applicant to outline the arrangements that will be in place to record the amount of cannabis plants, cannabis and cannabis resin the applicant will deal with.
• Lessening requirements that go further than the ND Act requires: The ND Regulation elaborates on the licence application requirements in the ND Act, but in doing so may go further in some instances than the ND Act requires. An example is the regulation that gives effect to the requirement in s 8G(d) of the ND Act that the Secretary in granting a licence be satisfied that the applicant will take all reasonable measures to ensure the physical security of cannabis plants, cannabis or cannabis resin that is in the applicant's possession or control and was obtained, cultivated or produced under the licence. Regulation 5(2)(h)-(i) requires an applicant to provide 'details of the arrangements that will be in place', variously, to ensure the physical security of cannabis products that are cultivated, obtained or produced under the licence, to ensure that loss or theft is detected immediately and reported, to ensure safe and secure disposal, of transport security arrangements, and of arrangements with emergency services agencies.
• The ND Regulation would better align with s 8G(d) of the ND Act if the specific requirements were replaced with a more general requirement that used similar wording to the Act, for example, that an application provide details of the security measures (rather than arrangements) that will be in place in relation to substances that are in the applicant's possession or control in pursuance of the licence. This general licensing requirement could be supplemented by instructions issued by the Secretary, guidelines issued by the Minister or informal guidance published by the ODC. The supplementary guidance could explain that the security measures can be tailored to relevant circumstances such as the number of cannabis plants covered by the licence and the THC content of the plants.
• Regulation 4A: Recommendation 2 in Chapter 5 is that the reference to cannabidiol be deleted from this regulation, with the consequence that the manufacture licence provisions in the ND Act would not apply to cannabidiol in a pure form. This would have a consequential and simplifying effect on manufacture licence applications and licence conditions.
• Regulation 19: Section 10J of the ND Act makes it a condition of medicinal cannabis licences that cultivation or production under the licence is covered by a contract with, respectively, an authorised producer or manufacturer. Regulation 19 prescribes the content that a contract must have. Roughly 25 elements are prescribed to do with the number and composition of plants, concentration of elements, security arrangements and disposal. Experience has shown that it is not possible to meet those requirements prospectively, except perhaps by scaling back the contract to a commercially basic level.
• Regulation 19 should be repealed in its current form and replaced by a regulation that places an obligation on a licence holder to demonstrate that the next step in the supply chain is covered by a contract that deals with matters that are listed in the ND Regulation but at a higher level of generality. A revised r 19 must still comply with s 10J of the ND Act, though it requires only that 'a contract that deals with matters prescribed by the regulations is in existence'. It would be consistent with that requirement for r 19 to provide that contract details necessary to support compliance oversight shall be included in a permit to undertake cultivation or production.
• Regulations 18 and 39: Regulations 18 and 39 supplement 10F of the ND Act by specifying categories of persons who are regarded as unsuitable to be employed or engaged by a licence holder to carry out activities authorised by the licence. Recommendation 14 in Chapter 7 is that the restrictions imposed by rr 18 and 39 be scaled back. This would have a consequential and simplifying effect on the obligations of a licence holder, and in particular as to the information or notifications that must currently be provided to the ODC.
• Inexact and demanding decision making criteria: Some regulations require an applicant to provide information and for the ODC to form a view, according to criteria that are inexact, elastic or demanding. This can be challenging for both the applicant and the regulator. Examples include the following statutory phrases:
  • regulation 11(2)(fa): 'the primary purpose of the research'
  • regulation 5(2)(g)(iii): 'the total area, and geographic coordinates, of the land at the location' - as opposed, for example, to 'the total area under cultivation'
  • regulation 5(2)(l): 'details of the arrangements that will be in place with emergency services, police and local government authorities' to deal with a specific list of possibilities in relation to specific items
  • regulation 5(3)(b): 'details of any civil penalty (however described) imposed, at any time, upon the applicant under a law of the Commonwealth, a State or a Territory'
  • regulation 5(3)(h): 'details of the applicant's previous business experience'
  • regulation 5(3)(j): 'whether the applicant is affected by bankruptcy'
  • regulation 5(3)(k): 'details of the applicant's current financial circumstances'
  • regulation 5(4)(h): 'details of the previous business experience … of the shareholders of the body corporate who are in a position to influence the management of the body corporate'
  • regulation 5(6): 'details of the procedures (including recruitment procedures) that will be used by the applicant' to ensure employment of suitable persons

A unifying theme in those examples is the expansive obligation they cast on applicants to provide a potentially extensive range of information that may be relevant to whether the applicant is fit and proper to hold a licence under the ND Act. While information falling within each category could have a bearing on that issue, conversely each category could draw in many items of information that will have no practical relevance.

These (and similar) examples in the ND Regulation should form part of a revision and consolidation of the application requirements in the Regulation. The revision options that should be canvassed include deletion of unnecessary requirements, consolidation/merger of similar requirements, scaling back the number and breadth of the mandatory requirements, and elaboration of more generally-framed requirements in Ministerial guidelines under s 26C of the ND Act or in informal guidance published by the ODC.

Recommendation 8

The requirements imposed by the Narcotic Drugs Regulation 2016 on licence and permit applicants to provide information and documents in support of applications be revised, with the following objectives:

• to delete requirements that are no longer necessary to attaining the objectives of the licensing or permit decision
• to merge or consolidate requirements that are similar in nature, so as to reduce the number of separate requirements that applicants are required to meet
• to reduce the number and breadth of mandatory requirements imposed on applicants, and
• to frame the requirements in more general terms that can, in appropriate circumstances, be elaborated in guidelines issued by the Minister under section 26C(1) of the Narcotic Drugs Act 1967 or in informal guidance published by the Office of Drug Control.

Section 11K of the ND Act provides that a licence cannot be granted for the manufacture of a drug derived from any part of the cannabis plant unless the Secretary is satisfied that the intended use of the drug is for one of a number of applications that are specified in s 11K or in the ND Regulation. The present list of permitted uses (that are set out fully in Chapter 4) includes certified research, in a certified clinical trial, to be supplied as a medicinal cannabis product in accordance with the TG Act or for approved export.

This limitation on the grant of manufacture licences was inserted in the ND Act in 2016 as part of the new medicinal cannabis scheme. The apparent purpose was to combat any risk of a cannabis product being diverted to an illicit, inappropriate or unapproved purpose, for example, to an unqualified research body or without adequate TGA oversight. No similar requirement (either prior to 2016 or subsequently) applies to the manufacture of other narcotic drugs in Australia.

While the list of permitted uses can always be extended by regulation, the situation at present is that a number of potential applications for medicinal cannabis products are not permitted, for example:

• medical research outside a clinical trial, including product formulation
• testing a manufactured medicinal cannabis product for compliance with GMP licensing requirements
• the development of reference standards for medicinal cannabis
• the use of medicinal cannabis products in veterinary treatment.

It is not strongly apparent why this tighter control should be imposed on medicinal cannabis and not on other therapeutic drugs. Nor is clear that s 11K is necessary to achieve an outcome that other Commonwealth, State and Territory laws could not achieve. A substantial number of other laws that are carefully administered (including the TG Act) control the supply and use of medicinal cannabis products, and for s 11K to restate that purpose adds little. Equally, research and clinical trials are closely controlled by other regulatory rules and protocols. If reassurance was needed that those other laws and processes will be observed, this could be achieved through a condition imposed on a manufacture licence on a case-by-case basis.

Section 11K also produces an uneven effect for imported and locally manufactured drugs. The potential applications outlined above can currently be serviced through imported medicinal cannabis products, but not by medicinal cannabis products that are manufactured under an ND Act licence. This gives a competitive advantage to international products over locally manufactured products, and potentially limits the development of Australian industry.

There is also a current anomaly in the operation of s 11K as regards patient supply, though this is principally a consequence of other legislative developments. A locally manufactured medicinal cannabis drug can be made available to patients through the Authorised Prescriber, Special Access Scheme B and clinical trial pathways, as those pathways fall within the list of permitted uses under s 11K. Special Access Scheme A is not a permitted pathway, as it is a notification rather than approval pathway that does not involve TGA oversight and can be used for unapproved therapeutic goods. However, an imported medicinal cannabis product can be made available under SAS A. A proposed regulation under the TG Act in 2016 would have closed that importation pathway, but the proposed regulation was disallowed in the Senate under the Legislation Act 2003 (Cth).[156]

It is recommended below that s 11K be repealed. There is no reason in principle why medicinal cannabis drugs that are manufactured pursuant to a licence under the ND Act should be treated differently to other therapeutic drugs manufactured pursuant to an ND Act licence. Section 11K also has an anomalous effect in treating locally manufactured products less favourably than imported products. If it is thought desirable to impose limitations on the permitted uses of locally manufactured products, this would be better done in other ways rather than through s 11K.

Recommendation 9: The Narcotic Drugs Act 1967 be amended by repealing section 11K, on the basis that it imposes an unnecessary and counterproductive constraint on the permitted uses of medicinal cannabis products that are manufactured pursuant to licences under the Narcotic Drugs Act 1967.

The ND Act requires that licences and permits specify the period in which they are in force.[157] The Act does not specify the maximum allowable licence or permit period. There is no procedure in the Act to renew an existing licence or permit - either a fresh application is required, or the period of the licence can be extended by a variation of the existing licence or permit. Nor can a licence be transferred to another person.[158]

The early practice of the ODC was to grant medicinal cannabis licences for a period of one year. They are currently granted for up to three years. Research licences are typically granted for a period of three years.

In 2018 the power to vary a licence at the Secretary's initiative[159] was used to extend the term of all existing licences for one year. That practice has been continued in 2019 for licences that were initially issued for a short term. A sensible rationale for that practice is that it can take longer to consider and finalise a licence application.

The term of a permit is tied, in practice, to the expected plant lifecycle or research period, and may consequently be granted for a shorter period than a licence.

There was understandably a view expressed strongly in the submissions from industry participants that a licence should be granted for a term of more than one year - some suggested five years. The practice adopted in 2018 and 2019 to extend the short term of existing licences affirms that view.

Several considerations support a licence term that is ordinarily more than one year. These include: the existing practice in the ODC; the considerable commercial investment that an entity will have made in applying for a licence and establishing a commercial operation; the need for relative certainty in conducting a business and planning for the future; and the common practice in other areas of commerce of granting licences that are automatically or presumptively renewed on a periodic basis.

Another relevant consideration, pointing in the opposite direction, is that a regulator of medicinal cannabis licences must be satisfied that the licensee meets the high standards required by the ND Act to mitigate the risks of criminal diversion and infiltration. A re-licensing or renewal process can automatically trigger an ample reassessment of whether a licensee is fit and proper to hold a licence. The renewal process will likewise focus the licence holder's attention on the need to demonstrate their compliance capability at all stages during the licence period.

That does not mean that a licence renewal process should be treated as no different to an initial grant process. Unless there are special circumstances, a licence holder should not have to submit the same range of information and documents required for the initial licence grant. The renewal process can be more akin to an accreditation process, though rigorous nonetheless.

It also seems appropriate that the grounds for refusal of a licence renewal should be similar to those for revocation of a licence. These are discussed in Chapter 7. In summary they include that a licence holder is no longer a fit and proper person to hold the licence, a condition of the licence has been broken, the licence holder has engaged in conduct that is an offence under the ND Act, a licence charge has not been paid, the premises or security arrangements applying to the licence or cannabis product are not suitable, or the licence holder has not provided information as required.

A workable model to balance those considerations would be as follows:

• the ND Act should provide that a licence can be granted for a maximum term of five years
• the present administrative practice of ordinarily granting licences for a term of three years should continue - that practice could, when settled, be explained in guidance issued either informally by the ODC or more formally in ministerial guidelines under s 26C of the ND Act
• the ND Act should provide (adopting the language of s 8E) that an application for renewal is to be made in the form or manner approved by the Secretary in accordance with the ND Regulation
• the ND Act should spell out the grounds for refusing the renewal of a licence, which should be based on the grounds for revocation of a licence
• the ODC should continue to discharge at all times its monitoring and enforcement functions to ensure compliance by licence holders with the terms of the ND Act and the conditions of their licences
• the scale of licence fees and charges be adjusted to take account of a new licensing framework.

Recommendation 10

The Narcotic Drugs Act 1967 be amended to provide:

• a medicinal cannabis licence, cannabis research licence or manufacture licence applying to cannabis products shall be granted for a term of maximum term of five years
• a licence holder may apply for renewal of the licence at the expiration of the licence term, in accordance with the Narcotic Drugs Regulation 2016
• the renewal of the licence may be refused on a ground on which the Secretary must or may revoke a licence.

Permits

Permits to accompany a licence are an accepted element of the medicinal cannabis scheme in the ND Act. It is also a requirement of the Single Convention that the manufacture of drugs will be authorised by both a licence and 'periodical permits specifying the kinds and amounts of drugs which [the licence holder] shall be entitled to manufacture'.[160]

The permit requirements are spelt out in the ND Regulation.[161] For example, the information requirements for a medicinal cannabis permit that authorises cultivation are that the licence applicant must provide information on matters such as the types and strains of cannabis plants to be cultivated, the THC, CBD and other cannabinoids in the plants, the size of the cannabis crop, the number of plants to be cultivated, the period of cultivation, and the source of the plants.[162]

The rules and practices surrounding permits give rise to three issues in this Review:

• the level of detail currently required in permit applications
• whether a more streamlined procedure for varying permits is needed
• the role of permits in the medicinal cannabis licensing scheme.

As to the first point, several submissions criticised the level of detail required in permit applications as being impractical and constricting. Examples given were the finished product specification, the number of seeds and tissue culture samples, the name and source of each cannabis strain, and precise details of the supply chain arrangements with manufacturers and prescribers. The submissions explained that it was difficult to estimate those exact details prior to cultivation or manufacturing commencing, and in any case this detail could be recorded at the end of the process or could be checked through auditing. The level of detail required could also trigger the need for an application to vary a permit, which could introduce further delay and administrative complexity into the process.

It is not practicable in this Review to examine the merits of any individual complaints about permit specifications. However, two observations can be made. One is that the information required in a permit application should not go further than what the ND Regulation requires. A licence holder who feels that the ODC has required information additional to that specified in the ND Regulation can request the ODC to point to the provision in the Regulation that supports the information request.

The other observation is that the ND Regulation should itself be reviewed in the course of the simplification and consolidation process recommended earlier in this chapter. The aim of the review would be to better align the Regulation with the requirements of the Single Convention and the regulatory objectives of the medicinal cannabis scheme.

There is room for considerable flexibility consistently with the Single Convention to choose the detail to be included in a permit application. For example, as to manufacture licences the Convention requires only that periodical permits specify 'the kinds and amounts of drugs' which shall be manufactured. There is no comparable requirement in the Convention spelling out the detail to be recorded in permits authorising cultivation, production or research - or, indeed, any requirement that permits be issued for those activities.

Other considerations will also be relevant in deciding the details that should appropriately be specified in permits. Parties to the Convention have reporting obligations which can only be met if sufficient information is collected. Compliance and monitoring activities undertaken by the ODC will also be structured around a licence holder's compliance with licence and permit conditions.

That said, it appears that the level of detail required in permit applications goes further than what is required to meet Convention requirements and the need to minimise the criminal risks of diversion and infiltration.

As to permit variations, experience suggests that a more flexible procedure is required - even if permits in future contain less detailed conditions and stipulations. It is sound in principle to require a licence or permit holder to apply for a variation if applicable conditions or stipulations can no longer be complied with. But that will not be a sound procedure in practice if the licence or permit holder is stalled by a long decision making delay. Two examples given in submissions were of delay in awaiting decisions on applications to transfer cannabis plants from one permit to another, and to vary the number of plants in cultivation.

A workable model to balance those considerations would be as follows:

• A licence holder is required to notify any proposed variation of a condition or term of a permit to the Secretary (or ODC as delegate).
• If the variation is of a kind listed in the ND Regulation as one that requires the approval of the Secretary, the licence holder must await formal written approval before acting on that basis. Variations that required formal approval could be confined to those that were substantive in nature or posed a material risk to the security of a licensed activity. Those broad concepts could be further explained in guidance issued either informally by the ODC or more formally in ministerial guidelines under s 26C of the ND Act.
• The licence holder may otherwise act on the basis that the permit has been varied following notification to the Secretary.
• It would be open to the Secretary at any time to exercise the standard compliance and enforcement powers in the ND Act, such as the power at the Secretary's own initiative to vary a cannabis licence or permit,[163] or to require a licence holder to provide any information or documents.[164]

The third issue - the role of permits - has largely been assumed rather than examined in the operation of the medicinal cannabis licensing scheme. As noted above, permits are a Single Convention requirement for manufacturing but not for other processes - and the Convention requirement for manufacture permits is limited to the kinds and amounts of drugs to be manufactured.

It will be necessary to review the current permit requirements in the ND Act and ND Regulation if other recommendations in this report are implemented - such as Recommendation 7, proposing a single licence structure in the ND Act; and Recommendation 8, proposing a reduction and simplification of the information and document requirements for licence and permit applications.

Adoption of those recommendations would, in principle, provide an opportunity to explore larger questions to do with the role of permits in the medicinal cannabis licensing scheme. While permits achieve a number of objectives in the scheme, the core objectives are the reporting and monitoring obligations that the ODC discharges. In theory, reporting and monitoring could probably be fulfilled by other measures, though perhaps less effectively.

This report does not include a recommendation for either a wholesale review of the role of permits, or a departure from the permit system for medicinal cannabis and cannabis research licences. The purpose in raising this topic is merely to underline that it is a larger background issue that intersects with any other (and more limited) review that is undertaken of the current permit requirements in the ND Act and ND Regulation.

Recommendation 11

The information and document requirements in the Narcotic Drugs Regulation 2016 applying to an application for a medicinal cannabis permit, cannabis research permit or manufacture permit be reviewed to reduce the level of detail and specificity required in applications, as part of the review proposed in Recommendation 8 to reduce the detailed prescriptive requirements in the Narcotic Drugs Regulation 2016.

Recommendation 12

The Narcotic Drugs Act 1967 (sections 10M, 10N, 13, 13A) and the Narcotic Drugs Regulation 2016 be amended to provide:

• that a licence holder must obtain the formal written approval of the Secretary for a variation of a permit, if the variation is of a kind listed in the Narcotic Drugs Regulation 2016
• as to any other variation of a permit that is not listed in the Narcotic Drugs Regulation 2016 as one that requires the Secretary's written approval - the licence holder shall notify the variation to the Secretary before acting on the basis of the variation.

The medicinal cannabis scheme implements a partial cost recovery scheme, in line with the Australian Government Charging Framework (July 2015). The Framework provides that identifiable groups that create a demand for a Government activity should generally be charged for it. Part of the cost to the Government of establishing a regulatory scheme for medicinal cannabis is accordingly passed on to those who undertake cultivation, production and research activities that fall within the scheme.

Charges are imposed on licence holders pursuant to two Acts:

• The ND Regulation, made under the ND Act,[165] imposes licence and permit application fees and inspection fees (as listed below).[166] These fees commenced on 30 October 2016. Lower fees are set for research licences and permits, with the intention of reducing the financial burden on the academic sector.
• The Narcotic Drugs (Licence Charges) Regulation 2016, made under the Narcotic Drugs (Licence Charges) Act 2016 (Cth), impose a charge on licence holders that is designed to partially recoup administration and regulatory costs, such as unannounced inspections, sampling, and ongoing monitoring and compliance activity. The charge is imposed annually on commercial licence holders, including a full charge for part only of a 12 month period in which a licence is in operation. It is imposed as a single licence charge on non-commercial cannabis research licence holders. The charge is imposed under a separate Act to meet Constitutional requirements as a law imposing taxation.[167] The charge commenced on 10 December 2016.

The scale of fees and charges is as follows:

An applicant may request that the application fee for either a medicinal cannabis licence or a cannabis research licence is reduced by up to 75% if the licence applications are made at the same time and relate to similar activities to be undertaken at the same licensed premises.[168]

Inspection fees

The fee for an inspection conducted in relation to an application for a licence, permit or variation, is $470 in respect of each hour or part hour spent by each person conducting the inspection.

The full costs associated with the grant of licences and the costs of some related activities are not recovered through the mechanisms outlined above. They include:

• expenses associated with the grant of manufacture licences and permits under the ND Act
• public education activities associated with the scheme
• administration of the Australian Advisory Council for Medicinal Cannabis
• meeting Australia's commitments under the Single Convention.

The scale of fees and charges has not changed since they were set in 2016. A periodical review is undertaken and published on the ODC website.[169] The latest review published in November 2018 observed:

The ODC is aware, based on internal and external reviews, that significantly more time is spent on assessing applications than the original assumptions that form the basis of this [Cost Recovery Implementation Statement]. In order to revise the cost recovery framework, in 2019 the ODC will conduct a more comprehensive review of the cost recovery model with a view to amending fees and charges as necessary. ...

Where changes to fees and/or the levy are proposed (other than annual indexation), stakeholders will be asked to provide their feedback on the cost recovery arrangement through the ODC website.[170]

The Discussion Paper for this Review invited submissions on whether the scale of fees and charges was appropriate. There was no consistent theme in the responses.

A few submissions commented that the current scale of fees was appropriate, while an equal number suggested that the scale be increased either to deter ill-prepared applications or to ensure that the ODC would be adequately funded to undertake its functions. A couple of submissions suggested that manufacture licence and permit fees be introduced, principally to ensure consistency in the treatment of licences and permits.

Another issue on which some submissions commented was the date on which the first annual licence fee is payable. One submission asked for greater clarity on this issue; while a couple asked that payment be postponed until the licence holder was ready to commence commercial operation.

Comment

It is premature in this Review to recommend any change to the current scale of fees and charges. There is no evidence to suggest that the scale is too high. The ODC has foreshadowed that a comprehensive review will be undertaken in the next year, and that stakeholders will be consulted.

A variation of the scale will also be required if some of the recommendations in this Review are accepted. For example, if the current structure of three separate licences is replaced by a new structure in which an applicant may apply for a single licence to undertake all of some of cultivation, production, research and manufacture, the scale of fees and charges would need to be tailored to the range of activities encompassed by a particular application and licence.

Similarly, any change to the permit provisions in the ND Act or ND Regulation may require a review or relevant charges. In particular, it would be inappropriate to maintain the current fee of $1,730 to apply to vary a medicinal cannabis or cannabis research permit if the ND Regulation is changed to allow notification of minor variations that do not require formal approval. A couple of submissions were already critical of the high cost applying to a minor variation application.

Decisions under the ND Act that directly affect the interests of applicants and licence holders are generally classed as 'reviewable decisions', for which internal and external review rights are available.

The reviewable decisions include decisions to refuse to grant a medicinal cannabis, cannabis research or manufacture licence or permit; impose conditions on a licence or permit; vary or refuse to vary a licence or permit; revoke a licence or permit; give a direction to a current or former licence holder; suspend a licence or permit; and classify research as commercial rather than non-commercial for charging purposes.[171]

An applicant or licence holder is to be notified that a reviewable decision has been made, and of the terms and reasons for the decision.[172] The person may firstly seek internal review of the decision by applying to the Minister.[173] The Minister may review the decision personally or cause the decision to be reviewed by a person who was not involved in making the decision and is at least as senior as the decision maker.[174] The indicative timeframe for making an internal review decision is 60 days, exclusive of any time that elapses while the review applicant is required to provide further information.[175]

An application may be made to the Administrative Appeals Tribunal (AAT or Tribunal) for review of an internal review decision, or of a reviewable decision that is deemed to have been affirmed after the elapse of the internal review timeframe. The review is to be determined by the Tribunal in accordance with the provisions of the Administrative Appeals Tribunal Act 1975 (Cth).

The ND Act contains provisions directed to preserving the confidentiality of sensitive law enforcement information in both the internal and external review processes.[176] Recommendation 18 below is that the ODC should initiate discussion with Commonwealth, State and Territory law enforcement agencies about those provisions to ensure they are understood and work effectively.

Comment

No change is recommended to these provisions in the ND Act. They provide an appropriate framework for internal and external review of decisions that directly affect the interests of applicants and licence holders. The review framework is consistent with best-practice administrative law principles.

• [144] Some submissions referred as an alternative approach to the Regulator of Cannabis Bill 2014 (see Chapter 2), that provided for the Regulator to administer a medicinal cannabis licensing scheme.
• [145] Single Convention, Articles 23, 28, 29.
• [146] These are explained in a Therapeutic Goods Administration publication, Australian manufacturing licences and overseas GMP certification: A step-by-step guide (March 2019).
• [147] Single Convention, respectively Art 28.1 (read with Art 23.2(b)) and Art 29.2(b).
• [148] See also ND Regulation, regs 7A(b), 13A(b).
• [149] ND Act, s 8A(g).
• [150] ND Act, s 8E(2) (medicinal cannabis licence application), s 9D(2) (cannabis research licence application), s 11G(2) manufacture licence application). Cf the TG Act s 22C(2) which similarly provides that an application is to be made in a form approved by the Secretary.
• [151] ND Act, s 26C.
• [152] ND Act, s 26C(2),(3).
• [153] ND Regulation, regs 5, 6, 8.
• [154] ND Regulation, regs 11, 12, 14.
• [155] ND Regulation, regs 11, 12, 14.
• [156] The Therapeutic and Other Legislation Amendment (Narcotic Drugs) Regulation 2016, reg 12A(1), Items 1 and 4, disallowed under the Legislation Act 2003 (Cth) s 42. See https://www.aph.gov.au/Parliamentary_Business/Statistics/Senate_StatsNe…
• [157] ND Act, ss 8N, 9C (medicinal cannabis licences and permits); ss 9M, 10B (cannabis research licences and permits); ss 11P, 12D (manufacture licences and permits).
• [158] ND Act, s 24C.
• [159] ND Act, s 10M (cannabis licences and permits); s 13 (manufacture licences and permits).
• [160] Single Convention, Art 29(2)(c).
• [161] As required by the ND Act, ss 8P, 9N and 12.
• [162] ND Regulation, reg 8(3)
• [163] ND Act, s 10M.
• [164] ND Act, s 14J.
• [165] ND Act, s 28(1)(c).
• [166] ND Act, s 54 (inspection fees), Schedule 1 (application fees).
• [167] Commonwealth Constitution, s 55.
• [168] ND Regulation, s 53.
• [169] See Department of Health, 'Cost Recovery Implementation Statement: Regulation of Medicinal cannabis' (Version 1.3, November 2018).
• [170] Cost Recovery Implementation Statement (2018), pp 5, 16.
• [171] ND Act, s 15D; ND Regulation, s 52.
• [172] ND Act, s 15G.
• [173] ND Act, s 15G
• [174] ND Act, s 15H.
• [175] ND Act, s 15J(2).
• [176] ND Act, ss 15F(2A), 15M(2), 15N.