July 10, 2017
The legal landscape of cannabis (a.k.a. marihuana, weed, pot …) is changing, both reflecting – and contributing to – more relaxed attitudes around cannabis consumption. Cannabis for medical purposes has been legal for some time. And though recreational cannabis isn’t legal yet, its pending legalization is driving the stigma associated with cannabis usage down and driving usage up. Although the legal regimes governing medical and recreational cannabis are separate, legalization of recreational cannabis will undoubtedly lead more people to view medical cannabis as an acceptable treatment. To date, insurers have, generally, been leery of coverage of medical cannabis both in benefit claims and in cost of care claims in the personal injury context. There aren’t many decisions considering medical cannabis as an element of a claim for cost of future care – yet. But the number will likely grow significantly and quickly given the current climate and a judicial trend recognizing that some patients benefit significantly from using medical cannabis. And insurers need to be prepared to respond.
Here is a look at the current legal context of medical cannabis and the themes that have emerged from the as yet limited court decisions dealing with claims for both insurance benefit coverage and cost of care.
MEDICAL CANNABIS’S LEGAL CONTEXT
Cannabis was criminalized in Canada in 1923. Yet the legal framework governing cannabis generally, and medical cannabis specifically, has evolved significantly in the last 20 years.
Legal Possession of Dried Medical Cannabis. In 1999, the federal government first permitted legal access to dried cannabis for medical purposes pursuant to exemptions under the federal Controlled Drugs and Substances Act (CDSA).
Limited Access to Dried Medical Cannabis. In 2001, in response to a legal decision that individuals with a medical need have the right to possess cannabis for medical purposes, the federal government implemented the Marihuana Medical Access Regulations (MMAR). These regulations enabled individuals to obtain authorization from their doctors to access dried cannabis by growing their own, designating someone else to grow it for them or purchasing it from a Health Canada supply. From time to time thereafter, the federal government amended the MMAR in response to further legal decisions.
Commercialization of Medical Cannabis. In 2013, the federal government implemented the Marihuana for Medical Purposes Regulations (MMPR) permitting the establishment of a commercial industry to grow and distribute dried cannabis for medical purposes, but stopped granting new authorizations for individuals to grow cannabis for their own medical purposes. In June 2015, in response to a legal decision that restricting medical access to dried cannabis only was unconstitutional, the federal Minister of Health issued new class exemptions under the CDSA to allow licensed producers to also produce and sell cannabis oil and fresh cannabis buds and leaves and authorized users to possess and alter different forms of cannabis.
Expanded Access to Medical Cannabis. In 2016, the Federal Court of Canada decided, in Allard v. Canada, the regulations then in effect requiring individuals to obtain cannabis only from licensed producers denied “reasonable access” to individuals requiring medical cannabis, and violated the Canadian Charter of Rights and Freedom’s section 7 liberty and security rights. In response, in 2016, the federal government implemented the Access to Cannabis for Medical Purposes Regulations (ACMPR): Part 1 sets out a framework for commercial production by licensed producers similar to that under the MMPR; Part 2 is similar to the former MMAR regime in that it permits individuals to produce a limited amount of cannabis for their own medical purposes or designate someone else to produce it for them. In August 2016, Health Canada started accepting applications from individuals for registration to produce cannabis for their own medical use, or to designate someone to produce it for them. The ACMPR authorizes four key activities:
An eligible individual can’t have more than one designated producer at a time or more than one registration to grow their own medical cannabis at a time, and must renew their registration annually. An eligible individual (or designated producer) can only have that number of plants under production that produces the daily quantity of cannabis (expressed in grams of dried cannabis) indicated in the individual’s Medical Document, as calculated pursuant to mathematical formulae in the ACMPR (s. 190). An eligible individual is also limited to a maximum quantity of cannabis in storage, as calculated pursuant to mathematical formulae in the ACMPR (s. 191). There are also extensive regulations with regard to production and storage sites.
Pending Legalization of Recreational Cannabis. Public opinion on cannabis control has shifted considerably in the last decade: 10 years ago about 50% of Canadians believed cannabis use should be decriminalized or legalized; today, about two thirds hold this view and most no longer believe simple cannabis possession should be subject to harsh criminal sanctions and support the Government’s commitment to legalize, tax and regulate cannabis. On April 13, 2017, Canada’s federal government introduced legislation that, if passed into law, will legalize recreational cannabis in Canada. And although recreational cannabis isn’t legal yet, much of the associated stigma is already gone, usage is up, and stakeholders like health benefits providers and employers are preparing for the impact of the pending legalization of recreational cannabis now. The pending legalization of recreational cannabis impacts medical cannabis to the extent it both reflects and is driving changing attitudes about cannabis generally, but it’s important to remember the legal regimes governing recreational and medical cannabis are, at least so far, different.
INSURERS’ MEDICAL CANNABIS CONUNDRUM
Insurers (both of casualty and healthcare benefits) have, generally, resisted coverage of medical cannabis on a number of bases, some successful – and some not. Here are three of the most common reasons for denial based on policy interpretation of benefit claims.
It’s not a “drug”. Some have taken the position that, since cannabis has (at least currently) no Drug Identification Number (DIN) under the federal Food and Drugs Act, it doesn’t meet the definition of “drug” under an insurance policy. For example, in Corporation of the City Hamilton v. Hamilton Professional Fire Fighters’ Association (a 2016 Ontario labour arbitration case), the arbitrator denied a grievance arising from the insurer’s refusal of coverage for prescribed medical cannabis under the firefighters’ benefits plan. The plan explicitly limited drug coverage to drugs with a DIN; since Health Canada hadn’t approved cannabis, it didn’t have a DIN and wasn’t included in provincial formularies and thus wasn’t an eligible expense under the plan. But to exclude coverage of medical cannabis on the basis it’s not a “drug”, the policy must explicitly define a drug as having a DIN under the Act. For example, in Skinner v. Board of Trustees of the Canadian Elevator Industry Welfare Trust Fund, a human rights complaint against the administrators of a health benefits plan, the plan didn’t expressly limit coverage to drugs with a DIN, define a “drug” or limit coverage to Health Canada-approved drugs or any other category. It’s probably not enough to define a drug as a “prescription drug” either; those terms must likely be narrowly defined if intended to exclude an ACMPR Medical Document. If not, a court might consider a Medical Document a prescription, as does, for example, the Ontario College of Physicians and Surgeons. For example, in Skinner, the plan described the types of drugs and medications excluded from coverage, stating over-the-counter medications or drugs for which a prescription wasn’t required by law (federal or provincial) were excluded from coverage – but the Human Rights adjudicator noted medical cannabis requires a “prescription”, removing it from that exclusion; the plan also included a pricing regime for drugs not included in the provincial formulary, suggesting inclusion in that formulary was not the only basis for determining whether a drug (or a medicine) was an eligible expense under the plan. [Note: On April 12, 2018 the N.S. Court of Appeal issued its decision in Canadian Elevator Industry Welfare Trust Fund v. Skinner, concluding the benefits provider’s denial of coverage of the insured’s medical marijuana prescription wasn’t discriminatory.]
It’s not “medicine”. Medical cannabis might still, however, be an eligible expense under a policy that includes coverage for “drugs” and “medicines”. If a policy includes “medicines” as an eligible expense without a narrow definition, a court will likely interpret “medicines” more broadly than “drugs” and may include medical cannabis if it’s prescribed for a medically necessary purpose such as pain management. Such a policy could reasonably be interpreted to exclude cannabis as a drug (because it doesn’t have a DIN) – but to include medical cannabis as a “medicine” if it’s prescribed to treat medical symptoms. For example, in University of Western Ontario v. University of Western Ontario Faculty Association, 2008 CarswellOnt 7554, an Ontario labour arbitration case, the “medicine” wasn’t cannabis, but a food supplement prescribed for a child with a catastrophic brain injury and consumed through a surgically inserted G-tube. The arbitrator concluded that drugs and medicines were both eligible expenses under the policy, so the two terms couldn’t have been intended to be synonymous; if “drug” could be defined narrowly as a regulated drug under the Food and Drugs Act, the term “medicine” must have been intended to have a broader meaning. On the facts, the arbitrator decided the food supplement was a medicine because it was prescribed by a physician to relieve the physical effects of an injury. Medical cannabis may be similarly prescribed by a healthcare practitioner to relieve the physical effects of an injury: for example, in Skinner, the plan included coverage for both drugs and medicines; the adjudicator confirmed that, for the reasons outlined in University of Western Ontario v. University of Western Ontario Faculty Association, one could reasonably conclude that medical cannabis is medicine – even if it’s not a drug.
It’s not “medically necessary”. Insurers have also argued medical cannabis isn’t an eligible expense because the policy only covers “medically necessary” drugs or medicines – but to be successful, the court may require that the policy defines “medically necessary” in a manner that excludes medical cannabis. For example, in Skinner, the plan only covered “medically necessary” drugs or medicines, but didn’t explicitly define “medically necessary”; it did, however, implicitly define it in the “Prescription Drug Exclusions” section, which excluded “Drugs which are not considered medically necessary, e.g. cosmetic or weight loss/lifestyle…”. The adjucator said, “This appears to have nothing to do with medical consensus and everything to do with the purpose for which a drug or medicine is prescribed”, concluding if medical cannabis is prescribed for pain management, there’s prima facie support for its medical necessity because conventional prescription pain management drugs are normally eligible for coverage. The medical evidence showed conventional medications weren’t effective and the complainant’s physicians had ruled them out because they didn’t improve his function and caused multiple and highly undesirable side effects; a pain management specialist testified the continuing use of medical cannabis had a positive impact on the complainant’s functionality, and the complainant gave un-contradicted testimony that it positively impacted his functioning.
CANNABIS AS COST OF CARE
There are not many decisions considering medical cannabis as a cost of care in tort claims – yet. But the number of cases will likely grow significantly in the next few years: given the current climate, and a judicial trend recognizing that some patients benefit significantly from using medical cannabis. As the adjudicator in Skinner expressly acknowledged, “one trend that emerges is the repeated judicial finding, based on anecdotal and expert evidence, of a significant benefit to some patients from using medical [cannabis]” (para. 46).
Cost of Care Considerations. Here are five key considerations courts considering cannabis cost of care claims take into account that emerge from the decisions to date.
Cost Calculation. Claims for cannabis as cost of care can be significant. But even if a court awards cost of cannabis care, that doesn’t mean it will agree with the plaintiff’s cost calculations, and insurers still have plenty of opportunity to argue for a reduction in that cost. There are several ways in which courts can assess the cost of care claim.
For example, in Joinson v. Heran, the plaintiff claimed $822,308 as the cost of purchasing medical cannabis for the rest of his lifetime. But the court didn’t accept the plaintiff’s claim for the amount he actually used or the price he actually paid for it. The court calculated that as at May 2010, the plaintiff’s cost of consumption was $76 a day, equating to an annual cost of $27,740. It then limited compensation to five grams a day (the maximum Health Canada recommendation) at the price for which it could be purchased from a licensed producer. The evidence showed the products the plaintiff used were available at substantially lower cost from authorized dispensaries; using the lower prices, the court reduced the annual cost to $14,560 and calculated the present value of the plaintiff’s future needs at $79,167. It then reduced that by 50% to account for the plaintiff’s recreational use of smoked cannabis, then adjusted the figure to allow for improvement in the plaintiff’s chronic pain condition as he went through a pain management program. The court’s final figure: $30,000 (plus $4,000 damages for pre-trial medical cannabis).
Insurers facing cost of care claims should also consider the possible (and perhaps ironic) upsides to medical cannabis if not now, then down the road.
Failure to mitigate? At least one insurer has argued a plaintiff’s refusal to take medical cannabis as recommended by one of her physicians amounted to failure to mitigate. In Glesby v. MacMillan, the insurer made this argument, but the court refused to find the plaintiff failed to mitigate her losses, in part because she had sincere reservations about cannabis acquisition and use. The court distinguished this from her failure to follow another physician’s recommendation to pursue a treatment program at a pain clinic because the pain clinic would have helped demonstrate her physical condition and prognoses and determine the extent of her physical limitations. Although the insurer wasn’t successful in this particular case, it may be possible to succeed on that argument in the future – as and when ongoing studies into medical cannabis treatment outcomes are completed and the medical community works its way toward a consensus about the effectiveness of cannabis as a medical treatment.
A cheaper – or less harmful – alternative? At this point, cannabis is more expensive than prescribed opioids in Canada. An April 1, 2017 CBC report, “How high will the price of legal pot be?” found the average black market price of cannabis was $9.32/gram, the average price in illicit dispensaries was $10.00/gram and, as of March 12, 2017, the average price from Health Canada-licensed growers was $9.12/gram. At Health Canada’s maximum daily dosage of 5 grams/day at the average licensed grower’s price of $9.12/gram and 30 days/month, this equates to a cost of about $1,368/month. On the other hand, the cost of 80mg (.08grams)/day of hydromorphone in N.S. is about $130 a month. But that may change as the market grows and competition develops among licensed producers. And although there’s not yet a consensus among doctors about cannabis’s efficacy as a pain treatment, some doctors see a benefit in cannabis use as a means of reducing or eliminating use of opioids and related side effects. For example, in Joinson v. Heran, the plaintiff’s family physician and his psychiatrist saw him regularly and both supported use of medical cannabis to reduce his pain and, thus, reduce his dependency on opioids, opining the opioids affected his functioning more than the cannabis.
Please contact your McInnes Cooper lawyer or any member of the Insurance Defence Team @ McInnes Cooper to discuss this topic or any other legal issue.
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