The State of Supply Chain Planning In Canada’s Cannabis Market
We recently posted a white paper where we discussed how the rapidly changing environment in the Canadian Cannabis space necessitates a fundamental re-think of the supply chain planning talent infrastructure; the business processes driving both oversight and workflow for supply chain planning; and the tools that can enable efficiency and collaboration between “insight generators,” “executors,” and “escalated decision makers.”
We also highlighted examples of events that are yet to come to the Canadian landscape. In this blog, we want to focus on a hypothetical scenario where public payers start reimbursing Medical Cannabis for a subset of patients. We present the types of conversations that can arise when a licensed producer that has matured its planning processes hired the right supply chain planning talent, invested in modern supply chain planning tools like Vanguard Predictive Planning™, and developed a culture primed for dealing with change.
The Buy In: Corporate Culture Primed for Dealing with Change
Our fictional company recently went through a corporate training program for Integrated Business Planning. First, the entire executive team was briefed on critical Integrated Business Planning best practices and the importance of implementing such a program. The executives then assigned an implementation team, comprised of the company’s best cross-functional talent, to mature the demand planning, supply planning, and inventory optimization procedures.
One of the key tenets of the transformation program was the creation of digital communities to enable the rapid exchange of ideas and decision making. The culture was highly collaborative and established a singular focus on ensuring the company’s supply chain was prepared for any major event that could arise, such as COVID-19. Another key tenet was embracing the “what-if” scenario planning and risk management allowing them to capture opportunities in the marketplace, keep their balance sheet and cash flow healthy, and meet vital service commitments to their most important customers. With this culture in place, the company was primed to deal with whatever changes might be coming and strongly believed their investment in people, processes, and tools would pay off, likely sooner rather than later.
Identify the Event: Strategic Demand Creation
The Director of Market Access and Government Relations has been a regular staple at the formalized demand planning meetings and in the digital demand planning community. She was medically focused, having been in the pharmaceutical sector and believed in the importance of formulary acceptance and reimbursement as a driver for compliance. She was an active participant in the industry society that lobbied provincial governments for market access and has recently analyzed data revealing the following trends.
- More and more Federal Medical programs have discrete subsets of patients who are reimbursed for medical cannabis. Countries like Denmark, Germany, France, and Ireland have a form of public payer involvement in medical cannabis reimbursement.
- The price per gram equivalent in Canada is one of the lowest across the developed world. This should lend itself favorably for reimbursement.
- Seniors, as a group, are increasing cannabis use. This is concerning because the out-of-pocket cost for a yearly supply of cannabis as a percentage of seniors’ median income is higher than any other age demographic. Because seniors stand to benefit greatly from the use of cannabis products as treatment for their ailments, the lack of reimbursement for this population represents an unwarranted burden.
- With legalization, the rate of medical registrations has stalled and channel shifting has occurred. In the absence of medical reimbursement, patients have chosen to self-medicate and get their supply from recreational channel dispensaries. Our Director of Market Access is concerned by this trend, as self-medication bypasses the medical professionals who could properly advise and balance the medication load for patients. Moreover, this phenomenon pushes patients further away from the company’s support staff, who counsel patients and drive compliance.
- For break-through chronic pain populations, many patients are still being prescribed opioids. A recent consultant-led study revealed how much money the Canadian government could save if they simply replaced opioids with cannabinoids for this population. The savings are staggering and she believes a compelling public debate is inevitable.
Armed with these facts, the heroine of our hypothetical scenario prioritized the company’s government lobbying efforts on ensuring Cannabis reimbursement gets focused on both seniors and break-through pain populations. She believes these efforts are in line with the company’s mission of driving medical access. As she drives this demand creation effort from a market access level with governments, she has decided to engage the sales, marketing, and planning teams.
She realized that if the initiative is successful, the organization’s supply chain will need to be prepared for this shift. She also wants to ensure the executive team fully understands the potential profit impact and fully supports the end-to-end requirements of shifting back toward the medical channel. To further bring the scenario to life, she identified a date when she thinks this new “Pan-Canadian” reimbursement scenario could take place and the likely timeline for provincial onboarding.
The type of scenario we’ve defined may sound specific to the Canadian cannabis industry, but JPSG and Vanguard see similar scenarios occurring quite frequently across other industries, such as pharma, CPG, and food manufacturing and distribution. We’d be happy to discuss real-world scenarios you might be facing in the near and long-term.
Stay tuned for Part 2 of this blog series, where we discuss how our story’s heroine and her organization respond to our hypothetical scenario and provide some thoughts for how your organization can prepare for similar hypotheticals.
The State of Supply Chain Planning In Canada’s Cannabis Market
About the Author
Boris Gorbatyuk, Ph.D. is the President of JPSG Consulting. Boris helps clients in the pharmaceutical, nutraceutical, consumer goods, and cannabis industries increase customer service levels and reduce inventory levels and supply chain costs through advanced planning adoption disciplines and lifecycles.
About Vanguard Software
Vanguard Software introduced its first product for decision support analysis in 1995. Today, companies across every major industry and more than 60 countries rely on the Vanguard Predictive Planning platform. Vanguard Software is based in Cary, North Carolina.