According to M Partners analyst Daniel Pearlstein, Health Canada‘s pressure on dispensaries will benefit licensed producers in the country.

Last week, 13 cannabis dispensaries and compassion clubs across the country received warning letters from Health Canada requiring these establishments to, “immediately suspend all activities with controlled substances within 30 days” or risk RCMP enforcement. Dispensary operators face a possible $5 million fine and up to two years in prison, according to the letters.

If Health Canada carries through with its threat, Pearlstein said it could send cannabis users scrambling to licensed producers, such as Tweed Marijuana.

As a controlled substance, Health Canada issues only a number of medical cannabis licenses to producers, authorizing them to grow, process and sell cannabis products to persons eligible under the Marihuana for Medical Purposes Regulations (MMPR).

With independent dispensaries gone, the number of patients enrolled in the government program would jump from the current 25,000. Pearlstein estimated there are currently 100,000 dispensary patients in Canada and that a tightening of enforcement would force most of these into the MMPR.

“Steering patients away from dispensaries and towards LPs is not only positive for the MMPR but may also help to diminish reliance on the black market,” said Pearlstein. “In a survey taken in the US, early data shows that the majority of cannabis users in states where legal dispensaries operate obtain cannabis through legal means while just 17 per cent rely on the black market.”

With the MMPR now in place, Pearlstein said the future of the cannabis market could quickly shift, seeing local cannabis dispensaries shut down and only licensed dispensaries selling cannabis procured from licensed producers.