Aphria’s (APH.V) veteran pricing scam leads to cannabis industry split

The Canadian government is getting gouged on its veteran medical marijuana program, and a VICE News investigation has revealed the likely culprits.

According to figures provided by Veterans Affairs Canada, the number of retired soldiers obtaining medical marijuana from the government saw a staggering 15-fold increase over just three years, with a corresponding 50-time increase in cost.

That’s how the Vice investigation into medical marijuana pricing for veterans begins, but the lede is totally buried in those first two paragraphs. That Canada would be spending a lot more money to cover a lot more veterans for medical marijuana isn’t exactly news. That certain companies have been exploiting that situation to charge the government above and beyond for that medicine is the real scam – and it’s one that has fractured the local industry in just a few days.

Vice found certain LPs were presenting veterans with different websites than non-veterans were seeing, with cheaper medicines omitted for the vets and in some cases pricing hidden.

Kurt logged onto the Aphria site, which offers a sleek, easy-to-navigate online shop, and chose several strains, paying upwards of $12 per gram.

Later, his wife stumbled onto Aphria’s main site, the one available to the general public. It turns out that, as a veteran, several products were hidden from view entirely.

“Kurt, this is beyond cheaper,” she recalls telling him. Strains were offered for as low as $4 per gram. Some of those strains were exactly what Kurt was looking for — lower in THC, the psychoactive ingredient in marijuana. When they called Aphria to ask if they could switch to the other site, they were told it would be impossible.

“What do you care?” Kurt recalls the Aphria representative telling him over the phone. “You don’t pay for it anyway.” Kurt, partly in protest, switched vendors and says he’s charging $800 to $1,000 less per month now on the public health plan.

To be sure, this story is anecdotal. Maybe the Aphria rep said that, maybe they didn’t. Maybe the rep was off-script, maybe not. But just presenting vets with the most expensive strains and not allowing them to see others, that’s bullshit, brutal, and scandalous. That’s not an isolated rep saying the wrong thing, that’s corporate misdirection and exploitation for which Aphria should be horrified and ashamed.

I’ve been a big Aphria supporter for months now. I saw them as a real adult in the space and saw their recent moves as strong indicators that they’d be on target to become one of a handful of giants parts that make up Big Cannabis going forward, but since this story has come out, Aphria has offered no news release to explain the situation or deny the situation. They’ve remained silent.

Which, again, is bullshit.

The day the Vice story landed, I tweeted that I was selling my Aphria stock and that the company needed to handle the situation immediately. It has preferred silence, and so it should be called out publicly by all.

The last thing the legitimate cannabis industry needs at a formative time like this is anyone, big or small, but especially big like Aphria, to be scamming the government and veterans. The veteran market is the way in for real insurance coverage, across the board, and the blossoming of the cannabis industry into what it could and should be. It only needs to play by the rules and wait for said rules to liberalize, and everyone will make bank.

Aphria’s moves are bush league stuff. They put a black eye on themselves, and the industry proper, and now the Veterans Affairs minister Kent Hehr has announced he will scale back the allowable prescription levels for veterans to reign in the runaway costs.

Translated: Vets will be allowed only 3 grams per day, and will be covered up to $8.50 per gram.

The Auditor General found one doctor was prescribing 29% of Canada’s medical marijuana prescriptions for the 2014-2015 fiscal year. No prizes for guessing where they were being sent.

In response, Canopy Growth Corp (CGC.V), which is currently being shorted to hell and back, and the drop in which has brought about a sector-wide plummet in the last few days, has taken a break from bailing water and announced it will pull out of the industry representing Cannabis Canada Association.

We do not operate separate websites for veterans. We do not oblige veterans to purchase higher-priced cannabis products, while hiding access to lower priced cannabis products. We do not charge a different price to veterans, and we do not hide pricing from veterans. Every veteran who registers with Tweed or Bedrocan Canada receives access to the exact same products at the exact same pricing as every other customer.

Though we serve hundreds of Canadian veterans, veterans represent only 2% of Canopy Growth’s combined client base of tens of thousands of Canadians. The Company does not foresee these policy changes having a material impact on sales or customer growth. Tweed and Bedrocan Canada attract and retain our veteran clientele the same way we attract all our other customers: with quality customer service, and a wide and diverse product selection. We are proud to serve our veterans and would never jeopardize the trust our veterans place in us, or attempt to artificially increase pricing at the expense of the Canadian taxpayer.

To ensure that Canopy can effectively voice its opinion on this and other pressing issues facing our sector, our Company has elected to withdraw its memberships from Cannabis Canada Association.

That Canopy has done more to answer for this scam than Aphria is both applause-worthy (for Canopy) and gross (for Aphria).

And, as if that wasn’t reason enough to give Canopy a golf clap, there’s this standup move:

Tweed and Bedrocan Canada are pleased to immediately commit that up to the specified daily amount approved, our companies will ensure full coverage for all of our products regardless of the price, so that veterans continue to have access to a full range of products to meet their needs, including cannabis oils. Any cost differential between our store price and the coverage by Veterans Affairs will be covered by Tweed and Bedrocan Canada, respectively, so that we subsidize our veterans and not the other way around.

That’s how you do it.

Yesterday, I talked to folks from Canabo Medical (CMM.V), a chain of cannabis clinics that charge Health Canada a consultation fee, like any other medical clinic, educate their patients about what strains to use and how they should use them, do ongoing research with their patients to monitor the efficacy of what’s being used and prescribed, educate doctors into proper dosage, effects, usage, and ailments that can be assisted, and take no referral fee at all from LPs for passing patients on to them.

That group is following not just industry best practice, but medical best practice in helping to build out a legitimate industry that could be just a few steps away from being completely insurance-covered. They’re consulting with large companies that know they need medical marijuana policies. They’re gathering patient data at the source and monitoring trends in the industry, and what’s working best, and what’s working for who. That’s a building block for a genuine marijuana sector that can move this whole industry forward.

Aphria, if anything, has damaged the sector. And it’ll be the veterans who now qualify for less who bear the brunt of their hubris.

For shame, Aphria. For shame.

— Chris Parry

FULL DISCLOSURE: Someone else owns my Aphria stock now, which is down 20% on the day. Sorry for your loss.