Sun Life’s move to cover medical cannabis a “very positive” development: Canaccord Genuity

The decision by one of the world’s largest insurance companies to add medical marijuana to it group benefits plans could drive patient numbers, Canaccord Genuity analyst Neil Maruoka says.

On Thursday, the Canadian Press reported that beginning March 1, Sun Life plan sponsors will have the ability to add medical cannabis to health plans. Coverage levels will range from $1500 to $6000 per person per year.

“Medical marijuana has become a very important part of their treatment program and pain management program,” CEO Dean Connor, speaking of patients who have multiple sclerosis, rheumatoid arthritis, or cancer, told the Canadian Press.

Maruoka says this could be a very positive move for the whole Canadian cannabis sector, and notes that the limited conditions covered could be expanded eventually, noting that several LPs are conducting clinical trials into other indications, such as sleep disorders and chronic pain.

“We believe this is a very positive development for medical cannabis in Canada, as we expect reimbursement is likely to be a significant driver of patient uptake,” the analyst said in a “Flash Update” to clients Thursday. Maruoka says this development could usher in a change in the composition of the market.

“With the launch of recreational cannabis on the horizon in Canada, our expectations are that a portion of medical users could migrate to the cheaper adult-use market,” Maruoka says. “There are currently >250,000 registered medical patients in Canada, a number that is expected to grow to ~800,000 at peak. We believe that medical-use cannabis will have premium pricing to recreational, potentially offsetting margin compression as dried bud becomes increasingly commoditized. We expect pricing and out-of-pocket costs will be a major determinant of uptake in both the medical and recreational markets. As medical reimbursement becomes increasingly widespread, the average cost to the patient will be lower; we believe this could potentially promote a shift to higher-priced medical extract-based cannabis products.”

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