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Fabian Henry prepares his medical marijuana in his home if Fredericton.

Stephen MacGillivray/The Globe and Mail

A former soldier organizing hundreds of fellow PTSD-suffering veterans in Atlantic Canada to take advantage of federally funded marijuana prescriptions says he sees no problem with producers paying groups representing patients in an industry with scant regulation on sales.

Afghanistan veteran Fabian Henry has spoken on behalf of his group, Marijuana for Trauma, to a number of licensed producers about sharing a cut of sales or receiving patient referral fees, which he says will help build a holistic centre for his group's roughly 500 members.

Revenue-sharing deals between licensed producers and clinics or groups of patients are the types of "kickbacks" decried earlier this week by Tilray, one of Canada's largest licensed growers that has formed its own breakaway lobby group outlawing such practices.

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But Mr. Henry says Tilray entertained such an arrangement. He approached the grower last summer asking for a percentage of gross sales to veterans he referred. But he says the company instead offered "$100 a patient." Tilray's CEO Greg Engel denied this and said his firm has never paid a referral fee or any portion of sales to any physician, clinic or group.

The practice of some doctors, clinics and patient groups such as Mr. Henry's receiving money from producers has revealed apparent gaps in the rules that govern the federal medical marijuana system, which was overhauled last year. There are strict regulations that set out how the drug is produced on a commercial scale in an industry that Ottawa estimates could be cultivating annual sales of $1.3-billion within 10 years.

However, there are few guidelines that cover the relationship between patients, their doctors, clinics specializing in pot prescriptions and growers, which, unlike traditional pharmaceutical companies, sell their products directly to consumers. Health Canada does not approve marijuana as a drug or medicine, but is compelled to regulate it by the courts, which have ruled that Canadians must have reasonable access to medical marijuana.

Mr. Henry says Marijuana for Trauma has a referral agreement with licensed producer MedReleaf to help fund its subsidiary, Veterans for Healing, which is building a holistic retreat for group members in rural New Brunswick. Neil Closner, MedReleaf's CEO, said his company doesn't have any such referral agreement but is dedicated to helping veterans and will occasionally pay the expenses of PTSD-awareness campaigns driven by Mr. Henry's group.

Mr. Henry says he works for free and that his group, like the specialized clinics, helps patients navigate the federal medical marijuana system and offers further support. He sees no problem with licensed producers agreeing to "some sort of profit sharing to develop further treatment" for veterans suffering from PTSD at his group's four centres in Markham, Ont., Sydney, N.S., St. John's and Fredericton.

"Why should I? They're making … millions off our injury, off of Veterans Affairs Canada, they should donate some of that back to every veteran group, every legion."

He says his group members are free to choose strains from any licensed producer, but added that "if they don't know who's who in the industry, then that's my job to … weed out the bad growers."

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So far, Health Canada has said it is "concerned about reports" of producers paying for referrals and is "actively looking into the issue" to determine if they present a conflict of interest for the 19 licensed growers, which it expects to "adhere to a high standard of ethical conduct."

Mr. Henry says producers view veterans as a small, but lucrative, patient stream.

Mr. Engel, Tilray's CEO, acknowledged that executives from his U.S.-based parent company, Privateeer Holdings, met with Mr. Henry and a number of other groups "in the early days of the industry."

He says the goal was simply to suss out whether there were legitimate opportunities to support clinical trials or unrestricted educational grants, which are commonplace in the pharmaceutical industry.

Moncton-based producer Organigram announced last November that it had entered into an agreement to become the preferred supplier of Trauma Healing Centres, a rival group to Mr. Henry's that organizes veterans to sign up for marijuana prescriptions in Atlantic Canada, which is the region from where almost two thirds of the 653 veterans using medical cannabis hail.

Organigram CEO Denis Arsenault said his company doesn't pay Trauma Healing Centres for referrals or share any revenue, but agreed to grow particular strains and committed to developing a digital application that would help veterans track their treatment.

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Asked why he was listed as having registered Trauma Healing Centres' website, Mr. Arsenault said he never had any ownership stake in the group and only helped its founders reserve the site when it first started.

"All we ever did was research names and help them understand how to set up a corporation," he said.

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