Tag Archives: analysis

December 18, 2018

Product Labeling Law: A Primer and a Warning for California Cannabis Executives

By Jonathan C. Sandler

What do you get when you combine a Schedule 1 federally controlled substance with a plethora of food, beverage and cosmetic entrepreneurs marketing new products to inexperienced users and then place that combustible combination into California’s plaintiff-friendly legal environment?

A lot of rich plaintiffs’ attorneys.

California continues to be a favored plaintiffs’ lawyers’ venue for filing consumer-related lawsuits against food and cosmetic companies. These lawsuits result in tens of millions in settlements each year and hundreds of millions in judgments. Staying current on statutes and trends is critical to doing business in California and cannabis companies are no exception.

While the Food and Drug Administration (“FDA”) has provided very little guidance on how cannabis products should be labeled, a lack of specific regulations does not mean that there are no applicable labeling requirements for cannabis. This is particularly true in states like California that have a multitude of statutes designed to protect consumers from false or misleading advertising and labeling. Below includes a brief list to help guide companies’ labelling processes:

Look to available guidance for the relevant industries. For example, food labeling of cannabis products still requires compliance with other nutritional labeling statutes. The same goes for supplements and cosmetics. The Fair Packaging and Label Act (“FPLA”) regulates labeling of all “consumer commodities” as to net contents, product identity, and manufacturer’s, packer’s or distributor’s name and location.
Consider the intended use of the product as well as the directions. For example, is the product meant to be consumed all at once or should it be consumed over a period of time? Depending upon the product, this question can affect whether compliance with the FDA dietary supplements guidance is required or whether the Food Drug and Cosmetic Act applies.
Consider your supply chains. This can be one of the most difficult aspects for cannabis companies that are looking to expand, but need more supply. However, keeping track of ingredients is a critical aspect to being able to defend against lawsuits. In the past, cannabis companies have been sued because they have expanded their suppliers without assuring consistency in the products and then combining inconsistent ingredients into one common product that is now mislabeled. While the Bureau of Cannabis Control testing requirements should help with some of the cannabis information, all ingredients need to be tracked and the final products tested.
Cannabis companies must label their products with applicable state laws. For example, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65 (“Prop. 65”)is being used by the plaintiffs’ bar as a basis to sue cannabis companies.
- Prop. 65 is a statewide initiative that regulates companies that make or sell their products in California in two ways: (1) it requires companies whose products contain certain levels of chemicals to provide clear and reasonable warnings. Prop. 65 does not ban or restrict the sale of chemicals on the list or their inclusion in products, but it requires warnings if the listed chemicals are included; and (2) It prevents companies from discharging these chemicals into the state’s water supply.
- All companies doing business in California and all products manufactured or sold in California are subject to Prop. 65 with three exceptions: (1) the company has fewer than 10 employees, (2) government agencies, or (3) the products contain less than a threshold amount of the chemicals.
- Penalties for violations can be staggering. Prop. 65 is enforced both by the California Attorney General and private lawsuits on behalf of the California Attorney General. The potential penalties for violations of Prop. 65 include a fine of up to $2,500 per day. Additionally, one of the largest drivers of litigation is that the private enforcers (plaintiffs’ bar) can recover their attorneys’ fees. The total amount paid in settlements in 2017 was over $25 million and of the more than $18 million in judgments, $13 million was attributed to attorneys’ fees.
The California Consumers Legal Remedies Act (“CLRA”) is another California statute that is intended to protect consumers from false advertising and other unfair business practices. The CLRA allows consumers to bring individual or California class action lawsuits to recover damages and enjoin the prohibited practices. The statute also allows a prevailing consumer to recover attorneys’ fees and costs. Cannabis companies need to be mindful of their representations related to their products. California courts are filled with cases involving terms like “natural” or “healthy” or “high performing.”

Product labeling, mottos and advertisements may seem straightforward, but they form the basis for hundreds of lawsuits filed every year throughout the country, and especially in California. At this stage of trying to get one’s product out the door and to the consumer, it is tempting to move quickly. However, the importance of sound research, strategy and consulting an experienced team to ensure compliance and avoid costly mistakes is critical.

IR Spectrum of 2,4-Dichlorophenol in different physical states

December 18, 2018

From The Lab

Gas Chromatography/Infrared Spectroscopy: A Tool For the Analysis of Organic Compounds in Cannabis

By John F. Schneider

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Editor’s Note: The author will be teaching a 1/2 day short course on this topic at PITTCON in Philadelphia in March 2019.

The combination of gas chromatography and infrared spectroscopy (GC/IR) is a powerful tool for the characterization of compounds in complex mixtures. ^(1-5) Gas chromatography with mass spectroscopy detection (GC/MS) is a similar technique, but GC/MS is a destructive technique that tears apart the sample molecules during the ionization process and then these fragments are used to characterize the molecule. In GC/IR the molecules are not destroyed but the IR light produced by molecular vibrations are used to characterize the molecule. IR spectrum yields information about the whole molecule which allows the characterization of specific isomers and functional groups. GC/IR is complementary to GC/MS and the combination results in a powerful tool for the analytical chemist.

A good example of the utility of GC/IR vs GC/MS is the characterization of stereo isomers. Stereo isomers are mirror images such as a left hand and a right hand. In nature, stereo isomers are very important as one isomers will be more active then its mirror image. Stereo isomers are critical to medicinal application of cannabis and also a factor in the flavor components of cannabis.

GC/MS is good at identifying basic structure, where GC/IR can identify subtle differences in structure. GC/MS could identify a hand, GC/IR could tell you if it is a left hand or right hand. GC/MS can identify a general class of compounds, GC/IR can identify the specific isomer present.

Why GC/IR?

Gas chromatography interfaced with infrared detection (GC/IR), combines the separation ability of GC and the structural information from IR spectroscopy. GC/IR gives the analyst the ability to obtain information complementary to GC/MS. GC/IR gives the analyst the power to perform functional group detection and differentiate between similar molecular isomers that is difficult with GC/MS. Isomer specificity can be very important in flavor and medical applications.

Gas chromatography with mass spectrometry detection (GC/MS) is the state-of-the-art method for the identification of unknown compounds. GC/MS, however, is not infallible and many compounds are difficult to identify with 100 % certainty. The problem with GC/MS is that it is a destructive method that tears apart a molecule. In infrared spectrometry (IR), molecular identification is based upon the IR absorptions of the whole molecule. This technique allows differentiation among isomers and yields information about functional groups and the position of such groups in a molecule. GC/IR complements the information obtained by GC/MS.

Interfaces

Initial attempts to couple GC with IR were made using high capacity GC columns and stopped flow techniques. As GC columns and IR technology advanced, the GC/IR method became more applicable. The advent of fused silica capillary GC columns and the availability of Fourier transform infrared spectrometry made GC/IR available commercially in several forms. GC/IR using a flow cell to capture the IR spectrum in real time is known as the “Light Pipe”. This is the most common form of GC/IR and the easiest to use. GC/IR can also be done by capturing or “trapping” the analytes of interest eluting from a GC and then measuring the IR spectrum. This can be done by cryogenically trapping the analyte in the solid phase. A third possibility is to trap the analyte in a matrix of inert material causing “Matrix Isolation” of the analyte followed by measuring the IR spectrum.

Infrared Spectroscopy

The physical state of the sample has a large effect upon the IR spectrum produced. Molecular interactions (especially hydrogen bonding) broadens absorption peaks. Solid and liquid samples produce IR spectra with broadened peaks that loses much of the potential information obtained in the spectra. Surrounding the sample molecule with gas molecules or in an inert matrix greatly sharpens the peaks in the spectrum, revealing more of the information and producing a “cleaner” spectrum. These spectra lend themselves better to computer searches of spectral libraries similar to the computer searching done in mass spectroscopy. IR spectral computer searching requires the standard spectra in the library be of the same physical state as the sample. So, a spectrum taken in a gaseous state should be searched against a library of spectra of standards in the gaseous state.

IR of various phases:

Liquid Phase – Molecular interactions broaden absorption peaks.
Solid Phase – Molecular interactions broaden absorption peaks.
Gas Phase – Lack of molecular interactions sharpen absorption peaks.
Matrix Isolation – Lack of molecular interactions sharpen absorption peaks.

IR Chromatograms

GC/IR yields chromatograms of infrared absorbance over time. These can be total infrared absorbance which is similar to the total ion chromatogram (TIC) in GC/MS or the infrared absorbance over a narrow band or bands analogous to selected ion chromatogram. This is a very powerful ability, because it gives the user the ability to focus on selected functional groups in a mixture of compounds.

Conclusion

Gas chromatography with infrared detection is a powerful tool for the elucidation of the structure of organic compounds in a mixture. It is complementary to GC/MS and is used to identify specific isomers and congeners of organic compounds. This method is greatly needed in the Cannabis industry to monitor the compounds that determine the flavor and the medicinal value of its products.

References

GC–MS and GC–IR Analyses of the Methoxy-1-n-pentyl-3-(1-naphthoyl)-Indoles: Regioisomeric Designer Cannabinoids, Amber Thaxton-Weissenfluh, Tarek S. Belal, Jack DeRuiter, Forrest Smith, Younis Abiedalla, Logan Neel, Karim M. Abdel-Hay, and C. Randall Clark, Journal of Chromatographic Science, 56: 779-788, 2018
Simultaneous Orthogonal Drug Detection Using Fully Integrated Gas Chromatography with Fourier Transform Infrared Detection and Mass Spectrometric Detection , Adam Lanzarotta, Travis Falconer, Heather McCauley, Lisa Lorenz, Douglas Albright, John Crowe, and JaCinta Batson, Applied Spectroscopy Vol. 71, 5, pp. 1050-1059, 2017
High Resolution Gas Chromatography/Matrix Isolation Infrared Spectrometry, Gerald T. Reedy, Deon G. Ettinger, John F. Schneider, and Sid Bourne, Analytical Chemistry, 57: 1602-1609, 1985
GC/Matrix Isolation/FTIR Applications: Analysis of PCBs, John F. Schneider, Gerald T. Reedy, and Deon G. Ettinger, Journal of Chromatographic Science, 23: 49-53, 1985
A Comparison of GC/IR Interfaces: The Light Pipe Vs. Matrix Isolation, John F. Schneider, Jack C. Demirgian, and Joseph C. Stickler, Journal of Chromatographic Science, 24: 330- 335, 1986
Gas Chromatography/Infrared Spectroscopy, Jean ‐ Luc Le Qu é r é , Encyclopedia of Analytical Chemistry, John Wiley & Sons, 2006

December 17, 2018

Aphria Fights Shortseller Allegations Of Insider Double Dealing

By Marguerite Arnold

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Two reports published by short selling stock firm Quintessential Capital Management and forensic investor research firm Hindenburg Research on December 3, charges that Canadian LP Aphria, has bought overinflated assets in Latin America and in Florida from shell companies owned by company insiders. Added to the lingering controversy is the purchase of the German Nuuvera this spring (a company also partly owned by Aphria brass), and the reports went over like a bombshell. Globally.

However, the story has already spread far beyond one company. And the response in the market has rocked the industry for most of December.

Aphria’s shares tanked, and dragged everyone down with them. Several class action law firms in the United States began promptly looking for aggrieved shareholders.

The response by the firm? A promise of an immediate line-by-line rebuttal, due out in the second week of December. So far, however, despite news of an additional Aphria purchase in Paraguay, the rebuttal report has not been issued.

Why Is This So Damaging? Or Is It?

Aphria’s stocks promptly took a dive that halved their value although they began to recover after Aphria management appointed an independent third party firm to review the claims.

Worse, however, the entire industry saw a hit too. This report affected investor confidence across the industry. And although the hit appears to be temporary, the unfolding scenario is a perfect example of why volatility in the market is scaring away not only more conservative female retail investors but larger institutional ones that the industry is now courting assiduously as medical cannabis begins to be integrated into health systems particularly in Europe.

Why?

Bottom line? As the big cannabis companies are listing on the larger, foreign exchanges, including the NYSE and Deutsche Börse, the scrutiny is getting more direct and granular.Despite the stratospheric market caps of all the major Canadian LPs in particular, not to mention enormous expenditures for the last several years (on property and other acquisitions), the revenue picture, as other stock analysts and publications such as the normally neutral Motley Fool recently pointed out, at least so far does not justify the same. Bulk sales to a hospital, establishing a cultivation or processing facility or even getting import licenses may set one up to do business however, but it is not an automatic route to ongoing and expanding sales. And that is the key to high valuations that are rock solid and beyond the scope of such allegations.

For the moment, that pressure, particularly in global medical markets, is falling first on patients if not doctors. Not the industry.

That said, this has been a major building year. Recreational cannabis has just become legal in Canada. And in Europe, reform is still in the process of happening.

It is also a charge if not frustration that has been growing, however, against all the public cannabis companies as valuations shoot into the stratosphere. Forensic and investigative firms, particularly in Europe and the United States have been focusing on the industry for close to a year now. As a result even when firms successfully rebut charges of fraud, they are looking at different valuations from analysts at least in the short term.

Bottom line? As the big cannabis companies are listing on the larger, foreign exchanges, including the NYSE and Deutsche Börse, the scrutiny is getting more direct and granular.

Are “Short Seller” Reports Unbiased?

For all of the focus on short seller reports in this industry, however, no matter the accuracy of some of their claims, here is the next issue:

Short sellers make money by betting against not only individual firms but the industry itself. They benefit financially in other words, from volatility in the market and arbitraging even small changes in price. Even if their reports cause the same.

Such reports as a result are also not “unbiased” as industry coverage in the press is supposed to be, no matter how much more time sometimes goes into the reporting and preparation of the same.

And no matter that this industry is now going into its fifth year, there is still lingering scepticism that, in the case of Aphria, has so far not only fallen on the individual firm in question, but then rebounds across the industry, unfairly hurting all firms in this space.

December 17, 2018

Seven Steps To Avoid the Green Rush Blues: Investigate Water Supplies Before Planting Cannabis

By Amy M. Steinfeld

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A clean, reliable water supply lies at the heart of every successful cannabis farm. It’s no surprise that the stakes for finding land with ideal growing conditions, including adequate water, are high. But new buyers (and lessees) caught up in the green rush often gloss over water rights or are unaware of California’s byzantine rules governing the irrigation of cannabis.

Water rights are complex. Water regulations applicable to cannabis cultivation are even more complex. And our new climate reality convolutes things further. Longer droughts, more volatile weather, political uncertainties, increased groundwater regulation and water quality concerns are exacerbating tensions over local and statewide water supplies. In many areas of California, landowners can no longer rely on local water districts to meet their needs.

A robust investigation of the property must consider water supplies. Because a property’s water supply is dependent on water rights, local ordinances, state regulations, politics and hydrology, it’s important to consult a water lawyer (and in some instances a hydrologist) before closing. A bit of foresight can prevent a grower from being left high and dry.

The following checklist provides a roadmap to conduct water rights’ due diligence. While many of these details are California-specific, this type of due diligence applies throughout the West.

Step 1: Identify Available Water Supplies and Consider Potential Limitations On Irrigation, Including Potential Future Changes

Conduct a site visit to identify existing water infrastructure, natural water features and existing or potential water service options. Next, determine if the property is served by a public water supplier. If that’s the case, the California State Water Resources Control Board (“State Water Board”) does not require any specific documentation to irrigate cannabis, but the water supply must be disclosed in the CalCannabis license application.

Groundwater is generally the best supply for cannabis, but the era of unregulated groundwater pumping is over. Many groundwater basins in California are now governed by the Sustainable Groundwater Management Act (“SGMA”), which requires water agencies to halt overdraft and restore balanced levels of groundwater pumping from certain basins. As a result, SGMA may result in future pumping cutbacks or pumping assessments. It’s imperative to identify the local groundwater basin via the Department of Water Resources’ Bulletin 118, and determine whether the groundwater basin is adjudicated or governed by a groundwater sustainability agency. Growers should also test the local water supply’s pH and salt levels because cannabis plants are finicky and water treatment can be cost prohibitive. If a new well is needed, growers should consult with their local county before drilling a new well. In some areas, moratoriums and restrictions on drilling new wells are on the rise.

As a rule of thumb, cannabis cultivators should avoid using surface water to irrigate cannabis. Surface diversions are subject to the California Department of Fish and Wildlife’s permitting authority. And under the interim State Water Board Cannabis Policy, commercial cannabis cultivators cannot divert anysurface water during the dry season (April 1 through Oct. 31), even if they have a riparian right that can be used to irrigate other crops. During the dry season, cultivators may only irrigate using water that has been stored off-stream. And even during the wet season, cannabis cultivators must comply with instream flow requirements and check in with the state daily to ensure adequate water supplies are available. Cannabis cultivators are also required to install measuring devices and track surface water diversions daily. And buyer beware, a groundwater well that extracts water from a subterranean stream may be considered a surface-water diversion. So be especially cautious if the well is located close to a creek or river.Develop a water use plan to optimize water efficiency

Step 2: Identify Water Supplies Used On the Property, Including the Basis of Right, and Quantify Historical Use

Review information on historic and existing water use. This may include past water bills and assessments. If there is a well on the property, the seller or lessor may have metering data, electrical records and crop data that can establish historic groundwater use. Cultivators must submit a well log to CalCannabis as part of the cannabis cultivation application. If surface water is available, the purchaser should review the State Water Board eWRIMs database for water rights permits, licenses, stock pond registrations and certificates, decisions and orders. The purchaser should also identify surface water diversion structures and review annual filings to determine compliance with all terms and conditions of the water right. Lastly, the purchaser should request all documents and contracts pertaining to water rights.

Realistically estimate water demand for irrigation and other on-site purposes.Step 3: Confirm Ownership of Right and Assess Any Limitations On Water Right

Determine whether the right has been abandoned, lost to prescription or forfeited. Evaluate the seniority of the water right, availability of the right, adequacy of place of use, purpose of use (must include irrigation), season of use, and quantity of any permitted or licensed post-1914 right. Determine whether historical diversions pursuant to an appropriative right support the full amount of the claimed right, and whether any changes to the water right are needed to support the proposed new use. Cultivators in California who plan to utilize surface water also need to file for a “Cannabis Small Irrigation Use Registration” to store water during the wet season for use during the dry season.

Step 4: Reconcile Water Demand With Available Supply

Realistically estimate water demand for irrigation and other on-site purposes. Develop a water use plan to optimize water efficiency (drip irrigation, rainwater harvesting, water monitoring, hoop structures) regardless of supply sufficiency. Many counties, such as Santa Barbara County, require that cannabis growers meet certain irrigation efficiency standards. Determine whether available supplies can meet all proposed demands, including plans for full buildout. If not, consider whether additional supplies are available for use on the property.

Step 5: Determine Water Supply Compliance Obligations

The rights associated with water supplies are defined by their source, the time frame during which supplies can be taken, the quantity of water to which the right attaches, and any limitations on the purpose of use of the water supply. There may also be reporting requirements associated with taking and using the supply—these can include requirements to report the quantity of water used as well as information regarding the end use of the water. Failure to timely report can have serious consequences. Cannabis cultivators are also subject to additional water quality regulations and restrictions, including waste discharge requirements pursuant to the State Water Board’s Cannabis General Order.

Step 6: Negotiate Deal and Draft Conveyance Documents

After obtaining an understanding of the water supply associated with the property, the property conveyance documents may be drafted to incorporate the transfer of rights associated with the property’s water supplies. These may include the assignment of contracts pursuant to which water supplies are obtained, the transfer of permits or licenses as to the water supplies, or the transfer of water rights arising out of a judgment or decree.

Step 7: Consider Unused Water Supply Assets That Could Be Monetized

To the extent the water supply rights associated with the property exceed the cannabis plants’ water demand, it may be possible to monetize unused or excess water supply assets through transfer of the rights to a third party.

If you have any questions about water rights related to cannabis cultivation it’s always in your best interest to contact an experienced water attorney early on in the process.

December 12, 2018

Wayland Group Makes European Waves

By Marguerite Arnold

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While it is news that Wayland Group has just signed a definitive production agreement in Italy with a local CBD producer (Factory S.S. – a subsidiary of Group San Martino), it is not that Wayland has been establishing itself in Europe for the past two years.

Nor is it surprising that the new Italian plant (named CBD Italian Factory) will feature world-class cleantech production technology (fuelled by biogas). Even more intriguingly the joint venture also includes a relationship with the University of Eastern Piedmont, which is developing a research center to study the development of cannabinoid products for both animals and people.

Why not?Europe is far from the only region on Wayland’s global expansion map.

Wayland has been establishing itself in an interesting way as the company expands globally that distinguishes its corporate strategy from its other cannabis competitors. It was only April of this year, after all, that Wayland received its ex-im license to ship dried cannabis flower from Canada to Germany. At a time when the company also used to be known as Maricann. That corporate name change happened this year too, as the company continues to build its global brand in very interesting if far-flung markets.

A Busy Fall So Far

Europe is far from the only region on Wayland’s global expansion map. In the first week of November, in fact, the company also signed an agreement to buy 100% of Colma Pharmaceutical SAS, a Columbian-licensed producer of THC. This will be an outdoor THC play, and produce two crops a year. They also just announced a land acquisition in Argentina to begin cultivating cannabis there as well.

In October, the company announced not only plans to raise $50 million, but also brought on three new board members with significant European legal and business experience (including M&A and access to equity markets). This includes the company’s first female board member, Birgit Homburger, based in Berlin.

And this is on top of its record-breaking hemp harvest in Germany, which outperformed internal forecasts by a factor of 2. This is an important benchmark domestically, as German cultivation licenses will require successful firms to prove they can bring large quantities of flower to market successfully and repeatedly.

A Marked Interest In Cannatech

Like many firms, Wayland is already showing a marked interest in new cannabis technologies, in particular, innovative cultivation solutions, but not limited to the same. In August, the company unveiled its first product launch in Europe – a soft gel with 25mg of CBD that utilizes multi-patented technology allowing optimum absorption and bioavailability. Its German unveiling is significant because the insurance and medical industries here are unclear about dosing. That lack of clarity is also now holding back policy and underwriting issues, including the approval of medical cannabis in the first place.

These capsules, a non-medical product and marketed under the name “Mariplant” were first shipped to pharmacies in both the Munich and Cologne area in the late summer.It has continued to expand both its Canadian and foreign as well as tech expansions ever since.

The Road So Far

The company, which started with a facility in Langton, Canada in 2013, earned a license from Health Canada to sell cannabis extracts in early 2016. By December of that year (a good four months before the German cultivation bid was announced) Maricann GmbH was formed in Munich. By March, the month before the cultivation bid was first announced, the company began retrofitting the Ebersbach facility, near Dresden.

In April of 2017, Maricann went public. It has continued to expand both its Canadian and foreign as well as tech expansions ever since.

While not a “high flier” on the stock market (like competitors Tilray, Canopy and Aurora), the company is carefully plotting its position in a global market that is still very much a “blue ocean” opportunity.

It is also carefully plotting a path into both production and delivery systems that are optimized by tech in a universe that is rapidly upgrading not only its image, but finding ways to prove if not justify medical efficacy.

December 11, 2018

Phenova Gets Accreditation For Cannabis Proficiency Testing

By Aaron G. Biros

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Phenova, Inc., a proficiency testing products and reference materials provider based in Golden, Colorado, works with labs and regulatory bodies to develop proficiency testing (PT) programs. According to a press release sent out by the American Association for Laboratory Accreditation (A2LA), Phenova is A2LA’s first ISO/IEC 17043 accredited PT provider for the cannabis marketplace.

According to Ty Garber, director of new business development for the cannabis and food and beverage markets at Phenova, they have been working with A2LA for over a decade in other industries, but the cannabis testing industry is a huge new market for them. “Our Cannabis Proficiency Testing products and services are experiencing high demand across North America and we are fortunate to offer our expertise in proficiency testing to client laboratories and regulatory agencies in their joint efforts to ensure cannabis product quality and safety,” says Garber. “By working with the laboratories and stakeholder agencies, we have been able to develop and operate Proficiency Testing Programs based on real marijuana matrices, especially where the matrix creates specific analytical challenges. This approach has proven to be very beneficial for everyone involved, and we are working diligently to expand these efforts.”

Trace McInturff, senior director of accreditation services at A2LA, says this could help fill a serious need for conformity assessments in accredited cannabis labs. “A2LA is excited to announce the expansion of Phenova’s existing ISO/IEC 17043 Proficiency Testing Provider scope of accreditation to become the first A2LA accredited Proficiency Testing Provider for cannabis,” says McInturff. “This milestone adds to the positive historical relationship between Phenova and A2LA that dates back to 2005 when A2LA implemented a new TNI SSAS program for Proficiency Testing Providers and A2LA performed one of the first assessments of its kind at Phenova.” McInturff also says that A2LA has been instrumental in establishing the initial ILAC Proficiency Testing Provider accreditation requirements which ultimately became the basis for ISO/IEC 17043.

In addition to the “real marijuana matrix PT programs” that Phenova offers in certain states and countries where legal, they also offer alternative PT standards for labs that have obtained or are working on obtaining ISO/IEC 17025 accreditation.

December 11, 2018

Soapbox

Dishonest Potency Testing In Oregon Remains A Problem

By Kelly O’Connor

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Oregon, we have a problem.

Anyone with a search engine can piece together how much THC certain strains produce and what their characteristics are. Oh wait- there’s an app for that… or dozens, I lose count these days.

Nefarious lab results are rampant in our communityLet’s take one of my favorites, Dutch Treat; relaxing, piney and sweet with a standard production of 18-25% THC, according to three different reviews online. So, did I raise an eyebrow when I saw Dutch Treat on Oregon shelves labeled at 30% THC? Did I take it in to an independent, accredited lab and have it tested for accuracy? You bet your inflated potency results I did! The results? Disappointing.

Nefarious lab results are rampant in our community; it is hurting every participant in our industry affected by the trade, commerce and consumption of recreational cannabis.

“I have had labs ask me what I want my potency numbers to look like and make an offer,” says David Todd, owner and operations manager of Glasco Farms, a craft cannabis producer in central Oregon. “It’s insane- I want to stand behind my product and show through scientific fact that I produce a superior flower.”

But without enforcement of lab practice standards, producers are being pressured to play dirty. In her third year cultivating at a two-tier recreational cannabis farm, a producer who wished to remain anonymous sent me an email about the pressures she is up against to produce high THC strains:

“The only sure way to get my product on the shelf at a profitable price is with THC 25% or above. Not a lot of strains have that potential, but the market has plenty with 28% to 32% floating around so I have to go with the same labs as the rest of the independent farmers to get the best numbers I can. The lab I use … return(s) good numbers.”

Those “good numbers,” aka high THC %, are the driving force of sales. A strain tests at 20% THC and it sells for $1,000/lb. Then it tests at 25% THC, and sells for $1300/lb. You produce cannabis for sale- this is your business. And labs are telling you that they can manipulate samples and reports to make you more money. Everyone else is doing it. If you don’t, your product isn’t “good enough” to sell. What do you do?Labs should operate ethically.

It’s a vicious cycle perpetuated by lies, lack of enforcement resources, coercion and undereducation. We are all responsible. Yet, ask who the source of the problem is and everyone points fingers across the circle.

The consumers are uneducated about cannabis and only focus on THC. The dispensaries and budtenders should be educating them. Producers should take a stand and use an honest lab. Labs should operate ethically.

I repeat: Oregon, we have a problem.

It’s time to stop living in a land where Dutch Treat is hitting 30% THC. It’s time for everyone to demand auditing and ethics.

Laws have been set forth on how to sample, prep, test and report analyses for cannabis to ensure fair commerce, consumer health and public safety. But there’s a clear need to blind test the different labs, and for unbiased, third-party research and development.

As federal eyes turn to the Oregon to investigate black market activity, regulatory bodies are tightening their grip on licensees to maintain legal validity and avoid shut down.

The time to demand change and integrity is now.The crack-down began on August 23, 2018, when the OLCC investigated several prominent producers’ practices. Black market distribution incurred the harshest penalty; the OLCC revoked their wholesale license due to multiple violations.

“We want good compliant, law-abiding partners as OLCC marijuana licensees,” says Paul Rosenbaum, OLCC Commission Chair. “We know the cannabis industry is watching what we’re doing, and believe me, we’ve taken notice. We’re going to find a way to strengthen our action against rule breakers, using what we already have on the books, and if need be working with the legislature to tighten things up further.”

Trends in METRC data lay the foundation for truth, and it’s time to put it to use. “The Cannabis Tracking System worked as it should enabling us to uncover this suspicious activity,” says Steven Marks, OLCC Executive Director. “When we detect possible illegal activity, we need to take immediate steps …”

Potency fraud might not be at the top of the list for investigation, but labs and producers are breaking the law, and there will be consequences. ORELAP and OLCC have the right to investigate and revoke licenses of labs that are falsifying data and consumers can file claims with the Department of Justice.

The time to demand change and integrity is now.

December 10, 2018

A Busy 4th Quarter Heralds An Amazing Cannabis Year Globally

By Marguerite Arnold

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In retrospect, when the cannabis history books are written, 2018 may come to represent as much of a watershed year as 2014. Much has happened this year, culminating in a situation, much like at the end of the first year of modernization, where great victories have been achieved. But a long road to true acceptance and even basic and much broader medical use still beckons. Even if the new center left ruling coalition party in Luxembourg has just announced that recreational cannabis reform is on its agenda for the next five years.

This is a quick and by no means a full review of both fourth quarter activity globally, and how that ties into gains for the year.

Canada Legalizes Rec Sales

Beyond all the other banner headlines, October 17 will go down in history as the day that Canada switched the game.

Will 1017 replace 420? Not likely. But it is significant nonetheless.

What does this mean for the rest of the industry (besides international border checks and lifetime bans for Canadian executives and presumably others traveling into the U.S. to cannabis industry conferences at present)? For starters, a well-capitalized, public industry which is building infrastructure domestically and overseas like it is going out of style.

This is important for several reasons, starting with the fact that the big Canadian LPs are clearly not counting on supplying Europe from Canada for much longer. Why? The big European grows that were set up last year are starting to come online.

So Does California…

And other significant U.S. states (see Massachusetts this month and Michigan) are following suit. However the big issue, as clearly seen at least from Canada and Europe, is there is no federal reform in sight. That opens up a raft of big complications that so far, most U.S. firms have not been able to broach. That said, this situation is starting to change this fall, with two U.S. firms entering both Greece and Denmark, but in general, a big issue. Canadian firms are still trying to figure out how to both utilize the public markets in the U.S. without getting caught in detention when crossing the border.the U.S. is continuing to be a popular place to go public for Canadian firms

Regardless, the U.S. is continuing to be a popular place to go public for Canadian firms, who are also looking for access to global capital markets and institutional capital. Right now, Frankfurt is off limits for many of them. See the Deutsche Börse. That said, with the rules already changing in Luxembourg, one firm has already set its sights for going public in Frankfurt next spring.

The German Situation

Like it or not, the situation in Germany is key to the entire EU and increasingly a global enchilada, and no matter where companies are basing their cultivation sites at this point, there are two big gems in the European cannabis crown. Deutschland is the first one because of the size of the economy, the intact nature of public healthcare and the fact that the German government decided to mandate that sick people could get medical cannabis reimbursed by their public health insurer.

german flag — Photo: Ian McWilliams, Flickr

Ironies abound, however. In the last quarter, it is clear from the actions of the Deutsche Börse that Frankfurt is not a popular place to go public (Aurora went public on the NYSE instead in late October).

The cultivation bid was supposed to come due, but it is now likely that even the December deadline might get pushed back again, interminably at least until April when the most recent lawsuit against the entire process is due to be argued.

In the meantime, there is a lot of activity in the German market even if it does not make the news. Distribution licenses are being granted all over the country (skip Berlin as there are already too many pending). And established distributors themselves, particularly specialty distributors, are increasingly finding themselves the target of foreign buyout inquiries.

There are also increasing rumours that the German government may change its import rules to allow firms outside of Canada and Holland to import into the country.

The German market, in other words, continues to cook, but most of it is under the surface a year and a half after legalization, to figure things out.

The UK

Next to October 17, the other date of note this fall of course was November 1. The Limeys may not have figured out Brexit (yet). But cannabis for medical use somehow made it through the national political fray this summer. Hospitalized children are compelling.

Now the question is how do other patients obtain the same? The NHS is in dire straits. Patients must still find a way to import the drug (and pay for it). And with newly imposed ex-im complications coming Britain’s way soon, there is a big question as to where and how exactly, patients are supposed to import (and from where). All looming and unanswered questions at the moment.

But hey, British doctors can now write prescriptions for cannabis.

Greece and Malta

Greece and Malta are both making waves across Europe right now. Why?

The licensing process that has continued into the fall is clearly opening up inexpensive cultivation in interesting places. Greece is growing. Malta, an island nation that is strategically placed to rival Greece for Mediterranean exports across Europe is still formalizing the licensing process, but don’t expect that to last for long.

Look for some smart so and so to figure out how to beat Brexit and import from Malta through Ireland. It’s coming. And odds are, it’s going to be Malta, if not the Isle of Mann that is going to clinch this intriguing if not historical cultivation and trade route.

Poland

Just as October came to a close, the Polish government announced the beginning of medical imports. Aurora, which went public the same week in New York, also announced its first shipment to the country – to a hospital complex.

Let the ex-im and distribution games begin!

It is widely expected that the Polish market will follow in German footsteps. Including putting its cannabis cultivation bid online whenever the Polish government decides to cultivate medical supplies domestically. The country just finalized its online tender bid system in general.

Does anyone know the expression for “pending cannabis bid lawsuit in Warsaw” in Polish?

Notable Mentions

While it gets little press outside the country, the Danish four year experiment is reaching the end of its first year. While this market was first pioneered by Canopy/Spectrum, it was rapidly followed by both Canadian LPs and others entering the market. Latest entrant this quarter? A tantalizingly American-British conglomerate called Indiva Ltd. as of November 21.

Italy is also starting to establish a presence in interesting ways as multiple firms begin to establish cultivation there.

There are also increasing rumours and reports that Israel might finally be able to start exporting next year. That will also disrupt the current ecosystem.

And most of all, beyond a country-by-country advance, the World Health Organization meeting in early November and in the early part of December is likely to keep the pressure on at a global level for rescheduling and descheduling the cannabis plant.

This in turn, is likely to set the stage as well as the timeline for rec use in Luxembourg. Look for developments soon.

A busy time indeed. Not to mention a quarter to end a very intriguing year, and certainly destined to sow returns for years to come, globally.

December 10, 2018

Luxembourg’s New Ruling Coalition To Legalize Recreational Cannabis

By Marguerite Arnold

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Stand aside Canada! Events are moving in a strategically interesting way in Europe. And for once it is not news of the German bid.

In this case, implementation of the decision in Luxembourg would actually have two immediate effects.What, where, when? Luxembourg’s new center-left coalition of the Greens, Socialists and more traditional Democrats have put recreational cannabis on their ruling mandate and five-year agenda as of November 29, 2018.

In the comments of the same at the press conference held last week, the sentiments were pretty much of one tenor: “It’s way overdue.”

What does that mean, however, for the rest of the conversation across the continent?

Luxembourg: The First Recreational “State” Market In Europe?

While local advocates are quick to say that their ambition will make them the first EU country to completely legalize recreational cannabis, this is mostly true, but not entirely.

As much as it is fashionable these days to diss Holland, the fact of the matter is that the Dutch pioneered just about everything about the modern movement except clear cut regulation. Coffeeshop envy being what it is, however, it is true that the historical marker of the Dutch market was grey areas. That, however, has been in shifting territory for the last four to five years however. Hard as it is to believe that in just 2014 the Cannabis Cup held its last expo in Amsterdam. How the world has changed since then!

There is also this fact: Switzerland (true not an EU country but just next door geographically), is also poised to use this excuse to make its next move to fully leaded THC. The country has seen a sharp uptick in the consumer, OTC CBD market over the last two years. So much so that foreign (read American and Canadian in particular) enterprises are now looking to Switzerland as one of the more interesting “semi-EU” entry strategies at present. Taxes on a highly profitable industry are also in the public discussion. Adding a bit of THC to the mix, in other words, is likely to come fast in other places too.

Will This Move The Needle In Other Places?

The answer to that question is also, undeniably, yes. How fast that will happen in individual countries across Europe is another discussion. See France, which is now the largest member of the EU to have so far successfully ducked the cannabis question except for some basic decrim ideas that the now embattled French President Emmanuel Macron might, finally, put some enthusiasm into backing.

This could also certainly galvanize the UK. One way or the other, to stay or leave the EU itself. Full recreational won’t be in the cards, however, for quite some time.

Sound incredible? See Brexit so far.it will create the first deliberately regulated recreational market in Europe.

Many other EU countries have also been chafing at the slow pace of reform. Even after basic medical use has occurred. See German advocates who long to follow both the U.S. and Canada, and at present are for the most part shut out of the medical cultivation process. They are simply being outbid by the large Canadians.

But how fast such reforms will come even in Luxembourg, not to mention have a knock on effect elsewhere, no matter how momentous, is still an undecided question.

What Is The Biggest Immediate Impact Going To Be?

As is usually the case in Europe, things are rarely as straightforward as one country deciding to do (or not do) something. In this case, implementation of the decision in Luxembourg would actually have two immediate effects.

One, it will create the first deliberately regulated recreational market in Europe. How fast that could actually roll out is up for debate, considering that the country only legalized medical use as of this summer. As Colorado, California and certainly Canada have proven in spades so far, recreational reform always need some kind of medical base to start with. And implementation of both kinds of markets always seems, at least so far, to carry litigation. Especially in young, untested markets. See the German bid, most recently, just across the border.

However here is the second, and far more intriguing reality that really may be key to the entire enchilada. The legality of cannabis in Luxembourg also has everything to do with the German public cannabis market. Namely, the German stock exchange will only allow Germans to clear stock purchases of publicly listed cannabis companies on the Deutsche Börse if they are in line with not only German cannabis law but also that in Luxembourg, where they actually clear. That was a big issue this summer, only rectified when Luxembourg first changed its medical law.

It also meant, as of this fall, that Aurora went public in New York, not Frankfurt.

In the future, however, after Luxembourg goes full recreational Monty, this will no longer be the case. This will already be tested next spring as another company hopes to go public here. And when that happens, although certainly not for the next several years, the entire discussion of recreational reform will fully and finally be in the European room.

December 3, 2018

Discussing Lab Accreditation: The New ISO 17025:2017 Standard

By Aaron G. Biros

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At this year’s Food Safety Consortium a couple weeks ago, the newly launched Cannabis Quality Track featured a number of panels and presentations that highlighted the many intersections between food safety and cannabis. One particular topic of interest was measuring the quality and safety of cannabis products through laboratory testing. At the event this year, representatives from the leading laboratory accreditation bodies in the country sat together on a panel titled Accreditation, Regulation & Certification: Cannabis Labs and Production.

Representatives from ANSI-ASQ National Accreditation Board (ANAB), the American Association for Laboratory Accreditation (A2LA) and Perry Johnson Laboratory Accreditation (PJLA) discussed the new ISO standard, common issues that labs encounter when getting accredited, the future of the cannabis lab industry and certifications for food safety and quality.

The panelists included:

Tracy Szerszen, president/operations manager, PJLA
Natalia Larrimer, engagement and program development manager, ANAB
Lauren Maloney, food safety program accreditation manager, Perry Johnson Registrars Food Safety, Inc. (PJRFSI)
Chris Gunning, life sciences accreditation manager with A2LA

The new ISO 17025:2017 standard was a topic addressed pretty early in the panel. Tracy Szerszen introduced the topic with a recap of the 2005 standard. “With 17025, for those that are familiar with the older version, 2005, there are really two sections of the standard for that one,” says Szerszen. “The newer standard is a little bit different, but there is a quality management system review that we do and we look at the laboratory to ensure that they are testing appropriately based on what they applied for. So, for cannabis labs, they typically have the same scope in types of methods with respect to microbiology and chemistry, and we are making sure they are following the standard from a technical standpoint, meaning they have the right equipment, the appropriate personnel and also have a quality management system.”

Chris Gunning followed that up with a closer look at the changes coming to the new 2017 standard. “If you are familiar with the 2005 version, you know that a lot of the clauses started out with a ‘you shall have a policy and procedure for doing X,’” says Gunning. “One of the major changes to the 2017 version is it gives laboratories more latitude on whether they need to have a policy/procedure to do certain things.” Gunning says the 2017 version is much more of an outcome-based standard. “As far as assessing to it, it becomes a little harder from our side because we can’t say you have to have this quality manual or you have to have this procedure that were going to assess you to. We are more open to looking at the outcomes.”

Christopher Gunning, life sciences accreditation manager with A2LA

The most interesting change to the ISO standard comes with addressing the idea of risk. “One of the newest concepts in this standard is risk and how you assess your risk to your organization how you assess risk of impartiality, how you assess your measurement uncertainty when you are creating decision rules,” says Gunning. “Those are the big concepts that have changed in the 2017 standard in that it is more outcome-based and introducing the concept of risk more.”

After discussing some of the broader changes coming to the 2017 version, the panelists began delving into some common pitfalls and issues labs face when trying to get accredited. “From our experience, in Michigan, the new standard was written into the regulations, but a lot of labs were already accredited to 2005,” says Szerszen. “So, we actually contacted the state and explained to them that they have three years to transition. And some states will say ‘too bad, we want the 2017 ISO,’ so some of the cannabis labs are asking us to quickly come back so they can get appropriate licensing in the state and do a transition audit quickly.” She says most states seem to be comfortable with the current transition period everyone has, but it certainly requires some discussion and explanation to get on the same page with state regulators. “November 29, 2020 is the deadline for moving to the new 2017 standard.”

In addition to state requirements like traceability and security on top of an ISO 17025 accreditation, labs can run into issues not typically encountered in other testing markets, as Gunning mentioned during the panel. “One of the hardest parts of getting accredited is the need for properly validated methods, for all the different matrices in samples,” says Gunning. “Some of the biggest hurdles for new labs getting assessed are validation and the availability of reference materials and proficiency testing samples that meet their state requirements.” Those are just a handful of hurdles that labs aren’t usually anticipating when getting accredited.

Natalia Larrimer, engagement and program development manager, ANAB

Another big topic that generated a lot of dialogue during the panel was the need for a national accreditation standard for cannabis testing labs, one that Natalia Larrimer is advocating for. “Many laboratories are operating facilities in more than one state and what they are facing is a different set of criteria for laboratory recognition in each state, says Larrimer. “One initiative that we would love to see more support for, is a set of uniform requirements nationally. ACIL is currently working on developing these type of requirements which would be in addition to the ISO/IEC 17025 standard and specific for cannabis industry…” Larrimer says she’d like to see these requirements recognized nationally to get labs on the same page across multiple states. “This includes requirements for things like security, traceability, proficiency testing, sampling and personnel competence. The industry would greatly benefit from a uniform cannabis testing program across the US, so that testing facilities in Oregon are operating to the same criteria as facilities in California or Colorado, etc.”

The panelists went into greater detail on issues facing the cannabis lab testing industry, but also delved into certifications for food safety and quality, an important new development as the infused products market grows tremendously. Stay tuned for more highlights from this panel and other talks from the Food Safety Consortium. We will be following up this article with another that’ll shed some light on food safety certifications. Stay tuned for more!