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Ask the Experts: Supply Chain Risks in Hemp & Cannabis

By Cannabis Industry Journal Staff
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There are a lot of risks throughout the entire supply chain in the cannabis and hemp markets. Legal and regulatory issues, quality control reliability, security problems, product safety, potency, and constantly changing supply and demand are just a few major risks cannabis operators must stay on top of. A lot of companies mitigate these risks by implementing programs to find the source and figure out what actions could alleviate it. Those actions can look like reviewing testing or certification reports, auditing supplier facilities, and much more.

Jennifer Lott, AMAS Service Delivery Director for the standards certification body, BSI, has over 25 years of experience in quality, safety, lab management, consulting, packaging, and systems development. She’s an expert in GMP, ISO 22716, 21 CFR 117, 21 CFR 111, 21 CFR 210-111, ICH Q7, WHO GDP, RSPO, food safety, GMP/HACCP and much more.

She is a panelist for an upcoming webinar, Supply Chain Risks in Hemp and Cannabis June 27, 2023. During that webinar, she’ll join other experts where they’ll discuss some of the supply chain risks cannabis companies face and what they can do to mitigate those risks.

Ahead of her webinar, where she’ll take a deep dive into supply chain risks, we sat down with Lott to get a preview for what she’ll talk about.

Q: What are the major supply chain issues faced by the cannabis and hemp markets currently?

Jennifer Lott: The U.S. market remains highly complicated for cannabis companies and investors. Fewer than half of U.S. states and territories have legalized recreational cannabis use as of Nov. 2022.

To this day, cannabis is still a Schedule one substance under the Controlled Substances Act, alongside drugs like heroin, LSD and ecstasy – an issue that has led to several regulatory and fiduciary challenges for growers, processors, and distributors of cannabis/hemp.

Legal concerns aside, cannabis companies operate much like other businesses and face almost the same exposures that most enterprises do. Here are the top risks cannabis businesses encounter, according to experts.

  • Distribution – Current regulations prevent products from one state to be transported to another state.
  • Natural disasters – including wildfires, storms, and flooding, can easily damage crops
  • Cybersecurity – Because of the type of information that cannabis companies handle, they can also become a prime target for hackers.

Despite the supply chain challenges mentioned above, the cannabis industry is growing, and its use is becoming more accepted in society, but still faces major challenges. These trends also will create a volatile and fast-changing environment cannabis companies in 2023. The big challenge will be deciding which of the scores of startups, IPOs and established cannabis companies can surmount the upheaval and succeed long term.

Q: How are companies mitigating risks and what tools are at its disposal?

Lott: Anyone involved in the cannabis/hemp business knows they need to manage their risk with a solid risk management plan.

The three biggest risks facing cannabis/hemp businesses aside from the supply chain issues mentioned above, include:

  • Employee theft – employees have easy access to the product, run cash registers at dispensaries, and generally know a lot about the inner workings of the company. Protecting against insider theft is critical for the business.
  • Product tampering – this can happen at any stage in the supply chain. Businesses whose products cause harm could be liable for injury and damages.
  • Compliance regulations – compliance varies from state to state and laws are frequently changing.

Thanks to regulatory uncertainty and limited access to tools other industries have access to, the cannabis industry likely will have an increased risk profile for the foreseeable future. This heightens the need for a structured, risk management approach. However, even with so many external factors out of its control, cannabis companies still can dramatically decrease risks by addressing internal strategies and processes.

Cannabis companies with effective, relevant, and well-documented risk management practices can better positioned to create and preserve capital, attract investment, and achieve long-term sustainable growth.

Jennifer Lott is speaking at the Supply Chain Risks in Hemp and Cannabis Webinar, taking place June 27 at 11:00 am EST. Click here to register.

About Jennifer Lott

Jennifer Lott is the AMAS Service Delivery Director for the internationally recognized standards certification body, BSI. Jennifer currently supports the quality and integrity of food and fast-moving consumer products. She is an accredited Lead Auditor and Trainer with over 25 years of experience in quality and safety, management system development, consulting, packaging, and laboratory management. Jennifer’s expertise includes GMP, ISO 22716, 21 CFR 117, 21 CFR 111, 21 CFR 210-111, ICH Q7, BRC GS Consumer Products, WHO GDP, EudraLex, BRC GS Storage & Distribution, BRC GS Packaging, BRC GS Agents & Brokers, RSPO, Food Safety, and GMP/HACCP.

Content Sponsored by BSI

Ask the Experts: Ensuring the Validity of Cannabis Lab Testing

By Cannabis Industry Journal Staff
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Cannabis testing laboratories are one of the major players in the industry for protecting public health. Ensuring that laboratory test results are reliable and valid requires a multipronged approach involving method validation, proficiency testing and performing frequent reviews of equipment and processes.

Cannabis testing laboratories often use a variety of different methods to conduct proficiency testing. Laboratories can either participate in programs run by ISO/IEC 17043-accedited proficiency testing providers or through intralaboratory comparison. Comparing different instruments, methods, technologies against pre-defined criteria is a must when validating methods for a specific type of test and ensuring the competence of the laboratory.

Beyond proficiency testing, there are a number of other stopgaps at a laboratory’s disposal for ensuring valid results, like using accredited certified reference materials, performing checks on measuring equipment frequently, reviewing reported results and retesting retained items. All of that and more is outlined in the ISO/IEC 17025:2017 standard, section 7.7.

labsphoto
What good is a test result if you cannot attest to its validity?

There’s a lot that goes into making sure laboratories provide valid results, much of which is detailed in the accreditation process. For more information, we sit down with Keith Klemm, senior accreditation manager for ANSI National Accreditation Board to learn about laboratory accreditation, method validation and other certifications and credentialing available in the cannabis industry.

Q: Why is method validation important for cannabis test methods? 

Keith Klemm: Because cannabis production, testing, and sales is regulated by each individual state, there are very few standard methods for testing cannabis and cannabis-derived products. Non-standard methods or methods developed by the laboratory must be validated to ensure the methods are fit for their intended purpose. What good is a test result if you cannot attest to its validity? There would be no confidence that the results are accurate. Additionally, while organizations such as ISO, AOAC and ASTM are developing standard methods for use in the laboratory, the wide range of products and matrices being tested require modifications to standard methods. Standard methods used outside their intended scope must also be validated, again to ensure the method remains fit for the intended purpose.

Q: We’re pretty familiar with laboratory accreditation. What other accreditations are available in the cannabis industry?

Klemm: Accreditation programs are available for product certification and personnel credentialing, in addition to laboratory accreditation. ANAB’s product certification program was launched in 2020 and is based on the requirements of ISO/IEC 17065. The program combines the requirements of this standard with specific scheme requirements to attest to the competency of certification bodies who then certify products within the scheme. Two schemes are in development specific to the cannabis industry: Cannabis Safety and Quality (CSQ) and PurityIQ. For personnel credentialing, a new Cannabis Certificate Accreditation Program (C-CAP) was developed and is based on ASTM D8403, Standard Practice for Certificate Programs within the Cannabis and Hemp Industries. It also includes any additional state Responsible Vendor Training requirements.

Q: What are the steps to becoming an accredited cannabis testing laboratory, product certification body, or C-CAP organization?

Klemm: The process begins with a request for quote. The organization prepares for the initial assessment by implementing the requirements of the applicable standards, regulatory requirements, and scheme requirements. ANAB believes in a partnership approach to accreditation with a focus on customer needs while ensuring accreditation requirements are met. Once the organization is ready, an initial document review is performed. The accreditation assessment is then performed on-site by technically skilled and knowledgeable assessors. If any nonconformities are encountered, the organization provides a response with cause and corrective actions. Once all nonconformities are resolved and technical review is completed, a scope of accreditation and certificate are provided to the organization. The technical review may vary depending on the accreditation that is being sought, but the general process of accreditation is the same. After accreditation is achieved, the organization moves into a cycle of surveillance and reassessment as defined by the accreditation program and any scheme requirements.

About Keith Klemm

Keith Klemm is a graduate of Manchester University with a B.S. in Biology.  Keith is an experience laboratory director and operations manager with 30 years’ experience in the laboratory environment and has worked as a senior accreditation manager for ANSI National Accreditation Board for the past five years.

Keith’s areas of expertise include:

  • Microbiological assays for food, medical device, and environmental test matrixes.
  • Environmental chemistry of water and wastewater.
  • Biocompatibility testing of medical devices.
  • ISO/IEC 17025:2017
  • AOAC International – guidelines for food laboratories program requirements
  • 21 CFR Part 58, GLP program requirements
  • EPA NLLAP program requirements
  • AAFCO program requirements
  • FDA ASCA Pilot program for Biocompatibility
  • Michigan Cannabis Regulatory Agency program requirements
  • ISO 20387 Biobanking

The Inflated THC Crisis Plaguing California Cannabis

By Erik Paulson, Josh Swider, Zachary Eisenberg
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Fraud

The THC content you see on a label when you walk into a dispensary? There is a very good chance the number is false.

In every state with regulated cannabis, there is a requirement to label the potency of products so consumers can make informed purchasing and medicating decisions. The regulations usually state that the THC/cannabinoid content on the label must be within a particular relative percent difference of the actual tested results for the product to be salable. In California, that threshold is +/- 10%.

The problem is, with all the focus on THC percentage in flower and concentrate products, enormous pressure has been placed on cultivators and manufacturers to push their numbers up. Higher numbers = higher prices. But unfortunately, improving their growing, extraction and formulation processes only gets companies so far. So, they proceed to ‘lab shop’: giving their business to whichever lab provides them the highest potency.

There are roughly 50 Department of Cannabis Control (DCC) licensed labs in the state, and competition is fierce to maintain market share in a maturing and plateauing industry. Whereas competition used to be healthy and revolved around quality, turnaround time and customer service, now it’s essentially become a numbers game. As a result, many labs have sacrificed their scientific integrity to chase what the clients want: higher THC potency results without contaminant failures. The practice has become so prevalent that labs openly advertise their higher potency values to gain customers without fear of recourse. Here are two examples:

 

Over a year ago, a few labs fed up with what was happening got together to determine the extent of the potency inflation issue. We proactively purchased and tested over 150 randomly chosen flower samples off dispensary shelves. The results were staggering. Eighty-seven percent of the samples failed their label claims (i.e., were >10% deviant of their labeled values), with over half of the samples >20% deviant of their labeled THC values (i.e., over 2x the legal permitted variance). Additionally, our labs found multiple cases of unreported category 1 pesticides in some of the analyzed samples at multiple times the legal limit – a significant public health concern. The deceit was not limited to small cultivators trying to get by but also some of the industry’s biggest brands.

The same issues and economic conditions are in play for concentrates. Manufacturers of these products also hunt for the highest D9 THC values because wholesale prices for distillate are determined by THC content: <86% for the lowest value, 86-88%, 88-90% and >90%, with a new price point for over 94%. As a result, consumers can walk into a dispensary and find concentrates like the one shown below that report>99% total cannabinoids (>990mg/g) and contains almost 10% additional terpenes. You don’t have to be an analytical chemist to realize those numbers add up to well over 100%, which is physically impossible.

Blame

Everyone can agree that the system is broken, but who is at fault? Should the blame be placed on dispensaries, many of whom use THC % as their only purchasing or marketing metric? Or on cultivators, manufacturers and distributors, who seek the highest results possible rather than the most accurate ones? Or on the labs themselves, who are knowingly reporting inflated results?

Ultimately, the individual businesses are acting in their own self-interest, and many are participating in this practice simply to stay afloat. Dispensaries can’t reasonably be expected to know which results are inflated and which are not. Cultivators and manufacturers feel obligated to use labs that provide them with the highest results; otherwise, they’re putting themselves at a disadvantage relative to their competitors. Likewise, labs that aren’t willing to inflate their numbers have to be ready to watch customers walk out the door to maintain their principles – an existential dilemma for many.

The primary reason why potency inflation has become so prevalent is that there have been no negative repercussions for those that are cheating.  

The axiom is true – don’t hate the player, hate the game. Unlike most businesses, testing labs operating with integrity want meaningful regulations and oversight to assure a level playing field. Without them, the economics force a race to the bottom where labs either have to inflate more and more or go out of business. Since 2016, the DCC (formerly BCC) has taken zero meaningful actions to discourage or crackdown on potency inflation— not a single recall of an inflated product or license suspension of an inflating lab— so predictably, the problem has gotten progressively worse over time.

So, to answer the question above – who is at fault for our broken system? The answer is simple: the DCC.

Inaction

In the Fall of 2021, we began engaging with the DCC to address the industry’s potency inflation concerns. The DCC requested we provide them with direct evidence of our accusations, so we collected and shared the flower data mentioned above. The Department tested the same batches off the shelf and confirmed our results. Somehow not a single recall was issued – even for the batches containing category 1 pesticides.

We pushed for more accountability, and DCC Director Nicole Elliott assured us steps were being taken: “The Department is in the process of establishing a number of mechanisms to strengthen compliance with and accountability around the testing methods required of labs and will be sharing more about that in the near future.”

Instead, we got a standardized cannabinoid potency method (mandated by SB 544) that all labs will be required to use. On the surface, a standardized methodology sounds like a good thing to level the playing field by forcing suspect labs into accepting generally accepted best practices. In reality, however, most labs already use the same basic methodology for flower and concentrate cannabinoid profiling and inflate their results using a variety of other mechanisms: selective sampling, using advantageous reference materials, manipulating data, etc. Furthermore, the method mandated is outdated and will flatly not work for various complex matrices such as gummies, topicals, beverages, fruit chews and more. If adopted without changes, it would be a disaster for manufacturers of these products and the labs that test them. Nevertheless, the press release issued by the DCC reads as though they’ve earned a pat on the back and delivered the silver bullet to the potency inflation issue.

Here are a few more meaningful actions the DCC could take that would help combat potency inflation:

  • Perform routine surveillance sampling and testing of products off of store shelves either at the DCC’s internal lab or by leveraging DCC licensed private labs.
  • Recall products found to be guilty of extreme levels of potency inflation.
  • Conduct in-person, unannounced audits of all labs, perhaps focusing on those reporting statistically higher THC results.
  • Conduct routine round-robin studies where every lab tests the same sample and outliers are identified.
  • Shutdown labs that are unable or unwilling to remediate their potency inflation issues.

For some less disciplinary suggestions:

  • Remove incentives for potency inflation, like putting a tax on THC percentage
  • Set up routine training sessions for labs to address areas of concern and improve communication with the DCC

Fight

Someone might retort – who cares if the number is slightly higher than it should be? No one will notice a little less THC in their product. A few counterpoints:

  1. Consumers are being lied to and paying more for less THC.
  2. Medical cannabis users depend on specific dosages for intended therapeutic effects.
  3. Ethical people who put their entire lives into cultivating quality cannabis, manufacturing quality products and accurately testing cannot compete with those willing to cheat. If things get worse, only the unethical actors will be left.
  4. Labs that inflate potency are more likely to ignore the presence of contaminants, like the category 1 pesticides we found in our surveillance testing.
  5. This single compound, delta-9 THC, is the entire reason why this industry is so highly regulated. If we are not measuring it accurately, why regulate it at all?

We will continue to fight for a future where quality and ethics in the cannabis industry are rewarded rather than penalized. And consumers can have confidence in the quality and safety of the products they purchase. Our labs are willing to generate additional surveillance data, provide further suggestions for improvement in regulations/enforcement, and bring further attention to this problem. But there is a limit to what we can do. In the end, the health and future of our industry are entirely in the hands of the DCC. We hope you will join us in calling on them to enact meaningful and necessary changes that address this problem.

Emerald Holding Acquires MJBiz for $120 Million

By Cannabis Industry Journal Staff
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In a press release sent out today, Emerald Holding, Inc. announced they have completed their acquisition of MJBiz for $120 million.

Emerald Holding, Inc. is a large, publicly traded business-to-business events producer and content conglomerate with a number of publications and events in industries like design, equipment, retail, safety & security and technology. Founded in 2013, the company has become a leading operator of B2B trade shows in the US, with their largest shareholder being the Toronto-based investment group called Onex Corporation.

MJBiz, founded in 2011, is known in the cannabis industry for their content platform, MJBizDaily, as well as the world’s largest cannabis trade show, MJBizCon.

As part of the agreement to acquire MJBiz, Emerald Holding will retain senior management in the company for day-to-day operations. The agreement also includes the potential for future payments, depending on the company’s performance through the end of this year.

Hervé Sedky, President and CEO of Emerald Holding, says they have been big fans of the MJBiz brand for a long time. “We have long admired MJBiz’s sterling reputation for being the most trusted event and content producer serving the business side of the cannabis and hemp industries and their respective participants,” says Sedky. “This is a transformational acquisition for Emerald as it represents an important next step in the implementation of our strategic initiatives and underscores our commitment to evolve and grow our customers’ businesses 365 days a year.”

The two founders of MJBiz, Cassandra Farrington and Anne Holland, will stay on with the company in a consulting capacity. According to Farrington, who is also chair of the MJBiz Board, says they went with Emerald because they value the company’s uniqueness. “Our organization has experienced massive growth since its inception, initially as a how-to resource to help dispensary owners run their businesses better, into our position today as the leading commercial resource for the cannabis sector,” says Farrington. “Integrating with a larger organization provides the additional resources and channels to unlock the next phase of MJBiz’s growth and is the right next step in our evolution as a business.”

Soapbox

User-Generated Data Brings Revenue: It’s Time for the Users to Get Some

By Dr. Markus Roggen, Amanda Assen, Dr. Tom Dupree
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You generate the product, you should benefit from it too.

If you are not paying for the service, you are the product. This pithy phrase is often heard in discussions about social media’s use of personal information and user-generated content. The idea can be traced back to a 1973 short film that critiques television’s impact on culture and politics. Although about television, the quote, “you are the end product delivered en masse to the advertiser,” still rings true when talking about major online corporations.

We have all seen it with big corporations. In the first three months of 2021, of Facebook’s $26.2B revenue, a whopping $25.4B was from advertising sales. However, the space for an advertisement to be delivered en masse to the public is not the only thing purchased from Facebook. Access to personal information such as your search history, likes and posts are also purchased by companies to determine which advertisements they should target you with.Access to user-generated data by advertisers has sparked privacy and ownership concerns regarding large internet platforms. The idea of being surveilled all the time is uncomfortable, and many large corporations like Facebook have royalty-free and transferable licenses to your posts.

Similarly, many websites in the cannabis industry gain value from information submitted by consumers. As an example, the website Leafly provides over 1.3 million consumer product reviews that are often used for purchasing decisions. These reviews play a role in attracting more people to websites that operate with a similar system to Leafly, and in turn advertising space to reach those people is sold. According to their About page, more than 4.5 million orders for advertising space are placed with businesses on Leafly each year, generating annually about $460 million in gross merchandise value. So, the users work for free to attract an audience to these websites for the advertisers, and the websites make money from advertisers.

Can we empower users with ownership of their content, data and participation in profits?

Frustrated social media users exclaiming “We are the product!” does nothing to change our reality. It is unlikely we will change how big corporations like Facebook work, but can we ensure users receive some of the benefits in our own cannabis industry? Many of these websites, especially those for medicinal cannabis, are designed to genuinely help users. Can we further increase this feeling of having a transaction with the websites rather than feel like we are being sold to advertisers? The world of NFTs may offer some guidance.

An NFT (or non-fungible token) acts as a digital certificate of authenticity. Unlike cryptocurrencies (like Bitcoin), each NFT is unique, so it cannot be exchanged or multiplied. They are kept on a blockchain system, which is a growing list of computationally secure ledgers. The blockchain allows proof of ownership to be established for the person with the NFT, and prevents others from being able to tamper with or claim ownership of the artwork, game, tweet or cat picture it is assigned to. Although non-exchangeable, NFTs can be traded on a digital marketplace, like how a physical piece of art can be auctioned.

While NFTs and cryptocurrencies are certainly not without controversy and flaws, an NFT-like system that provides users with proof of ownership for their data and grants them control over what is done with it may be the way of the future for websites in the cannabis industry. Just like Facebook, when it comes to sales, online display advertisements are some of the top revenue generators for websites in the cannabis industry that utilize user-generated content. With an NFT-like system, users could be granted a royalty for their content, which would obligate websites to give a portion of their profits to the users when their content is sold to an advertiser. Users may be able to have a portfolio of their generated content, have some control over who can access their content and who their personal data can be sold to.

Websites that are more focused on cannabis for medicinal use often pride themselves on being more patient-focused and professional – no pothead puns or crass logos. An NFT-like system might be especially beneficial for these companies, as it would further increase the emphasis of trust and respect for users. In this case, an NFT-like system could be used to assign ownership of reviews to individual website users. Since these reviews attract new people to these websites, when access to a user’s data is sold to advertisement companies, then a portion of that revenue is given to the people who created the reviews. The estimated amount of revenue that reviewers help to bring into the company can be calculated and distributed accordingly. While this may seem like it would cause a significant loss of revenue for the websites, the increased trust that would come with this system would likely promote more users, generating an overall increase in revenue and credibility. Users could become more engaged and spend more time writing reviews, increasing web traffic considerably. Advertisers would be more attracted to the larger audience and the prestige of having their advertisement on a well-respected site.

An NFT-like system could hold large internet corporations accountable.

The new normal is corporations on the internet making money from the content created by users. In return, users receive none of the monetary benefits and have their personal information shared with hundreds of businesses. An NFT-like system, although theoretical, may be able to empower users to hold large corporations accountable for what is done with user-generated data. It is unlikely we can change big companies like Facebook, but if adopted early, this may be plausible in our cannabis industry. This in turn may not only give more ownership to the website users, but could also benefit the websites, and the advertisers. Overall, the product should be the website and the services it provides. An NFT-like system might help promote this and could make users who generate value for the website partners in business.

Ask the Experts: The Business of Cannabis Meets the Law

By Cannabis Industry Journal Staff
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Practicing Law Institute Press’s Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is a one-of-a-kind deep dive into the many regulations governing the industry. Aimed at attorneys representing clients in this space, the treatise offers guidance on a range of interrelated topics including state regulation of medical and non-medical cannabis; federal law, enforcement and preemption and their implications for employment, taxes and banking; and the various aspects of establishing and managing a cannabis enterprise, from growth to licensing, transport and distribution. We spoke with co-authors James T. O’Reilly, professor of Public Health Policy at the College of Medicine of the University of Cincinnati and author of leading references on food and drug law, and Edgar J. Asebey, a founding partner of Keller Asebey Life Science Law and a life sciences attorney with over twenty years of experience, about the intersection of the cannabis business and the law.

Q: From the legal industry’s perspective, how has this area of the law evolved over the past few years – and what would you advise clients in cannabis to look for when engaging legal assistance for their businesses?

James T. O’Reilly & Edgar J. Asebey: Over the past few years, we have seen a growing acceptance of the idea that lawfully serving the needs of cannabis consumers is a commendable business initiative. This evolution in thinking – tied to the myriad business opportunities cannabis presents – has given large, mainstream corporate law firms the incentive to grow practices and develop specialists in this area, which is a very positive development.

But it is not enough for lawyers to know their way around M&A and the capital markets; they must also have experience with federal regulatory bodies. As regulations continue to evolve, it is essential for practitioners to be familiar with the Food, Drug and Cosmetics Act as well as the Federal Trade Commission Act. The framework for regulating cannabis products already exists, as can be seen in the Warning Letters sent to hemp and CBD companies by both the Federal Trade Commission and Food and Drug Administration (as well as, most recently, the FDA and CDC’s warning about delta-8 THC). If a client places their hemp or CBD product into the stream of commerce, that product will be subject to FDA, FTC and relevant state laws. We strongly recommend seeking out advisors who truly understand these regulations and how they align with the regulatory agencies’ procedures and agendas.

Q: What are the most urgent legal and regulatory topics the industry is watching these days?

O’Reilly & Asebey: Our treatise follows and analyzes the most pressing legal issues facing those in the cannabis and hemp space. In our most recent edition, we add discussion of the Final Rule for the establishment of a domestic hemp production program. We think this is a significant development in that it attempted to address some of the industry’s criticism of some provisions found in the Interim Final Rule, par­ticularly around issues of sampling and testing for THC content. The Final Rule clarified issues around THC percentage testing methodologies, but disappointed many in the industry by leaving in place the low 0.3% dry weight threshold for an acceptable hemp THC level. On the other hand, The Final Rule raises the threshold for a negligent violation from 0.5% to 1.0% total THC and limits the number of violations a grower can receive in one year to one, easing potential penalties for violations.

Of course, the regulation of CBD products is on the minds of many in the industry. Key questions remain about whether cannabinoids such as delta-8 THC can be lawfully sold. Since the FDA has provided no clear guidance with regard to the sale and use of CBD and other hemp-derived cannabinoid-containing prod­ucts, well-meaning businesses find themselves operating in a regulatory gray area. While some states have raced to place delta-8 THC on their controlled substances lists or otherwise regulate it, at the federal level it remains unclear. Our book provides a legal argument showing that current regulations support the lawful production and sale of delta-8 THC. To date, this and other legal arguments have not been tested in the courts and, without FDA guidance, the delta-8 THC sector will remain gray.

Editor’s Note: The Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is now available for purchase here.

About James T. O’Reilly

James T. O’Reilly of the University of Cincinnati College of Medicine is former chair of the 8,000-member Section of Administrative Law & Regulatory Practice of the American Bar Association and has been active in numerous ABA, Federal Bar Association, and state and local bar activities. He retired as Associate General Counsel of The Procter & Gamble Company to teach full-time, and served as a consultant to three federal agencies and to the Deputy Secretary General of the European Commission. He has authored fifty-six texts and more than 230 articles, and his work was cited numerous times in appellate opinions, including “The experts have written . . . ” in a March 2000 opinion of the U.S. Supreme Court (Food & Drug Administration v. Brown & Williamson Tobacco Corp., 120 S. Ct. 1291). He has received numerous honors and awards for his professional and electoral activities and has been listed in Who’s Who in American Law for twenty-five years. He is a graduate of Boston College and the University of Virginia School of Law.

About Edgar J. Asebey

Edgar J. Asebey, a partner at Asebey Life Sciences Law PLLC, is a regulatory and transactional attorney with over two decades of experience in federal regulation of pharmaceutical, biotechnology, medical device, food, dietary supplement and cosmetics companies. Since 2015, he has been working on cannabis-related matters and transactions, and since 2018, he has provided regulatory compliance, business transactional, venture finance and international trade services to hemp/CBD companies. Mr. Asebey practices before the FDA, the USDA, the CBP, the EPA, and the FTC, representing client companies on regulatory compliance, product approval/registration and FDA enforcement defense matters. He founded and served as president of Andes Pharmaceuticals, Inc., a natural products drug discovery company, from 1994 to 2000, and has served as in-house counsel to two life sciences companies. Mr. Asebey is a member of the American Bar Association (Section on Administrative Law & Regulatory Practice: Food and Drug Committee and International Committee), the Food & Drug Law Institute (FDLI), the Dade County Bar Association, and BioFlorida.

Content sponsored by Practicing Law Institute

Can Cannabis Get Even More Social?

By Mark Goldwell
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Cannabis has always had it tough when it comes to marketing. Part of it is simple logistics. A DTC playbook, heavily contingent on growing a brand’s audience and pushing folks to purchase products through digital marketing, isn’t a possibility for them. Despite its mainstream acceptance, most large ad platforms like Facebook and Instagram won’t touch it because of its tenuous legality. Banner ads don’t convert and only end up on specific platforms like Pornhub or Weedmaps anyway.

PlugPlay, a California cannabis brand, stays relevant with creative posts like these on Instagram

And because the legal status changes on a state-by-state basis, it’s extremely difficult for a brand to span across multiple markets. Just think: why would someone living in Florida care about a cool cannabis brand in Detroit if they weren’t in that industry or have ties to that state? This also makes influencer marketing tough because people aren’t finding the coolest people in their respective states to follow. They’re just finding people they think are interesting.

That leaves budtenders – point of sale experts – that hold a huge position of educating and steering folks towards products. Most folks are newer to cannabis – or cannabis has grown up a ton since their past casual experience with it. Budtenders offer an informative, hyper-local solution with extremely limited reach to a narrow market.

But the future shows promise. A new wave of platform marketing has emerged with new formats and lots of room to cultivate and grow for cannabis brands. With a little understanding of what’s driving the success of social media newcomers and evolving mainstays, cannabis companies can potentially find new avenues for marketing and brand-building success.

Going Native

There’s currently a lot of opportunity through the larger cannabis retail and native ordering apps – ones like Weedmaps, Leafly and others that have widespread brand recognition within the cannabis community and a growing array of social media-like features. These are places that already segment according to markets, with a built-in, educated audience open to creative approaches to branding and marketing.

These types of apps are also becoming the norm more and more. Especially since the pandemic, dispensaries are doing most of their volume through online orders and pickup. As a result, making sure you show up, look great and convey your unique position on these platforms is incredibly important.

Listening and Learning

Whether it’s Clubhouse or other upcoming rivals on the horizon, audio platforms are great because they can serve as a means to have an honest, direct and enlightening conversation about cannabis. This is great news for budtenders who can help a brand expand their reach by facilitating these sorts of conversational consumer relationships. As the cannabis market matures rapidly, people will need a safe place to normalize consumption, talk about dosage or about how normal consumers (not just stereotypical potheads, but every day, “constructive members of society”), are able to use cannabis effectively in their day-to-day lives.

A lot of other visually-based platforms are about curation or presentation of an ideal life and less about learning or sharing – a place where audio platforms can shine.

Old is New

In some cases, it’s not about just using new platforms but finding better ways to utilize old ones. For example, legal or not, a lot of folks are about discretion when it comes to their cannabis. They want to get questions answered and learn about brands and products via peers and experts, but they don’t want their bosses or grandparents knowing that they’re hitting a pen between meetings or before brunch.

That’s why time-based content platforms – Snapchat, Instagram, WhatsApp and others – that offer individuals and brands some measure of safety, as well as controlled messaging, will help continue to normalize cannabis.

Another non-cannabis example worth emulating is Psilodelic, a psilocybin gummy brand that’s super low-dose and decently branded, using Instagram in a creative way. Purposefully making their accounts private and going without a public hub, the only way to buy the product is to follow and DM them. “Hacking” the platform in this way means they have to shut down and open up new accounts all the time, but they’ve done an amazing job offering a product that, similarly to cannabis, is sometimes inaccessible, and have done it in a way that’s simple and feels more elite. That’s creative entrepreneurship.

In the end, using these changing platforms means approaching them as tools to foster a better relationship with people. The brands that succeed will have dead-simple instructions and information that really helps to empower folks to look at cannabis in a different way. Then, as we finally reach legalization, these brands will find themselves better equipped to step into the mainstream, confident in the meaningful relationships they’ve already cultivated.

Ask the Experts: Microbiological Contamination in Cannabis & What You Should Look for

By Cannabis Industry Journal Staff
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Testing cannabis and cannabis derived products for microbiological contamination should be a straightforward conversation for testing labs and producers. However, a patchwork of regulations and a wide variety of perspectives on what we should, or should not, be looking for has left much of the cannabis industry searching for reliable answers.

Organizations like the AOAC are taking the first crack at creating standardization in the field but there is still a long way to go. In this conversation, we would like to discuss the general requirements that almost all states share and where we see the industry headed as jurisdictions start to conform to the recommendations of national organizations like AOAC.

We sat down with Anna Klavins and Jessa Youngblood, two cannabis testing experts at Hardy Diagnostics, to get their thoughts on microbiology testing in the current state of the cannabis industry.

Q: What are the biggest challenges facing cannabis testing labs when it comes to microbiology?

The CompactDry Yeast and Mold Rapid plate provides fast results.

Anna Klavins & Jessa Youngblood: For microbiology testing, it comes down to a lack of standardization and approved methods for cannabis. In the US, cannabis regulation is written on a state-by-state level. As a result, the rules that govern every aspect of bringing these materials to market is as unique and varied as the jurisdiction writing them. When we are speaking specifically about microbiology, the question always comes back to yeast and mold testing. For some, the challenge will often be centered on the four main Aspergillus species of concern – A. terreus, A. niger, A. fumigatus, and A. flavus. For others, it will be the challenges of total count testing with yeast, mold, and bacteria. These issues become even more troublesome by the lack of recognized standard methodology. Typically, we expect the FDA, USP, or some other agency to provide the guidelines for industry – the rules that define what is safe for consumption. Without federal guidance, however, we are often in a situation where labs are required to figure out how to perform these tests on their own. This becomes a very real hurdle for many programs.

Q: Why is it important to use two different technologies to achieve confirmation?

Dichloran Rose Bengal Chloramphenicol (DRBC) Agar is recommended for the enumeration of yeasts and molds.

Klavins & Youngblood: The push for this approach was borne out of the discussions happening within the industry. Scientists and specialists from across disciplines started getting together and creating groups to start to hash out problems which had arisen due to a lack of standardization. In regards to cannabis testing, implementing a single method for obtaining microbiology results could be unreliable. When clients compared results across labs, the inconsistencies became even more problematic and began to erode trust in the industry. As groups discussed the best way to prove the efficacy of their testing protocol, it quickly became apparent that relying on a single testing method was going to be inadequate. When labs use two different technologies for microbiology testing, they are able to eliminate the likelihood of false positives or false negatives, whichever the case may be. In essence, the cannabis testing laboratories would be best off looking into algorithms of detecting organisms of interest. This is the type of laboratory testing modeled in other industries and these models are starting make their way into the cannabis testing space. This approach is common in many food and pharma applications and makes sense for the fledgling cannabis market as well.

About Anna Klavins

Anna Klavins earned a Molecular and Cellular Biology B.S. degree from Cal Poly San Luis Obispo while playing for the Cal Poly Division I NCAA women’s tennis team. Since joining Hardy Diagnostics in mid-2016, she has gained experience in FDA submissions [510(k)] for class II microbiology in vitro devices. She has worked on 15 projects which led to a microbiology device becoming FDA cleared. She has recently begun participating in the AOAC Performance Tested Methods program.

 

About Jessa Youngblood

Jessa Youngblood is the Food, Beverage and Cannabis Market Coordinator for Hardy Diagnostics. A specialist in the field of cannabis microbiology for regulatory compliance, she is seated with the AOAC CASP committee working on standard methods for microbiological testing in cannabis and hemp. She also sits on the NCIA Scientific Advisory Council as well as the ASTM Cannabis Council.

Content sponsored by Hardy Diagnostics.

Jane & Leafly Join Forces: An Interview with Socrates Rosenfeld, CEO of Jane

By Aaron Green
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As retailers accept the end of in-store shopping as we know it and start adjusting to e-commerce, an improved and more involved customer experience will be imperative for an e-retailer to grow, let alone stay afloat.

Jane recently announced a strategic partnership that combines Jane’s best-in-class product catalog and business tools with Leafly’s consumer marketplace and reach. Together, the companies will build solutions that empower cannabis retailers with fast and simple online shopping experiences that increase consumer purchase behavior. The partnership will seek to help instill consumer trust in the online shopping experience, build stronger customer acquisition tools for retailers, and help dispensaries grow their ecommerce capabilities with consistency and automation.

This strategic partnership comes after a massive year of growth for both Jane and Leafly. In the past year, Jane powered over 17 million orders and $2 billion in cannabis sales, while Leafly has seen more than 4,500 cannabis retailers in North America leverage their platform to bring new customers through the door.

Socrates Rosenfeld, CEO of Jane

We spoke with Socrates Rosenfeld, CEO of Jane to learn more about e-commerce and online marketplaces and how Jane and Leafly came together as partners, rather than competitors. Prior to Jane, Socrates was an Apache helicopter pilot for the US Army later transitioning to consulting with McKinsey.

Aaron Green: Socrates, thanks for taking the time today. What trends are you seeing and following in the industry?

Socrates Rosenfeld: Always happy to chat about the industry. Thanks for having me.

If you were to ask me that question a year ago, I’d say having a digital footprint was something that would give a dispensary or a brand a nice advantage. Today, it’s a must-have for survival. Where it used to be one or the other; online or offline, now we are able to merge the two by replicating a physical store into a digitized form to extend its reach far beyond its walls.

As things become more digitized, information becomes more necessary to run operations. With that we are able to meet the expectations of the consumers who are accustomed to convenience and curation. The omnichannel experience provides the best of both worlds. Access and ease of search with the ability to pick up or have the product delivered the same day from a locally owned and run business.

Reviews are one of the most important aspects of this unification of online and offline. It is something that is lost in solely offline purchases, that we’re now able to collect and organize. This product information allows us to provide customers the purchasing power to make a well-informed decision.

At Jane, we believe it is possible to create wins for the dispensaries, brands and customers – and digitization creates the opportunity for that to happen. I think there’s no better incubator in the world than the cannabis industry to prove that online and offline retail can work in harmony.

Aaron: Jane is the largest e-commerce platform in North American cannabis and Leafly is the largest marketplace in North American cannabis. What’s the difference between an e-commerce platform and a marketplace?

Socrates: Great question. There is definitely some overlap between the two, which is why it makes so much sense for us to collaborate. Ultimately though, our focus and expertise are different. Jane’s ecommerce platform serves as the industry’s digital infrastructure that pushes digital products across various order origination points like a dispensary’s own website, a brand’s own website and now, Leafly’s marketplace. Paired with Leafly’s industry-leading content and market information, together we can complete the entire online cannabis shopping experience – from product discovery through order fulfillment.

Aaron: At first glance, one might think that Jane and Leafly are competitors. How did you see it differently? And how did this partnership come about?

Socrates: Not only is our tech complementary, but we are aligned on mission – to empower consumers, dispensaries and brands with the integrity of the plant in mind.

We want to make it simple for consumers to reach the products that will be most helpful for them. We want to make it possible for dispensaries and brands, regardless of their size, to be able to compete on an even playing field.

It all comes back to being good stewards of the industry. Education and access create a healthy demand for a diverse range of products. That means that the plant stays in the hands of many – safeguarding it from homogenization.

Aaron: How do consumers benefit from the partnership?

Socrates: It really is all about bringing this industry in line with any other retail vertical and meeting the customer where they are. It unlocks more avenues for customers to discover products and access a vast catalog of information and verified customer reviews. Bottom line, this partnership makes shopping for cannabis as simple as shopping online for everything else in the world, while also ensuring the success of the sellers.

Aaron: When you say the sellers, are you talking about the dispensary or the brands?

Socrates: Both, we want to provide value for the entire ecosystem. We can do that directly for dispensaries and brands by enabling an automated ecommerce platform that they can use to power their own website. At Jane, we know that technology can unlock value for everyone, where it is not a zero-sum game and success for one means success for the other. With Jane, both the dispensaries and the brands win.

Aaron: What kind of regulatory challenges do you face through the partnership?

Socrates: There are no real regulatory challenges for the partnership itself. The entire industry operates under regulatory challenges, but it is those regulations that have been the catalyst for innovation. I see the opportunity for legal online payments and national product distribution to play a large role in shaping the industry soon, and a partnership like this will ensure a seamless transition for the industry as things continue to evolve.

Aaron: Final question. What are you personally interested in learning more about?

Socrates: I’ve always been curious about disruptive models. The companies, not just in tech, but any company that has set out to do things differently and has been able to hold true to a vision. That’s what interests me, and I think I will always have something to learn and draw inspiration from. 

Aaron: Excellent, that’s the end of the interview, Socrates!

Socrates: Thanks, Aaron.

Soapbox

Need to Improve Your Cannabis Initiatives? Consider Marker-based Augmented Reality

By Amanda Byrd
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Augmented Reality (AR) used to be something us mere humans only dreamt about. Now, AR is the norm and is seen in thousands of apps that people use every day. In fact, the forecast for the AR market is projected to reach up to $75 billion in revenue by 2023.

This is largely in part due to the fact that many smartphone apps now use AR as their default engagement method. And, with more people than ever using their smartphones to shop, the opportunity to engage through AR is easier than ever.

To give you a better idea of just how regularly we engage with AR, think about the popular apps Snapchat and Waze. Both apps utilize AR in some way – Snapchat uses AR to create the app’s infamous filters, and Waze uses AR to offer pop-up coupons and other promos based on the user’s location.

Another popular type of AR is marker-based AR. This form of AR is when a mobile app lets users scan the “marker” or image for a rendered interaction. Marker-based AR can be especially useful to cannabis businesses and offers a relatively low price point and easy execution.

Here are just a few ways marker-based AR can revamp your cannabis business and take you to the next level.

Education

The canna-curious are becoming one of the largest audiences in relation to the sustained growth of the cannabis industry, and it’s more important than ever to provide valuable information to this demographic to encourage their purchasing decision. Considering the fact that 65% of the world is comprised of visual learners, showing a video will have a far greater impact compared to talking them through a product.

By utilizing marker-based AR, a budtender can quickly activate video content from packaging or marketing material to demonstrate how a product works and its most important features. This provides an easy and effective way to quickly educate customers and entice them to make a purchase. 

Engagement

Connecting with customers is more important than ever thanks to the fragmented distribution system in the cannabis industry. Capturing customer information and building relationships is crucial to a brand’s longevity.

AR can support two aspects of the customer journey: in-store and post purchase. Fifty-five percent of shoppers use online videos while they’re in the store making a purchase, and eight out of ten people are more likely to purchase after viewing a brand video.

An AR app that provides customers with support during and after their purchases not only encourages sales but also provides brands with the opportunity to engage with push-notifications and direct marketing, which ultimately encourages additional product purchases. With more people than ever using their smartphones to shop, the opportunity to engage through AR is easier than ever.

Experience

The experience a consumer has with your brand can make or break their brand loyalty. As the Chief Marketing Officer for Philter Labs, Inc., I’m constantly looking for authentic ways to connect with our customers.

We recently partnered with Daily High Club, a monthly subscription box that offers custom glass pieces and must-have smoking accessories inspired by cannabis influencers. For June, Daily High Club featured two fan-favorite influencers: MacDizzle420 and Koala Puffs.

Using marker-based AR, we activated a video montage featuring the influencers that could be viewed directly from their custom piece of glassware. Subscribers were able to engage with the influencers while enjoying the glassware which added a new element to the experience that was both engaging and immersive in a way that was never possible before.

At PHILTER, we’re committed to continue using AR to supplement our marketing strategies. As a proponent of the technology, I truly believe that as brands work to differentiate themselves in the space, leaving a lasting impression will be the catalyst for brands to thrive and grow in an increasingly competitive market while also directly impacting a customer’s lifetime value.