Tag Archives: controlled

December 2, 2021

How Section 280E is Still Hindering the Cannabis Industry

By Jay Jerose

The cannabis industry is an unprecedented industry and one under constant review and control. Following the November 2020 elections, fifteen states and Washington DC have legalized adult use cannabis, a number that will continue to grow as legalization slowly becomes more widely adopted in other states. Beyond that, a continuously growing number of states allow residents to purchase legal medicinal cannabis, and many have also decriminalized adult use. However, it still remains a Schedule I substance under the Controlled Substances Act and is therefore illegal on all accounts at the U.S. federal level, which creates a number of issues for businesses in the cannabis industry duly operating in states where it has been legalized.

Not only is it difficult for cannabis companies to avail themselves of alternative banking solutions, but there are also obstacles in place preventing these companies from taking advantage of notable tax deductions. The primary obstacle being Internal Revenue Code (IRC) Section 280E.

What is Section 280E?

Section 280E is a relatively short code section, only 77 words to be exact, but it carries significant weight and can have a debilitating effect on the taxable income of marijuana [sic] related businesses (MRB). Section 280E of the IRC prohibits taxpayers who are engaged in the business of trafficking certain controlled substances, including cannabis, from deducting typical business expenses associated those activities. Section 280E, which was enacted in 1982 during the “War on Drugs” era, has become increasingly relevant for cannabis businesses. The cannabis industry has grown substantially in recent years with annual market values expected to reach $30 billion by 2025.

However, while Section 280E greatly restricts the tax deductions of state-legal cannabis businesses, there is some reprieve. Current IRC provisions permit state-legal cannabis businesses, including growers, producers, wholesalers or retailers, to deduct the Cost of Goods Sold (COGS) in computing their US federal income tax liability, despite the application of Section 280E.

Impact of Section 280E on Businesses

What does Section 280E mean for cannabis businesses today? It is intended to prevent dealers from claiming tax deductions for their business expenses, interpreted to include state-legal cannabis businesses, reduced deductions that result in increased taxable income and MRBs will face higher federal tax rates.

The IRC disallows any deductions or credits paid or incurred during a tax year if those deductions or credits relate to trafficking controlled substances. The courts have taken the position that the term “trafficking” in this case means “engaging in a commercial activity – that is, to buy and sell regularly.” Simply, the law denies cannabis businesses any U.S. federal income tax deduction for ordinary and necessary business expenses, despite being duly licensed as a legal business in their state of operation.

Typically, the ability to deduct ordinary business expenses means that a business is subject to federal tax on its net income (i.e., gross receipts minus expenses). However, the definition of Section 280E and the classification of cannabis as a Schedule I substance severely hinders legal cannabis companies from taking advantage of tax deductions for actual economic expenses incurred in the ordinary course of business, which results in a significantly higher effective tax rate as compared to other businesses.

Legal Actions and Challenges to Section 280E

There have been court challenges and concessions made to Section 280E. Specifically, the 2007 court case Californians Helping to Alleviate Medical Problems, Inc., v. Commissioner. This court case reinforced the precedence that Section 280E does not apply to cost of goods sold. The Internal Revenue Service (IRS) defines cost of goods sold to be “expenditures necessary to acquire, construct or extract a physical product which is to be sold.” Generally, for a retail MRB, this means that the direct cost of acquiring cannabis products for resale. Deductions for rent, utilities, wages, insurance and other operating costs common to ordinary businesses are generally disallowed. New York State has specifically indicated that it intends to follow Section 280E for its own income tax calculations, disallowing these same deductions against New York taxable income

Tax Court and Section 280E

The Tax Court has also been aggressive in tamping down efforts by MRBs to separate cannabis related and non-cannabis related activities. The courts argue that these separate activities constitute a single trade or business when they share a close and inseparable organizational and economic relationship. In addition, the risk of cannabis related activities tainting a taxpayer’s other business concerns exists if services or employees are shared between an MRB and a non-MRB. Allocation of expenditures to cost of goods sold, as well as any allocations of costs between MRB and non-MRB entities, need to be well thought out and supported by defensible tax and accounting positions.

The Future of MRBs and Section 280E

All indications point to an increased frequency of IRS audits of MRBs compared to audits of non-cannabis related businesses. Therefore, documenting the methodology behind the calculation of costs of goods sold is even more important for MRBs. It is vital to consult with a tax advisor to ensure you are maximizing your cost of goods sold deductions and preparing the best documentation possible to support your 280E tax positions.

Disclaimer: The information presented in this article should not be considered legal advice or counsel and does not create an attorney-client relationship between the author and the reader. If the reader of this has legal or accounting questions, it is recommended they consult with their attorney or accountant.

November 3, 2021

Controlled Environment Agriculture: An Interview with Sam Andras

By Aaron Green

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Food-focused controlled environment agriculture (CEA) is a multidisciplinary production technique whereby plants and products are grown inside greenhouses, vertical farms and growth chambers where every aspect of the environment can be monitored and controlled. Using CEA, cultivators can produce high-value and traditional food crops with the goal of maximizing plant productivity in an efficient and environmentally friendly way.

As the industry’s first integrated building and cultivation systems design firm, urban-gro is ushering in a new era in the design of efficient indoor agriculture facilities, providing productivity and efficiency benefits to CEA operators when designing and operating facilities.

We interviewed Sam Andras, executive vice president of Professional Services at urban-gro, and principal of MJ12 Design Studio. Sam joined urban-gro after his company MJ12 Design Studio was acquired in July 2020. Prior to that, he was principal in charge of 2WR+ Partners, a 20-year Georgia-based architecture and interior design firm.

Aaron Green: Sam, tell me, how did you get started in the cannabis industry?

A facility that Andras designed in Massachusetts

Sam Andras: I started my architecture firm in 2001 in Georgia and later moved to Colorado in 2012. In 2013, I had the opportunity to do three cannabis facilities and really saw it as an emerging market that I thought would be really cool to dig into and pursue. Due to the marijuana stigma at the time, our company, 2WR, decided to create a cannabis-specific entity and developed MJ12 Design Studio. We built a website and it took off. Since 2013, I’ve personally designed about 130 cultivation facilities and vertically integrated facilities, from Hawaii all the way to New Zealand.

Green: When you say vertically integrated, what does that include?

Andras: The full building design of cultivation, product manufacturing, extraction, infusion and dispensaries.

Green: Is that something urban-gro currently does as well?

Andras: Now? Yes, with MJ12 under the facility design umbrella. After urban-gro acquired us in July, they were able to start offering full turnkey services. Everything from architecture, mechanical and plumbing engineering, electrical engineering, integrated cultivation, design of fertigation, benching, lighting, water treatment, environmental controls and other plant focused services– all of that is under our umbrella.

Green: Can you explain what controlled environment agriculture (CEA) is?

Andras: Absolutely. To me, CEA is crop agnostic, it can be anything from leafy greens to cannabis. Though we’re mainly focused on the cannabis industry and controlling that environment, we do also serve some leafy green companies. Environmental control includes things like temperature and humidity levels in the various stages of growth which is key to the economic success of organizations.

I’m a firm believer in legalization on the federal level down the road, which means that everything’s going to be under FDA for human consumption. If you look at the European models, when you look at the medicinal product development, it’s focused on consistency of the crop, from one crop to the next. And the way you achieve consistency is with CEA.

Green: From a resource perspective, can you describe how CEA differs from indoor to outdoor and greenhouse?

Andras: When you look at the market and the sale value of cannabis flower grown indoors versus outdoors or even greenhouse, greenhouse growing has huge variations by region. I believe greenhouses function better in more of a dry, arid climate. Indoor grows give you the ability to design and control your entire environment including temperatures, humidity levels, plant sizes, watering rates and other considerations. Growing indoors, in a controlled environment, gives you more flexibility to explore different alternatives in your cultivation.

A California cultivation facility he designed

Green: Final question: what in cannabis or in your personal life are you most interested in learning about?

Andras: That’s a great question. I’m a hands-on kind of guy. I would love to spend a couple of weeks working in extraction, as that’s the piece of the puzzle, as an architect, I know the least about. We’ve designed pretty much every type of cultivation from drip irrigation aeroponics to aquaponics, ebb & flow. You name it, we’ve done it, but the whole extraction process and the different equipment, and why companies choose ethanol, butane, hydrocarbon, CO₂ and how to design for those extraction processes is something that as an architect, I’d love to learn more about.

Green: Okay, Great. That concludes the interview. Thanks Sam!

Andras: Thanks, Aaron.

October 28, 2020

Soapbox

How to Vote for Cannabis Research on November 3rd

By Dr. Jordan Zager

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It was 1996. I was four years old. California Proposition 215 passed and for the first time, legal medical cannabis became available. I don’t remember it honestly, but that moment triggered a reckoning of outdated and ineffective efforts to control cannabis, which continues on November 3rd.

The moment in 1996 created for me and my generation of millennials a new, decriminalized lens for which to view cannabis and its potential. In my lifetime, from first experimenting with cannabis after high school and then earning my PhD in plant biochemistry, advancing cannabis research, to starting an agtech company dedicated to the genetic improvement of cannabis, we continue this march toward legalization. But another march hasn’t started yet.

The cannabis we consume today is still largely the same (albeit more potent today) as the cannabis that was legalized in 1996. There’s been little advancement in our scientific understanding of the plant. This can and should change. I believe the future and legitimacy of the cannabis crop in the medical field and in farmers’ fields is on the ballot this November.

In 33 states, medical cannabis is currently legal and in eleven of those, including my home states of Nevada and Washington, legalized adult-use recreational cannabis is generating millions in tax revenue every month. But compared to every other commercial crop, cannabis is still decades behind.

We are seeing a glacial cadence with cannabis research. As voters in five more states consider this November whether to legalize cannabis, that same tipping point we reached in 1996 comes closer to being triggered for cannabis research.

Here’s what cannabis scientists, like me, face as we work to apply real scientific methods to the long-neglected crop: I published one of the most cited papers on cannabis research last year, titled, Gene Networks Underlying Cannabinoid and Terpenoid Accumulation in Cannabis. But, as per university policy, we were unable to touch the plant during any of our research. We could not study the physical cannabis plant, extracts or any other substantive physical properties from the plant on campus or as a representative of the university. Instead we studied cannabis DNA processed through a third-party. Funding for the research came from private donors who were required to be unassociated with the cannabis industry.

While we were conducting our heavily restricted, bootstrapped cannabis research, the university lab in the next building over was experimenting with less restrictions on mice using other drugs: cocaine, opioids and amphetamines. (Quick note, marijuana is listed as more dangerous than cocaine, which is a Schedule II drug.)

I get it. Due to the federal prohibition on cannabis as a heavily regulated Schedule I drug, universities cannot fund research without the risk of losing all of their federal funding. While the USDA does not support research and SBIR grants are all but impossible, one government agency does allow research, from cannabis grown only in Mississippi. It’s the Drug Enforcement Agency (DEA) and any research conducted using its crop is as ineffective as you’re imagining. Relevant research is likely impossible using the crop which dates back to a 1970’s strain with a potency that’s about 30 percent of today’s commercial cannabis offerings.

To change this anti-research climate, do what those in California did with Prop 215 in 1996. Vote.

Dr. Jordan Zager, author and CEO of Dewey Scientific

Vote for legalization of cannabis if you’re in those five states where legalization is on the ballot; that’s Arizona, New Jersey, Montana, South Dakota and Mississippi. The more states that align with cannabis legalization, the stronger the case becomes for the federal government to reschedule the drug from a Schedule I controlled substance. Currently cannabis is listed as a Schedule I alongside heroin. The DEA claims cannabis has no currently accepted medical use and a high potential for abuse. Both are not true, just listen to the scientists.

Those outside of the five states putting cannabis on the ballot can still play a role in creating a Congress that is more receptive to cannabis reform. This Congress is the oldest, one of the most conservative and least effective in our country’s history. Younger, more progressive representation will increase our odds of advancing cannabis research.

Cannabis holds far too much possibility for us to allow it to be an unstudied “ditch weed.” THC and CBD are just two of nearly 500 compounds found in cannabis which, when scientifically scrutinized will harvest – I believe – vast medicinal and commercial benefits and the tax windfalls that accompany both. But first you have to vote.

If cannabis and your representatives are not on the ballot, do something millennials have built somewhat of a reputation for failing to do; pick up a phone and call your current representative. Tell them cannabis deserves scientific attention and investment. There’s too much potential in the cannabis plant to wait any longer.

September 23, 2020

The DEA’s Interim Final Rule and its Impact on the Industrial Hemp Industry

By Seth Mailhot, Steve Levine, Emily Lyons, Megan Herr

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On August 20, 2020, the Drug Enforcement Administration (DEA) published an Interim Final Rule on industrial hemp and hemp derivatives (the interim rule), which immediately went into effect, to conform DEA regulations with the Agriculture Improvement Act of 2018 (the 2018 Farm Bill).

The 2018 Farm Bill effectively removed industrial hemp from the definition of “marijuana” in the Controlled Substances Act (CSA). Additionally, tetrahydrocannabinols contained in industrial hemp, such as cannabidiol (commonly known as CBD), were also removed from the purview of the CSA.

The 2018 Farm Bill defines hemp as:

the plant Cannabis Sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.

Accordingly, because cannabis and its “derivatives, extracts, [and] cannabinoids” are not considered “marihuana,” so long as their delta-9 tetrahydrocannabinol (THC) concentration is at or below 0.3% on a dry weight basis, the regulation of hemp fell outside the authority of the DEA. However, the DEA’s interim rule attempts to draw a hard line in the sand as to when the plant, and any products derived therefrom, are considered “marihuana,” thereby still subject to the DEA’s purview.

Specifically, the interim rule promulgates the DEA’s position that hemp processors can convert otherwise legal hemp into illegal “marihuana,” thereby bringing it back under the DEA’s authority, if such processing and extraction increases the THC content above the 0.3% THC threshold, even momentarily. Specifically, the interim rule states:

[T]he definition of hemp does not automatically exempt any product derived from a hemp plant, regardless of the Δ9-THC content of the derivative. In order to meet the definition of ‘hemp,’ and thus qualify for the exemption from [S]chedule I, the derivative must not exceed the 0.3% Δ9-THC limit. The definition of ‘marihuana’ continues to state that ‘all parts of the plant Cannabis sativa L.,’ and ‘‘every compound, manufacture, salt, derivative, mixture, or preparation of such plant,’ are [S]chedule I controlled substances unless they meet the definition of ‘hemp’ (by falling below the 0.3% Δ9-THC limit on a dry weight basis) or are from exempt parts of the plant (such as mature stalks or non-germinating seeds) . . . As a result, a cannabis derivative, extract, or product that exceeds the 0.3% Δ9-THC limit is a [S]chedule I controlled substance, even if the plant from which it was derived contained 0.3% or less Δ9-THC on a dry weight basis.

Accordingly, the DEA’s stance creates a substantial risk for processors who will be considered to be in possession of a Schedule I controlled substance during the extraction process if the THC content exceeds the 0.3% THC threshold at any point during processing, an almost inevitable result of the extraction process. Nevertheless, the interim rule states:

the definition of hemp does not automatically exempt any product derived from a hemp plant, regardless of the Δ9-THC content of the derivative. In order to meet the definition of ‘hemp,’ and thus qualify for the exemption from [S]chedule I, the derivative must not exceed the 0.3% Δ9-THC limit.

Although the DEA impliedly recognizes the fact that hemp processing can result in a temporary increase in THC content, it still took the position that, should the THC content exceed 0.3% THC at any point during the extraction process, processors will be considered to be in possession of a Schedule I controlled substance, regardless of whether the finished product complies with federal law.

Just some of the many hemp-derived CBD products on the market today.

Consequently, the interim rule creates significant criminal risk for anyone processing industrial hemp, as the DEA has asserted that the processing of hemp into extracts, derivatives and isolated cannabinoids (which are arguably legal under the 2018 Farm Bill) can result in unintentional violation of federal law, thereby subjecting processors to the risk of significant criminal liability. That said, the interim final rule does not appear to be a shift in DEA policy since the passage of the 2018 Farm Bill in December 2018, nor has DEA issued any warnings to industrial hemp manufacturers or otherwise signaled a change in enforcement policy by issuing the Interim Final Rule.

In addition, the DEA took several other steps in the interim final rule towards the deregulation of hemp products:

Adding language stating that the definition of “tetrahydrocannabinols” does not include “any material, compound, mixture, or preparation that falls within the definition of hemp set forth in 7 U.S.C. § 1639o”.
Removing from Schedule V a “drug product” in an FDA-approved finished dosage formulation that contains cannabidiol (CBD) and no more than 0.1 percent (w/w) residual tetrahydrocannabinols (e.g. Epidiolex).
Removing DEA import and export controls for hemp extract that does not exceed the statutory 0.3% THC limit.

March 27, 2020

CARES Act – Stimulus Package Won’t Aid the Cannabis Industry

By Steve Levine, Megan Herr

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On Wednesday, March 25, the United States Senate approved an estimated $2-trillion stimulus package in response to the economic impact of the COVID-19 outbreak. The legislation, formally known as the “Coronavirus Aid, Relief, and Economic Security Act” (or the CARES Act), was approved by the Senate 96-0 following days of negotiations. One of the most highly anticipated provisions of the CARES Act, the “recovery rebates” for individuals, will provide a one-time cash payment up to $1,200 per qualifying individual ($2,400 in the case of eligible individuals filing a joint return) plus an additional $500 for qualifying children (§6428.2020(a)). The CARES Act, which remains subject to House approval, also prescribes an additional $500 billon in corporate aid, $100 billion to health-care providers, $150 billion to state and local governments and $349 billion in small business loans in an effort to provide continued employment and stabilize the economy. The legislation further provides billions of dollars in debt relief on existing loans.

CARES Act – Paycheck Protection Program

Under the CARES Act, small businesses who participate in the “Paycheck Protection Program” can receive loans to cover payroll expenses, group health care benefits, employee salaries, interest on mortgage obligations, rent, and utilities (§1102(F)(i)). To qualify for these small business loans, businesses must employ 500 employees or less, including all full-time and part-time employees (§1102(D)). Eligible recipients must also submit the following as part of their loan application: (i) documentation verifying the number of full-time equivalent employees on payroll and applicable pay rates; (ii) documentation verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments; and (iii) a certification that the documentation presented is true and the amounts requested will be used to retain employees and make necessary payments (§1106(e)). The CARES Act delegates authority to depository institutions, insured credit unions, institutions of the Farm Credit System and other lenders to provide loans under this program (§1109(b)). The Treasury Department will be tasked with establishing all interest rates, loan maturity dates, and all other necessary terms and conditions. Prior to issuing these loans, lenders will consider whether the business (i) was in operation as of February 15, 2020, (ii) had employees for whom the business paid salaries and payroll, or (iii) aid independent contractors as reported on a Form 1099-MISC (§1102(F)(ii)(II)).

What Does This Mean for Cannabis Businesses?

Due to the continued Schedule I status of cannabis (excluding hemp) under the Controlled Substances Act (CSA), cannabis businesses are not eligible to participate in the Paycheck Protection Program intended to keep “small businesses” afloat during the current economic crisis. Because federal law still prohibits banks from supporting marijuana businesses, financial institutions remain hesitant to service the industry, as anti-money laundering concerns and Bank Secrecy Act requirements (31 U.S.C. 5311 et seq.) are ever-present. As a result, even if cannabis businesses technically qualify to receive federal assistance under the Paycheck Protection Program, they will face an uphill battle in actually obtaining such loans.

Cannabis Businesses Are Also Precluded from “Disaster” Assistance

Moreover, the conflict between state and federal law continues to prevent cannabis business from receiving assistance from the U.S. Small Business Administration (SBA) under the Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6201). In light of the COVID-19 outbreak, the SBA revised its “Disaster Loan” process to provide low-interest “Disaster Loans” to eligible small businesses. To qualify for these loans, a state must submit documented business losses for at least five businesses per county. The problem, however, is that the SBA still refuses to assist state-legal cannabis businesses in equal need of small business loans. Specifically, in a 2018 Policy Notice, the SBA reaffirmed that cannabis businesses – and even some non “plant-touching” firms who service the cannabis industry – cannot receive aid in the form of federally backed loans, as “financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity.” The 2018 Policy Notice clarified that the following business are ineligible to receive SBA loans:

(a) “Direct Marijuana Business” — a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. This applies to personal use and medical use even if the business is legal under local or state law where the applicant business is or will be located.

(b) “Indirect Marijuana Business” — a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to support the use, growth, enhancement or other development of marijuana. Examples include businesses that provide testing services, or sell grow lights or hydroponic equipment, to one or more Direct Marijuana Businesses. In addition, businesses that sell smoking devices, pipes, bongs, inhalants, or other products that may be used in connection with marijuana are ineligible if the products are primarily intended or designed for such use or if the business markets the products for such use.

More recently, the SBA provided further clarification that cannabis businesses are not entitled to receive a cut of the federal dollars being appropriated for disaster relief because of the CSA’s continued prohibition of the sale and distribution of cannabis. Last week, the SBA reiterated that:

“With the exception of businesses that produce or sell hemp and hemp-derived products [federally legalized under the 2018 Farm Bill], marijuana related businesses are not eligible for SBA-funded services.” (@SBAPacificNW)

Consequently, because of the continued Schedule I status of cannabis under federal law, cannabis businesses will not be entitled to receive Disaster Loans from the SBA, regardless of whether they qualify as a struggling small business.

Resolving the Issue

While the federal government has been considering legislation, such as SAFE Banking and the STATES Act, to create a more rational federal cannabis policy, neither of these bills are likely to pass any time soon given the current COVID-19 pandemic.

At the end of the day, until Congress passes some form of federal cannabis legalization, these small businesses will remain plagued by the inability to receive financial assistance, as evinced by the Paycheck Protection Program.

May 1, 2018

Soapbox

Replacing Opiates with Cannabis is Finally Becoming a Reality: Where do we go from Here?

By Dr. Richard Kaufman

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Opiate abuse is a far-reaching international public health issue, impacting tens of thousands of people every year in the United States alone. As the epidemic continues to spread, the medical community is faced with the immense task of researching and developing safer, non-addictive treatment alternatives for patients of chronic pain and other ailments. The controversial and oft-debated notion of cannabis as an opiate alternative has become increasingly well-researched and gained considerable credibility in recent years. The new challenge lies in advancing the cannabis industry to the point of being a legitimate medicine that can be prescribed and administered by doctors.

Opioids are among the most commonly prescribed medical treatments for severe chronic pain, yet prescription opioid overdoses killed more than 165,000 Americans between 1999 and 2014 according to the Department of Health and Human Services. In fact, the health and social costs of opioids are estimated to be as much as $55 billion a year. As such, it has become more imperative than ever that mainstream medical practitioners take notice of the cannabis plant’s powerful healing properties and shift away from potentially harmful pharmaceutical medications.

The evidence of cannabis’ safety and efficacy is well established. For instance, in a literature review of 38 studies evaluating medical cannabis’ efficacy for treating pain, 71 percent concluded that cannabinoids had empirically demonstrable and statistically significant pain-relieving effects. In addition, a 2015 meta-analysis of 79 studies found a 30 percent or greater reduction of pain with the use of cannabinoids compared to placebos. Further, an analysis of a decade of randomized, double-blind placebo-controlled clinical trials on cannabis for treating pain concluded that cannabis should be a first line treatment for patients with painful neuropathy and other serious and debilitating symptoms, who often do not respond to other available medications.

Not only is cannabis demonstrably safe and effective, but numerous studies also present compelling evidence that the prescription of opiates has dropped sharply in U.S. states and countries that have legalized medical cannabis. For example, a study in the Clinical Journal of Pain followed 176 chronic pain patients in Israel over seven months. Researchers found that 44 percent of participants stopped taking prescription opioids within seven months after starting medical cannabis. Patients cited the following reasons for using cannabis instead of pharmaceutical drugs: 65 percent reported less adverse side effects, 57 percent cited better symptom management and 34 percent found that cannabis had less withdrawal potential than their other medications.The evidence of cannabis’ safety and efficacy is well established.

The tide is quickly turning as many respected doctors are beginning to advocate for the tremendous medical potential of cannabis as a replacement for prescription pills. That said, if the cannabis industry is to help solve the crisis inflicted by modern pharmaceutical painkillers, we must develop next-generation scientifically formulated products and advocate to improve their accessibility.

Inhalation and oral methods of cannabis consumption have no reliable dosage as medicine, rendering them unfit for administration by health professionals. These mainstream consumption methods also have extremely low bioavailability and bioactivity. Bioavailability for ingested cannabis products is only 6 percent and for inhalation methods can be as low as 2 percent. Oral absorption of THC is slow and unpredictable, with peak blood concentration occurring 1–5 hours post dose. Similarly, inhalation methods can take up to two hours to have any effect. The next phase of the medical cannabis industry must focus on fixing problems that prevent cannabis from being a universally recognized health tool. Fortunately, scientists are making major advancements in cannabis delivery technologies, offering novel and innovative administration methods that have proven both effective and reliable.

With products like Evolve’s NanoSerum™ representing a promising solution to help reduce the morbidity and mortality associated with prescription opioid use and abuse, meaningful progress is already underway. It’s been a long and challenging road to arrive at this point, but our efforts are only just beginning. Achieving long-term change on a national and international scale will require professionals from all levels of the cannabis, science and medical communities to push for advanced product offerings that provide consistent, standardized dosing in healthier, smokeless modes of delivery.

March 28, 2018

Environmental Controls: The Basics

By Vince Sebald

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The outside environment can vary widely depending on where your facility is located. However, the internal environment around any activity can have an effect on that activity and any personnel performing the activity, whether that’s storage, manufacturing, testing, office work, etc. These effects can, in turn, affect the product of such activities. Environmental control strategies aim to ensure that the environment supports efforts to keep product quality high in a manner that is economical and sensible, regardless of the outside weather conditions.

For this article, let us define the “environment” as characteristics related to the room air in which an activity is performed, setting aside construction and procedural conditions that may also affect the activity. Also, let us leave the issue of managing toxins or potent compounds for another time (as well as lighting, noise, vibration, air flow, differential pressures, etc). The intent here is to focus on the basics: temperature, humidity and a little bit on particulate counts.

Temperature and humidity are key because a non-suitable environment can result in the following problems:

Operator discomfort
Increased operator error
Difficulty in managing products (e.g. powders, capsules, etc)
Particulate generation
Degradation of raw materials
Product contamination
Product degradation
Microbial and mold growth
Excessive static

USP <659> “Packaging and Storage Requirements” identifies room temperature as 20-25°C (68-77 °F) and is often used as a guideline for operations. If gowning is required, the temperature may be reduced to improve operator comfort. This is a good guide for human working areas. For areas that require other specific temperatures (e.g. refrigerated storage for raw materials), the temperature of the area should be set to those requirements.

Humidity can affect activities at the high end by allowing mold growth and at the low end by increasing static. Some products (or packaging materials) are hydroscopic, and will take on water from a humid environment. Working with particular products (e.g. powders) can also drive the requirement for better humidity control, since some powders become difficult to manage in either high or low humidity environments. For human operations without other constraints, a typical range for desirable humidity is in the range of 20 to 70% RH in manufacturing areas, allowing for occasional excursions above. As in the case of temperature, other requirements may dictate a different range.

In a typical work environment, it is often sufficient to control the temperature, while allowing the relative humidity to vary. If the humidity does not exceed the limits for the activity, then this approach is preferred, because controlling humidity adds a level of complexity (and cost) to the air handling. If humidity control is required, it can be managed by adding moisture via various humidification systems, or cooling/reheating air to remove moisture. When very low humidity is required, special equipment such as a desiccant system may be required. It should be noted that although you can save money by not implementing humidity control at the beginning, retrofitting your system for humidity control at a later time can be expensive and require a shutdown of the facility.

Good engineering practice can help prevent issues that may be caused by activities performed in inappropriately controlled environments. The following steps can help manage the process:

Plan your operations throughout your facility, taking into account the requirements for the temperature and humidity in each area and know what activities are most sensitive to the environment. Plans can change, so plan for contingencies whenever possible.
Write down your requirements in a User Requirement Specification (URS) to a level of detail that is sufficient for you to test against once the system is built. This should include specific temperature and RH ranges. You may have additional requirements. Don’t forget to include requirements for instrumentation that will allow you to monitor the temperature and RH of critical areas. This instrumentation should be calibrated.
Solicit and select proposals for work based on the URS that you have generated. The contractor will understand the weather in the area and can ensure that the system can meet your requirements. A good contractor can also further assist with other topics that are not within the scope of this article (particulates, differential pressures, managing heating or humidity generating equipment effects, etc).
Once work is completed, verify correct operation using the calibrated instrumentation provided, and make sure you add periodic calibration of critical equipment, as well as maintenance of your mechanical system(s), to your calibration and maintenance schedules, to keep everything running smoothly.

The main point is if you plan your facility and know your requirements, then you can avoid significant problems down the road as your company grows and activity in various areas increases. Chances are that a typical facility may not meet your particular requirements, and finding that out after you are operational can take away from your vacation time and peace of mind. Consider the environment, its good business!