Last week, Pennsylvania Department of Health Secretary Dr. Karen Murphy announced the formation of temporary regulations for cannabis growers and processors in the state, according to a press release. Those temporary rules were published on Saturday, October 29. Secretary Murphy asked for public comment on developing regulations for dispensaries as well.
The PA Department of Health published the new set of temporary regulations this past Saturday, outlining “the financial, legal and operational requirements needed by an individual to be considered for a grower/processor permit, as well as where the facilities can be located.” The regulations also discuss tracking systems, equipment maintenance, safety issues, disposal of cannabis, tax reporting, pesticides, recalls and insurance requirements. “One of our biggest accomplishments to date is the development of temporary regulations for marijuana growers and processors,” says Secretary Murphy. “We received nearly 1,000 comments from members of the community, the industry and our legislative partners.”
The general provisions published on Saturday outline the details of the application process, fees, inspections, reporting, advertising and issues surrounding locations and zoning. The temporary regulations for growers and processors delve into the minutia of regulatory compliance for a variety of issues: including security, storage, maintenance, transportation, tracking, disposal, recall, pesticides and packaging and safety requirements. A list of pesticides permitted for use can also be found at the bottom of the rules.
PA Department of Health Secretary Dr. Karen Murphy
The document discusses the regulations for performing voluntary and mandatory recalls in great detail. It requires thorough documentation and standard operating procedures for the disposal of contaminated products, cooperation with the Department of Health and appropriate communications with those affected by the recall.
The department has yet to release temporary regulations for laboratories and dispensaries, but hopes to do so before the end of the year. “I am encouraging the public – and specifically the dispensary community – to review the temporary regulations and provide us with their feedback,” says Secretary Murphy. “The final temporary regulations for dispensaries will be published in the Pennsylvania Bulletin by the end of the year.”
Since Governor Tom Wolf signed the medical cannabis program bill into law in April 2016, the state has made considerable progress to develop the program, including setting up a physician workgroup, public surveys for developing temporary rules and a request for information for electronic tracking IT solutions. The PA Department of Health expects to implement the program fully in the next 18 to 24 months.
Even though half of U.S. states and the District of Colombia now permit the possession of medical or recreational cannabis, state regulatory bodies differ greatly in their approaches to managing our industry. In Washington, anyone over the age of 21 can legally possess one ounce of usable cannabis and/or seven grams of concentrate. In Minnesota, patients are only allowed to purchase non-smokable cannabis in pill, liquid or oil form.
Given these substantial differences, it is no surprise that the application process to open a dispensary or cultivation facility also varies from state to state. The question I am most often asked (and catch myself mulling over late at night) is what can applicants do to ensure their success, regardless of where they are applying?
Recently we helped a client secure one of the first 15 licenses issued to grow medical cannabis in Maryland. The Maryland application process was particularly unique because most of the applicants had political or law-enforcement ties, or were connected to successful out-of-state growers. That experience, along with our work in places like Arizona, Colorado and Florida, has shown me the importance of teamwork, diversity and security in developing a winning application.
So here are my suggestions for ensuring a successful submission, regardless of which state you are operating in:
Build the Right Team. My dad likes to say, “Use the right tool for the right job.” I think the same is true about creating the team for your application. Do not assume one or two people will be able to fill all of the required roles. You will need experts in a range of different areas including medicine, pharmacology, capital investment, cultivation, real estate, security and law.
Focus on Diversity. I think one of the reasons we have been successful in helping clients secure applications (we are six for six, in six different states) is our commitment to gender, racial and even geographic diversity. For example, we recently helped a client secure a license in an economically underdeveloped area. I think our choice to headquarter the new business outside of the metropolitan corridor was at least partially responsible for our success.
The Devil is in the Details. According to ArcView Market Research, the cannabis industry is expected to be worth $23 billion by 2020. If you want to be one of the organizations selected by your state to sell cannabis, you need to have your act together. Most applications ask incredibly detailed questions. Therefore it is essential that you answer them thoroughly and accurately. All answers should be in compliance with your state’s regulations.
Put Safety First. You will need a comprehensive plan that takes all aspects of security into account. This includes everything from hiring security guards to purchasing cameras, and implementing internal anti-theft procedures. Regardless of the size of your operation, safety should be a primary consideration.
Secure Funding. Successful cannabis businesses require capital. It’s important to be realistic about the amount of money you will need to have on hand. Application costs typically range from $500,000 to $1 million. This will cover things like hiring an architect or leasing land. Ideally, your organization will have another $5 to $10 million or more available to start your project once you’ve been approved so that you can quickly become operational.
Connect With Your Community. It is essential to consider the impact of your business on the community. Being a good corporate citizen means being transparent and engaging in a two-way dialogue with neighbors, government officials and patients. I strongly recommend that my clients develop a comprehensive community outreach plan that designates which organizations they plan to work with, (hospitals or universities, for example) and what the nature of those partnerships will be.
Cannabis processors and dispensaries in Colorado were hit with new rule changes over the weekend, going into effect on October 1st. The rule changes affect those producing edibles and dispensaries that sell retail and medical cannabis products.
The universal symbol required on all cannabis products in Colorado
As of October 1st, all cannabis edibles must be marked with the universal THC symbol, according to a bulletin posted by the Colorado Department of Revenue’s Marijuana Enforcement Division (MED). Both medical and retail cannabis products require labeling that includes a potency statement and a contaminant testing statement.
The rules also set “sales equivalency requirements” which essentially means a resident or non-resident at least 21 years of age can purchase up to one ounce of cannabis flower or up to 80 ten-milligram servings of THC or 8 grams of concentrate, according to the MED. The packaging must also include: “Contains Marijuana. Keep out of the reach of children.”
The universal symbol printed on products from Love’s Oven.
It seems that cannabis edible manufacturers have two clear choices for complying with the new rule requiring the THC symbol: They can use a mold to imprint the symbol on their product or they can use edible ink. Peggy Moore, board chair of the Cannabis Business Alliance and owner of Love’s Oven, a Denver-based manufacturer of cannabis baked goods, uses edible ink to mark each individual serving. The printer uses similar technology and ink used to print on m&m’s, according to Moore. “Baked goods are difficult to find a solution for marking them because they are a porous product, not smooth.” Complying with the new rules almost certainly means added costs for processors and edibles producers.
Moore said she updated all of their labels to include the appropriate information in compliance with the rules. “In terms of regulatory compliance, there have been some disparities for labeling and testing requirements between medical and retail cannabis products, however they are coming into alignment now,” says Moore. “The testing statement rule has been in place for some time on the retail side, but now we are seeing this aligned with both medical and retail markets.” This new rule change could be seen as a baby step in making the different markets’ regulations more consistent.
California’s tradition of social and political experimentation has made it the national leader in areas ranging from environmentalism and social justice to technology. Now it is poised to make the same far-reaching transformations in the cannabis industry.
As one of the world’s top ten economies and the nation’s most populated state (having a population of 38 million), California could propel the decriminalized recreational cannabis industry to $6.5 billion in 2020, according to a report by ArcView Group and New Frontier.
At the same time, California is in the process of moving from state to local zoning control, as far as issuing the OK to become licensed, effective Jan. 18, 2018. This means collectives and dispensaries have to obtain local approval before they receive a state license. It also puts greater pressure on gray market operations to become licensed.
On the regulatory front, the state is also heading toward a historic vote in November 2016 in the form of Proposition 64. This will open up the customer base to all Californians. It has a similar licensing path as the medical regulations the Governor signed last year, except it allows vertical integration between growers and dispensaries, which is not allowed under the medical regulations, except in very limited circumstances.
Credit: cannabisbenchmarks.com
“My bet is the demand will outweigh the supply for a while and the legal cannabis businesses that are licensed by the locals and have their supply chain in place will end up profiting,” says Andrew Hay of Frontera Accounting, a cannabis-focused CPA firm based in California under the umbrella of the Frontera business group.
A Huge Market Awaits
If the Adult Use of Marijuana Act passes and is enacted by 2018, the state’s legal cannabis sales are projected to hit $1.6 billion in their first year, the ArcView and New Frontier market report said. Even without the new expanded legislation and working amid a fractured medical cannabis regulatory environment, California now accounts for about half of all the legal cannabis sales nationwide, according to the report.
At the same time, the state is well positioned to capitalize on new technology and financing from Silicon Valley in terms of human talent, money and the applications of new technology in both the medical and recreational sectors. One driving force will come from the Adult Use of Marijuana Act, which mandates that 10 percent of sales tax collected on cannabis sales be re-directed towards medical research and drug abuse programs.
In addition, according to Marijuana Politics, the expected tax windfall is slated to be divided up among a variety of programs: $10 million to public universities, $10 million to business and economic development, $3 million to California Highway Patrol and $2 million for medical cannabis research at UC San Diego. The remainder will be divided between youth drug education and prevention (60%), environmental protection (20%) and law enforcement (20%).
This flow of new funds is expected to propel research into biomedical and applied research, as well as nutraceuticals, or products derived from food sources with extra health benefits in addition to the basic nutritional value found in foods. The driving new ingredients in these products will be derived from cannabis.
Consolidating the Recreational and Medical Markets
Californians will vote in November 2016 to legalize the sale of recreational cannabis. This vote will have serious repercussions since it could mean that the delineation between medical and recreational markets will disappear.
“Should California vote to legalize recreational use this November, we expect implementation of a combined regulated market as soon as 2018,” says Matt Karnes, founder of GreenWave Advisors. Karnes says a merged California market is significant, not only because of its sheer size (it represents about 55% of the U.S. market), but also because it “would mark the first state to implement regulations for a fully legal market without initial oversight of medical use purchases. This could serve as a catalyst for similar action in Nevada, Arizona, Massachusetts and Maine which will also vote to fully legalize cannabis this November.”
In the report, “Mid Year Update: The Metamorphosis of the U.S. Marijuana Market Begins,” the firm said it projects cannabis sales in the U.S. to hit $6.5 billion for 2016. The firm forecasts that by 2021, revenues should reach about $30 billion. This assumes that marijuana will be legal in all 50 states to various degrees. The firm also notes that this year’s election choices can potentially generate $4.2 billion in incremental retail revenues by 2018 and $5.8 billion by 2021.
The Impact on Branding, Music and Culture
As the nation’s culture manufacturing center for films, TV and music, the cannabis business is also expected to shape artistic direction for years to come. Jeff Welsh is a partner at Frontera, a business group that holds a suite of services including the Frontera Law Group, Frontera Advisors, Frontera Accounting and Frontera Entertainment, which is headquartered in Sherman Oaks with a specific focus on the cannabis industry. Welsh says he sees more partnerships between the cannabis industry and mainstream entertainment outlets. Welsh recently signed Chris Sayegh, the herbal chef who uses liquid THC to create elegant restaurant-quality food, in a deal with the United Talent Agency. This marks a cultural breakthrough that links the cannabis and culinary industries.
Because Los Angeles is the largest market, this cultural nexus is expected to contribute more new alliances between celebrity branding and cannabis products.
Luke Stanton, founder and managing partner of Frontera, also said less stringent regulations in the cannabis legal environment could find their way into the regulations and laws of other states that often adopt California laws as templates for their own state. “We have seen this happen in other areas, such as environmental and criminal justice, so it would not be surprising to see our state regulations and policies being enacted in states nationwide, and even in some countries outside of the U.S.,” Stanton says.
California has also been the site of innovative marketing efforts between cannabis patients and growers. The Emerald Exchange held in Malibu, was the first event in cannabis that allowed a direct conversation between Northern California cultivators and the Southern California patient community. According to Michael Katz of Evoxe Laboratories, a California cannabis product manufacturer, “Often the farmers don’t have a chance to really engage with patients, and we wanted everyone to be able to come together, discuss practices, provide information and ultimately support the entire ecosystem of the cannabis community.”
Caveats for Investors
While the California market looks very attractive, it may be the siren’s call for investors until issues related to finding solid companies and taxation are settled.
Since more operations will have to become fully compliant with state regulations, these businesses will face more significant expenses to meet security, taxes, licensing fees, accounting and reporting operations requirements. This could drive smaller operations out of business or force them to become more efficient.
In addition, California’s huge potential and changing regulatory environment is attracting large growers into the state that will compete with smaller, established operations. According to Jonathan Rubin, chief executive officer of Cannabis Benchmarks, these regulations affecting commercial growing vary greatly by municipality. For instance, Mendocino and Humboldt counties have enacted measures to protect local growers, while other counties have not, Rubin says.
Credit: cannabisbenchmarks.com
In addition, cannabis wholesale prices have been falling due to changes in cultivation methods and variations in supply.
Andrew Hay, a CPA at Frontera Accounting, believes investors should make sure there is a solid plan behind any cannabis company investment. “I’ve seen significant money thrown behind ‘cannabis brands’ with no substance,” Hay says.
“In these cases, the winners are the growers, manufacturers, distributors and dispensaries that are licensed (or are in the process of getting licensed), who pay their taxes and have a successful track record. I wouldn’t invest until you see the underlying operational structure, their tax/regulatory compliance and financials that prove there have been sales,” he says.
Another major problem for investors lies in the IRS accounting regulations. “The biggest hurdle I see facing the California cannabis business is the IRS / IRC 280E, which only allows cost of goods sold deductions. Every cannabis business should be planning their operations around IRC 280E, as there is no way to legitimately survive in the cannabis industry without doing so,” according to Hay.
“IRC 280E is here to stay regardless of California legalization. It is up to the Federal government to fix this issue, which I don’t see happening any time soon. Every cannabis business should hire a CPA and business attorney that work well together to devise a cost accounting strategy to minimize IRC 280E and its impact. Without this, an investor’s profits can go up in smoke to the IRS,” Hay says.
David Goldstein, co-founder and chief executive officer of PotBotics, launched a medical cannabis recommendation engine called PotBot with the goal to better inform patients to target their conditions with more accurate recommendations based on scientific research. “This is a tool to help move the market away from the thousands of strain names that are mainly just marketing or branding indicators,” says Goldstein. The medical application is designed to inform patients on peer-reviewed data, research on the treatment of their ailments with cannabis and the specific cannabinoids that are necessary for treating their condition. They began development on PotBot in October of 2014, launching the beta version to 400 users in November of 2015. On April 20th, 2016, Goldstein launched officially in the Apple Store, and the program will be available on Android in July.
David Goldstein (left) alongside co-founder, Baruch Goldstein (right)
Rather than focusing on strain names, PotBot focuses on the cannabinoid values to help patients gain an understanding of the correlation between which compounds might best target their condition. “This is a great tool for patients trying to familiarize themselves with what strains might work best,” says Goldstein. “For example, insomnia patients generally need cannabis with higher CBN levels, so we first educate the patient on cannabinoid ranges to shoot for and what strains might help. PotBot would recommend the strain Purple Urple because it is an indica found to have higher CBN values,” adds Goldstein. The program goes into great detail with the patient’s preferences including everything down to consumption methods so they know why it might recommend certain strains.
A screenshot showing a recommended cannabinoid ratio for a patient
The recommendation tool is accessible via kiosks at dispensaries, on a desktop version for the computer as well as on the Apple Store for iPads and iPhones. “I do not see it as a way of replacing budtenders, rather supplementing them with knowledge,” says Goldstein. PotBot is designed as a tool to supplement the budtender’s understanding of cannabis, so the budtender does not need to know everything off the top of their head or recommend strains based on anecdotal information, according to Goldstein.
Goldstein’s team at PotBotics performed extensive research prior to launching PotBot, spending two years doing strain testing to develop the program. “There is currently no regulatory body [for strain classification] so we took it upon ourselves to work with the best testing laboratories for truly robust analyses and properly vetted growers to get the most valid data,” says Goldstein. “The current strain classification system and nomenclature is rather unscientific so we focus on cannabinoid values and soon we will be able to incorporate terpene profiles in the recommendation.” Moving away from the common focus on taste, smell and other qualitative values, they focus on medical attributes of cannabinoid profiles because they have the most peer-reviewed research available today.
As an OEM, the company designed the tool to work with each dispensary’s inventory, to provide recommendations for strains that a patient can access on site, however anyone can access the recommendation tool for free at PotBot.com. Goldstein’s company and their mission represent an important development in the cannabis industry; this could begin a key transition from thousands of understudied strain names to a more scientific and calculated method to treating patients’ conditions with cannabis.
Derek Peterson, chief executive officer of Terra Tech
Terra Tech, with the recent acquisition of Blum, a dispensary in Oakland, and the line of concentrates, IVXX, is sweeping the cannabis industry by setting standards for safety and quality. Terra Tech, publicly traded in theOver-The-Counter market, is well known as an agricultural company, with the subsidiary brand, Edible Garden, selling produce to Whole Foods, Wal-Mart and Kroger’s. In December of last year, we covered Terra Tech’s entrance into the cannabis marketplace and their experience with large-scale, sustainable agriculture. We sit down with Derek Peterson, chief executive officer of Terra Tech, to get an update on their progress and quality controls.
CannabisIndustryJournal: In January, Terra Tech announced revenue guidance of $20-22 million for 2016. Can you share some of your strategy going forward to meet your goals?
Terra Tech is taking organic and GFSI-certified agricultural practices to growing cannabis
Derek Peterson: We have always played both a long game as well as a short game, meaning while we are building our longer term business, like in Nevada, we are also focusing on short term accretive acquisitions, like we did with Blum in Oakland. We want to make sure we capture short-term revenue growth while we plan our future revenue production. We feel confident about achieving those results.
CIJ: How big of a role does the acquisition of Blum and IVXX brand expansion play in meeting those goals?
The Oakland location of Blum dispensary
Derek: Blum is a significant factor even though we are only capturing three quarters of revenue considering we closed the deal on March 31st of this year. So for the full year of 2017 we will have growth from this level considering we will be able to report a full year of Blum revenue. IVXX presents us with the best opportunity for growth in the coming years. As the market in California and Nevada grows we can continue to expand our IVXX footprint throughout the state. Being able to wholesale to thousands of other retail facilities affords us a significant opportunity to grow our sales.
CIJ: How do you think the brand of Edible Garden positions you well for expansion in the cannabis industry?
Produce ready for distribution at Edible Garden facility in Belvidere, New Jersey
Derek: One of the reasons we were so successful in the Nevada market was because regulators and legislators felt a high degree of confidence in our abilities considering we are USDA organic, Kosher and GFSI-certified. Our traditional agricultural experience has been very synergistic with our cannabis division from both an optics and operational perspective.
CIJ: Could you give us an update on progress in Medifarm LLC in Nevada? And on your distribution plan for IVXX in California?
IVXX concentrates
Derek: We are continuing to expand our IVXX line throughout the state and increasing our sales force. In addition we will continue to develop new products to distribute into our existing supply chain, like we just did with our new pre filled cartridge line.
We are opening our Decatur location in Las Vegas in early July and Reno and Desert Inn towards the end of August. Our cultivation and extraction facilities should be complete no later than January 2017. We will have our entire infrastructure in place if the recreational bill passes in Nevada this November.
Blum Las Vegas location will open in July
CIJ: Tell us about the role of laboratory testing in your business.
Derek: Laboratories play a significant role, as they are becoming a mandated step in most new legislation around the company. Independent lab testing is extremely important to maintain safe access for consumers and patients. We work primarily with Steep Hill Labs and CW analytics.
CIJ: Can you expand on your integrated pest management and your growing practices?
Platinum Cookies ready for packaging and labelling
Derek: Well we cannot say organic, however we do cultivate all naturally. We also cultivate traditional produce that we sell to major retailers. We are USDA organic-certified and we implement similar processes in our cannabis cultivation. Pest control is extremely challenging for any farmer but we rely primarily on bio control, meaning the good bugs eat the bad bugs. This has been very effective for us in the cultivation of all our products.
CIJ: How is your business different from the slew of other dispensaries and growers in California?
Consistency in quality standards requires meticulous SOPs
Derek: Service and consistency; we have over 42,000 registered patients and our operations team has over 19 years of experience in California. One of the reasons we have become one of the largest dispensaries in the state is because of that experience. In addition, consistency is extremely important. Consumers expect the same product in every other business and ours is no different. If they come in for our Platinum Cookies one month and the next month it has different characteristics you are going to lose patient confidence. So in the front of the house, we are focused on pairing patients’ needs with the correct product and in the back of the house we are focused on providing a meticulously cultivated product, produced at the highest standards.
CIJ: Can you delve into some of the processing for concentrates? How do you meet such rigorous quality standards?
Extraction equipment in one of the processing facilities for IVXX
Derek: Through research and development, we have engineered a proprietary process in which our solvent profiles used under our proprietary conditions ensures solvent residual levels which are not detected by instrumentation at 3rd party testing agencies such as Steep Hill Labs. In addition, any good scientific method requires repetition and corroboration of results. In order to accomplish this we also rely on random routine testing in which we send out extracts out to other 3rd party testing labs. Proprietary conditions include, but are not limited to, heat, vacuum, agitation, etc. By utilizing the correct amalgamation of solvent profiles, extraction conditions, purging conditions, as well as rigorous quality control standards, we are able to ensure a product that is void of any residual solvents, without sacrificing potency or identity of the cannabinoids and terpenes. Cannabinoids and terpenes are of chief interest when extracting cannabis for patients so that they have access to these essential oils without any of the actual leaf and bud.
All solvents used are the highest grade available to us, which ensures a truly medical product for the patient. In addition, all of our extraction equipment is routinely cleaned and sterilized using medical grade cleaning agents.
Doctors are still very hesitant to recommend cannabis in medical treatment of their patients. A key aspect missing from the medical cannabis industry is participation from physicians and the medical community. Cannabis’ Schedule I drug status blocks medical research and leaves a stigma in the medical community. Doctors are concerned with the implications of recommending cannabis, the possibility of losing their license to practice and most lack any formal education in prescribing cannabis. The DEA’s recent announcement to consider rescheduling cannabis this year could dramatically impact doctor’s willingness to work with the drug.
The DEA’s plan to release a decision on the matter represents a major shift in attitude toward treating patients with medical cannabis. This could very possibly culminate in the rescheduling of cannabis, which would allow for more medical research, including clinical trials. Dr. Scott Gottlieb, board-certified anesthesiologist and pain management specialist from Pearl River, New York, believes the bigger obstacles for doctors prescribing cannabis include the stigma associated with it, legal concerns and physicians’ lack of education. Dr. Gottlieb has practices in both New York and New Jersey where he recommends patients cannabis. He believes there should be some type of recourse to help physicians circumvent legal issues. “Some of the bigger legal concerns regarding cannabis surround complying with state regulations,” says Gottlieb. “That sort of compliance includes confirming the diagnosis of the patient with thorough documentation, making sure it is an approved condition to treat with cannabis, documenting continued treatment of the illness and clearing the patient of any contraindications.”
Dr. Gottlieb believes it should be a collaborative effort on behalf of states, dispensaries and patients working to help educate doctors on the legal concerns surrounding the recommendation of cannabis. “Physicians are not taught anything in medical school about dosing or the medical effects of cannabis,” says Gottlieb. “With more education we can get rid of the stigma and get physicians aware of the potential benefits for their patients and the ability to control dosage in medication.”
Currently, there is very little communication between doctors and dispensaries in New York. A collaborative effort to educate all stakeholders involved could help get more doctors involved and streamline the entire process. “Doctors want patients to feel comfortable and know what to expect in receiving treatment with cannabis,” continues Gottlieb. “Which will come with a more transparent system, involving patients, doctors and dispensaries in a conversation about education.”
Pointing to the success of doctors actively recommending cannabis could also facilitate doctor participation. “The number one reason why I recommend cannabis is that I have a number of patients that use it to successfully treat their conditions and completely eliminate their opioid regiment,” says Gottlieb. That kind of success in a treatment should grab the attention of physicians as what could possibly be best for their patients. With more education and research, doctors will gradually feel more comfortable recommending cannabis to their patients.
The Supreme Court shut down a lawsuit on Monday brought by two states against Colorado for its recreational cannabis laws. Nebraska and Oklahoma brought the case to the Supreme Court, claiming that the recreational cannabis industry in Colorado is responsible for the illegal exportation of cannabis outside of Colorado. “Colorado has facilitated purchase of marijuana by residents of neighboring states by issuing licenses to an unusually high number of marijuana retailers perched on Colorado’s borders,” the two states told the court in a supplemental brief.
In that brief, the two states argue that Colorado’s cannabis industry led to more cannabis illegally crossing state lines. They argue because of that influx of cannabis, they spend more on law enforcement and state resources, which is a detriment to their citizens. The Supreme Court did not provide an explanation for why they refused to hear the case.
Many view this as a big win for the legal cannabis industry. “The Supreme Court has protected the will of the people today and I believe the court has demonstrated that it understands legal cannabis is a fundamental right,” says Andy Williams, president of Medicine Man, the largest cannabis dispensary in Denver.
Still others see this simply as business as usual. “While I’m pleased to see the Court reject the challenge to Colorado’s cannabis law, this decision isn’t really a win for cannabis advocates- it only maintains the status quo,” says Aaron Herzberg, partner and general counsel at CalCann Holdings, a medical cannabis holding company specializing in real estate and licensing. “We are struggling with diversion in California, so hopefully states will continue to be on track to create a more regulated and taxed environment where cannabis can be manufactured and sold through channels where it is safe and tested,” continues Herzberg.
Adam Koh, chief cultivation officer at Comprehensive Cannabis Consulting (3C), warns that the Court’s denial to hear the case is not necessarily an affirmation of state’s cannabis programs. “It is evident that some diversion is taking place, which of course is against the provisions of the Cole Memorandum,” says Koh. “In order to avoid being implicated in such activities, legally licensed cannabis businesses in Colorado should not take the SCOTUS decision as a signal to relax, but should instead work to make sure that inventory control and record-keeping protocols are in place and even exceed the standards required in state regulations.”
The fact alone that Nebraska and Oklahoma even brought the case to the Supreme Court means that diversion is a major issue facing the cannabis industry. “Only by going above and beyond in terms of compliance will this controversial industry make itself credible in the eyes of its detractors,” says Koh. Some cannabis industry leaders take it upon themselves to help guide rule makers in crafting standards.
Lezli Engelking, founder of the Foundation of Cannabis Unified Standards (FOCUS), believes the Cole Memo is currently the best guidance for states and business owners to follow by the federal government in regards to cannabis. “Gaping holes in cannabis regulations are glaringly identified via the pesticide issues and recalls recently,” says Engelking. “These issues showcase each state being in violation of the Cole Memo’s expectation that they will implement strong and effective regulatory and enforcement systems that address the threat to public safety, public health, and other law enforcement interests.”
The Supreme Court’s denial of the two states’ challenge to Colorado’s cannabis legislation suggests the federal government’s intentional avoidance of involvement in current state cannabis issues. The government’s inaction does not, however, indicate their support.
Studying cannabis genetics is a convoluted issue. Strain classification, medicinal effects and plant breeding are particular areas in the science of cannabis that still require heavy research. Marigene, a company researching cannabis genetics, is currently working with universities and research institutes to help map the cannabis genome and catalog genetic variation.
CJ Schwartz, Ph.D.
According to CJ Schwartz, Ph.D., chief executive officer and founder of Marigene, their mission is to “to classify, certify, and improve cannabis.” After studying genetics and cellular biology at the University of Minnesota, Schwartz received his Ph.D. in biochemistry from the University of Wisconsin. His research in the past decade has focused on genetic variations that control flowering time, discovering the expression of a gene called Flowering Locus T leads to differential flowering time of plants and is dependent on their native locations. We sat down with Schwartz to learn more about his research and collaborative efforts.
Cannabis Industry Journal: Why are you researching mapping the cannabis genome?
CJ Schwartz, Ph.D: We seek to identify the genetic differences among cannabis strains and the genes responsible for these differences. Genetic differences are what cause different strains to have different effects. DNA allows reproducibility, consistency, and transparency for your cannabis strains.
The more information we gather about cannabis genetics, the more tools we have available to create tailored strains. Cannabis is a targeted compound. It interacts with a very specific system in the human body, similar to hormones, such as insulin. Understanding the cannabis genome will help bring legitimacy and integrity to cannabis products, and allow us to better understand how chemicals from cannabis interact with the human brain. Genetic identification can provide a method of certification to more comprehensively describe plant material.
Schwartz doing sample preparation on the lab bench.
CIJ:How did you get involved in cannabis research?
Schwartz: My interest in cannabis guided my research career. Cannabis may not be a cure-all, but it has significant and measurable medicinal effects for many patients.
To allow true development of cannabis products, we need more science! Our genetic analysis is required for normalization and acceptance of cannabis products, but also essential for future breeding efforts to develop better and more useful plants.
Our sister company, Hempgene, is applying all of the same technology and techniques for hemp research. One focus of Hempgene is to manipulate flowering time in select hemp cultivars so that they mature at the appropriate time in different environments.
CIJ:What do you hope to accomplish with your research?
Schwartz: We can develop or stabilize a plant that produces a very specific chemical profile for a specific condition, such as seizures, nausea or pain. By breeding plants tailored to a patient’s specific ailment, a patient can receive exactly the medicine that they need and minimize negative side effects.
The current term describing the interaction of cannabis compounds is called the entourage effect. Interactions among compounds can be additive or synergistic. The entourage effect describes synergistic effects, where small amounts of compound A (e.g. Myrcene) vastly increase the effects of compound B (e.g. THC). Instead of flooding one’s body with an excessive amount of chemicals to get a non-specific effect, cannabis plants can be bred to produce a very specific effect.
A view of some of the work stations inside the laboratory at Marigene.
Currently our goal is to catalog the natural genetic variation of cannabis, and to identify DNA changes that affect a trait of interest. Once superior variants of a gene are identified, those variants can be combined, by marker-assisted breeding, to produce new combinations of genes. How different cannabis chemicals interact to produce a desired effect, and how different human genetics influence the efficacy of those chemicals should be the ultimate goal of medical marijuana research.
We are working closely with academic institutions and chemical testing labs to gather data for establishing correlations between specific cannabis strains and desirable chemical profiles. Our closest collaborator, Dr. Nolan Kane at UC-Boulder, is working to complete the Cannabis genomic sequence and generate the first high- resolution cannabis genetic map.
We are currently accepting samples and we produce a report in roughly two to three months. For one sequencing run, we identify 125 million pieces of DNA that are 100 base pairs long. We get so much information so there is a considerable time commitment.
I am excited to look at the amount of success the cannabis industry saw in 2015 and know that 2016 and the next five to eight years will see even more growth. With the upcoming presidential election and ten states that have either a medical or adult use legalization initiative on their ballot, the industry could rapidly accelerate.
Five of the states listed are located on the East Coast. The industry has, almost solely, existed in the West and it is relieving to see the East finally catch on. We saw the East grow more of a presence in 2015 than any other year. New Jersey is beginning to settle into it’s market, Delaware is getting off the ground slowly, Maryland began accepting license applications and New York, Connecticut, Massachusetts and Rhode Island have initiated medical programs. Now, there are eight potential states in the Northeast that may vote on cannabis in 2016.
I predict that we will see the Northeast become very research focused. There are five ranked medical institutions in the North East Region alone.
Philadelphia in particular has an incredible opportunity to become a research hub in the industry. In Philadelphia, there are three medical schools ranked top 100 in the country, and one that is ranked in the top five. When colleges and universities with clout like this step out and back medical cannabis research, more are soon to follow suit.
Last year I spoke with Dr. Marcel Bonn-Miller, researcher and faculty member at the University of Pennsylvania, Perelman School of Medicine. Dr. Bonn-Miller previously received two grants from Colorado to study the effects cannabis has on patients who suffer from PTSD.
While speaking with Dr. Bonn-Miller, we discussed how the University of Pennsylvania is involved with these studies. “Penn has always supported my work,“ he says. “They helped me all throughout the application process, making sure that I had everything I needed to receive the grants from Colorado.” Dr. Bonn-Miller also shared that he feels there are many opportunities for the other universities in Philadelphia to do the same.
When the industry loses the stigma people associate with cannabis, it will invite more professionals into the market, as well as top research programs. Currently not many top ranked organizations attempt to conduct research because of the difficulty to receive approval from the government.
“We’re only at the very beginning, essentially like being at the very beginning of Sir Alexander Fleming discovering penicillin as mold in a petri dish,” said Leslie Bocksor in an interview with CNBC. “That’s how it started, and now how broad are antibiotics as a category of medicine? In the same sense we’re just looking at the very beginning of cannabis.”
This industry is still relatively young. There is a tremendous amount that we have yet to learn until more research is done. When the barriers to research are removed, I believe we will see money put into research programs, helping to improve standards for quality and safety.
This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
Strictly Necessary Cookies
Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.
We use tracking pixels that set your arrival time at our website, this is used as part of our anti-spam and security measures. Disabling this tracking pixel would disable some of our security measures, and is therefore considered necessary for the safe operation of the website. This tracking pixel is cleared from your system when you delete files in your history.
We also use cookies to store your preferences regarding the setting of 3rd Party Cookies.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.
