According to a press release published last week, SC Labs is in the midst of a multi-state expansion under new leadership. The company hired Jeff Journey as their new CEO, coming from a VP position at Thermo Fisher Scientific.
Jeff Journey, the new CEO of SC Labs
Last year, in what seemed like an initial move to establish the lab on a coast-to-coast level, SC Labs developed a hemp testing panel that covers a number of contaminants on a national regulatory level. The hemp testing panel they developed purportedly meets testing standards in states that require contaminant levels below a certain action limit.
Then in February of this year, the company announced a partnership with Colorado-based Agricor and Botanacor Laboratories, with the goal of establishing a national testing network, offering comprehensive cannabis and hemp lab testing. All three of those organizations are certified by the Colorado Department of Public Health and Environment (CDPHE) for compliance testing required for hemp products.
In the press release that was published last week, they hinted at another announcement coming soon: a new partnership with Michigan-based Can-Lab. This, coupled with hints at further expansion and their current presence in California, Colorado and Oregon, means Journey will have his hands full and his sights set on nationwide cannabis testing.
“We’re looking forward to partnering with cannabis and hemp brands at every stage of the supply chain to share our innovative and forward-thinking scientific expertise so they can deliver safe products to the marketplace,” says Journey. “As cannabis legalization expands across the country, the testing industry is rapidly shifting and scaling to meet both market and regulatory demands.”
The leadership team will still have a few familiar faces, such as Jeff Gray as chief innovation officer and Josh Wurzer as chief operating officer. “The most important assets we can offer as a multi-state operator are scientific expertise, financial stability, and unquestionable integrity, the principles on which SC Labs has long stood for and will continue to provide to our valued customers,” says Journey.
Having a well-built grow room with adequate lighting, the ability to properly control the environment, proper nutrient feedings, a good pest management plan, well trained employees and an experienced cultivation manager are very important to the overall output of cannabis plants. However, even if you have all those measures in place, there’s no guarantee of success. One factor that is often overlooked is how many harvests you can get per year, as clearly the more harvests you can get in a given time period, the more likely your chances of success are in this competitive industry. This is why having a good cultivation plan in place, with proper foresight and planning, is so essential to success.
Increasing yield or production output in a cannabis cultivation facility can often be as simple as having the right cultivation plan in place to ensure that you are harvesting the maximum number of times per year. All it requires is a well thought out plan, and best of all, that does not cost any money if you have someone with enough cultivation experience assisting you and will earn back more than the cost of paying a consultant to get such a plan in place.
In this article I will explain why changing nutrients, grow media or even a cultivation manager may not necessarily increase yield, quality or your chance of success. What you should be focusing on is your cultivation plan and the scheduling of your cultivation cycles.
Why changing nutrient companies may not necessarily increase your yield
Nutrient dosers are used to inject fertilizer directly into irrigation lines
For the most part, nutrient companies use the same ingredients in their product lines and often buy them from the same source, but they combine them in different forms and ratios to create their “unique” product. You can go to a grow store, pick five different nutrient products, read the labels and compare the different nutrients in each one. You will find for the most part that they are very similar. Generally speaking, you could pick any one of those five nutrient companies and have great results. Mixing nutrients into a nutrient tank needs to be done precisely and if your employees are not doing it properly this can lead to plant health issues. In larger cultivation facilities, often nutrient dosers are used to inject fertilizer into the irrigation lines without having to mix nutrients. However, if the dosers are not set to the proper ratios, this can also lead to plant health issues.
There are a few companies that I really like that have a different approach to plant nutrition, which saves time and can prevent human error associated with mixing and applying liquid nutrients. Soilscape solutions, Organics Alive and Beanstock Agriculture all have nutrient lines that are intended to be used with soil or soilless media that can be amended into the soil which provide a slow steady release of nutrients that the plants can uptake as needed. This avoids the risk of human error in repeatedly applying liquid nutrients to the plants.
Why changing grow medium and nutrients will not necessarily improve your yield but may increase yourquality
Whether it is rock wool, coco fiber, a soilless mix or living soil, everything has a limit. Giving your plants the proper amount of water and the frequency at which you water, along with having sufficient room for the roots to grow are key factors to ensuring plant health. If your plants aren’t getting watered properly, no matter what media you are growing in, you will be having problems. Changing things like grow media won’t result in instant success, as there will always be a learning curve when making changes to your cultivation. If you cannot adapt quickly enough, you can quickly create major problems.
Changing things like grow media won’t result in instant success, as there will always be a learning curve when making changes to your cultivation.
You would be better off to master the grow media you are currently working; you will have more chance of success making slight alterations to your current media than you will if you switch your grow media altogether. There are so many different nutrient lines, soil companies, coco coir companies and the truth is any of them can lead to success.
Changing grow media and nutrients do play a large role in quality though. With cannabis being legalized in many states, the overall quality of cultivation inputs have increased, especially nutrients. However, in general, with some exceptions, the quality of cannabis has not necessarily increased along with the increase in quality of nutrients. One exception: I would argue that switching from salt nutrients and rock wool, to organic living soil will result in an improvement to the flavor, quality and terpenes of the cannabis.
A lot of people use rock wool with salts because it’s easier to scale up than if you are growing in soil, but some quality is also sacrificed. Soil is heavy and messy and most people throw their soil away which takes a lot of money and labor to do. Reusing your soil is one of the best ways to save time, money and increase quality. I had a friend that grew the same variety, same lights, same ventilation but grew hydroponically with salt-based nutrients and he would always say the cannabis I grew, organically, tasted better. The same was true when we grew the same variety outdoors. He used salt-based fertilizer, I used amended soil with water. There wasn’t really a comparison in flavor and the yield was not compromised either! This was his opinion not mine.
I think the vast majority of consumers have not seen the type of quality that someone in Northern California who has been smoking and growing for 20 plus years has seen. Quality is relative to what you have been able to acquire. Most people especially nowadays will never see the quality that used to be common when we didn’t treat the sacred herb like a commodity. When you do it for the love of the plant it shows. Remember, quality is relative to your experience and if salty weed is all you know, you are probably missing out.
Why changing your Cultivation manager may not necessarily increase your yield
Every cultivation facility should have an experienced cultivation manager who is knowledgeable in the areas of nutrient requirements, pest management, environmental requirements, managing employees and overall facilities operations. If a grow room cannot sustain the proper environmental set points, blaming the problems and issues that arise on the cultivation manager is not fair. It is a common problem in the cannabis industry – the owners of a company are not seeing the results that they want and think that by replacing the cultivation manager it will solve all their problems. In reality, often the problem results from upper management or owners of the company not providing the cultivation manager the tools necessary to perform their job at the highest level. Another common problem is when owners fire the cultivation manager and replace them with lower-level employees to manage the facility. The problem with this is those employees do not have enough experience nor the attention to detail to successfully run a cultivation facility. The result is that yield and quality suffer tremendously.
You should be harvesting every 60-70 days
If you are cultivating strains that finish flowering in 60 to 70 days you should be getting five harvests per year.
The reality is there is no one specific thing you can try or buy that will result in success. It is everything combined, the HVAC system, lights, genetics being grown, water quality, air quality, root zone temperature, ability to control environment, having a clean facility, disease free plants, knowledgeable cultivation manager etc. that are required to operate a successful cultivation.
But all of that is less important to yield than a good cultivation plan. Cultivation methods directly tie into the overall production of a facility. But, regardless of whether you’re growing in soil, hydroponics, using LED or HPS, have low or high plant counts, if you don’t have the ability to harvest a grow room, clean and replant within a very short amount of time (ideally one or two days) then you’re going to be losing out on profit.
If you’re cultivating strains that finish flowering in under 60 days you should be getting six harvests per year. If you are cultivating strains that finish flowering in 60 to 70 days you should be getting five harvests per year. To do this, you will need to have the appropriate amount of plants that are ready to be flowered to refill your grow room or greenhouse ready to flower. With a little bit of planning and foresight you will be able to do this, and you will be on your way to producing your highest yield potential.
If you are struggling to have enough plants that are ready to flower once you are done harvesting and cleaning your grow room, having trouble planning your cultivation schedule to maximize production, or struggling to maintain a mother and clone room to supply your own plants or planning for the appropriate amount of labor, contact Floresco Consulting and talk with one of our cultivation advisors to get you back on track. We can guide you to ensure you are harvesting, cleaning and replanting every 60 days. Contact us today to get your facility producing at its maximum potential.
What do Aurora Cannabis, Tilray and Pfizer all have in common? They all produce and sell products used for medicinal purposes, they are top competitors in their field and they all have statements on their websites claiming that science is one of the most important things to their business. But unlike Pfizer, Aurora and Tilray do not have any positions in the executive suite for scientists or medical personnel. This led us to wonder, why does the structure of their corporate ladder (as well as so many other cannabis companies) not align with what they claim to be their values?
According to Aurora Cannabis, “Science is at the core of what we do”.1 Look up the definition of “core” and you will get “foundational, essential, central, and enduring.”2 Sounds important. Meanwhile, Tilray’s main page states: “For the therapeutic value and risks of cannabinoid-based medicines to be fully understood, Tilray believes it is critical to evolve current scientific understanding of the field.”3
You would assume that somebody in the executive suite would have a position and an educational background relating to the central and enduring part of a business, right? We looked at 10 of the biggest Canadian cannabis companies, their founders’ educational backgrounds and whether there were executive positions for science, R&D or medicine (Table 1). We also looked at the same data for the top 10 biggest pharmaceutical companies (Table 2). As expected, every pharmaceutical company had upper-level (C and/or P level) positions for scientists and/or medical personnel. However, only 2 of the 10 cannabis companies had this.
To figure out why this is, (as scientists) we did some research. It turns out, the consensus is scientists are bad at commercialization. Scientists are rarely successful as CEOs because they are (usually) not good at attracting customers and get confused by things like revenue models.4 As Akshat Rathi bluntly put it, “just because you are the smartest person in the building does not make you capable to run a company.” In fact, many CEOs of life science companies got to the top by pursuing business, finance, marketing or sales. In the 90s, some life science companies took a chance on scientists and hired them as CEOs, but when they hit financial turmoil, they quickly undid this.5
So maybe scientists aren’t always cut out to be the CEO of a company. But that still doesn’t explain why so few large cannabis companies have a chief scientific/medical officer, or even a president of R&D.
Maybe we are looking in the wrong place. Maybe their value of science can be demonstrated by their spending on research. Typically, a larger agricultural company will spend 9% or more on R&D, and a smaller company will spend 2-4%.6 Meanwhile, the major pharmaceutical companies we looked at spent between 12 and 25% of their revenue on R&D during their most recent fiscal year. Since a cannabis company falls somewhere in between we approximate they would spend around 9-12%.
However, Canopy Growth was the only company that fell into our prediction range, spending 10.5% of their revenue on R&D in 2021.7 Tied for a distant second place were Charlotte’s Web and Aurora Cannabis (a subsidiary of Tilray), spending 4.6%. At the very bottom were Tilray which only spent 0.16% on R&D and TerrAscend which spent 0.21% during their most recent fiscal year.8,9 With most of the cannabis companies, we saw a gradual decrease in R&D funding over time, which intensified with the Covid-19 pandemic.
So why the heck are these companies going on about how they value science? To give them the benefit of the doubt, maybe they do think they value science, but they don’t know how to value it.
It’s hard for a company to take actions that show they value science if there are no voices for scientists at the executive level. After all, how can you make decisions based on science if nobody in the room understands it? Sure, we saw the argument that people who make it to the top can “learn enough science to ascend to the executive suite without much trouble”.5 But what is “enough science”? The mitochondria is the powerhouse of the cell?
This leads to our argument for putting scientists in the executive suites of cannabis companies and giving them a more powerful voice. Whereas scientists are not good at marketing, those in managerial roles tend to overly rely on intuition – even when the evidence is against them.10 For those relying on intuition, R&D is an easy target during times of crisis (like a global pandemic). Cutting costs in R&D yields a short-term immediate increase in profit and the negative impacts are often not felt until years later.11 However, cutting R&D investment is the opposite of what you should do during a time of crisis. Evidence suggests companies that maintain or even increase spending in marketing and R&D and focus on operational efficiency (such as process optimization) are the ones that will come out as the top competitors in the long run.12,13 Having a chief scientific officer or an executive for R&D with a scientific background can help sustain companies by promoting R&D during hard times and indicating what projects will be the most promising to help the company optimize their processes.
Having a scientist in the executive suite can also help keep everyone in check. “Senior execs live in a feedback loop of positive reinforcement making them unlikely to question their decisions,” according to Stefan Thomke and Gary Loveman.10 They claim the best way for those in managerial roles to avoid over relying on instinct and break out of that positive feedback loop is by “thinking like a scientist”. This involves not letting bias get in the way of truth, studying anomalies, being skeptical, developing strong hypotheses, producing hard evidence and probing cause and effect. To add to this, we think a major part of thinking like a scientist is by having at least one high up in the team. In our own company, giving equal value to scientific voices has resulted in all parties learning and thriving by making fact-based decisions.
Finally, scientists deliver! To be a scientist (with a PhD), one must master the field, find a gap in the knowledge, then fill that gap – all for little pay and no guarantee of a job at the end. This makes them dedicated workers whose main goal is to contribute something unique to their field, or in this case, their company.14 Having someone up top who is dedicated, passionate, innovative and trained to look for gaps in knowledge can be an invaluable voice in the executive suite. They are likely to point out potential money-saving solutions (i.e.: optimizing extraction conditions) that others up top may not have thought of on their own.
If you feel strongly that science is at the core of what you do, and you already know that R&D is crucial for the long-term survival of your company, you are already on the right track. In addition to this, consider giving a voice to scientists at the executive level in your company. The cannabis industry is still in its infancy. This means there is potential for R&D in more than just new product development. Basic stuff like extraction, modifying plants to be heartier against harsh conditions and pathogens, curing and safety testing processes have all barely been studied and optimized to reduce costs. These things won’t be solved by a Juris Doctor, an MBA or even an engineer, they will be solved by scientists, and it will take a scientist up top to ensure the whole company recognizes the importance of these projects.
Table 1: Top cannabis companies stats on founders and their educational backgrounds, presence of scientific executive positions and spending on research and development
Terry Booth, Steve Dobler, Dale Lesack and Chris Mayerson
Terry: Master Electrician18
Steve: B. Eng
Chris: Concrete business
Dale: Electrician and homebuilder
no
4.6% 19
Village Farms International Inc.
Michael A. DeGiglio
BSc Aeronautic Science
no
No data available on R&D expenses
Tilray Inc
Brendan Kennedy, Christian Groh, Michael Blue
Brendan: Ba. Architecture, Msc: Eng, MBA20
Christian: Ba. unknown, MBA21
Michael: Ba. Finance, MBA22
no
0.16% 23
Ayr Wellness Inc
Jonathan Sandelman
Juris Doctor, Law Degree24
no
No data on R&D spending available
TerrAscend Corp
Michael Nashat
Pharm. D . Post doc in Neuroscience25
no
0.21% 26
HexoCorp
Sebastien St-Louis
Ba. Economics, MBA 27
no
3.09% 28
Fire & Flower Holdings Corp
Trevor Fencott
Ba (unknown), and Law degree29
no
No data on R&D spending
Zenabis Global Inc
(now owned by hexo corp)
Rick Brar, Mark Catroppa, Monty Sikka
Rick: Ba. (unknown)
Mark: Ba. Finance 30
Monty: Ba Accounting and Finance31
Chief science Officer:
Natasha Ryz PhD experimental medicine.32
NA
Table 2: Top pharmaceutical companies founders and their educational background, presence of executive positions for scientists and spending on R&D
Company
Current Executives
Educational Background
Science executive positions?
% Revenue spent on R&D
Amgen
Robert A. Bradway
BSc. Biology, MBA33
Chief Medical officer: Darryl Sleep, M.D. 33
Senior VP in R&D:
Jean-Charles Soria PhD molecular Biol, MD
18.5% 34
Sanofi
Paul Hudson
Ba. Economics, honorary doctorate in business35
Executive VP, R&D:
John Reed, MD, PhD in Immunology35
14.51% 36
Bristol-Myers Squibb
Giovanni Caforio
MD.37
Chief Medical Officer: Samit Hirawat, MD.
Rupert Vessey:
Executive VP: R&D PhD molecular immunology 37
24.58% 38
Takeda
Christophe Weber
PhD. pharmacy and pharmacokinetics, Msc. pharmaceutical marketing, accounting, and finance39
Director
President, R&D:
Andrew Plump, MD. Ph.D. in cardiovascular genetics 39
14.25% 40
AbbVie
Richard A. Gonzalez
No college degree. Practical experience in biochemistry research.
Vice chairman and president, R&D:
Michael E. Severino, MD, Bsc biochem41
12.60% 42
Novartis
Vasant Narasimhan
Bsc. Biology, MD, Msc Public policy
President, Biomedical research, James Bradner M.D.
President innovative medicine, Victor Bulto: Msc. Chemical engineering, health economics, and pharmaeconomics, MBA. Chief medical officer, John Tsai BEng. MD43
18.04% 44
Merck
Robert M. Davis
Ba Finance, MBA, Juris Doctor45
Executive VP and president of Merck Research Laboratories; Dean Li MD, PhD cardiology45
25.14% 46
Johnson & Johnson
Joaquin Duato
Vanessa Broadhurst
Peter Fasolo
Joaquin: MBA, Master of international management
Vanessa: Ba, Master of Business Administration
Peter: PhD in organizational behavior, Msc. Industrial Psychology, Ba Psychology47
Executive VP, Chief Medical Safety Officer; William Hait MD. PhD Oncology
Definition of Core. Merriam-Webster Dictionary https://www.merriam-webster.com/dictionary/core?utm_campaign=sd&utm_medium=serp&utm_source=jsonld.
Tilray Brands WebPage. https://www.tilray.com/.
Rathi, A. Why scientists make bad entrepreneurs—and how to change that. Quartz (2015).
Mintz, C. Science vs. Business: Who Makes A Better CEO? Life Science Leader (2009).
Fuglie, K., King, J. & David Schimmelpfennig. Private Industry Investing Heavily, and Globally, in Research To Improve Agricultural Productivity. US Department of Agriculture, Economic Research Service (2012).
Thomke, S. & Loveman, G. Act Like a Scientist. Harvard Business Review (2022).
Knott, A. M. The Trillion-Dollar R&D Fix. Harvard Business Review (2012).
Gulati, R., Nohria, N. & Wohllgezogen, F. Roaring Out of Recession. Harvard Business Review (2020).
Soferman, R. Why You Shouldn’t Cut R&D Investments In Times Of Crisis And Recession. Forbes (2020).
Madisch, I. Why I Hire Scientists, and Why You Should, Too. Scientific American (2018).
Havn Life Sciences Inc. Announces Appointment of Gary Leong as Chief Science Officer. https://apnews.com/press-release/accesswire/science-business-life-sciences-inc-aphria-inc-319a516963144b308d146d97dee0dc69 (2020).
Bruce Linton. Elite Biographies https://elitebiographies.com/biography/bruce-linton/.
A Jonathan Sandelman Profile. zoominfo https://www.zoominfo.com/p/Jonathan-Sandelman/2245250.
Dr. Michael Nashat Appointed President & CEO of TerrAscend. https://markets.businessinsider.com/news/stocks/dr-michael-nashat-appointed-president-ceo-of-terrascend-1012862002 (2018).
Aurum Labs, a cannabis testing laboratory based in Durango, Colorado, announced last week that they have become certified by the Colorado Department of Public Health and Environment (CDPHE) for all of the compliance testing required for hemp products. The press release says they are the first independent lab that is actually based in the state to receive the CDPHE certification for every compliance test.
Last year, Colorado rolled out hemp testing regulations that are some of the most comprehensive in the world. The required pesticide screening includes testing for more than 100 different types of pesticides. The new rules, along with the certification requirement, make it difficult for labs to enter the market, with only eleven total labs certified by the CDPHE for various hemp compliance panels and only five certified for every type of test, according to the department’s website.
Most of the companies on that list certified to conduct hemp compliance testing are familiar labs with large footprints, such as Eurofins, Kaycha Labs, Columbia Labs, SC Labs, InfiniteCAL and ACS Labs. Most of these labs are out of state and by the looks of it, only four independent, Colorado-based labs are certified so far: Aurum Labs, Gobi Analytical, Botanacor Labs and Minova Labs. Gobi and Minova, however, are not yet certified for pesticide testing, while Aurum appears to be certified for all compliance testing. Botanacor Labs, based in Denver, was certified back in June of 2021 to every compliance test except for pesticides.
“It’s difficult to compete with these large, private-equity-funded labs, but Aurum is passionate about serving the evolving hemp industry” Liz Mason, director of operations at Aurum Labs, said in a press release. “We are committed to staying on the scientific forefront to give the most comprehensive services to our clients.”
Back in December of 2021, The Pennsylvania Department of Health sent emails to registered medical cannabis patients, notifying them of a safety review being conducted on ingredients found in cannabis vape products.
Then in February this year, the state’s health agency sent a third email. This one notified patients that they were recalling more than 650 products and ingredients. “As you know, the Department recently conducted a statewide review of all vaporized medical marijuana products containing added ingredients,” reads the email to patients. “After finishing this review, the Department has determined that certain vaporized medical marijuana products containing some added ingredients have not been approved for inhalation by the United States Food and Drug Administration (FDA).”
The recall generated a lot of controversy for the state’s medical cannabis market, leaving patients, dispensaries, processors and other cannabis businesses with little guidance from the state’s health department. Cannabis companies in Pennsylvania, like Curaleaf, Jushi and Trulieve, formed a coalition and sued the state’s health department in February, alleging that regulators ordered the recall preemptively and did so without going through the proper channels, according to the Philadelphia Inquirer.
On June 2, the coalition of cannabis companies won and a judge stopped the recall. The very next day, the health department took issue with the judge’s decision and filed an appeal with the PA Supreme Court. For now though, as the appeal makes its way to Pennsylvania’s top court, the recall is lifted and dispensaries can restock their shelves with vape products.
Leafreport released the findings from their expansive CBD testing study that revealed some pretty alarming results. According to their study, only 7% of CBD brands they sampled actually conduct legitimate contamination testing for pesticides, heavy metals and microbial contamination.
Leafreport is an Israeli company founded in 2019 that does product reviews, independent testing and provides educational resources for consumers. The company produces studies on CBD products in the market and reports their results on its website. Back in 2020, the watchdog company conducted independent lab testing on 22 different CBD-infused beverages and found a lot of inconsistencies with the actual amount of CBD found in the beverage and what the product’s label claimed.
In this latest study, finalized in late May of 2022, the consumer advocacy group found a lot of inconsistencies throughout the CBD market. For their study, they reviewed 4,384 products from 188 brands, with the goal of looking at overall transparency in the CBD products market. Judging by the results they share, the CBD market is unsurprisingly not very transparent.
Here are some highlights from this most recent study:
20% of the brands reviewed didn’t carry out any purity tests to check for the presence of microbes, pesticides, or heavy metals. In 2021, 25% of the brands Leafreport reviewed didn’t carry out any purity tests.
42% of brands test almost all of their products for potency (90%-100% accurate) and share their third-party lab results with consumers — the same as in 2021.
Only 12% of brands had all their products fall within acceptable potency variance limits.
88% of brands that tested their products for potency had at least one product test beyond the 10% variance for potency, in comparison to 84% in 2021.
28% of brands didn’t carry out any testing at all for pesticides (such as glyphosate), 26% didn’t test for the presence of any heavy metals (such as arsenic), and 24% didn’t test for microbes (like bacteria).
Two brands carried out no lab testing at all for either purity or potency, compared to 3 brands in 2021.
The Center for Scientific Cannabinoid Information (CSCI) announced their launch on June 14. In a press release announcing their launch, the non-profit organization says they want to serve as a resource for healthcare professionals, psychologists, doctors, athletic trainers and others looking for information on the safety and efficacy of cannabinoids. The organization is focused on providing current, research-based information on cannabis.
The advisory board for the CSCI includes: Margaret Roche, a dietitian; Dr. Steven Salzman, a surgeon; Dr. George Gavrilos, a pharmacist; Joseph Cachey, an attorney and former hemp executive; Dr. David Kushner, a hospitalist; Dr. Bonni Goldstein, a physician; Dr. Kylie O’Brien, an integrative medicine specialist; and Dr. Jason Canner, an oncologist.
According to Dr. Steven Salzman, who is named as CSCI Chief Medical Officer, their organization will help fill the knowledge void in the healthcare space. “As a physician and practitioner working with cannabinoids, I’ve heard from many other practitioners who have been searching for reliable, evidence-based information on cannabinoids, and realized there was a void,” Says Dr. Salzman. “The CSCI fills this void by serving as a valuable resource where practitioners can access accurate, up-to-date information on CBD and other cannabinoids to help them gain a better understanding of this emerging field.”
The press release says that the organization will compile the latest research and clinical best practices for cannabinoid treatments and share the information with their community. The CSCI invites folks interested in medical cannabinoid research to check out their website and join their community to receive up-to-date scientific information.
Protecting Consumer Health: The Need for More Stringent Lab Testing Rules
Milan Patel, CEO, PathogenDx
In this session, Milan Patel discusses:
The current problems with testing in the cannabis industry. (Loose regulation and enforcement, allowing operators without scruples to endanger consumers, E.G. increasing moisture to products to increase weight, while also increasing risk of mold.
Potential solutions to this problem. (Bring more attention to the problem, states need to follow CGMP for recreational markets, companies should test at every step of the supply chain)
Why this matters (beyond protecting consumers, this will help protect the reputation of the industry and individual companies within it.)
TechTalk: Millipore Sigma
Maria Nelson, Technical Consultant, AOAC International
Why Use an Accredited Laboratory to Test your Cannabis
Tracy Szerszen, President & Operations Manager, Perry Johnson Laboratory Accreditation (PJLA)
This presentation will educate listeners on the various aspects laboratories must meet in order to obtain ISO/IEC 17025 accreditation. This will include an overview of what the ISO/IEC 17025 standard mandates on laboratories, the accreditation process and timelines as well as best practices to become prepared for an assessment. Utilizing an accredited laboratory is critical to this market resulting in less retesting and reliable results to support safe products.
How Authenticity Testing Can Help Cannabis Businesses
Dr. Arun Krishnamurthy, NMR Spectroscopist, Purity-IQ
Metrc combines a software platform with radio frequency identification technology to track plants and cannabis products from seed to sale. The track-and-trace model quickly became adopted by dozens of states to regulate their cannabis markets over the years, becoming an important standard in the industry.
With government contracts in nineteen states and counting, Metrc has become an omnipresent fixture in the United States cannabis market. States work with Metrc to provide their market’s traceability software for the entire supply chain, which helps prevent diversion to the black market, offers security and safety, aids in recalls and regulatory compliance tools.
We sat down with Michael Johnson, CEO of Metrc, to discuss retail challenges, regulations, cybersecurity, compliance and more.
Aaron Green: What are the major compliance challenges retailers face?
Michael Johnson: Major compliance challenges that retailers face will vary from state to state, however, we do see common themes across state lines. Financial services, for instance, has been a historical industry hurdle, as most big banks and credit card companies deny access to their network, making it difficult for retailers across the board – from bank account setup to limited customer and patient payment options to security issues when managing a cash-only retail business. The tides are starting to change with more credit unions and state-chartered banks opening their doors to the industry, along with new payment technologies for consumers to use instead of cash.
Michael Johnson, CEO of Metrc
We also see common operational challenges, including inventory management issues due to human error, lack of consistent quality assurance, and product theft. Retailers regularly face strict packaging, labeling, and product safety laws along with requirements for public health, storage and sanitation procedures and additional layers of security and surveillance.
Finally, access to compliant and retail-friendly technology systems is important as it can have a major operational impact. If a retailer can choose, selecting the right platform will manage all their operational needs – from ID-scanning at check-in to inventory management to banking – while properly integrating with their state’s track-and-trace technology. That’s a major benefit and one that Flowhub brings to the industry, alongside Metrc.
Aaron: How does compliance for retailers differ from cultivators and manufacturers?
Michael: It is important to note that proactive compliance sits at the center of cannabis regulation. Not only does it ensure the maintenance of license(s) and overall businesses, it helps expand and enhance the industry as a whole. As a highly regulated sector, transparent and consistent compliance initiatives provide the necessary foundation for a safe and secure environment, strengthening all levels of the supply chain and the industry at large.
All industry players must adhere to specific licensing and documentation requirements – an expired or illegal license may lead to serious fines and carries the potential of losing the business. In a handful of states, employees may need a license as well. Real estate also comes into play for all license holders, with special cannabis zoning restrictions, such as requiring distance limits between select institutions.
Since retailers are customer- and/or patient-facing, they may experience unique operational requirements compared to cultivators and manufacturers, including ID-checking policies, customer or patient delivery laws, additional packaging and labeling rules, strict dispensation regulations, in-store and on-shelf product placement, retail signage, and product promotion rules, and more.
Just like retail, cultivation and manufacturing compliance will also vary across states, but with a host of additional compliance requirements to keep in mind – for example, biological, chemical, and physical hazards are something that play a larger role at facility operations, which are subject to Occupational Safety and Health Administration (OSHA) rules. Other compliance issues to highlight on the cultivation and manufacturing side include state requirements on inventory reporting, security patrols, waste removal, and meticulous logging.
Aaron: What is your process for evaluating vendor integrations?
Michael: At Metrc, we maintain an efficient and consistent process for evaluating vendor integrations – an example of our commitment to ensuring the safety and security of legal cannabis markets.
First, integrators petition access into specific instance(s) by filling out a form with their basic information (business name, software name, contact info, etc.), along with any state-required agreements that must be signed. The integrator is then given a set of steps to perform in each instance requested. The steps provided are then evaluated by our API Support team. When all steps are performed accurately, the integrator is added into production and an API key is generated for their use. Licensees must also issue the TPI a User API key to gain access to the API. Overall, the process is a combination of meeting state, Metrc, and licensee requirements.
Aaron: Can you address the cybersecurity landscape METRC faces? What is METRC’s process for dealing with cybersecurity threats?
Michael: Cybersecurity threats are shared across industries and although not unique to Metrc or the cannabis sector, cybersecurity threats and the value of data continues to change. Maintaining strict safeguards around data privacy and the security is a top priority at Metrc and we keep a constant pulse on changes in the cybersecurity landscape, to maintain this safeguard for our customers, industry users, and Metrc as a whole.
Aaron: What trends in cannabis regulation are you following?
Michael: Cannabis rules and regulations are ever evolving, which is why it is vitally important for anyone in the industry to stay up to date. Examples of some we are following closely at Metrc include the SAFE Banking Act, Marijuana Opportunity Reinvestment and Expungement (MORE) Act, and Cannabis Administration Opportunity Act (CAOA); and more generally federal legalization, public health protection, and environmental regulations.
Aaron: What’s next for METRC?
Michael: We continue to expand our customer and user feedback loop to ensure our roadmap meets the unique needs of markets and an overall evolving industry/regulatory landscape. Examples include continued performance improvements, more robust analytics capabilities, user-driven functionality updates, and exploring the design of a more sustainable RFID tag.
By Abraham Finberg, Simon Menkes, Rachel Wright No Comments
Some states, like California, Colorado and Washington, have welcomed cannabis with open arms while others have taken a while to come to the party (or haven’t gotten there yet). Missouri, whose licensed sales only began in October 2020, is one of the late arrivals.
Perhaps it’s in the nature of the people of the Show Me State to wait for proof that something is a good thing rather than being early adopters. Even Missouri’s nickname came into being as a statement of skepticism when Missouri Congressman Willard Duncan Vandiver, in an 1899 speech in Philadelphia, said, “Your frothy eloquence neither convinces nor satisfies me. I am from Missouri. You have got to show me.” (Not surprisingly, perhaps, Missouri’s state animal is the Missouri Mule).
Missouri legalized the use of medical cannabis on December 6, 2018. Compared to many other states, Missouri’s definition of what constitutes medicinal use is more tightly defined. For example, most medical cannabis states allow “anxiety” as an acceptable condition for a prescription; Missouri does not.1
Current Status of Adult Use Cannabis
St. Louis, Missouri
Missouri is now locked in a battle to legalize adult use cannabis, with the group Legal Missouri 2022, among others, working hard to put the measure on the ballot this year. At the same time, Representative Ron Hicks (R) is pushing to legalize recreational purchases with his Cannabis Freedom Act. “I want the legislature to be able to handle it so that when there are problems and things need to be changed, it can be changed,” Hicks said.2 Missouri Governor Mike Parson (R), who has been against recreational usage, has stated he would “much rather have the legislators have that discussion out here and see if there is a solution other than doing the ballot initiative.” Parson added, “If it got on the ballot, it’s probably going to pass.”3
Cannabis Business in Missouri: Only Cost of Goods Sold Deduction
Missouri has maintained its state tax code to be in conformity with Section 280E of the Internal Revenue Code, which disallows deductions and credits for expenditures connected with the illegal sale of drugs, stating:
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business … consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law.4
This is true for both corporation5 and individuals6 in Missouri.
Governor Mike Parson recently vetoed a bill to eliminate conformity with I.R.C. Section 280E. Eliminating conformity would have lowered the tax burden on medical cannabis businesses, and increased Missouri’s competitiveness.7
State Sales and Cannabis Taxes
Missouri taxes retail sales at 4% of the purchase price.8 In addition, Missouri taxes retail sales of medical cannabis another 4% of the retail price.9,10 The medical cannabis tax is collected by dispensary facilities who then remit it to the Department of Revenue using Form 5808.11
Tax compliance is burdensome in Missouri, with dispensaries having to file returns monthly, even when they have no tax to report.12 Missouri also doesn’t allow cannabis businesses to pay their taxes in cash.13
No Tax on Tax
It’s important to note that Missouri doesn’t charges sales tax on cannabis tax nor cannabis tax on cannabis tax (unlike high-tax states like California). Under Missouri’s law, the tax is “separate from, and in addition to, any general state and local sales and use taxes that apply to retail sales.”14 Under Missouri’s sales tax law, “ Tax collected as a part of a sale should not be included in gross receipts.”15 Missouri has not specified whether the medical tax constitutes tax collected as a part of a sale; however, its regulations state that gross receipts from the sale of cigarettes do not include the amount of the sale price that represents the state cigarette tax.16 If the medical tax is analogous to the cigarette tax, gross receipts from the sale of medical cannabis likely excludes the amount paid as medical cannabis tax.
If the Legislature-Sponsored Cannabis Freedom Act Passes
If the Cannabis Freedom Act passes, Missouri will have a number of additional interesting changes. The bill would only allow for double the number of current medical cannabis licensees to serve the adult use market. It would also allow for people with non-violent convictions to petition the courts to have their record expunged (cleared).
Adult Use Taxes
The Act would allow the Department of Revenue to set an adult-use tax of up to 12%. There would be no such tax on medical cannabis sales.17
Normal Tax Deductions Allowed for Businesses
Licensed businesses would also be able to make tax deductions with the state up to the amount that they’d otherwise be eligible for under federal law if they were operating in a federally legal industry.18
Amendment Added to Act
In a move seen by many as a bid to derail the Cannabis Freedom Act, Representative Nick Schroer (R) amended the Act to bar transgender women from accessing no-interest loans for women- and minority-owned cannabis businesses, adding that only women who are “biologically” female would be eligible for the benefit. In the end, this addition may have the effect of scuttling the bill.19
Multiple Efforts to Place Cannabis on the Ballot
Even if the Act doesn’t pass, there are multiple efforts to place cannabis before the voters, including one by Representative Shamed Dogan (R), the group Legal Missouri 2022, which got medical cannabis passed by voters in 2018, and Fair Access Missouri.20
Comparison to Neighboring Oklahoma
Oklahoma, like Missouri, has not legalized the use of recreational cannabis, only medical cannabis. Also, Oklahoma taxes sales of tangible personal property (except newspapers and periodicals) at 4.5%, which is close to Missouri’s 4%.21 Tax is imposed on gross receipts or gross proceeds.22 Gross receipts (or gross proceeds) = Total amount of consideration, whether received in cash or otherwise. Credit is allowed for returns of merchandise.23
Oklahoma taxes retail medical cannabis sales at 7% of the gross amount received by the seller.24 Like Missouri, it has not specified any exemptions from the medical cannabis tax. Oklahoma’s medical cannabis tax base is the same as Missouri’s. Oklahoma’s medical tax rate is higher than Missouri’s. Therefore, Missouri’s tax treatment of medical cannabis is even better than Oklahoma’s.
Note, however, that Oklahoma has made it explicit that there is no tax-on-tax. “The 7% gross receipts tax is not part of the gross receipts for purposes of calculating the sales tax due, if the tax is shown separately from the price of the medical marijuana.”25
Oklahomans appear to be far more favorably disposed towards cannabis than Missouri, however. 2021 cannabis sales per person in Missouri was approximately $34, while Oklahoma boasted an impressive $210 per person, besting even California, which had $111/per person in cannabis sales.26
The Hidden Opportunity
Although Missouri only began licensed sales in October 2020, the state’s monthly sales has shown a strong upward curve. By the end of June 2021, monthly sales were just above $16 million. That number had shot up to $29 million per month for December 2021, and almost $37 million for April 2022.27 Patient enrollment is also increasing significantly.28
The best move, many experts believe, is to get into the medical market now, before the inevitable happens and adult use is approved. Competition is low at the moment, due to the lack of medical licensed dispensaries in the state. Although obtaining a license can be difficult, the current lack of competition, as well as the opportunity to gain a foothold in the cannabis industry before recreational purchases are approved, could provide a 10 times revenue increase from current medicinal sales levels.
Tyler Williams, founder of St. Louis-based Cannabis Safety and Quality and one of the St. Louis Business Journal’s 2021 40 Under 40, is optimistic about the future of Missouri cannabis. The state, he says, has been left “with only a few cannabis growers and manufacturers with a head start over the impending recreational market that is likely to come within the next couple of years.”29
The Bottom Line
The State of Missouri’s treatment of legal cannabis has been mixed, but the demand for the product by many residents of the state is unquestioned. If an entrepreneur has the foresight to get involved before all the wrinkles of legalization have been resolved, there is a possibility for very strong return on investment.
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.
“We’re looking forward to partnering with cannabis and hemp brands at every stage of the supply chain to share our innovative and forward-thinking scientific expertise so they can deliver safe products to the marketplace,” says Journey. “As cannabis legalization expands across the country, the testing industry is rapidly shifting and scaling to meet both market and regulatory demands.”
