Tag Archives: Ohio

Flower-Side Chats Part 11: TILT Holdings

By Aaron Green
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Flower continues to be the dominant product category in US cannabis sales. In this “Flower-Side Chats” series of articles, Aaron Green interviews integrated cannabis companies and flower brands that are bringing unique business models to the industry. Particular attention is focused on how these businesses navigate a rapidly changing landscape of regulatory, supply chain and consumer demand.

TILT Holdings (NEO: TILT) is a publicly traded cannabis company with business divisions including Jupiter Research, distributor of CCELL in the US, as well as cannabis operations Commonwealth Alternative Care in Massachusetts and Standard Farms in Pennsylvania and Ohio. Unlike many publicly traded companies, TILT has focused their business on B2B sales staying away from retail operations. TILT recently announced a partnership for vertical cannabis operations with the Shinnecock Nation on Long Island, New York called Little Beach Harvest.

We interviewed Gary Santo, CEO of TILT Holdings. Prior to joining TILT, Gary worked at Columbia Care where he was the vice president of investor relations. Gary has a background in finance with several startup companies.

Aaron Green: How did you get involved in the cannabis industry?

Gary Santo: My career started about 26 years ago in finance at a startup. It was a financial services intermediary startup company where we did a lot of B2B work. From there, I branched out and continued to work with what I consider to be startup companies and companies going through a massive transformation. What’s been interesting is no matter whether that industry is finance, or whether it was gaming and leisure – where I was doing casino equipment – or whether it was life sciences, there were all so many common threads to how those businesses work. They were all complex and all had stories that needed to be told.

Gary Santo, CEO of TILT Holdings

I looked at cannabis around 2017 or 2018. A friend of mine said, “you should really look at this space, because this could be a great way to cap off your career. It’s an emerging space. It’s a story space. It’s a space that’s just looking for some level of normal operational competency.” So, I was lucky enough to find Columbia Care. I joined them back in 2019 and helped take them public. They were the first cannabis company I had seen that was focused on being pragmatic and operational, not flashy, like so many of the companies that went public. They showed me that there is a way and a path in cannabis, that can be pragmatic, that can be operational, and where certain business rules do in fact, apply.

In July of last year, in the middle of COVID, I joined TILT, because I saw an opportunity to have that rebirth story, that complete turnaround story. It’s a B2B story that fits almost every part of my career up to this point.

Green: You have business units within TILT that span a diverse array from cultivation to manufacturing and technology. How do you see the business units of TILT working together in synergy?

Santo: That was the first question that was posed when I joined. We had three divisions at the time. We had our technology and accessories division with Jupiter that focused on inhalation. This includes the power packs, the cartridges, all the packaging that goes into that and also packaging for cannabis in general, not just for vapes. We had the software and services division in Blackbird which also does a bit of distribution in California and Nevada. Then we had our plant-touching side with vertical operations on the East Coast.

We quickly figured out that the software and services were not a place where we had good line of sight. That market is very competitive and irrationally priced. So, we leaned into the other two parts of the business which were profitable. TILT went through a rebirth when it went public with the same kind of wide mandate in 2018 that a lot of companies had back then. They had acquired some interesting assets. Jupiter has been profitable since day one. On the plant-touching side, we have assets in Massachusetts and Pennsylvania, that are in underserved, limited-license and supply-constrained markets, and those were profitable as well.

The way they work together is if you think about Jupiter’s business model, they are a distributor of the CCELL vaping technology. It’s a ceramics-centered cart. They were instrumental. The founder of Jupiter, who’s the chair of our board, Mark Scatterday, really helped the Chinese factory, Smoore, who owns CCELL and the patents on CCELL, to develop that technology from their use in the tobacco space, which is where it had been for quite some time, and bring it into the cannabis space.

Jupiter has always had a forefront position as a distributor. We have our own R&D shop, but the way we sell there is B2B. We will sell vape cartridges and power packs either as stock items with Jupiter and CCELL logos or on a customized basis. If there’s a bespoke mouthpiece or something we can take one of our existing designs, white label it and put different badging or color combinations.

The CCELL business grew to over 700 customers, including MSOs, LPs, brands, and in about 36 different states and in 15 countries. As we looked at how best to lean into our plant-touching assets coming into 2021, the question was, could you replicate that where you own more of the supply chain? The issue with being a distributor is if you don’t own enough of the supply chains, the margins aren’t quite as eye-popping as they are in the plant-touching side. So, we’ve built a robust wholesale business, selling into about 90% of the retail stores in Pennsylvania from our manufacturing and distribution facility, and selling into about 50 or 60% of the retail stores in Massachusetts from our operations. We thought that created a strong window for us to do the same exact thing: offer up our facilities to create product whether it be on a bespoke basis with one of our brands, or a white-label basis, or straight-up contract manufacturing. We then leverage that distribution network, and that’s where the pieces all started to fit together.

We started this year with probably about 15-20% of our revenue was coming from people who were customers of both plant-touching and non-plant-touching businesses. We’re up to over 30% now and really, we just started leaning into the strategy in the start of 2021.

Green: In Q2 TILT showed continued growth in revenues and EBITDA with the Q3 report recently released. Where are you seeing growth in revenues right now? What’s got you excited?

Santo: With Jupiter, it’s been great to watch the vape industry come back. I think you could not have thrown much more at the vaping industry than what was thrown out there in late 2019, with the vape crisis rolling right into a respiratory pandemic. I think what we saw there was consumer demand remains strong. For every percentage point vaping was down, smokable flower is up. So, inhalation is clearly the absorption method of choice.

Obviously, the utility and the convenience of the vape was less important to people working from home. You can now smoke a pre-roll, whereas you’d never do that in your office setting. You might go outside and take a quick draw on a vape and then go back to work. That’s one of the reasons we saw a little bit of choppiness in 2020. We started to see that that business come back towards the end of the year with a lot more consistent ordering, and this year, it’s gone into full throttle. All-in-ones – the disposables – have returned to ordering so that means more power packs and more cartridges. It’s been a pleasant return to normalcy.

Now, I think Jupiter has been outpacing the broader vaping market in terms of year-over-year growth. That’s exciting granted the margin profile is certainly not as eye-popping as the plant-touching businesses. With Jupiter, we’re talking mid 20%’s on gross margin and low-to-mid teens on EBITDA.

Plant-touching aspects are where we’re super excited. These are facilities that a little over a year ago, prior management was thinking of selling off mostly because they thought there was tremendous value there. And it made sense. When I joined the firm, one of my first jobs was to look at a strategic view of the entire company and break down each of the business units. It became very clear that Massachusetts, Pennsylvania, and recently Ohio, we’re going to be the significant growth engines for us, but not necessarily in retail.

A lot of the MSOs go and play in several stores and focus on sales per square foot. We are leveraging that B2B wholesale strategy. That’s exciting to us and the approach that we’re taking. It’s not about selling bulk flower. It’s not about selling just our own brands. It’s about really partnering with brands that are going to be coming from West to East. Whether it’s California, Washington State, or Colorado, brands that have managed to stake out a claim in the most hyper-competitive spaces in a race to the bottom market in terms of pricing, have held their price point and held their ground. We think they play exceptionally well here on the East Coast where we’re just getting started. The East coast is nowhere near the depth of market that you see over in California.

What we offer, what makes it exciting, is that we’re not trying to buy those brands. We think brands are where this industry is going. But we don’t know which brands are going to win any more than anyone else does. We know it’s expensive to own a brand and it’s hard to keep a brand fresh. So, we’re doing partnerships and those partnerships are literally on a SKU-by-SKU basis. In some cases, it’s a straight licensing deal, and in other cases, we share the gross profit. Brands come in, like Old Pal, for example, and we’re able to educate them on how different it is to sell their ready-to-roll pack in Massachusetts compared to what they do in California from the packaging to the formulation, and what can be on the labels, all those kinds of things. It’s been eye-opening.

The feedback has been better than I would have ever expected. I knew we would land a few brands. I wouldn’t have thought we would have already signed four brands on something we just announced strategically in January. We had MJ BizCon, where we were getting hit up all over the place with additional brands. I think between that, and then the work we’re doing in New York State, it shows that we’re differentiated and how we’re approaching this market. We’re in this to last, not to just squeeze every last basis point and ride the wave into the shore. We want to still be out here playing in the ocean in any market, whether it be this market, the legalized market, or whatever the market throws at us.

Green: When you are partnering with brands, what does that look like?

Santo: It depends on the jurisdiction. In Pennsylvania, you can’t really do pre-rolls there. You can’t sell the ready-to-roll pack that comes with a lighter. I can sell the pouch with flower, but I can’t sell you rolling papers. I can’t sell you a lighter because you might “figure out how to put that all together and smoke a joint.”

Part of the issue is being able to marry what makes that brand, “the brand?” And how do we keep that brand fidelity when we know we have certain restrictions, whether it’s medical-only market in Pennsylvania, or THC levels in Ohio. That’s where we spend time working with the brands, helping to develop which SKUs they want to see hit the market first. Everybody says they want to be a number one brand in every market and it’s not realistic. You might carve out a niche if you want to be number one in a certain type of product. We work with brands to figure out where their niche is going to be.

Green: You recently announced a partnership with the Shinnecock Nation. How did you decide on a partnership with them? Why does it make sense? And can you talk to kind of the tribal aspect of it and how that differentiates you in the New York market?

Santo: We had been looking across the Northeast and want to build sort of some type of Northeast corridor for brands to come East because we think having that tri-state region right would be distribution most of these brands would love to have. We had been looking for ways to get into New York. It is incredibly expensive and incredibly difficult. We saw deals earlier this year. One was $75 million for the old MedMen assets and money has to be invested into building out the growth facility further.

My former shop, Columbia Care, spent about $45 million purchasing a bunch of greenhouse space on eastern Long Island. We thought the return on that kind of expense was just not there.

So, looking at how we look at brands and how we look at the market in general, we love partnerships where both sides are incentivized. An investor introduced us to Conor Green. They are a shop out of Chicago, and they had been advising a lot of different Native American tribes, including Shinnecock, on how to enter the cannabis space. We were very impressed when we met with the Shinnecock on how they were viewing cannabis. A lot of people want to just get in and ride that green wave I talked about and don’t fully understand how to translate the passion for the plant into a functional operating company. I was incredibly impressed by the thoughtful, pragmatic way the Shinnecock worked through setting up their cannabis control infrastructure on their sovereign grounds. They had their own standalone Cannabis Control Commission, setting up the regulations to mirror very closely what was going on in New York state where they are ready should that time come where wholesale can occur across sovereign state lines. They were really being thoughtful about what they were looking for in a partner.

A rendering of Little Beach Harvest, a dispensary and “wellness lounge” proposed for Southampton

We like the location out in eastern Long Island. The next closest dispensary is about 30 minutes away. It’s a great neighborhood with good access. We’re creating a vertical operation that has a large dispensary selling on the tribal grounds. The numbers look great. Once wholesale comes, and we do think wholesale will come to the state, the ability to reach all of New York State from that tribal ground is incredible. We have the ability to expand the facility if the demand is great. They’ve already approved adult-use on tribal grounds. Little Beach Harvest, which is the name of the Shinnecock enterprise we’ve partnered on, does have to go through the process of applying to the Shinnecock Cannabis Regulatory Division to get approval. But they’ve already got all the framework in place for both medical and adult-use. So, it gives us a chance to really get going strong in New York.

From a dollars and cents point of view, it only costs $700,000 to get in – about half in cash half in stock. If Conor Green hits their milestones and we get open when we think we can, there could be another two and a half million or so in stock. Every dollar we put in is now going towards building the facility, not towards just the right to build the facility.

We love this deal from a social equity standpoint. It’s unique. This is not a facility we will take over and own. At the end of the day, it is owned by the Shinnecock. They will be receiving 75% of the free cash flow. Our contract runs nine years and it’s got some automatic extensions if we hit certain milestones. If we decide to build bigger, that opens up the contract again. It’s a symbiotic relationship. We provide financing. We provide training. We provide the horsepower to help them scale. They provide the license. They provide the passion and the understanding of the plant, and really a great group of folks who are so interested in investing and seeing a true economic, sustainable engine out on that plot of land. We couldn’t be more excited.

Green: What trends are you following in the cannabis industry right now?

Santo: We are keeping our eyes on where the form factor is going. CPG is where we think the world is heading to at some point. I think in Massachusetts, it moves quicker. When you look at Pennsylvania, and as you watch these markets trying to transition from purely medical to medical and adult-use, we’re seeing some grinding of the gears. Some states did a great job. Pennsylvania is a little bit of a no man’s land where right now the legislature and the Department of Health are fighting with each other, saying one got ahead of the other. So, it’s hard to get new products approved. If you can’t get new products approved that migration towards adult-use becomes that much harder. You would want to broaden out the form factors. So, we are keeping an eye on what’s allowable in those states.

We are also keeping a strong eye on how we can expand further with additional partnerships, maybe in New Jersey, maybe in Connecticut, who knows? We must be responsible. Those deals take a while to find and a while to get done.

In the Northeast, there’s been a slowdown in cannabis sales. I think it’s too soon to know exactly what’s driving that. But it’s also an industry that’s going to normalize at some point from these explosive growth rates that have been reported for all these years. It was inevitable it was going to start to slow down. That’s what happens with mature industries.

Green: What in cannabis, or in your personal life are you most interested in learning about?

Santo: I think every day I find instances of new uses for the plant. I was not one who thought much about cannabis growing up. I was a bartender. I was kind of on a different side of the world. But cannabis is amazing. I first was introduced to use cases by my dad. He’s suffering from arthritis in his knees, and he had gotten a medical card. He was getting CBD and THC balms that he puts on his knees.

As I look deeper into the plant, it amazed me that if this was a plant that was discovered today, and nobody knew anything about it, you’d probably be buying it down the aisles of Whole Foods. It’d be in every drugstore. It’d probably be over-promoted at that point. But it’s got that long legacy of prohibition, and social inequity. So, it’s making it harder to adopt. Obviously, being Schedule 1 doesn’t help either.

I am excited to see more and more people start to incorporate it responsibly in their mainstream lives and really promote a lot of that counterculture. It really is no different than other ways that people use to manage stress and anxiety and manage pain. That’s what keeps me coming to work each day, frankly. No, we’re not saving lives necessarily. But at the end of the day, I think we really are improving them and giving people alternatives to opioids and benzos and things like that. So, I think as long as that keeps happening, I’ll still be here.

Green: Okay, great. That concludes the interview.

Santo: Thanks, Aaron.

North Coast Analytical & North Coast Testing Accredited to ISO 17025:2017

By Cannabis Industry Journal Staff
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According to a press release published earlier this month, the American Association for Laboratory Accreditation (A2LA) announced the accreditation of both North Coast Analytical Laboratories and North Coast Testing Laboratories to ISO 17025:2017 for cannabis testing.

Both labs are located in Streetsboro, Ohio, becoming A2LA’s first accredited labs in the state. North Coast Testing does cannabis testing for Ohio’s medical cannabis industry, whereas North Coast Analytical does testing for the hemp industry.

Carolyn Friedrich, Ph.D., scientific director at North Coast Testing, says they are excited to help ensure the safety of patients for Ohio’s medical cannabis program. “We are extremely proud of the work of our entire team in rapidly developing and implementing a comprehensive quality management program that can give all participants in the Ohio Medical Marijuana Control Program confidence in the quality and safety of products tested in our laboratory,” says Friedrich.

Nick Szabo, laboratory director at North Coast Analytical, says A2LA went “above and beyond at every step, we greatly appreciate their efforts. Our accreditation by A2LA is a testament to our ability to meet the most rigorous quality management standards in analytical testing of hemp products, and a vote of confidence in our team’s ability to perform at the highest levels.”

Integrated Labeling Helps This Ohio Cannabis Company Grow

By Mike Barker
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Since medical cannabis was legalized in Ohio in 2016, companies that cultivate and process medical cannabis, as well as the plants themselves, have been popping up around the state.

Grow Ohio, a dual-licensed Level 1 cultivator and processor, was the first licensed processor in Ohio and the first to successfully bring product to market. From plant material to edibles, tinctures, oils, lotions and capsules, the company seeks to ensure that medical cannabis is cultivated and processed under the same strict standards as any pharmaceutical medication. As first to market, Grow Ohio found themselves navigating a complicated process by themselves.

As their first product was ready to be packaged, Executive Vice President (EVP) Justin Hunt and the team at Grow Ohio were focused on marketing, packaging and distributing their product. With the sheer number of items that required attention, it is easy to see how something like labelling can slip under the radar. With a variety of products and dosages, and the first delivery of the product slated for late April of 2019, Grow Ohio needed a consistent way to ensure their product complied with state law, and also satisfied their own brand standards.

As their April product launch date grew closer, Grow Ohio realized they needed help with executing on Ohio’s labeling requirements for medical cannabis products.

They turned to Adaptive Data Inc., a barcode and labeling systems supplier to provide labels, printers, and software. ADI’s task was to specify the right label materials for their branding and compliance needs and provide software and equipment to print compliance labels on demand. ADI’s proposed solution would slash the waste associated with printing and applying labels and create a lean process.

Compliance

Compliance labels must contain specific information and must be prominently visible and clearly legible. Containers have to be labeled with details including the specific quantity of product, dosage, THC levels, license #, testing lab name and ID #, and other details. Different sizes and shapes are required for the various packaging form factors.

Due to the large amount of content and a relatively small label area, ADI specified 300 dpi printer resolution so that 4 or 5 point fonts would be legible.

Hunt had all the information needed to comply with state regulations, but didn’t have a way to get that information, properly formatted, onto a finished label at the point of packaging. “It’s all about how you get the data from one source to the other in a way that is easily repeatable,” says Hunt. The solution provides the capability to handle all compliance requirements, for all types of product and all sizes/shapes of labels. The system is designed to minimize key entry of data, a typical source of content errors. All of Grow Ohio’s products contain THC and require the red THC compliance logo. Early on this requirement was met using a separate, hand-applied THC logo label, which was very costly. The labels now include the THC logo, all required compliance data, and the capability to include a 2d barcode.

At the time the products are packaged all compliance information is printed on demand with label printers. As retail expansion continues, the barcode on the plant material compliance label can be used with the POS systems of the dispensaries, to keep their systems fast and accurate.

Until the system is ready to receive data automatically from METRC, the State approved inventory system which tracks all medical cannabis plants and products grown or produced in Ohio, they used user interfaces that reduce the amount of data that is key entered to an absolute minimum. Using drop down lists, date pickers and calculated results, means that Grow Ohio only enters data in 5-10 fields, depending on product line. As the system evolves the next step will be to take data for compliance details automatically from METRC.

Branding

As the first to enter the medical marijuana market, Grow Ohio leadership knew that their brand image is as important to their success as the quality of their products. Their logo, color choice, and inclusion of the THC logo had to be consistent in appearance across all products, regardless of production method.  They used full color branded product labels and blank labels that have the Grow Ohio and THC logo pre-printed. (Compliance data is added to the blank labels on demand.)

Label Application – Automatic, Semi-automatic and Manual

Grow Ohio packages in metal cans, glass bottles and in boxes. Each packaging type has specific requirements.

Metal Cans: Grow Ohio uses an automated packaging line for plant material in cans. That line includes two automatic apply-only machines (for brand labels). The compliance label is printed and dispensed and placed on the can as it is boxed.

Bottles: Cylindrical containers can be difficult to label. Grow Ohio originally packaged tinctures and oils in glass bottles which were pre-printed with their logo. The printed logo looked nice, but printing on the glass was expensive. This made placing the compliance label on the bottle more difficult, since the logo could not be covered. Positioning and straightness was critical for readability as well as aesthetics. Manual placement was time consuming (15 – 30 seconds per bottle).

Now, bottles are being processed with the help of a semi-automatic print-apply machine. The print-apply machine can label 18-20 bottles per minute.

By using plain bottles and pre-printing the blue Grow Ohio logo and red THC logo on the label, they were able to streamline the process. The semi-automatic print-apply machine adds the compliance data to the label and applies the label to the bottle.

The result is a lower total cost of the product. Plain bottles cost less without the logo and the labor to manually apply the labels has been greatly reduced. In addition, with the logos on the label instead of the bottle, orientation and spacing are no longer an issue. The label maintains the natural brand feel, which was important to Hunt.

Boxes: Only compliance labels are required for boxes as the branding information is pre-printed on the box. Compliance labels for boxes include a pre-printed, red THC logo. The printer prints the compliance data and presents the label with the liner removed, ready to be manually applied to the box.

Summary

With a broad product line, Grow Ohio’s label requirements are quite diverse. By specifying and sourcing the right hardware, software and label materials,

Adaptative Data provided an efficient, repeatable, cost-effective way to do brand and compliance labeling for Grow Ohio’s diverse product offering.  

Hunt now understands the magnitude of work that goes into coming up with a compliant, cost-friendly compliance labeling approach – an appreciation he did not have at the outset. He is not alone in this regard as many companies come to this understanding late in the start-up process.

Hunt isn’t sure how fast the market will grow, but he is not worried. As the market expands and demand grows, he knows his systems can handle it.

Introducing the Cannabis Quality Conference & Expo

By Aaron G. Biros
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An educational and networking event for cannabis safety and quality solutions: Innovative Publishing and Cannabis Industry Journal are pleased to present the first annual Cannabis Quality Conference & Expo (CQC). The conference will take place October 1-3, 2019, hosted at the Renaissance Schaumburg Convention Center in Schaumburg, Illinois.

The inaugural CQC will consist of two separate tracks: The Cannabis Labs track, focused on all things cannabis lab testing, and the Cannabis Quality track, focusing on quality in cannabis product manufacturing.

Sharing an exhibit hall and meeting spaces right alongside the Food Safety Consortium Conference & Expo, the CQC allows cannabis professionals to interact with senior level food quality and safety professionals, as well as regulators. Visit with exhibitors to learn about cutting-edge solutions, explore two high-level educational tracks for learning valuable industry trends, and network with industry executives to find solutions to improve quality, efficiency and cost effectiveness in a quickly evolving cannabis marketplace.

The CQC will be hosted at the Renaissance Schaumburg Convention Center in Illinois (just outside of Chicago)

With the cannabis industry in the Midwest growing at a rapid pace, the CQC offers attendees, exhibitors and sponsors unparalleled access to explore these emerging markets, their regulations, opportunities for business growth and best practices from the more established food industry.

For information on speaking opportunities and to submit an abstract, click here to view the Call for Proposals. The CQC will be accepting abstracts for consideration until June 3, 2019. For information on exhibiting, as well as additional sponsorship opportunities, contact RJ Palermo, Sales Director, rj@innovativepublishing.net, (203) 667-2212.

Take advantage of this chance to connect with cannabis industry and food safety professionals in the Greater Chicago Area. Don’t miss this opportunity to network with hundreds of industry stakeholders, get the latest on regulatory developments and see the newest technology disrupting the cannabis space.

The New ISO/IEC 17025:2017: The Updated Standard

By Ravi Kanipayor, Christian Bax, Dr. George Anastasopoulos
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As state cannabis regulatory frameworks across the country continue to evolve, accreditation is becoming increasingly important. Because it provides consistent, turnkey standards and third-party verification, accreditation is quickly emerging as an important tool for regulators. For cannabis testing laboratories, this trend has been especially pronounced with the increasing number of states that require accreditation to ISO/IEC 17025.

As of 2017 there were nearly 68,000 laboratories accredited to ISO/IEC 17025, making it the single most important benchmark for testing laboratories around the world. ISO/IEC 17025:2005 specifies the general requirements for the competence to carry out tests including sampling. It covers testing performed using standard methods, non-standard methods and laboratory-developed methods. It is applicable to all organizations performing tests including cannabis labs. The standard is applicable to all labs regardless of the number of personnel or the extent of the scope of testing activities.  Developed to promote confidence in the operation of laboratories, the standard is now being used as a key prerequisite to operate as a cannabis lab in many states.

There are currently 26 states in the United States (also Canada) that require medical or adult-use cannabis to be tested as of February 2019. Of those states, 18 require cannabis testing laboratories to be accredited – with the vast majority requiring ISO/IEC 17025 accreditation. States that require testing laboratories to attain ISO/IEC 17025 accreditation represent some of the largest and most sophisticated cannabis regulatory structures in the country, including California, Colorado, Maryland, Massachusetts, Michigan, Nevada and Ohio. As a consequence, many cannabis testing laboratories are taking note of recent changes to ISO/IEC 17025 standards.

ISO/IEC 17025 was first issued in 1999 by the International Organization for Standardization. The standard was updated in 2005, and again in 2017. The most recent update keeps many of the legacy standards from 2005, but adds several components – specifically requirements for impartiality, risk assessment and assessing measurement uncertainty. The remainder of this article takes a deeper dive into these three areas of ISO/IEC 17025, and what that means for cannabis testing laboratories.Objectivity is the absence or resolution of conflicts of interest to prevent adverse influence on laboratory activities.

Impartiality

ISO/IEC 17025:2005 touched on an impartiality requirement, but only briefly. The previous standard required laboratories that belonged to organizations performing activities other than testing and/or calibration to identify potential conflicts of interest for personnel involved with testing or calibration. It further required that laboratories had policies and procedures to avoid impartiality, though that requirement was quite vague.

ISO/IEC17025:2017 emphasizes the importance of impartiality and establishes strict requirements. Under the new standard, labs are responsible for conducting laboratory activities impartially and must structure and manage all laboratory activities to prevent commercial, financial or other operational pressures from undermining impartiality. The definitions section of the standard defines impartiality as the “presence of objectivity.” Objectivity is the absence or resolution of conflicts of interest to prevent adverse influence on laboratory activities. For further elaboration, the standard provides similar terms that also convey the meaning of impartiality: lack of prejudice, neutrality, balance, fairness, open-mindedness, even-handedness, detachment, freedom from conflicts of interest and freedom from bias.

To comply with the new standard, all personnel that could influence laboratory activities must act impartially. ISO/IEC 17025:2017 also requires that laboratory management demonstrate a commitment to impartiality. However, the standard is silent on how labs must demonstrate such commitment. As a starting point, some cannabis laboratories have incorporated statements emphasizing impartiality into their employee handbooks and requiring management and employee training on identifying and avoiding conflicts of interest.

Risk Assessment

Both the 2005 and 2017 versions contain management system requirements. A major update to this is the requirement in ISO/IEC 17025:2017 that laboratory management systems incorporate actions to address risks and opportunities. The new risk-based thinking in the 2017 version reduces prescriptive requirements and incorporates performance-based requirements.

Under ISO/IEC 17025:2017, laboratories must consider risks and opportunities associated with conducting laboratory activities. This analysis includes measures that ensure that:

  • The lab’s management system is successful;
  • The lab has policies to increase opportunities to achieve its goals and purpose;
  • The lab has taken steps to prevent or reduce undesired consequences and potential failures; and
  • The lab is achieving overall improvement.

Labs must be able to demonstrate how they prevent or mitigate any risks to impartiality that they identify.To comply with ISO/IEC 17025:2017, labs must plan and implement actions to address identified risks and opportunities into management systems. They must also measure the effectiveness of such actions. Importantly, the standard requires that the extent of risk assessments must be proportional to the impact a given risk may have on the validity of the laboratory’s test results.

ISO/IEC 17025:2017 does not require that labs document a formal risk management process, though labs have discretion to develop more extensive methods and processes if desired. To meet the requirements of the standard, actions to address risks can include sharing the risk, retaining the risk by informed decision, eliminating the risk source, pinpointing and avoiding threats, taking risks in order to pursue an opportunity, and changing the likelihood or consequence of the risk.

ISO/IEC 17025:2017 references “risks” generally throughout most of the standard. However, it specifically addresses risks to a laboratory’s impartiality in section 4.1. Note, the new standard requires that labs must not only conduct activities impartially, but also actively identify risks to their impartiality. This requirement is on-going, not annually or bi-annually. Risks to impartiality include risks arising from laboratory activities, from laboratory relationships, or from relationships of laboratory personnel. Relationships based on ownership, governance, shared resources, contracts, finances, marketing, management, personnel and payment of a sales commission or other inducements to perform under pressure can threaten a laboratory’s impartiality. Labs must be able to demonstrate how they prevent or mitigate any risks to impartiality that they identify.

Assessing Measurement Uncertainty With Decision Rules

ISO/IEC 17025:2005 required (only where necessary and relevant) test result reports to include a statement of compliance/non-compliance with specifications and to identify which clauses of the specification were met or not met. Such statements were required to take into account measurement uncertainty and if measurement results and uncertainties were omitted from the statement, the lab was required to record and maintain the results for future reference.

ISO/IEC 17025:2017 requires similar statements of conformity with an added “decision rule” element. When statements of conformity to a specification or standard are provided, labs must record the decision rule it uses and consider the level of risk the decision rule will have on recording false positive or negative test results. Like the 2005 version, labs must include statements of conformity in test result reports (only if necessary and relevant- see 5.10.3.1 (b)). Now, test result reports on statements of conformity must include the decision rule that was employed. 

Moving Forward

Because many states require ISO/IEC 17025 accreditation for licensing, cannabis testing labs across the country would be well advised to closely monitor the implications of changes in ISO/IEC 17025:2017 related to impartiality, risk assessment and measurement uncertainty. If you run a cannabis testing lab, the best way to ensure compliance is education, and the best place to learn more about the new requirements is from a globally recognized accreditation body, especially if it is a signatory to the International Laboratory Accreditation Cooperation (ILAC) for testing laboratories, calibration laboratories and inspection agencies.


References

Facts & Figures

ISO/IEC 17025:2005: General requirements for the competence of testing and calibration laboratories

ISO/IEC 17025:2017: General requirements for the competence of testing and calibration laboratories