Tag Archives: Pesticide

Soapbox

Stemming the Cannabis Black Market

By Matthew Zandi
1 Comment

On July 18, 2019, the Riverside County Sheriff’s Department in California served search warrants at 56 illegal cannabis cultivation sites. This operation was spearheaded by 390 law enforcement personnel, whose mission was to combat the ongoing problem of illegal cannabis cultivation sites throughout California.

The raids resulted in:

  • 47,939 marijuana plants confiscated
  • 2,132 pounds of processed cannabis
  • 47 tons of cannabis plants disposed
  • 2 Butane Honey Oil Labs located
  • 71 firearms
  • 49 arrests

The target of the operation was illegal cultivation sites. Individuals or licensed businesses with permits to grow cannabis legally were not affected.

Illegal cultivation is far from just a California problem. For example, if Oregon halted cannabis production today, the state would not experience a shortage as it has a six-year surplus.

The fear for investors and legal growers is that, if some growers turn to the black market to unload excess inventory, federal enforcement will come into play, which will set back the legal cannabis industry to the stone age. Oregon is currently making moves to limit licensure for legal production, but some active licenses may also need to be revoked, which would leave those licensees with vast investment losses. In other words, legalized cannabis’s massive economic market is not without financial problems of its own.

Don’t Make a Federal Case Out of It

Several states have legalized recreational cannabis with the intention of reimagining this vast underground market as an above-board business that bolsters the state’s economy via transparent dealings. To date, however, the federal government has refused to budge regarding cannabis’s status as an illegal Schedule 1 substance. This classification puts cannabis on a par with opioids. As such, those states that have legalized recreational cannabis are extremely motivated to keep these businesses on the up and up and not to pique federal interest.

Black Market Vulnerability

One of the tenets of legalizing cannabis is stemming the proliferation of black-market suppliers and minimizing the negative effects that the “war on drugs”has had in minority communities. These positive impetuses have yet to flourish. As a result of the illegal status of cannabis at the federal level, cannabis-legal states are forced to operate as islands.

Generally, taking legally purchased cannabis across state lines – from a legal to an illegal state – is illegal, and this is not only confusing but is also a recipe for complications. This leaves cannabis-legal states vulnerable to black market activity. These pockets of legal recreational cannabis that are popping up around the country loosen the constraints of the cannabis movement while the legality of this movement remains problematic. The results are an environment that’s extremely hospitable to black market activity.

Supply and Demand

The reality is that – due to supply and demand – cannabis costs about half as much in cannabis-legal states as it does in states in which it’s illegal. Black market growers in legal states destabilize the market. Those legit companies which remain above board, pay their taxes and jump through every legal hoop, cannot compete with black market interlopers who eschew such niceties.

The point made by detractors of legal cannabis isn’t lost on the rest of us – the black market is burgeoning.States that have legalized production have inadvertently made it easier for illegal producers to hide in plain sight, and the line between legal and illegal operations can become blurred. This creates new frustrations for law enforcement and naturally cuts into the legal cannabis trade. The situation has left some opponents to legalization demanding new crackdowns – others characterize such suggestions as amounting to a new war on drugs.

No Going Back

Detractors of legalized cannabis claim the somewhat chaotic effects related to the current patchwork approach to legalization are a result of opening the gates to legalization in the first place. However, putting the genie of legalized recreational cannabis back in the bottle simply isn’t feasible for operational, financial and political reasons. With the proliferation of attendant illegal operations, however, it is becoming more and more clear that leveling the playing field – via some form of federal legalization – is inevitable. The current state-by-state solution leaves too much wiggle room for the illegal transport of cannabis from those states with looser restrictions to those states with tighter protocols. If politics is choosing between the disastrous and the unpalatable, the billion-dollar cannabis conundrum is a great example. The question may no longer be should we legalize cannabis but, instead, how do we legalize cannabis.In other words, we need to find a path forward, and focusing only on the pitfalls that we’ve experienced so far isn’t going to get us where we need to be.

A Tale of Two Choices

The point made by detractors of legal cannabis isn’t lost on the rest of us – the black market is burgeoning. As such, we have an important decision to make. A blanket prohibition of cannabis may no longer be practicable, so we’re left to choose between legal and overt practices across the board or a hodgepodge of semilegal practices with covert ops in tow. Fostering illegal activity is rarely in our nation’s best interests, which leaves legalizing cannabis at the federal level as possibly the most practicable solution.

Protecting Public Health

As more states embrace the legalization of recreational cannabis, public health concerns remain an issue. Many of these illegal cultivators use chemicals that are banned in the United States and do not properly dispose of chemicals or waste products that destroy the environment, contaminate drinking water and have the potential to harm or even kill residents and domestic animals. Not only is this activity harmful, growers often steal electricity and water from surrounding residents.

Cobbling together a pastiche of laws, however, inevitably bolsters black market activity and does nothing to help protect public health. Even the staunchest proponents of legalizing cannabis don’t want minors involved in the equation. Additionally, few debate that unchecked usage is a healthy option. Quasi-legislation at the state level (and on a state-by-state basis), however, provides neither a check nor a balance.

Onward and Upward

The most likely next step for safeguarding public health, for stemming black-market activity, and for generating maximum revenues is toward thoughtful and comprehensive national legalization that comes sooner rather than later. In the meantime, law enforcement should protect the public, legal operations, investors, and the environment from the black market.


The opinions expressed are those of the author and do not necessarily reflect the views of Guidepost Solutions or its clients.

California Cannabis Business Conference

NCIA’s 3rd Annual California Cannabis Business Conference is the only industry trade show focusing solely on the California cannabis market. Join 3,000+ cannabis business leaders, policymakers, and entrepreneurs will convene to discuss California-specific regulations, market trends, policy, advocacy, and research

Driving Strategic Advantage for your Cannabusiness through Process Efficiency, Quality & Compliance

Cannabis Industry Journal is pleased to present this webinar sponsored by Rootstock. The cannabis industry is in the midst of huge industry growth along with equally huge operational, regulatory and supply chain challenges. Just trying to keep up takes valuable time away from actually managing and scaling your business.

During this webinar we will explore the market forces that continue to impact your cannabusiness and show how by automating processes, managing quality and compliance you can ease the burden of changing requirements to gain increased visibility into production, finance, and operations.

Agilent Partners with LSSU on Cannabis Chemistry & Research

By Aaron G. Biros
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Back in August, Lake Superior State University (LSSU) announced the formation of a strategic partnership with Agilent Technologies to “facilitate education and research in cannabis chemistry and analysis.” The university formed the LSSU Cannabis Center of Excellence (CoE), which is sponsored by Agilent. The facility, powered by top-of-the-line Agilent instrumentation, is designed for research and education in cannabis science, according to a press release.

Chemistry student, Justin Blalock, calibrates an Agilent 1290 Ultra-High Pressure Liquid Chromatograph with a 6470 Tandem Mass Spectrometer in the new LSSU Cannabis Center of Excellence, Sponsored by Agilent.

The LSSU Cannabis CoE will help train undergraduate students in the field of cannabis science and analytical chemistry. “The focus of the new LSSU Cannabis CoE will be training undergraduate students as job-ready chemists, experienced in multi-million-dollar instrumentation and modern techniques,” reads the press release. “Students will be using Agilent’s preeminent scientific instruments in their coursework and in faculty-mentored undergraduate research.”

The facility has over $2 million dollars of Agilent instruments including their UHPLC-MS/MS, UHPLC-TOF, GC-MS/MS, LC-DAD, GC/MS, GC-FID/ECD, ICP-MS and MP-AES. Those instruments are housed in a 2600 square-foot facility in the Crawford Hall of Science. In February earlier this year, LSSU launched the very first program for undergraduate students focused completely on cannabis chemistry. With the new facility and all the technology that comes with it, they hope to develop a leading training center for chemists in the cannabis space.

Dr. Steve Johnson, Dean of the College of Science and the Environment at LSSU, says making this kind of instrumentation available to undergraduate studies is a game changer. “The LSSU Cannabis Center of Excellence, Sponsored by Agilent was created to provide a platform for our students to be at the forefront of the cannabis analytics industry,” says Dr. Johnson. “The instrumentation available is rarely paralleled at other undergraduate institutions. The focus of the cannabis program is to provide our graduates with the analytical skills necessary to move successfully into the cannabis industry.”

Storm Shriver is the Laboratory Director at Unitech Laboratories, a cannabis testing lab in Michigan, and sounds eager to work with students in the program. “I was very excited to learn about your degree offerings as there is a definite shortage of chemists who have experience with data analysis and operation of the analytical equipment required for the analysis of cannabis,” says Shriver. “I am running into this now as I begin hiring and scouting for qualified individuals. I am definitely interested in a summer internship program with my laboratory.”

LSSU hopes the new facility and program will help lead the way for more innovation in cannabis science and research. For more information, visit LSSU.edu.

german flag

Does Germany Have a Gray Market Problem?

By Marguerite Arnold
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german flag

Tilray just did something very interesting. In addition to announcing that it was shipping product to German distributor Cannamedical via its Portuguese facility, it also announced that it had begun outdoor cultivation.

Groovy.tilray-logo

Even more intriguing: the company is claiming that somehow, via its proprietary technology (apparently), this kind of crop will be legit for distribution within the EU medical system.

There is only one problem with this. Outdoor growing does not sound remotely GMP-certified.

Here is the next bit of exciting news. Tilray, apparently, is not the only large Canadian cannabis company now operating in Europe that appears to be trying to get around GMP certifications for medical market penetration. Or appear oblivious to the distinctions in the international (and certainly European market).

german flag
Photo: Ian McWilliams, Flickr

And things are a bit smelly on that front, not only in Denmark post CannTrust, but in truth even in Germany, the supposed “Fort Knox” of regulatory consumer and pharmaceutical standards.

In fact, at least according to insiders, there is apparently quite a bit of gray market product sloshing around in the Teutonic medical market. Even though so far, at least not publicly punished for the same, nobody has been caught. Or at least publically reprimanded.

And who is on the hot seat at least according to most of the licensed if not just pre-licensed indie producers and distributors who were contacted for this story? Sure, there are dark horse “start-up” indie violators, but they are not the only problem. Many who talked to CIJ named big public Canadian companies too. And potentially Bedrocan beyond that.

Who Is Who And What Is What?

Part of the problem, beyond any kind of deliberate flouting of regulations on the part of many companies who are at least trying to understand them, is that global standards are different. “GMP certifications” of every country, even within a region like Europe, are in fact, not uniform. That is why, for example, the new EU-US MRA agreement had to be signed first regionally and then on a state-by-state level across the EU.

Beyond Germany of course, there are other problems that are coming to the fore.In the medical cannabis space, in particular, right now, that is causing problems simply because many with pharma experience are not hip to the many risks in the cannabis industry itself. On the Canadian, Australian and American side, there is also a lot of bad advice, in particular, coming from consultants who should know better.

To be properly EU and German GMP-certified, one of the required steps is to have German inspectors walk your production floor. It is also not good enough to have “pesticide-free” or national organic certification at the crop cultivation site, and add GMP cert at time of “processing.” That piece of misadvise has been showing up not only in Canada, but Australia too. And creates a nasty reality if not expensive retooling upon entering the legitimate market in Europe, for starters.

These Issues Affect Everyone In The Industry

German Parliament Building

In an environment where ex-im is the name of the game, and even the big guys are short of product, compliance is getting granular as smaller players step up to the plate – and many if not most hopeful Canadian producers (in particular) now looking to Europe for sales are not (yet) up to speed.

A big piece of the blame also lies in the lack of proper administration at the federal and state level too – even auf Deutschland. To get a distribution license, a company must actually get three licenses, although there are plenty in the market right now who begin to describe themselves as “distributors” with less than the required certs.

The lack of coordination and communication, including which certs to accept as equivalent and from where is creating a market where those who know how to game the system are.

For example, several people who contacted CIJ, claimed that uncertified product was making its way into Germany via Central and Latin America, through Canada, picking up “GMP cert” along the way. In other words, not actually GMP-certified but labelled fraudulently to make it appear that way.

The same claims were also made by those with on-the-ground industry knowledge in South Africa (Lesotho).

Beyond Germany of course, there are other problems that are coming to the fore. As CIJ recently learned, a firm authorized by the Dutch government to provide cannabis packaging, including for exports, was not GMP certified until July 2019 – meaning that all product they shipped internationally even within Europe before that date potentially has labelling issues. Cue domestic importers. If not regulators.

Grey Market Product Is Making Its Way In Through Official Channels

For those who are taking the time to actually get through the legal registration and licensing process, it is infuriating to see others who are apparently fairly flagrantly buying market position but are in no position to fulfil such obligations. It is even more infuriating for those who intend to meet the requirements of the regulations to realize that the vast amounts spent in consulting fees was actually money paid for inaccurate information.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.German distributors are so aware of the problem that they are starting to offer gap analysis and specific consulting services to help their import partners actually get compliant.

Government agencies also might be aware of the problems, but they have been reluctant to talk about the same. CIJ contacted both BfArM and the local Länderauthorities to ask about the outdoor grow in Portugal and the lack of GMP cert for a Dutch packager. After multiple run-arounds, including sending this reporter on a wild rabbit chase of federal and state agencies (who all directed us back to BfArm) and an implication by the press officer at BfArM that the foreign press was not used to talking to multiple sources, CIJ was redirected back to state authorities with a few more instructions on which bureau to contact. The state bureau (in Berlin) did not return comments to questions asked by email.

Here is the bottom line that CannTrust has helped expose this summer: the entire global cannabis industry is trying hard to legitimize. Not every company is shady, and there are many who are entering it now who are playing by the rules. But those who are hoping to exploit loopholes (including “name” if not “public” companies) are also clearly in the room.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.

Canopy_Growth_Corporation_logo

From CannTrust To Canopy: Is There A Connection To Current Cannabis Scandals?

By Marguerite Arnold
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Canopy_Growth_Corporation_logo

As Europe swooned under record-breaking heat this summer, the cannabis industry also found itself in a rather existential hot seat.

The complete meltdown at CannTrust has yet to reach a conclusion. Yes, a few  jobs have been lost. However, a greater question is in the room as criminal investigatory and financial regulatory agencies on both sides of the US-Canada border (plus in Europe) are getting involved.

As events have shown, there is a great, big, green elephant in the room that is now commanding attention. Beyond CannTrust, how widespread were these problematic practices? And who so far has watched, participated, if not profited, and so far, said nothing?

Who, What, Where?

The first name in the room? Canopy Growth.Canopy_Growth_Corporation_logo

Why the immediate association? Bruce Linton, according to news reports, was fired as CEO by his board the same day, July 3, 2019, that CannTrust received its first cease and desist notice from Health Canada.

Further, there is a remarkable similarity in not only problematic practices, but timing between the two companies. This may also indicate that Canopy’s board believed that Linton’s behaviour was uncomfortably close to executive misdeeds at CannTrust. Not to mention, this was not the first scandal that Linton had been anywhere close to around acquisition time. See the Mettrum pesticide debacle, that also broke right around the time Canopy purchased the company in late 2016 as well as the purchase of MedCann GmbH in Germany.

Reorg also appears to be underway in Europe as well. As of August, Paul Steckler has been brought in as “Managing Director Europe” and is now based in Frankfurt. Given the company’s history of “co-ceo’ing” Linton out the door, is more change to come?

What Went Down At Canopy?

Last year, Canopy announced its listing on the NYSE in May. To put this in context, this was two months after the first German cultivation bid went down to legal challenge. By August 15, 2018 with a new bid in the offing, the company had closed the second of its multi-billion dollar investments from Constellation.

Bruce Linton, former CEO of Canopy Growth
Photo: Youtube, TSX

Yet by late October, after Bruce Linton skipped a public markets conference in Frankfurt where many of the leading Canadian cannabis company execs showed up to lobby Jens Spahn (the health minister of Germany) about the bid if not matters relating to the Deutsche Börse, there were two ugly rumours afoot.

Video showing dead plants at Canopy’s BC facility surfaced. Worse, according to the chatter online at least, this was the second “crop failure” at the facility in British Columbia. Even more apparently damning? This all occurred during the same  time period that the second round of lawsuits against the reconstituted German cultivation bid surfaced.

Canopy in turn issued a statement that this destruction was not caused by company incompetence but rather a delay in licensing procedures from Health Canada. Despite lingering questions of course, about why a company would even start cultivation in an unlicensed space, not once but apparently twice.  And further, what was the real impact of the destruction on the company’s bottom line?

Seen within the context of other events, it certainly poses an interesting question, particularly, in hindsight.

Canopy, which made the finals in the first German cultivation bid, was dropped in the second round – and further, apparently right as the news hit about the BC facility. Further, no matter the real reason behind the same, Canopy clearly had an issue with accounting for crops right as Canadian recreational reform was coming online and right as the second German cultivation bid was delayed by further legal action last fall.

Has Nobody Seen This Coming?

In this case, the answer is that many people have seen the writing on the wall for some time. At least in Germany, the response in general has been caution. To put this in true international perspective, these events occurred against a backdrop of the first increase in product over the border with Holland via a first-of-its kind agreement between the German health ministry and Dutch authorities. Followed just before the CannTrust scandal hit, with the announcement that the amount would be raised a second time.

German health authorities, at least, seem doubtful that Canadian companies can provide enough regulated product. Even by import. The Deutsche Börse has put the entire public Canadian and American cannabis sector under special watch since last summer.

Common Territories

By the turn of 2019, Canopy had announced its expansion into the UK (after entering the Danish market itself early last year) and New York state.

And of course by April, the company unveiled plans to buy Acreage in the U.S.

Yet less than two weeks later, Canopy announced not new cultivation facilities in Europe, but plans to buy Bionorica, the established German manufacturer of dronabinol – the widely despised (at least by those who have only this option) synthetic that is in fact, prescribed to two thirds of Germany’s roughly 50,000 cannabis patients.

By August 2019, right after the Canopy Acreage deal was approved by shareholders, Canopy announced it had lost just over $1 billion in the last three months.

Or, to put this in perspective, 20% of the total investment from Constellation about one year ago.

What Happened At CannTrust And How Do Events Line Up?

The current scandal is not the first at CannTrust either. In November 2017, CannTrust was warned by Health Canada for changing its process for creating cannabis oil without submitting the required paperwork. By March of last year however, the company was able to successfully list on the Toronto stock exchange.

Peter Aceto arrived at CannTrust as the new CEO on October 1 last year along with new board member John Kaken at the end of the month. Several days later the company also announced that it too, like other major cannabis companies including Canopy, was talking to “beverage companies.” It was around this time that illegal growing at CannTrust apparently commenced. Six weeks later, the company announces its intent to also list on the NYSE. Two days later, both the CEO and chair of the board were notified of the grow and chose not to stop it.

Apparently, their decision was even unchanged after the video and resulting online outrage about the same over the destroyed crops at the Canopy facility in BC surfaced online.

On May 10, just over a week after the Bioronica purchase in Germany, the first inklings of a scandal began to hit CannTrust in Canada. A whisteblower inside the company quit after sending a mass email to all employees about his concerns. Four days later, the company announced the successful completion of their next round of financing, and further that they had raised 25.5 million more than they hoped.

Six weeks later, on June 14, Health Canada received its warning about discrepancies at CannTrust. The question is, why did it take so long?

Where Does This Get Interesting?

The strange thing about the comparisons between CannTrust and Canopy, beyond similarities of specific events and failings, is of course their timing. That also seems to have been apparent at least to board members at Canopy – if not a cause for alarm amongst shareholders themselves. One week after Health Canada received its complaint about CannTrust, shareholders voted to approve the Canopy-Acreage merger, on June 21.

Yet eight days after that, as Health Canada issued an order to cease distribution to CannTrust, the Canopy board fired Bruce Linton.

One week after that, the Danish recipient of CannTrust’s product, also announced that they were halting distribution in Europe. By the end of August, Danish authorities were raising alarms about yet another problem – namely that they do not trust CannTrust’s assurances about delivery of pesticide-free product.

Is this coincidence or something else?

If like Danish authorities did in late August 2019, calling for a systematic overhaul of their own budding cannabis ecosystem (where both Canadian companies operate), the patterns and similarities here may prove more than that. Sit tight for at least a fall of more questions, if not investigations.

Beyond one giant cannabis conspiracy theory, in other words, the problems, behaviour and response of top executives at some of the largest companies in the business appear to be generating widespread calls – from not only regulators, but from whistle blowers and management from within the industry itself – for some serious, regulatory and even internal company overhauls. Internationally.

And further on a fairly existential basis.


EDITOR’S NOTE: CIJ reached out to Canopy Growth’s European HQ for comment by email. None was returned.

Correction: This article has been updated to show that the Danish recipient of Canntrust’s product announced they were halting distribution one week after Bruce Linton’s firing, not one day. 

Soapbox

California Banned Ozone Generator “Air Purifiers”

By Jeff Scheir
1 Comment

California was the first state to step up to defend consumers from false marketing claims that ozone generators are safe, effective air purifiers. In reality, ozone is a lung irritant, especially harmful to allergy and asthma sufferers. In 2009, California became the first state in the nation to ban ozone generators. The Air Resources Board of the California Environmental Protection Agency states:

Not all air-cleaning devices are appropriate for use — some can be harmful to human health. The ARB recommends that ozone generators, air cleaners that intentionally produce ozone, not be used in the home or anywhere else humans are present. Ozone is a gas that can cause health problems, including respiratory tract irritation and breathing difficulty.

The regulation took effect in 2009 along with a ban on the sale of air purifiers that emit more than 0.05 parts per million of ozone. The ARB says that anything beyond this is enough to harm human health; however, some experts say that there is no safe level of ozone.

The National Institute for Occupational Safety and Health recommends an exposure limit to ozone of 0.1 ppm and considers levels of 5 ppm or higher “immediately dangerous to life or health.”

If you’re shopping for an air purifier, it’s best to avoid ozone generators, especially if you have a respiratory condition. Ozone generators, and ionic air cleaners that emit ozone, can cause asthma attacks in humans while doing little to nothing to clean the air.

O3 is a free radical, an oxidizer; when it meets any organic molecule floating around it bonds to it and destroys it. In a grow room, organic molecules include the essential oils in cannabis which produce the fragrance. When using ozone within your grow room, too much will not only all but eliminate the smell of your flowers but with prolonged exposure, it begins to actually degrade the cell walls of trichomes and destroy the structure of the glands.

Despite the claims of some manufacturers, ozone does not have an anti-microbial effect in air unless levels far exceed the maximums of the regulation and is therefore harmful humans.

Keeping the grow room clean of mold and bacteria is important, but ozone is not the technology you want to employ to satisfy this goal. Looking into a combination of UVC and Filtration will better meet the goal while keeping both your plants and staff healthy.

Denver Plans Crackdown on Contaminants

By Aaron G. Biros
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Earlier this month, Colorado cannabis producer Herbal Wellness LLC recalled dozens of batches of cannabis due to positive yeast and mold tests. The Colorado Department of Public Health and Environment (CDPHE) issued a health and safety advisory following the news of microbial contamination.

The Colorado Department of Revenue then identified batches of both medical and recreational cannabis produced by Herbal Wellness that were not even tested for microbial contaminants, which is a requirement for licensed producers in the state. Just a few days later, the Denver Department of Public Health & Environment (DDPHE) issued a bulletin announcing their plans to conduct random tests at dozens of dispensaries.

“In the coming weeks, the Denver Department of Public Health & Environment (DDPHE) will be conducting an assessment in approximately 25 retail marijuana stores to evaluate contaminants in products on store shelves,” reads the bulletin. “DDPHE has worked with epidemiological partners at Denver Public Heath to create the assessment methodology. Participating stores will be randomly identified for inclusion in the assessment.”

“Current METRC inventory lists for each store will be used to randomly identify samples of flower, trim/shake, and pre-rolls. Each sample will be tested for pesticides and total yeast and mold by a state- and ISO-certified marijuana testing facility. Results of their respective testing will be shared with each facility and will also be shared broadly within a write-up of results.”

The Fall of Farmako?

By Marguerite Arnold
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Chances are if you follow the European cannabis scene, particularly out of Germany, that you might have heard of a firm called Farmako. They have certainly, in the three quarters or so they have been in business, been given a lot of “good press.” They certainly worked hard to get into the headlines.

The problem is that no matter how scintillating initial claims were to many members of the media if not industry beyond, the bloom was quickly off the rose in the same circles. Since at least March, these grumbles have earned the company increasingly bad press. Industry insider complaints and background knowledge also began appearing in places like Manager (a top German business magazine), Vice and Business Insider Germany. Behind the headlines and insider quotes, however, quite a few people are admitting, even if off the record, that while initially impressive enough to be believed – at least on the surface – most of Farmako’s claims have panned out so far to be just hot air. And there have been a lot of them, not only from the sourcing perspective but also from the research, scientific development and certainly tech fronts.

The rebutting, editing and confronting of which has also set off a round of really bad press.

Live by the sword, die by the sword.

Further, apparently even the embarrassing fallout (and of course resulting reorganization) is not what it seems to be. Which of course has also been described so far publicly by the Frankfurt-based company itself, and Berlin-based tech funder, Heartbeat Labs. The former of which are so far unsuccessfully walking back just about every claim made over recent months. The latter of which has a great deal of embarrassing egg on its face on the compliance front.

When reached for comment by Cannabis Industry Journal, Heartbeat Labs responded via email that they had none.

While Farmako is struggling to regain the confidence of the industry if not regulators and appears to be trying to hang on to its distribution license, the story itself is also illustrative of many of the failings of the so-far establishing cannabis industry. In Germany and elsewhere. Coming as it does within the summer of scandal involving both larger companies and start-ups, bigger questions about industry practices, in general are in the room. If not the backgrounds of those boasting about “industry experience” (or even worse when caught, “oops I have none, really”). Highly stereotypical fixes so far have also not helped.

Everyone makes mistakes in a world where everything is new and one where the regulations are constantly changing. The problem with Farmako in particular, is that there were so many.All the bragging in the English and German language press had consequences.

The Story So Far

Farmako made headlines earlier this year when they issued a press release claiming that they had inked a deal to “import 50 tonnes of cannabis from Poland.” They further claimed, when contacted by CIJ that they stood by the story. At this point, their claims were clearly about a future delivery. However, Farmako CEO Niklas Kouparanis then embellished further on Bloomburg. Kouparanis claimed that they were already distributing product from Macedonia.

The reality of course was nothing of the sort. While Farmako was distributing product it had sourced from other places, no Macedonian product had ever crossed the border. But as May rolled into June, it was clear that there was something else afoot. All the bragging in the English and German language press had consequences. The German press had a field day with the storied and very colourful past of both Farmako founders. The regulatory agency, BfArM conducted an investigation. Kouparanis was out by the beginning of July.

Producers Do Not Trust Them

Cannabis industry insiders (both producers and distributors) who contacted CIJ about this story, but wished to remain off the record, confirmed that many producers who had initially heard of the firm in both Poland and Macedonia, in particular, were distancing themselves from Farmako. But the stories were not limited to Eastern Europe. In the UK, where Farmako had used a chunk of its investment from Heartbeat Labs to also open a London office, cannabis professionals expressed scepticism of almost all of the company’s claims including not just sourcing, but on the tech and R&D side. One senior executive in the Canadian industry said on deep background that he was tired of the lies from Diemer in particular, and never wanted to speak to anyone associated with the company ever again.

And clearly all was not well within Farmako itself, no matter the constant cheery optimism, if not “shucks we didn’t know” attitude of all involved when actually confronted or questioned about their behaviour – and or statements – particularly to the press.

What Has Been The Upshot To Date?

Kouparanis may be history but Diemer remains with the company. Although Heartbeat Labs claims this has nothing to do with the subsequent company re-org and Kouparanis’ departure, insiders in the industry claim otherwise. Further, several also suggested that any attempt on the part of Farmako to enter into contracts until July was fundamentally compromised by the actions of Farmako execs themselves.

Diemer certainly, has been remarkably candid at least in review about one aspect that most in the cannabis industry who have encountered him so far agree with. He has come clean in interviews that he knows very little about the legitimate cannabis industry. Perhaps that is also why he has continued to claim that there is no crisis at the company.

Both statements of course also raise questions about why he is still there.

The company is still in business although apparently finding it very difficult to source product.The appointment of a new CEO, Geschäftsfüherinen– a female and first head of any kind of cannaspecialist distribution company auf Deutsch, Katrin Eckmans is also interesting. Eckmans makes her apparent cannabis industry debute with a professional background that includes ex-im at Frankfurt airport, after the quick departure of Kouparanis. Particularly given that he co-founded the company with Diemer after leaving a year long stint at Cannamedical (the second indie cannabis specialty distributor in Germany, established in 2017 by David Henn). And she is apparently being hired for both complementary experience and her gender (which while refreshing in a still male dominated industry is widely also regarded as at this point fairly easy-to-spot window dressing conveniently proffered to regain confidence of investors if not customers in a gender-friendly twist when a company or organization hits an existential crisis).

Calling in even a highly competent if inexperienced in the cannabis niche woman, in other words, even in this industry, does not necessarily “fix” things. This goes from company culture to critical relationships within the industry (upon which distributors like Farmako depend on at this point).

For now, at least, Farmako, and its financier in Berlin appear to have deflected criticism of their efforts although those who have had interactions with the staff are placing bets on when the doors in both Germany and the UK will shutter.

Farmako’s detractors may yet also lose such wagers. The company is still in business although apparently finding it very difficult to source product. Not, in this case because they cannot find it – but rather because producers are flat out refusing to work with them.

In the meantime, particularly other German canna specialty distributors are taking a lesson from this story. If Farmako survives, in other words, it will do so by overtaking the competition that has sprung up all around them – which is not only unburdened by the baggage, but is also determined not to make the same mistakes.

Luxembourg Announces Plans For Two Year Transition To Recreational Use

By Marguerite Arnold
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For those who have been watching, Luxembourg has played an inordinately influential role on the entire cannabis discussion in Europe for the past year.

This summer, the country announced that it had plans to implement recreational use (for residents only) within two years.

Last summer, the country not only changed its medical use policy as the Deutsche Börse tried to halt the clearances of cannabis trades made in Germany (Luxembourg is the place where the stock trades clear), but set a five-year mandate and timeframe as well.

This new announcement certainly is an attempt to signal at any rate, that the government is not going to run out the clock. But, realistically, with the extra six months already in front of the start date necessary to enshrine the legislation, plus whatever complications arise after that, Luxembourg could initiate its market on January 1, 2022.

Or, as is more likely, it could not. Including rolling delays caused by everything from EU objection and internal logistical hurdles of other kinds to lack of access to product.

Refom Redux?

Will Luxembourg be the “Colorado of Europe?” Probably not.

Will Luxembourg “be the next Canada?” Probably not either. However it is also worth noting that legislators and lawmakers from Luxembourg have drawn recent inspiration via numerous fact finding trips to Canada of late.

It is also worth remembering that even Canada’s great, green, “well-oiled” cannabis machine delayed its recreational market start by months last year. And that was a scenario already a generation in the making.

Further, as some would argue this summer, certainly post CannTrust, the relative “speed” with which Canada embraced its recreational market is again being criticized for not only being precipitous but a direct cause of problems in financial compliance and tracking.

The lack of regulatory muster, in other words, that even allowed a CannTrust to happen, will not fly in Europe. Certainly not in a country where regulations, including that of the European kind, are decided upon (the other center of EU regmaking is of course Brussels).

For that reason, no matter how exciting the news to an industry fighting an uphill battle on medical efficacy, there is plenty of room to temper enthusiasm.

Luxembourg is not going to be “just like” anywhere seen so far. The needle has moved. And the conversation is morphing if not moving on.

One of the most intriguing aspects of all of this, of course, is how insurers will treat the entire discussion.

Holland Round 2?

Here is what Luxembourg also won’t be. A new tourist mecca for out of towners. At least according to the current discussion. How the government will prevent that, is of course unclear. The same grey areas exist in the law behind Barcelona’s social clubs. The Dutch have tried for most of this decade to discourage this – and have largely failed.

What it very well might be, however, is a catalyst for change.  A before and after moment if you will.

european union statesThe Swiss are moving ahead with recreational and medical trials. The British, whatever their relationship with the world after Halloween, are too.

Luxembourg, whatever it ends up being, in other words, is well timed, if nothing else, to be a reference point if not conversation starter about real reform.

Including of course, medical impact, if not, beyond that, efficacy.

Here is where Luxembourg might in fact, be much closer to the Dutch experiment than any other place. Despite the fact the country has had a coffee shop culture for over 30 years, and Dutch medical cannabis is exported to countries all over the world, here is what is missing in Holland: Medical health insurance coverage for patients. In fact, Dutch insurers, en masse, stopped reimbursing the drug as soon as Germany changed its insurance rules in March 2017.

If that is on the agenda for Luxembourg, in other words, no matter how exciting a timeline for recreational is anywhere in Europe, this will be a pyrrhic victory indeed.