Tag Archives: policy

Cannabis Industry Insurance Outlook for 2020

By , T.J. Frost
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Cannabis businesses have a lot to look forward to in 2020. After a bipartisan push through the House, the Safe Banking Act currently awaits passage in the Senate and then the president’s signature. If all goes well, the bill will allow the financial sector to finally service cannabis businesses – from banking to investments and insurance.

What else can cannabis business look forward to this year? Check out HUB’s Top 5 cannabis industry predictions for 2020.

  1. Hemp/CBD products go to market in droves. The passage of the Farm Bill and the ease of shipping hemp across state lines has led to a production boom for the crop. With little federal regulation around manufacturing and distribution, hemp/CBD products from edible oils to clothing and anti-inflammatory lotions are extremely profitable. Expect final federal Domestic Hemp Production Program rules on acceptable levels of THC in hemp/CBD products to be published sometime in 2020. These will be based on the current rule draft. There’s a strong push to move industrial hemp into the federal crop insurance program, which is also likely to happen in 2020.
  2. Product liability insurance is no longer a luxury. Thanks to significant vaporizer, battery and contamination claims currently in the courts, cannabis business can expect higher product liability premium rates in 2020. Expect rates to jump as much as 30 to 40%, depending on the resolution of these cases. For this reason, carriers will be more diligent about underwriting and may even ask for certification of insurance from vendors, and additional insureds on third-party policies. Exercising more caution and oversight when selecting vendors is a must for cannabis businesses operating in 2020 under this premise. It’s critical for all organizations to take a hard look at business practices before entering partnerships moving forward.
  3. Phase II industry growing pains surface. Now that the cannabis gold rush is dying down, businesses are poised to enter Phase II of their growth.Those who failed to institute proper hiring processes, including background checks, as well as protocols to promote security and prevent theft are currently facing challenges. Significant industry consolidation is making way for cannabis conglomerates to become multi-state operators. Directors and officers that made poor investments or acquisitions are facing scrutiny at the hands of the SEC or business investors. Without D&O insurance, or adequate limits, directors and officers could find their personal finances drained. Insisting on adequate D&O protection going forward is a best practice for cannabis executives.  
  4. Product and state regulatory testing expands. High-profile manufacturers and distributors of cannabis are standardizing their cannabis, hemp and CBD ingredient labeling. However, many others are taking advantage of the lack of rules currently surrounding cannabis production by falsifying labels and misrepresenting THC content in products. This has led to recent lawsuits and claims. As a result, states will begin to administer product testing and license regulations and enforce carrying time limits, track and trace and bag and tag rules. Get ready for fines, penalties and increased non-compliance liabilities in 2020.
  5. Increased availability of policies and limits. Both the cannabis industry and the number of insurance carriers entering the market continue to grow steadily. Businesses are enjoying higher liability limits as a result – to the tune of $15M on product liability and $60M on property. Coverage for outdoor cannabis crop is now a possibility, and workers’ compensation coverage can function as a blanket policy for businesses across state lines as well. Should the Safe Banking Act pass soon, stay tuned for additional insurance opportunities as well.

2020 Growth and Beyond

The 2020 presidential election will bring the federal legalization of cannabis to the forefront of public discourse. While the law may not change yet, passage of the Safe Banking Act and increased regulatory action at the state level will highlight the successes and failures of the 33 states and the District of Columbia that have legalized cannabis in some capacity. These will serve as a guiding light for federal legalization down the road.

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USDA Announces Hemp Regulations

By Aaron G. Biros
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This morning, U.S. Secretary of Agriculture Sonny Perdue announced the establishment of the U.S. Domestic Hemp Production Program. The program, as stipulated by Congress in the 2018 Farm Bill, will establish a regulatory framework for hemp production in the country.

Secretary Perdue made the announcement in a YouTube video titled “USDA’s Hemp Policy.” Later in the week, an interim final rule formalizing the program will be published in the Federal Register, according to the USDA’s website. “The rule includes provisions for the U.S. Department of Agriculture (USDA) to approve hemp production plans developed by states and Indian tribes including: requirements for maintaining information on the land where hemp is produced; testing the levels of delta-9 tetrahydrocannabinol; disposing of plants not meeting necessary requirements; and licensing requirements,” reads the press release. “It also establishes a federal plan for hemp producers in states or territories of Indian tribes that do not have their own approved hemp production plan.” The interim final rule will go into effect as soon as it is published in the Federal Register, which should be by the end of this week.

You can find a preview of the rule here. The agency has also developed guidelines for sampling and testing procedures, which you can find here. Those documents are meant to provide more information for hemp testing laboratories.

You can watch the YouTube video and read the announcement he made below:

Hello everyone, as I travel across this great country of ours, I hear a lot about a strong interest in a new economic opportunity for America’s farmers: the production of hemp. Which is why today I am pleased to announce the USDA has published the rule establishing the US domestic hemp production program. We said we’d get it done in time for producers to make planning decisions for 2020 and we followed through. We have had teams operating with all hands-on-deck to develop a regulatory framework that meets Congressional intent while seeking to provide a fair, consistent and science-based process for states, tribes, and individual producers who want to participate in this program. As mandated by Congress, our program requires all hemp growers to be licensed and includes testing protocols to ensure that hemp grown under this program is hemp and nothing else. The USDA has also worked to provide licensed growers access to loans and risk management products available for other crops. As the interim final rule, the rule becomes effective immediately upon publication in the federal register. But we still want to hear from you. Help us make sure the regulations meet your needs. That’s why the publication of the interim final rule also includes a public comment period continuing a full and transparent rulemaking process that started with a hemp listening session all the way back in March 2019. At USDA, we are always excited when there are new economic opportunities for our farmers and we hope the ability to grow hemp will pave the way for new products and markets. And I encourage all producers to take the time to fully educate themselves on the processes, requirements and risk that come with any market or product before entering this new frontier. The Agricultural Marketing Service will be providing additional information, resources and educational opportunities on the new program. And I encourage you to visit the USDA hemp website for more information. As always, we thank you for your patience and input during this process.

Gaps in Standard Property Insurance Can be an Unknown Hazard for Cannabis Businesses

By Susan Preston, T.J. Frost
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Basic business liability coverage is not enough for those cultivating, selling and distributing cannabis. General liability, property and even commercial renter’s insurance policies all exclude aspects of cannabis operations, leading to significant gaps in coverage.

Unfortunately, many cannabis operations purchase traditional property policies, assuming they’re insured. Then, when a claim comes to light, they find out they’re not covered.Consider the following common exclusions that could lead to a costly business interruption – or worse

Although the production, sales and distribution of cannabis is legal in many U.S. states, it is still illegal federally. This disparity can cause confusion when it comes to insurance compliance. Cannabis companies will want to secure industry specific coverage for risks associated with property, business interruption, and auto as well as general liability.

Consider the following common exclusions that could lead to a costly business interruption – or worse – a shutdown of operations when not properly insured:

  • Property coverage does not cover crops. Cannabis crops require specific coverage for different growth stages, including seedling, living plant and fully harvested. The insurance industry has designed policies specifically for indoor crop coverage for cannabis operations. There is some market availability for normal insured perils such as fire and theft, to name a few. Work with your broker to review your property policy and any potential exclusions related to cannabis operations. There is currently not much availability for insurance for outdoor crop.
  • Auto policies exclude cannabis transport. Some states require separate permits for transportation. Review coverage options with a knowledgeable broker before moving forward with driver hiring. Implement driver training sessions on a regular basis, conduct background checks and review MVRs prior to hiring company drivers. Teach drivers how to handle accidents on the scene, including informing law enforcement of the cannabis cargo. Remember that transporting cannabis across state lines (even when legal in both states) is still illegal due to federal law.
  • Equipment damage and/or breakdown coverage may be excluded from property policies. Consider the expenses and potential loss of revenue due to mechanical or electrical breakdown of any type of equipment due to power surges, burnout, malfunctions and user error. Having the right equipment breakdown insurance will help you quickly get back into full operation, with minimal costs. Conduct an onsite risk assessment of your equipment to get a comprehensive picture of your risk exposure, and review current insurance policies to identify key exclusions. 

Organizations looking for cannabis business insurance are best off working with a qualified broker who is knowledgeable in the cannabis space.As the cannabis industry continues to expand, more and more insurance options have become available. And yet as with any fast-paced industry, not every option that appears legitimate is a good risk for your cannabis business.

Be a contentious insurance consumer. Review the policy closely for exclusions and coverage features so you understand the premium rates and limits of the policy.  Discuss with your broker the history of the carrier as to paying claims in a timely fashion.

Organizations looking for cannabis business insurance are best off working with a qualified broker who is knowledgeable in the cannabis space.

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How Much Cannabis Astroturfing Is Afoot In The UK?

By Marguerite Arnold
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Astroturfing is the practice, in political messaging and campaigns, of creating what seems to be a legitimate, grassroots inspired campaign that is actually bought and paid for by an industry lobby or other corporate interests.

It is also clear that this practice is now entering the cannabis space, certainly in the UK.

How and Where?

On August 1, the British Conservative Drug Policy Reform Group sent out a group email entitled “Strategic litigation on medical cannabis access in the UK.” The email, from the group’s senior communications manager, was to announce the kick-off of a crowdfunding campaign to defend a cannabis patient.

It’s beneficiary? A British female MS patient, Lezley Gibson, now facing prosecution for growing her own cannabis after being unable to afford what was on offer at her local pharmacy.

Here is the first flag: MS is the only condition for which Sativex (manufactured by British firm GW Pharma) is prescribed on label (in other words without special approvals).

The problem is that the NHS (along with most of the German statutory approvers) feels that Sativex is still too expensive and not effective enough. And that problem won’t be solved with either patient home grow access or a lawsuit to gain that right, but rather funded trials.

UKflagHowever, more disturbingly, the email referenced the supposed success of a similar legal tactic in Germany several years ago. This is to say it used a highly inaccurate analogy. In Germany, a male chronic pain patient sued the government for the right to grow his own cannabis. He won the right temporarily, but this was taken away from him after the law changed in March 2017. Now he, like every other cannabis patient in Germany, must get his cannabis from a pharmacy. German patients also must get their initial prescription approved by health insurers – which is for everyone – but particularly non MS patients – the biggest fight in the room right now on the topic of medical efficacy.

Further, the right to grow one’s own medical cannabis, no matter the condition suffered, has been removed from patients in every legal jurisdiction where there is no constitutional right to it first – namely patients sue for the same.

As such, it is entirely conceivable that as a “strategic” case, this is more likely to put pressure on the NHS to pay the sky-high price of Sativex for MS patients (which it has already refused to do) than create any other kind of access for anyone else.

When contacted by Cannabis Industry Journal, a CDPRG spokesperson said that the patient had given her support for the crowdfunding campaign and needed help.

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Most German Patients Are Still Only Getting Dronabinol

However, there are other issues here. Namely that when selecting a strategic case (no matter how harsh this sounds to the individual patient), the entire discussion at this point – certainly from an efficacy point of view, might be better served with supporting the case of a patient who has less access because of either physical condition or economic status.

In fact, in Germany so far, thanks to the change in the law that the British group references, while there certainly are tens of thousands of cannabis patients at the moment (including many MS patients), the majority of them receive Dronabinol or Sativex. And all of them have to fight for medical access and approval from their insurers. That is of course, when they can find a doctor to prescribe in the first place. There are also estimates that there are close to a million patients in Germany who cannot get access, thanks to the change in the law created by one patient’s law suit.

Is this flavour of litigatious advocacy now afoot in the UK, in other words, the kind of lawsuit that is designed to benefit the industry more than patients looking for affordable, home-grown, if regulated product?

Astroturfing Cannabis Issues Under Brexit Colors?

No matter the real versus stated intent of the instigators of the Gibson case, or the eventual outcome of such litigation, there is no doubt that cannabis is being brought into larger political debates. And further, no surprise, “patient access” is an issue just as ripe for “issue manipulation” and astroturfing as anything else.

“Strategic” if not “crowdfunded” cause or tactical lawsuits are another form of this technique.

That foreign cannabis money is already in the room is also no surprise. The British press was alight with stories during June of the amount of money contributed to the CDPR Group from Canadian sources.

Seen within the context of Brexit itself, this is disturbing locally.There are other issues involved in this kind of challenge to the law.

Not to mention the fact that in May, none other than Arron Banks, the self-styled backer of the Leave Campaign, decided, suddenly, to throw his hat into the CBD oil ring on Twitter. Not to mention repeated the same information repeatedly, including his $4 million investment into the space during the following months so far. Plus, of course, wildly optimistic valuations of the U.S. market.

Suing For Patient Justice Or A Backdoor For Canadian and Other Corporate Interests?

There are other issues involved in this kind of challenge to the law.

The first is that in the British case this is actually not a constitutional case per se, but a human rights one. See the problems that those who are trying to define the British constitution right now on other matters (see Brexit) are running into.

The second is that while the patient in question in this case (Ms. Gibson) is undoubtedly relieved at the prospect of a legal defence for growing her own medication in the face of insurmountable cost, on the “positive” side, her case is unlikely to do much more than make impoverished patients fight NHS paperwork if they can find a doctor. See Germany, as a prime example.This lawsuit, in other words, no matter how it might get one woman out of a terrible legal situation, is not necessarily “pro-patient.”

But what it will do is something else. It may well remove the current widespread prohibition on the harvesting of cannabis flower in the UK. And while patients would face again being moved into the slow lane of NHS approvals (with lots of fights over efficacy looming and still unsolved), corporate growers and processors if not importers, already investing millions into such efforts across the UK and Ireland, benefit.

At the exclusion, also, as has been the case in Germany, of local producers who are not already large corporate interests or existing farms.

This lawsuit, in other words, no matter how it might get one woman out of a terrible legal situation, is not necessarily “pro-patient.” It also may well do everything to frustrate, slow down and further complicate medical access for those at the end of the chain, while only opening up “investment opportunities” for large companies and well-heeled interests who have nothing but profit, if not the destruction of the NHS in mind.

The 2018 Farm Bill Legalized Industrial Hemp. Now What? Get Your Answers Here.

By Josh Smart
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The Agriculture Improvement Act of 2018 legalized the growth, sales and transportation of industrial hemp across state lines. Although it looks identical to other types of cannabis, this cannabis plant contains less than 0.3 percent THC, and can be used to make building insulation, beauty products, car dashboards and more. Most significantly for farmers, it can serve as an ideal rotational crop because of its ability to reduce soil toxicity.

Until this update to the Farm Bill, hemp was considered a controlled substance and few U.S. farmers were granted rights to plant and harvest it. Now, the agricultural commodity is expected to raise the crop’s already growing GDP to that of liquor and beer sales and some estimate it should reach $20 billion in as little as five years.

Agribusinessesand farmers alike will now be looking to secure processors and other commodity buyers ahead of planting industrial hemp and purchasing the necessary equipment for its harvest. Because hemp can be grown in any climate, it may be especially attractive to tobacco growers and dairy farmers who have been less profitable as of late. 

Now that it’s been legalized, what’s the risk?

As more agribusinesses and farmers look to confirm viability of industrial hemp growth, potential liabilities will surface. The 2018 Farm Bill left many questions unanswered. Here are a just a few FAQs:

Question: Can I just add hemp to my crop rotation, or is additional insurance required?

Answer: The standard multi-peril crop insurance policy DOES NOT provide coverage for planting hemp, or endorsements for its storage and transportation- yet. Instead, industrial hemp must be insured on separate private policies for: harvest, extreme weather and crop storage and transportation. There’s a strong push to get industrial hemp into the federal crop insurance program as early as crop year 2020. As hemp planting, harvesting, storage and transportation become more understood and predictable, new policy options will likely become available. Inquire about new coverage options at your next annual renewal.

Q: How will the FDA regulate industrialized hemp?

A: The FDA will develop rules and regulations on industrial hemp throughout 2019, and will be ready for rollout during the 2020 crop year. Because it’s impossible to distinguish a cannabis plant with THC from an industrial hemp plant in the field, crop lifecycle testing and documentation will likely be required. The question remains if this testing and documentation will be incumbent on the farm/agribusiness, or FDA agents. Some states are further along in this process and have already hired testing and compliance officers.

Q: How can farmers ensure that the THC content of their plants does not exceed .3%?   

A: Farmers must have a contingency plan for monitoring their hemp’s THC content which should include employing a seasoned agronomist who can institute controls, keep plants properly hydrated and create a plan to maintain optimal THC levels. In the heat of the summer, THC levels typically remain low, but rise with cold and rain. Should there be a local cold spell, high rainfall, or if the hemp plant was seeded late in the season and the harvest runs into the fall, THC levels could rise quickly. When this happens, farmers will have to chop down the plant to control the level and harvest the plant’s flower before its next THC test.As with any emerging market, there is still a lot of doubt surrounding the growth and sales of industrial hemp, as many risks are unknown. 

Q: Can I transport hemp across state lines to a processor in another state?

A: On paper, industrial hemp is legal across all 50 states, and therefore can be transported across state lines and sold as any other commodity. In reality, though, hemp is undistinguishable from cannabis to the naked eye, and therefore, shipping an entire biomass directly from the field across state lines has a good chance of being confiscated.

When hemp is confiscated on the side of the road – even if it is eventually returned – there could be significant lag in delivery, storage is uncertain and quality control can’t be maintained. Alternatively, farmers are now shipping their hemp in smaller, unmarked loads, which is forcing them to hold onto product for longer than usual.

As with any emerging market, there is still a lot of doubt surrounding the growth and sales of industrial hemp, as many risks are unknown. On the flip side, industrial hemp offers small farmers and agribusinesses alike an unprecedented opportunity to get in at the ground floor of a new crop. If you do, make sure to work with your insurance broker to secure proper coverage immediately.

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Tilray Imports Medical Cannabis Oil In Bulk To UK

By Marguerite Arnold
1 Comment
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Tilray has managed to successfully import its first bulk supply of medical cannabis oil into the UK.

It was a Tilray product, in fact, that was not only confiscated at the border last year – but subsequently sparked media outrage over the denial of the same to one Billy Caldwell, an epileptic child. It was not the only outcry nor was Billy the only child endangered. And the British people, in fact, finally signalled that they had lost their stiff upper lip on this one last year.

All of this despite lingering and significant problems ever since. Not to mention an intriguing and well-timing market entry for Tilray right after things have been heating up on cannabis reform in Parliament of late.

The Tilray product, which will be imported from its new production facilities in Portugal, has already been distributed in other European countries, including Croatia and Germany.

tilray-logoWhat is significant in other words, is that the UK is starting to allow bulk orders in through customs- and they are coming not from Canada, but from Europe. Even if it is a Canadian company’s brand on the same, for now at least.

Tilray of course, is not the only company engaged in a race to get imports into the country. Right after Christmas last year, Canopy/Spektrum announced the same plans. Wayland has clearly been angling for a British outpost for some time. And of course, more locally initiated groups, including European Cannabis Holdings, have been working to initiate easier access to British markets for well over a year. Let alone more locally grown interests and pursuits now clearly lining up for market entry.

But this announcement, coming so shortly after all the recent activity on cannabis reform and calls for trials in the UK, clearly means that the doors are now opening fast for the largest players angling to get in.

Bottom line? Look for the biggest Canadians with an already established European presence, to begin making similar announcements this summer.

Being “Available” Is Only The First Hurdle

One of the biggest problems facing not only the “industry” but patients in the UK, much like elsewhere, is that doctors do not know or want to prescribe cannabis and cannabinoid medicines- and for reasons stemming from fear or ignorance about medical efficacy to insurance coverage.

Medical cannabis, in all its forms so far, however, is also highly expensive and out of reach for most unless they obtain an NHS approval (or as in Germany, statutory health insurer approval) to actually obtain the drug. And then have a place to obtain it.

This basically counts out everyone who cannot pay out of pocket and cannot find a willing doctor to sign them up via onerous and ongoing paperwork. And that, of course, is the majority of the sick people in the room.

It is this basic conundrum, which the bigger Canadians have yet to solve themselves (and it is becoming more of a recognized issue in the U.S. in the days, presumably, before the 2020 election which will hopefully set a timetable for federal reform) that has been in the room for the last two years thanks to Germany.

Image credit: Flickr

It is even more of an issue in the UK. Especially with a renegotiation in Britain’s diplomatic and trade relationship with the rest of the world.

That includes, as of mid-July, a downright, undiplomatic spat between the White House and Whitehall right now over leaked comments from the British Ambassador to Washington – and about matters of competency far from cannabis. Although of course, this issue is in the room.

For that reason, the Canadian as well as the European connection to imports right now (from not just Portugal but Holland) on the medical side of the ledger, spell an intriguing fall for not only cannabis, but the real shape and direction of British politics- and by extension- British trade.

Patients Are Taking It To The Streets And To Parliament

As much as patients have so far partnered with the big Canadian companies in the attempt to get the borders open, this is not the only game in town. Dutch imports, from Dutch companies, are already showing up in the UK (see Bedrocan). And both British and Irish growers are getting in on early action, even if for now “just” on the CBD side.

Furthermore, it is clear that patients are playing a large role in making sure that they are being heard, even to the point of putting pressure on doctors. In an extraordinary admission at the parliamentary level during the last week of June, lawmakers conceded that the British public was taking matters into their own hands. And furthermore, that the change in the law had led to clear expectations that were not being met.

Namely, British patients are literally demanding medical cannabis by prescription from their doctors.

And much like in Germany, with a mandate for coverage, the government is being forced to listen, and as best as it can in a severely crimped and politicized Brexit environment, respond.

While cannabis reform is hardly the Guy Fawkes, in other words, in a tinder match environment that British politics certainly is right now, it might be a kind of spark that drives a much wider conversation in the UK about current events.

Specifically the survival of a system that is poised to provide not only access to cannabis but comprehensive medical care beyond that, even for the old or chronically ill.

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Biros' Blog

FDA Public Hearing On Hemp: What You Need To Know

By Aaron G. Biros
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Folks from around the country and the world tuned into the U.S. Food & Drug Administration (FDA) website as they held a public hearing on Friday, May 31. Manufacturers and suppliers asked the FDA to regulate CBD like food or dietary supplements, while the FDA seemed to want more evidence on the safety of CBD products before giving the greenlight.

Background On The HearingFDAlogo

For the uninitiated, after President Trump signed the Farm Bill into law back in December 2018, Scott Gottlieb, now former director of the FDA, issued a statement the same day the Farm Bill passed, clarifying the FDA’s regulatory authority. In the statement, Gottlieb explained that Congress preserved the FDA’s authority to regulate products containing cannabis and its constituents under the Federal Food, Drug, and Cosmetic Act (FD&C Act).

In April 2019, around the same time he resigned from the FDA, Gottlieb issued another statement, acknowledging the quickly growing industry throughout the country and total lack of federal regulatory guidance. This time around, Gottlieb laid out a handful of steps that the FDA plans on taking to address regulations around hemp and cannabidiol (CBD). Those included scheduling the public hearing for May 31, where written and oral public comments were submitted by stakeholders, sharing “their experiences and challenges with these products [hemp and CBD products], including information and views related to product safety.”

That statement also announced the formation of an internal agency working group to “explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed; including a consideration of what statutory or regulatory changes might be needed and what the impact of such marketing would be on the public health.”

Fast-forward to May 31, the day of the public hearing, and all eyes in the industry focused on what all these stakeholders had to say to the FDA about CBD. The day started off with about two hours of oral comments, each speaker had roughly two minutes to deliver their thoughts.

Karen Howard, CEO of the Organic and Natural Health Association, speaks about the quality of CBD products 

Oral Comments

Industry stakeholders representing cannabis businesses sang much of the same tune, clamoring for wise regulations on safety, testing, banking and interstate commerce, among other standards. NCIA Policy Director Andrew Kline’s comments included running through five major positions of the industry trade organization representing CBD companies. Those included recommending the FDA act quickly in setting up regulations, stressing the massive economic impact of the industry, saying that CBD products are generally safe, clamoring for voluntary, consensus-based standards and informing consumers of any potential risks. “The bottom line is this – an overwhelming preponderance of evidence indicates that cannabis and cannabis-derived compounds present minimal health and safety concerns,” Kline told the folks at the FDA. “Time is of the essence. Hemp-derived CBD products are in very high consumer demand and the industry is eagerly awaiting FDA’s regulatory framework for these products. We strongly recommend that FDA act quickly to clarify the regulatory environment because there is significant confusion in the market.”

Anna Williams, representing the American Association for Laboratory Accreditation (A2LA), stressed the importance of testing for contaminants and adulterants as well as advocating for national standards on lab testing, instead of the state-by-state network of different standards.

Patients & Public Safety

After industry stakeholders had their chance to speak, the FDA allowed a group of advocacy organizations representing patients time to speak. That included representatives for the Alzheimer’s Association and the American Epilepsy Society, both of which were hesitant to throw their full support behind CBD as medicine. Kevin Chapman with the American Epilepsy Society said he wants to see clear warning labels, testing standards, more clinical trials and more studies before the group is ready to form a position on using CBD as medicine. Keith Fargo with the Alzheimer’s Association supports clinical trials to study it more, but thinks CBD is risky for patients without serious evidence of efficacy. A representative from the Tuberous Sclerosis Alliance also echoed similar concerns. They want to see labeling of drug interactions on labels of CBD products.

One section of the oral comments included discussions about patients, public safety and retailers/distributors.

After those comments, some organizations had the chance to speak followed by comments from retailers and distributors. Patrick Bird, owner of PMB BioTek Consulting, spoke on behalf of AOAC International, where he primarily discussed public safety. He said they want cannabis products to be regulated with food safety in mind, asking for FSMA to apply to hemp products. They want to adequately ensure product safety with things like mandating HACCP plans, recall readiness, saying hemp products should be treated just like food products.

Retailers & Distributors

Peter Matz, representing the Food Marketing Institute, the trade association for the supermarket industry, said that regulatory ambiguity is a serious issue that needs addressing. “There is mass confusion in the marketplace for the public, suppliers, retailers and state regulators,” says Matz. “Demand for CBD products in human and animal use is growing rapidly. ¼ of American have already tried it. We are fielding questions from companies seeking clarity regarding the current federal regulatory framework.” He added, what many others also mentioned, that the FDA needs to move swiftly to provide a pathway to regulation.

State Regulators

Next on the docket came presentations from state government entities, including state departments of agriculture, followed by healthcare professionals. The state regulators that spoke mentioned a lot about food safety, standards, testing regulations, GMPs and things like that to protect consumer safety. “Currently states are struggling with the lack of sound scientific research available in CBD and long-term health impacts,” said Pam Miles, representing the Virginia Department of Agriculture.

The docket for state regulators delivering presentations

One interesting aspect on their talks however was telling the FDA just how large their markets have gotten already and how they need guidance on how to regulate markets in their own states. Joseph Reardon, with the North Carolina Department of Agriculture, said they already have about 600 farmers growing hemp and thousands of processors working with the product in their state. “We urge the FDA to resolve the statutory issues improperly establish a legal pathway for CBD products to enter the market place,” Reardon commented. He also asked that the FDA extend the written comment period from July to August. “We are simply looking for a regulatory framework on the extraction, production and reconstitution of CBD or cannabinoid related products.”

Healthcare & Research

Healthcare providers, and physician testimony also echoed a lot of the same concerns, including the lack of research done, concerns about effects on at-risk populations and concerns about use as ingredients in dietary supplements and food. Some of the presentations also highlighted the room for nefarious activity in an unregulated marketplace. Some went as far as to mention cases where they found CBD vape juices with DXM in it (the active ingredient in cough syrup), CBD products found to contain THC, as well as synthetic cannabinoids responsible for drug overdose deaths. Some advocates in the hemp and CBD community have equated these arguments similar to reefer madness.

The major takeaway from this hearing is that everyone wants to see more data. Researchers and healthcare providers want to study the efficacy of CBD used in medicine, regulators want public safety information, patient advocates want to see data about effects on at-risk populations, trade organizations want data to back up label claims and the FDA wants to see just how safe CBD really is.

Water Policy in California: Six Key Takeaways from the State Water Board’s New Cannabis Cultivation Policy

By Amy Steinfeld
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Cannabis is the most highly regulated crop in California, and the state just added another layer of regulation. This article breaks down the State Water Resources Control Board’s (SWRCB) recently updated Cannabis Cultivation Policy – Principles and Guidelines for Cannabis Cultivation (“Policy”) into six key takeaways.1 These guidelines impose new rules on cannabis cultivation activities that have the potential to impact a watercourse (stream, creek, river or lake). Most of these rules apply to cultivation of sun-grown cannabis, which is currently allowed in some form in 12 counties. Compliance with these new requirements will be implemented through the CalCannabis Cultivation Licensing Program.

  1. When developing farmland, hillsides should be avoided and erosion must be controlled.

The Policy provides specific rules for growing pot on undisturbed land. To prevent erosion, numerous limitations are placed on earthmoving and activities in sensitive areas, and cultivators are not allowed to grade hillsides that exceed a 50% slope.2

Cultivation prepping activities must minimize grading, dust, soil disturbance, erosion, and impacts on habitat, especially during the winter season.3 No vehicles or heavy equipment may be used within a riparian setback4 or watercourse,5 and cultivators must avoid damaging native riparian vegetation6 and oak woodlands.7 All farm equipment, fuel, and hazardous materials must be carefully stored away from creeks and sensitive habitat.8 The Policy also governs road construction.9

  1. Cultivators should avoid work in or near a surface waterbody.10

If a cultivator’s activities impact a river, stream, or lake, they must consult with the California Department of Fish and Wildlife (CDFW).11 Cultivators must maintain minimum riparian setbacks for all cannabis activities, including grading and ancillary farm facilities. Before grading land, a biologist must identify any sensitive flora or fauna, and if any is located, consult with CDFW and provide a report to the Regional Board.12 No irrigation runoff, tailwater, chemicals or plant waste can be discharged to a waterbody.13 Diversion facilities for the irrigation of cannabis may not block fish passage, upstream or downstream, and must be fitted with a CDFW-approved fish screen; new facilities are subject to all applicable permits and approvals.

  1. During the dry season, cultivators may not use surface water.

The use of surface water supplies in California requires a valid water right and the use of water for cannabis cultivation is no different.14 Anyone seeking to appropriate “water flowing in a known and defined channel” or from a watercourse must apply to the SWRCB and obtain a permit or license.15 Alternatively, a landowner whose property is adjacent to a watercourse may have a riparian right to divert the water for use on her land. Riparian users do not need permission from the SWRCB to divert water, but they must report water use annually.16

The biggest obstacle that growers face under this Policy is that they cannot divert anysurface water during the dry season—the growing season (April 1 through Oct. 31). It should be noted:

  • The seasonal prohibition of surface water diversion applies regardless of the nature of the water right or what has been historically used to irrigate other crops.
  • During the dry period, cultivators may only irrigate using stored water (see no. 5 below) or groundwater.
  • It remains to be seen whether a legal challenge will be brought against the state for their draconian prohibitions on irrigating cannabis during the six-month growing season. Because this prohibition applies to all watersheds in California, singles out one low-water use crop, and ignores established water rights, it is overly broad and may constitute a constitutional “taking” of property rights.
  1. During the wet season, surface water diversions must be monitored closely.

Cannabis-specific restrictions also apply during the wet season. From Nov. 1 to March 31, cultivators must comply with instream flow requirements and check in with the state daily. All surface water diversions for cannabis are subject to “Numeric and Narrative Instream Flow Requirements,” to protect flows needed for fish migration and spawning. To ensure diversions do not adversely impact fish flows, cultivators must also “maintain a minimum bypass of at least 50% of the streamflow.”17,18

While valid appropriative right holders may divert more than 10 gal./min. for cannabis irrigation during the wet season, riparian right holders are not allowed to exceed that diversion rate.19 All cultivators (including small diverters <10 acre-feet (“AF”)/yr) are required to employ water-saving irrigation methods, install measuring devices to track diversions daily, and maintain records on-site for at least five years.20 Cultivators must inspect and repair their water delivery system for leaks monthly,21 and inspect sprinklers and mainlines weekly to prevent runoff.22

  1. Cannabis cultivators may obtain a new water storage right for use during the dry season.

To address dry season irrigation limitations, cultivators are urged to store water offstream during the wet season, including rainwater, for dry season use. Growers may not rely on onstreamstorage reservoirs, except if they have an existing permitted reservoir in place prior to Oct. 31, 2017.23 Alternatively, small growers (storage is capped at 6.6 AF/yr) may benefit from the new Cannabis SIUR Program, an expedited process for cultivators who divert from a surface water source to develop and install storage offstream. Only diverters with a valid water right that allows for diversion to storage between Nov. 1 and March 31 qualify.

  1. Groundwater is less regulated, but cultivators should avoid drilling or using wells near waterbodies.

Groundwater is generally the recommended water supply for cannabis because, unlike surface water, it may be used during the dry season and is not subject to many of the restrictions listed above. It should be noted however:

  • Many groundwater basins are now governed by California’s Sustainable Groundwater Management Act (“SGMA”), which requires water agencies to halt overdraft and restore balanced levels of groundwater pumping from certain basins. Thus, SGMA may result in future pumping cutbacks or pumping assessments.
  • In some counties, moratoriums and restrictions on drilling new wells are on the rise.
  • Under this Policy, the state may step in to restrict groundwater pumping in the dry season in watersheds where there are large numbers of cannabis groundwater, wells located close to streams, and areas of high surface water-groundwater connectivity.24

In short, groundwater pumpers are at risk of cutback if the state deems it necessary to maintain nearby creek flows.Noncompliance can bring lofty fines, revocation of a grower’s cultivation license, or prosecution

Final Takeaways

This cannabis policy presents one of California’s most complex regulatory schemes to date. Before investing in a property, one must understand this Policy and have a robust understanding of the water rights and hydrology associated with the cultivation site. Growers looking to reduce permitting time and costs should invest in relatively flat, historically cultivated land with existing wells and ample groundwater supplies, or alternatively, grow indoors.

This article attempts to synthesize the maze of water supply and water quality regulations that make compliance exceedingly difficult; more detailed information can be found here. Noncompliance can bring lofty fines, revocation of a grower’s cultivation license, or prosecution. Growers are encouraged to contact a hydrologist and water lawyer before making major investments and to designate a water compliance officer to monitor and track all water diversions and water used for irrigation. Growers should also consult with their local jurisdiction regarding water use restrictions and stream setbacks before moving any dirt or planting cannabis.


References

  1. The Policy is available at: https://www.waterboards.ca.gov/water_issues/programs/cannabis/cannabis_policy.html (will go into effect on or before April 16, 2019.)
  2. Policy, Appendix A, Section 2, Term 4. The Policy defines “Qualified Professional” as a: California-Licensed Professional Geologist, including Certified Hydrogeologist and Certified Engineering Geologist, California-Licensed Geotechnical Engineer, and Professional Hydrologist. (Policy, Definition 72, p. 11.)
  3. Policy, Appendix A, Section 2, Terms 4 and 10.
  4. Policy, Appendix A, Section 2, Term 3.
  5. Policy, Appendix A, Section 2, Term 40.
  6. Policy, Appendix A, Section 2, Term 33.
  7. Policy, Appendix A, Section 2, Term 34.
  8. Policy, Appendix A, Section 2, Term 7.
  9. Policy, Appendix A, Section 2, Terms 15 to 29.
  10. Policy, Appendix A, Section 1, Term No. 41.
  11. Policy, Appendix A, Section 1, Term No. 3; see also 1602.
  12. Policy, Appendix A, Section 1, Term No. 10.
  13. Policy, Appendix A, Section 1, Term No. 326.
  14. Policy, Appendix A, Section 2, Term 69.
  15. Wat. Code §1225; See alsoWat. Code §1201 [providing that the state shall have jurisdiction over, “[a]ll water flowing in any natural channel” except water that is appropriated or being used for beneficial purpose upon land riparian to the channel.”]
  16. Wat. Code §§ 5100–02.
  17. Policy, p. 12.
  18. Policy, Attachment A, pp. 60, 63.
  19. Policy, Section 2, Term 78.
  20. Policy, Section 2, Term 82.
  21. Policy, Section 2, Term 95.
  22. Policy, Section 2, Term 99.
  23. Policy, Section 2, Term 79.
  24. Policy, p. 11.

Cannabis Legalization in Massachusetts: An Interview with Steven Hoffman, Chairman of the Cannabis Control Commission

By Aaron G. Biros
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On February 13 at the upcoming Seed To Sale Show in Boston, MA, Steven Hoffman, Chairman of the Cannabis Control Commission of Massachusetts, will deliver a keynote discussion. Hoffman will sit down with National Cannabis Industry Association (NCIA) Executive Director Aaron Smith to discuss the first few months of recreational legalization, challenges and the path forward for the state. We caught up with Hoffman to hear about some of the biggest obstacles and successes when it came to standing up a regulated adult-use cannabis market.

On November 8, 2016, voters in Massachusetts ushered in a new era for the East Coast, when they passed a ballot initiative to legalize adult-use cannabis. Almost immediately after that, the Massachusetts Legislature put a hold on implementation in order to study the issues and revise the legislation, which was ultimately signed in July of 2017. That September, Steven Hoffman and his colleagues at the Cannabis Control Commission were appointed to figure out how the state should regulate the market, enforce its regulations and roll out the new adult-use program.

Steven Hoffman, Chairman of the Massachusetts Cannabis Control Commission

The Commission was tasked with creating something brand new, without a roadmap in place and developing rules around some very contentious issues. “I think the biggest obstacle was that we were doing something unprecedented,” says Hoffman. “Every state is different demographically and the laws differ state to state, and we got a lot of help from other states sharing their experiences with us, but we were still going down an uncharted path for Massachusetts.”

Hoffman told us the very first thing they needed to do in 2017 was conduct listening sessions in which the commissioners listened to citizens for recommendations and heard people’s thoughts on cannabis legalization. “We did that immediately. We needed to conduct a process that was transparent, thoughtful and inclusive,” says Hoffman. “We then, in public, debated policies around adult-use marijuana regarding licensing processes, criteria and enforcement.”

They debated policies in a public forum for four days and came back the following week to embed their decisions in draft regulations that were submitted to the Secretary of State in December 2017. Then, they had 10 more public hearings, made some modifications to the rules, and promulgated a final version of the adult-use regulations in March 2018, keeping everything as transparent and inclusive as possible. “I don’t think anyone has been critical of that process behind it,” says Hoffman.

Certain pieces of the regulations stand out as particularly inclusive and progressive for Massachusetts’ cannabis program. For example, certain mandates encourage diversity and support communities affected by the drug war. Hoffman says the Commission couldn’t take credit for those completely because their objectives are explicit in the legislation, however, the agency still made sure the state followed through. “The mandate said the industry should look like the state of Massachusetts in terms of our diversity,” says Hoffman. That includes creating a diverse industry with respect to ethnicity, gender, LGBTQ, veteran and disabled participation. Additionally, he added, “it was a very explicit set of requirements that those communities who were disproportionally harmed by the drug war are full participants in the new industry we set up. Those were both legislative mandates, so we take them very seriously and I wouldn’t have taken this appointment if I didn’t think it was absolutely essential.”

You can expect to hear more from Hoffman on this and other matters related to implementing cannabis regulations at the upcoming Seed To Sale Show in Boston, MA, February 12-13, 2019. On November 20, 2018, the first adult-use dispensaries in the state opened their doors for business and began selling cannabis. Hoffman says he is most proud of their rollout of the program as well as the transparency and inclusiveness through which they conducted the process. “I think this is a very controversial issue; the voters approved this issue by 53-47%,” says Hoffman. “No matter what we do, we won’t make everyone happy, but we’ve done everything possible to allow people to participate and feel like they’ve been listened to. We made our decisions publicly and transparently.”

Beyond that, the Commission wanted to take their time to make sure things were done the right way the first time. “From day one, we decided we were going to do this right rather than meet an arbitrary timeline,” says Hoffman. “It’s gradual, it’s maybe slower than some people would like, but our rollout has been well-received and relatively smooth. I think a gradual and thoughtful process, not focused on a deadline, went very well. Hopefully we have given other states a model when they plan their own rollout.”

Hoffman wouldn’t comment on whether or not he would encourage other states down a similar path, but he did say they could probably learn a thing or two from them. “I expect other states will do what we did,” says Hoffman. “They will talk to other states ahead of them like us and hopefully will benefit from learning from our experiences. I don’t know what the laws will look like but I expect other states need to make it work for them specifically.”

You can expect to hear more from Hoffman on this and other matters related to implementing cannabis regulations at the upcoming Seed To Sale Show in Boston, MA, February 12-13, 2019. Make sure to check out his keynote discussion with Aaron Smith on Wednesday, February 13 at 10:30am.

israel flag

Israel and Thailand Approve Cannabis Exports

By Marguerite Arnold
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israel flag

On Christmas Day, not only did Israel, global leader in medical cannabis in particular, finally decide to legalize medical exports, but in a surprise move, so did Thailand.

Both developments are likely to have huge implications on the entire global cannabis discussion, albeit in slightly different ways.The impact will be interesting to watch.

Israel’s Export Decision

The issue of exports from the original home of the medical cannabinoid revolution has been a perennial sticky wicket for the last several years. As the Israeli medical market liberalized at home and certainly in the last five years, the government steadfastly refused to export the drug. Further, the country’s president Benjamin Netanyahu also cut a political deal with Donald Trump to move the Israeli capital from Tel Aviv to Jerusalem that delayed this discussion over the last 18 months. With a global market now exploding that Israel to date has been excluded from and Netanyahu’s political capital tarnished with corruption, things are about to change.

The impact will be interesting to watch. Especially with the network of Israeli production farms also sprinkling around particularly Eastern Europe and Greece.

Thai Surprise

Thailand’s parliament voted to legalize the use of medical cannabis, making it the first country in Southeast Asia to do so.

Here is also what is intriguing: The country is, like Israel, looking at creating a domestic boon with a tightly controlled domestic economy booster. Not to mention clearing the jails, which are filled to bursting with people on even low level drug offenses.

Thailand’s Parliament

And just like Israel, Thailand is also, already, talking protectionist measures to shield domestic producers from being bought out by foreign interests, certainly of the corporate kind.

The Combination Package

In the short term this means, at least on the export front, that there will be more competitors to the Canadian giants now entering the room. And between Israel and Thailand alone, this also means that new strains on the medical side, will begin to enter global medical markets.

For all the future promise of tweaked product, cheap cannabis flower and oil flooding markets globally by importers and distributors realizing that the game is far from over, is going to be the first real challenge the Canadian cannabis companies have yet faced.

In the wake of the news that Epidiolex is not as effective longer term as hoped (which is a common phenomenon in the pharmaceutical industry known as a “drug holiday” where users initially improve and then develop tolerance to the drug), this is also an intriguing new development. This means that new strains are entering the global market at an unprecedented pace, literally competing with pharmaceutical products at a time when reform continues apace.

At a time when cannabis investments (particularly in the US), quadrupled in 2018, this also means that western dollars, if not companies, will begin to find other markets and market outlets.

And that is a Christmas present in 2018 that will reverberate long into the future.