Tag Archives: regulatory

By Dr. Ginette M. Collazo

Recently Puerto Rico approved the law that regulates the production, manufacturing, dispensing and consumption of medical cannabis. Although medical cannabis was already “legal” through an executive order and was “supervised” by local regulation, there was no law to back up the industry and protect investors.

The creation and approval of laws resides in the hands of elected individuals. Expecting absolute knowledge is unrealistic, especially when we refer to cannabis as a medicine. Sadly, the lack of knowledge is affecting the patients, and an emerging industry that can be the solution to the Island’s current economic crisis.

I am in no way insinuating that Puerto Rico is the only example. I have seen this type of faulty thinking in many places, but cannabis is the perfect manifestation of this human defect. Check some of your laws, and you will find a few that nearly qualify for the same characterization.

As we can see, lack of knowledge can be dangerous. Objective, factual information needs to be shared, and our leaders need a formal education program. Patients need them to have a formal education program to better understand and regulate the drug.

The approval of this law is a significant step for the Island. Still, many Puerto Ricans are not happy with the result. The lack of legitimate information coupled with conservative views made the process an excruciating one. It took many hearings, lots of discussions and created tensions between the government and population, not because of the law, but for the reasons behind the proposed controls. Yes, it was finally approved, but with onerous restrictions that only serve as a detriment to the patient’s health, proving the need for an education program designed specifically to provide data as well as an in-depth scientific analysis of the information, then, you address the issue at hand.

Let’s take a look at some of the controls implemented and the justification for each one as stated by some members of the government.

Patients are not allowed to smoke the flower in its natural state unless it is a terminal patient, or a state-designated committee approves it. Why? Because the flower is not intended for medical use (just for recreational) and the risks associated with lung cancer are too high. Vaporize it.
It was proposed to ban edibles because the packaging makes it attractive for children. Edibles made it, but with the condition that the packaging is monochromatic (the use of one color), yes, insert rolling eyes here.
It only allows licensed pharmacists to dispense medical cannabis at the dispensary (bud tending). The rationale? Academic Background.
The new law requires a bona fide relationship between the doctor and the patient to be able to recommend medical cannabis, even if the doctor is qualified by the state and is a legitimate physician. This is contrary to their policy with other controlled substances, where a record is not required.

When there are different beliefs on a particular topic like it is with medical cannabis, you are not only dealing with the technical details of the subject; there is an emotional side to it too. Paradigms, stigma, stereotypes, beliefs and feelings affect the way we think. We let our judgment get in the way of common sense. When emotions, morals and previous knowledge are hurting objectivity, then we have to rely on scientific data and facts to issue resolution. However, when the conflict comes from opinions, we rely on common sense, and this one is scarce.

Now education: what can education do with beliefs, morals and emotional responses?

David Burns in his book “Feeling Good: The New Mood Therapy” discusses ten thinking errors that could explain, to those like me that want to believe this is a legitimate mistake, that there are cognitive distortions that affect the result of ours thoughts.

Now let’s analyze …

There are many things wrong with this prohibition. First, the flower is natural and organic. It is the easiest to produce and the cheapest alternative for patients; there are more than 500 compounds all interdependent to make sick people feel better. There are seas of data, anecdotal information, serious studies collecting information for decades and opinions of highly educated individuals that support the consumption of flower in its natural state for medical purposes. The benefits are discarded, and personal opinions take the lead. Based on Burns’s work this is a textbook case of Disqualifying the Positive: dismissing or ignoring any positive facts. Moreover, let’s not forget the benefit for illegal growers and distributors.
Keep out of reach of children, does it ring a bell? For years and years, we have consumed controlled substances, have manipulated detergent pods, bleach and so many other products that can be fatal. The warning is enough, just like is done with other hazardous Here we can notice how we can fall into the Fortune Teller Error, which believes that they know what will happen, without evidence.
Not even the largest drug stores in the USA have this requirement. There is one pharmacist per shift, and a licensed pharmacist supervises pharmacy technicians. Medical cannabis is not even mentioned in current Pharmacy’s BA curricula. Most pharmacists take external courses in training institutes. On the other hand, bud tenders go through a very comprehensive certification process that covers from customer service to cash management and safety and of course all technical knowledge. If anything, a botanist (plant scientist) makes more sense. What a splendid example of magnification (make small things much larger than they deserve). This is an unnecessary requirement.
The relationship between a certified doctor and patient has to be bona fide (real, honest). In practical terms, the doctor has to treat the patient for some time (sometimes six months) and have a history of the patient. Even though this sounds logical, not all doctors are certified to recommend cannabis, but all can diagnose. Are we penalizing the doctor or the patient? The only thing that you need to qualify as a patient is the condition. Besides, I had prescriptions filled for controlled medications at the drug store with no history. Why are we overgeneralizing Do we think that all doctors are frauds?

July 20, 2017

Massachusetts Lawmakers Reach Compromise on Cannabis Bill

By Aaron G. Biros

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On Election Day last year, voters in Massachusetts approved a measure to legalize recreational cannabis. With recreational sales beginning in July of 2018, lawmakers have tried to get a bill through the state legislature to settle on, among other things, a tax rate and regulatory framework.

On Wednesday, multiple news outlets reported that the legislature has reached a compromise on a bill that would change the measure that voters passed to allow for lawmakers to implement higher taxes, a strategy on local bans and a regulatory framework, reports The Boston Globe.

MPP logo for the Regulate Marijuana Like Alcohol Campaign in Massachusetts

In a statement to supporters, Matt Schweich, director of state campaigns at Marijuana Policy Project (MPP), the biggest changes are in local control and taxation. “After weeks of persistent advocacy from Massachusetts residents, the Senate and House have reached a compromise that largely respects the will of the people,” says Schweich. “The legislation adjusts the local control policy, allowing local government officials in towns that voted “no” on the 2016 ballot initiative to ban marijuana businesses until December 2019. For towns that voted “yes” in 2016, any bans must be placed on a local ballot for voters to approve.” Therefore if a town wants to ban cannabis sales, they need to bring it to a vote for the people to decide. 72% of the population voted in favor of the ballot initiative. “The maximum tax rate — which depends on whether towns adopt optional local taxes — will increase from 12% to 20%,” says Schweich. “Under the bill, the state tax will be 17%, and the local option will be 3%.” A major push behind increasing the tax rates concerned lawmakers’ worries that the original 12% tax rate would not cover regulatory costs and government expenditures on the industry.

Boston, MA
Photo: Trenton Kelley, Flickr

The ballot initiative created the Cannabis Control Commission, the regulatory body overseeing the industry, with three board members. That agency will remain in the new bill, just with five board members that will write the rules on things like marketing, safety, fines and penalties and fair business practices.

Schweich says the MPP helped orchestrate over 1,000 calls to legislators, urging them to reject the House’s version of the bill, which some have called draconian. “The bill isn’t perfect, and we preferred the original language of the ballot initiative,” says Schweich. “However, given how problematic the House bill was, we are satisfied with the final compromise.”

The bill is expected to pass votes in both the House and Senate on Thursday and Governor Charlie Baker is expected to sign the bill that same day.

July 20, 2017

Las Vegas Gets First ISO 17025-Certified Cannabis Lab

By Aaron G. Biros

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According to a press release published earlier this week, DB Labs achieved accreditation, becoming the first ISO 17025-accredited cannabis laboratory in Las Vegas. DB Labs received their accreditation with the help of Perry Johnson Laboratory Accreditation, Inc., an organization that provides third-party assessments to ISO/IEC 17025:2005. DB Labs was also the very first cannabis-testing lab in the state of Nevada.

According to Susan Bunce, president of DB Labs, ISO accreditation is one way the cannabis lab space is being standardized. “As the first cannabis-testing laboratory in Nevada, DB Labs has always taken patient safety very seriously and has always tried to raise the bar,” says Bunce. “The world of cannabis testing is often compared to the Wild West: each lab uses state regulations to set their standards, but it leaves a lot of room for subjective interpretations. The ISO accreditation removes the ambiguity and guarantees a consistent level of testing to users. We are proud to be a part of that.”

According to Tracy Szerszen, president and operations manager at Perry Johnson, ISO/IEC 17025:2005 is an international standard utilized to accredit testing laboratories. “This accreditation provides confidence to end-users that the test results they receive are reliable,” says Szerszen. “Laboratories achieving this accreditation have demonstrated their ability to adequately perform tests using appropriate equipment, environmental conditions and technical staff.” She says another requirement for that accreditation is a quality management system, which essentially helps manage operations and client needs. “Achieving this type of accreditation is quite challenging for laboratories especially with all of the new up-and-coming regulations, technologies and methods in the cannabis industry,” says Szerszen. “Laboratory testing is such a critical part of this industry and becoming accredited provides assurance that they are performing to the highest standard.”

As Szerszen points out, laboratory accreditation can provide a consumer that sense of confidence and trust in the product’s lab testing. “PJLA would like to commend DB Labs for achieving their ISO/IEC 17025:2005 accreditation and their commitment towards meeting the standard,” says Szerszen.

The news of their accreditation comes at an opportune time: With surging consumer demand at the outset of recreational sales, the state has raked in millions of dollars in sales within the first weekend. Recreational cannabis sales in Nevada began on July 1^st, and a statewide cannabis product shortage recently led to Governor Sandoval issuing a statement of emergency, allowing more applications for distribution licenses to be considered.

July 19, 2017

Biros' Blog

Should PA Revoke a Cannabis License For Their Parent Company’s Past?

By Aaron G. Biros

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Pennsylvania Medical Solutions, LLC (PAMS), won a license to grow medical cannabis in Pennsylvania, but some think the Pennsylvania Department of Health (PA DOH) should reconsider awarding that license. PAMS is a subsidiary of Vireo Health, which has medical cannabis licenses in New York and Minnesota, as well as quite the blemish on their business record. In December 2015, two former employees were accused of breaking state and federal laws by transporting cannabis oil from Minnesota to New York. Because of that history, some are questioning why exactly they were awarded the PA medical cannabis license.

In that school of thought is Chris Goldstein, a Philadelphia-based cannabis advocate and author of an article on Philly.com, which calls PAMS’ license into question. According to Goldstein, Vireo Health could lose their licenses in New York and Minnesota, and those former employees involved might even face federal prosecution. “On the surface it would seem that Vireo broke every rule in the book,” says Goldstein. “Not only could the company lose its permits in both of those states, but employees could face federal prosecution for interstate transport and distribution.” But does that previous wrongdoing by two former employees have any bearing on their application in PA? In Maryland, it did. According to The Baltimore Sun, concerns surrounding MaryMed’s parent company, Vireo Health, is the main reason why their permit to grow medical cannabis was revoked.

In response to some of those concerns about their PA license, Andrew Mangini, spokesman for Vireo Health, issued the following statement, which appeared in Goldstein’s article: “While we’re aware of allegations against two former employees of an affiliate, those individuals have never had a role in our application or in the management of PAMS,” says Mangini. “It’s also important to note that our Minnesota affiliate and our parent company Vireo Health have not been accused of any wrongdoing in connection with those allegations.”

Below is a timeline of events leading up to the PA DOH defending their decision to give PAMS a license:

December 2015: Two former employees of Minnesota Medical Solutions, a subsidiary of Vireo Health, transported a half-million dollars worth of cannabis oil from Minnesota to New York, violating state and federal laws.
February 9^th, 2017: The two former employees were formally charged with crimes in Minnesota for illegally transporting cannabis across state lines.
February 20^th-March 20^th, 2017: PAMS submitted a license application to the PA DOH between these dates, listing their business state as Minnesota on the application.
May 2017: Maryland DOH suspended the licenses of MaryMed LLC, a subsidiary of Vireo Health, over concerns that the company did not provide information related to the Minnesota and New York licenses on their application, according to the Washington Post.
June 20^th, 2017: PA DOH releases a list of license winners; PAMS was listed among winners for a cultivation license in Scranton.
June 26^th, 2017: PA DOH officials defend their decision to award PAMS a license, according to a Philly.com article. That same day, The Baltimore Sun reported the Maryland Medical Cannabis Commission revoked MaryMed, LLC their license, citing concerns about Vireo Health.

April Hutcheson, spokeswoman for the PA DOH, told Philly.com in June, “Remember, the permits are given to business entities, not people.” The point she is making refers to the charges being filed against former employees, not any of the businesses who hold medical cannabis licenses.

Steve Schain, Esq. practicing at the Hoban law Group

Steve Schain, Esq., an attorney with Hoban Law Group in Pennsylvania, has seen no objective evidence of anything wrongful in either PAMS’ application or the DOH’s processing of it. “Marijuana related businesses often have distinct, affiliated components and the Department of Health faces two critical issues,” says Schain.

“First, whether grow applicant PA Medical Solutions, LLC (PAMS) had a duty to disclose alleged wrongdoing on its application, failed to fulfill this duty and, if so, whether PAMS’ application should be amended, re-scored or disqualified. Second, as part of its ongoing license reporting requirements, whether grow licensee PAMS has any duty to disclose the alleged wrongdoing. The answer to much of this hinges on whether criminal or administrative charges were leveled against just Vireo Health’s former employees or also included the entity and whether these individuals or enterprise fell within Pennsylvania Medical Marijuana Organization Permit Application definition of an “Applicant” (“individual or business applying for the permit”) or applicant’s “Principals, Financial Backers, Operators or Employees” of PAMS. Either way, it does not presently appear that the [PA] DOH missed anything.”

This does raise the question of whether or not Vireo Health is under investigation, which is yet to be determined. According to Goldstein in his Philly.com article, the Minnesota DOH declined to comment on Vireo Health and the New York DOH says the department’s investigation is ongoing. “The selection of a Vireo Health affiliate to grow and process medical cannabis in Pennsylvania has cast a serious shadow over the integrity of the program even before it has started,” says Goldstein.

In Maryland, the DOH revoked their license as a direct result of those former employees in Minnesota committing crimes, according to The Baltimore Sun. Commissioner Eric Sterling said there is “a reasonable likelihood of diversion of medical cannabis by the applicant.” So should Pennsylvania do the same? Do those crimes by former employees have any bearing on their application? This story raises a number of questions regarding applications for state licenses that are largely left unanswered. One thing we know for certain: each state handles applications very differently.

July 13, 2017

DigiPath Gets Rec Testing License, Renews Medical License In Nevada

By Aaron G. Biros

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According to a press release, Digipath, Inc. (OTCQB: DIGP) was awarded a recreational cannabis-testing license and a renewal of their medical cannabis-testing license in Nevada.

The news came the week following Nevada’s opening day for recreational cannabis sales, which began July 1^st. Some estimates report up to $5 million in sales within the first weekend.

Todd Denkin, founder and president of Digipath

According to Todd Denkin, president of Digipath, that massive start hasn’t showed any signs of slowing. “I was in a dispensary yesterday and it was packed,” says Denkin. “There were 40 people in line and it was pouring rain outside.” He says the flow of customers to dispensaries hasn’t stopped since July 1^st.

Because of that demand as well as the state’s testing requirements, Denkin is preparing to expand. “From a laboratory’s perspective, we expect a large increase in volume,” says Denkin. “Most of the medical cultivators we work with got their rec license as well so we’re working with a lot of the same clients and getting new clients on a regular basis.” Before the launch of recreational sales, DigiPath has been doing lab testing for medical cannabis for over two years.

Cindy Orser, PhD., chief science officer at Digipath, says they are on their way to receiving ISO 17025 accreditation via the American Association for Laboratory Accreditation (A2LA). According to Orser, labs in Nevada must go out and do the sampling themselves, then bring the samples back to the lab for testing. The testing regulations overall seem relatively similar to what we’ve seen develop in other states with required pesticide testing and microbial screening. “We have a list of 24 pesticides, (two of them are plant growth regulators) that we monitor for,” says Orser. “We have specific allowable limits for that set of chemicals.” For microbial testing, Orser says they enumerate total aerobic count (TAC), total yeast and mold (TYM), pathogenic E. coli and Salmonella spp., enterobacteriaceae and bile-tolerant gram-negative, a subset of enterobacteria, as well as screening for mycotoxins. All of the testing in the state goes through just eleven laboratories, including DigiPath.

In preparing for expansion, they are looking at California in addition to other states. California released a set of draft regulations for lab testing in the spring, which many say is an example of regulatory overreach. “We still don’t know exactly what’s going to happen in California,” says Orser. “The draft regulations that have come out are so restrictive.” As Digipath looks toward expanding more in Nevada, California and other states, all eyes are on regulators proposing requirements for laboratory testing. “The future looks promising,” says Denkin.

July 6, 2017

National Hemp Association Board Chairman Meets With USDA Senior Officials

By Aaron G. Biros

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According to a press release yesterday sent out by the National Hemp Association (NHA), on Wednesday, June 28^th, Board Chairman Geoff Whaling met with senior U.S. Department of Agriculture staff, along with Erica McBride from the Pennsylvania Industrial Hemp Council. The press release says this is the first time that Agricultural Secretary Perdue has had his staff meet with the hemp industry. “The meeting reaffirmed critical elements of the working relationship that the hemp industry has established with the USDA since the enactment of Sec. 7606 of the 2014 Farm Bill,” reads the press release put out by the NHA.

The press release says the USDA will support hemp pilot projects, considering grant and loan applications and other means of funding under the USDA and NIFA. “All hemp industry participants are encouraged to participate in these funding opportunities,” says Whaling. “USDA confirmed that nine Industrial Hemp funding requests to NIFA are being processed and that USDA has encouraged those who submitted previous requests to resubmit them.”

“USDA also offered to provide a quick response to any Secretary or Commissioner of Agriculture who is looking for clarification on either the Farm Bill or SOP, which may be preventing the States that have enacted enabling Industrial Hemp legislation from advancing research,” says Whaling.

A big driver of the meeting was the support of the Industrial Hemp Farming Act of 2018 on behalf of the NHA. That bill, which Congressman James Comer (R-KY) plans on introducing in July, would essentially remove hemp from the Controlled Substances Act, allowing industrial cultivation of the plant. It also would set a THC limit and give states the power to regulate their own hemp industries.

“There is new leadership in the USDA, on the Hill and within our industry,” said Whaling. “I am confident that this group will advance our industry to a level never before achieved.”

June 20, 2017

Cannabis M&A: Practice Pointers and Pitfalls When Buying or Selling a Cannabis Business

By Soren Lindstrom

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The Stage is Set

According to the Marijuana Policy Group, the U.S. cannabis industry is expected to reach more than $13 billion in sales by 2020 and create more jobs than the U.S. manufacturing industry. According to Viridian Capital’s Cannabis Deal Tracker, there were close to 100 M&A transactions in the U.S. cannabis industry in 2016 and approximately $1.2 billion was raised in equity and debt. As the cannabis industry has grown more mature and businesses begin to have more capital available, the M&A activity within the industry is poised to grow significantly over the next years to assist businesses gain necessary scale and take advantage of synergies and diversification.

The Obvious Wrinkle

U.S federal law has prohibited the manufacture and distribution of cannabis since 1935. The U.S. regulates drugs through the Controlled Substances Act, which classifies cannabis as a Schedule I drug (i.e., drugs determined to have a high potential for abuse with no currently accepted medical use and a lack of accepted safety regarding their use). Yet, more than 25 states have by now legalized cannabis for medical and/or recreational purposes and, as a result, there is a clear conflict between such state laws and existing federal law. To possibly help bridge that conflict, the U.S. Attorney General’s office in 2013 issued guidance directing the federal government not to intervene with state cannabis laws except in specific, limited circumstances, but, contrarily, the DEA has shown no desire to re-classify cannabis. To add to the confusion, President Trump and the new U.S. Attorney General have provided mixed statements and signals about their positions.

All of this means that it continues to be risky to acquire cannabis businesses. The requirements to legally grow, distribute, prescribe, and use cannabis for either medical or recreational purposes vary widely by country, state, and local jurisdiction, making it tricky to determine whether such businesses can be legally combined, in particular, across state lines.

Pick the Right Team of Advisors

When preparing to sell or buy a cannabis business, it is important to pick the right team of advisors. Your regular legal counsel, accounting firm or CPA may not be the right advisors for a cannabis M&A transaction. Choose a legal counsel that not only has experience with cannabis laws and regulations, but also has cannabis M&A experience and can offer expert advice on areas like IP, employment, tax matters, etc. Similarly, verify that your accounting firm or CPA has real experience with financial and quality of earnings analysis and due diligence.

Conduct Gating Due Diligence Up Front

In any contemplated M&A transaction, it is wise to prioritize your due diligence investigations. There will always be some more prominent risks and business objectives in a particular industry or with respect to a specific target business. It will be more cost and time effective if those specific risks and business objectives are prioritized early in the due diligence process. These can dictate whether you even want to pursue the target further before you dig into a deeper and broader due diligence investigation. Conducting gating due diligence up front is even more important in an industry like cannabis that contain complex and thorny regulatory hurdles.

So, before you spend money and time on a broader legal, business and financial due diligence investigation, have your legal counsel analyze and confirm that the potential transaction is feasible from a regulatory perspective. This will include whether it is possible to obtain or transfer necessary local and/or state licenses and whether a combination or sale can occur across state lines if necessary. Early on in the process, It is also advisable to request that the target business complete a legal compliance questionnaire or discuss with the target its regulatory compliance program, policies and training. Such up front due diligence will either clear a path to negotiations and broader confirmatory due diligence or flush out “red flags” that may kill a possible deal or require the buyer to investigate further before proceeding.

Important Terms and Pitfalls in the M&A Agreement

Generally, a sale or purchase agreement for a cannabis business does not appear to vary much from a similar agreement in any other industry. However, the complex environment and the premature nature of the industry impacts certain deal terms and processes in different ways from most other developed industries.

Here are few examples to keep in mind when preparing and negotiating a sale or purchase agreement:

Third Party and Governmental Consents: Buyer’s legal due diligence must focus on the consents that may be required from seller’s suppliers, customers, landlords, licensors or other third parties under relevant contracts. Additionally, the due diligence should focus on consents and approvals required by local and state regulators as a result of the sale. The M&A agreement should contain solid seller representations and warranties about all such consents and approvals and any such material consents and approvals should, from a buyer’s perspective, be a condition precedent to closing of the transaction.
Legal Compliance: A buyer should not agree to a boilerplate seller representation about the target’s compliance with laws. Be specific and tailor seller’s legal compliance representation to relevant state and local cannabis laws, regulations and ordinances. From a seller perspective, be careful and thoughtful about any appropriate exceptions (including the federal prohibition) to be disclosed to buyer in the disclosure schedules underlying the sale or purchase agreement.
Financial statements: The cannabis industry is very fragmented and consists of many small businesses. Many of these small businesses do not have financial statements prepared in accordance with GAAP and may consist of only management prepared financials. In that scenario, a buyer should have its financial advisor do an analysis of the financials available and ask seller to provide a representation and warranty about the accuracy and good faith preparation of the provided financials.
Escrow: Typically, a buyer will request some part of the purchase price be placed with an independent financial institution for a period of time post-closing as a source of recovery for losses as a result of breaches by seller of any of the representations and warranties in the definitive sale or purchase agreement. Due to the federal cannabis and banking regulations, many of the larger commercial banks will not provide financial services to cannabis businesses, in particular if the business touches the plant. The parties must therefore consider alternatives, including local financial institutions with more relaxed compliance requirements or perhaps place the escrow in a trust account of a law firm or other independent party.
Working Capital Dispute Procedures: Similar to the escrow, larger accounting firms generally do not provide services to cannabis businesses. Due to the rapid evolution of cannabis related regulations, if the terms of the transaction include provisions for a post-closing working capital/purchase price adjustment and related dispute procedures, it is advisable to not name an arbiter in the agreement. Instead, parties should agree to mutually select the arbiter if and when a dispute should arise.
Indemnification: Because of the tricky legal environment of the cannabis industry, it may be prudent for a buyer to request, at the very least, that certain parts of seller’s legal compliance representation and warranty not be subject to the “regular” caps, deductibles and other indemnification limitations. Also, if a buyer has unearthed a significant issue in its due diligence investigation, it should consider asking seller for a special indemnity for such issue that would be indemnifiable regardless of buyer’s knowledge of the issue and not be subject to the general indemnification limitations.
R&W Insurance: If there’s a lot of competition for the purchase of a target, particularly in a bidding process, it is now common for buyer to offer to purchase a representation and warranty insurance policy (“R&W Insurance”) to possibly gain an advantage by limiting the seller’s post-closing indemnification exposure. The good news is that many of the R&W Insurance carriers do offer such insurance in connection with the sale and purchase of cannabis businesses. However, typically, R&W Insurance cannot be obtained for insured amounts of less than $5 million. Experienced M&A counsel can advise of the advantages and disadvantages of R&W Insurance and assist in the negotiation of the related terms.

The above are just some examples of what to expect in a cannabis M&A transaction. Every M&A transaction will have its unique issues that will need to be appropriately reflected in the sale or purchase agreements and good M&A practices will continue to evolve with the industry. If you are an owner of a successful cannabis business, buckle your seat belt and be prepared for an exciting ride as the industry gets closer to significant consolidation.

June 12, 2017

Biros' Blog

Washington Changes Course, Selects MJ Freeway as New ASV

By Aaron G. Biros

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Two weeks ago, we reported on the State of Washington choosing Franwell as their apparent successful vendor (ASV) for their seed-to-sale traceability system contract. Late last week, the Washington State Liquor and Cannabis Board (WSLCB) sent out an email explaining that they are no longer going with Franwell and the new ASV is MJ Freeway.

The email (left) consisted of a letter sent by Peter Antolin, Deputy Director of the WSLCB, to licensees “who had written to the Board and staff regarding the marijuana traceability Apparent Successful Vendor and RFID tags.” Apparently, the reason behind switching the ASV to MJ Freeway is because Franwell’s system requires only one method for tagging plants- RFID tags. According to the letter, Deputy Director Antolin says the initial request for proposal (RFP) stated that the traceability system needs to support a variety of tagging methods, including bar codes and RFID. “The RFP requirements did not allow a vendor to make any assumptions regarding use of a single tagging methodology or allow vendors to include any such costs affecting the state or our licensees in their proposal,” says Antolin. As they made clear in the previous press release, the ASV is not the official contract winner until they complete negotiations and sign the contract.

On June 7^th, Franwell withdrew their proposal for the state’s traceability system, thus Washington went with the second highest scoring vendor, MJ Freeway. Deputy Director Antolin says they submitted a strong bid, but there are still many questions left unanswered. How could such a glaring mistake be overlooked when the state named Franwell the highest scoring bidder? Is MJ Freeway’s system robust enough and capable of handling the state’s cannabis licensees’ traceability requirements even though they were not the highest scoring bidder? The deadline for the new system to be in place is October 31, 2017, which is quickly approaching for such a massive systems overhaul.

The WSLCB’s oversight highlights a few inadequacies with the state’s regulatory agency, particularly their indecision and lack of foresight. So much of the concept behind seed-to-sale traceability rests on Cole Memo compliance. A big reason why some states seek to implement a robust tracking system is to remain compliant with the Cole Memo; preventing diversion to crime organizations with regulatory oversight is a key tool that states use to tell the federal government they are complying with their directive and intend to protect their state’s legal cannabis operations from federal prosecution. Without a proper system in place, the state runs the risk of exposing their entire cannabis market to threats of federal enforcement, a scenario that seems unlikely but could be disastrous to cannabis businesses and the local economy.

The WSLCB needs to get their act together fast.

May 18, 2017

Soapbox

Quality Controls and Medical Cannabis: What We Can Learn from Pharma

By Dr. Ginette M. Collazo

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When we discuss growing and producing medical cannabis, we must think of it as a medicine. By definition, it is a substance intended to assist you with a medical condition, to help you feel better and not harm you. Drugs produced in the pharmaceutical industry go through extensive quality controls to ensure a level of safety for the consumer or patient. Yet when we talk process and quality controls in medical cannabis production, there is still a lot to learn.

Are we waiting for the wake-up call? Well, ring! Recently Health Canada, the regulatory body overseeing Canada’s medical cannabis market, decided that “It will begin random testing of medical marijuana products to check for the presence of banned pesticides after product recalls affecting nearly 25,000 customers led to reports of illnesses and the possibility of a class action lawsuit.”

Proper quality controls help protect businesses from unforeseen issues like those massive recalls in Canada. These can assure that the product is safe (won’t harm you), has integrity (free of contamination), and that the product is what it says it is (identity). To achieve this important goal, we must have robust systems that will guarantee product quality. Why is this important? Quality controls can ensure a safer and more consistent product, helping build patient and consumer trust and brand loyalty, preventing a public relations nightmare like a recall due to pesticide contamination.

Food processing and sanitation — Product recalls due to manufacturing errors in sanitation cause mistrust among consumers.

The FDA, among other regulatory bodies, has established excellent guidelines to implement these controls. So there is a lot we can learn from the pharmaceutical industry and that FDA guidance regarding quality controls and assurance. After all, we are all interested in the same thing: a safe and effective product.

So, let’s take a look at some of the controls included in the CFR (Code of Federal Regulation), Part 211 , which include Good Manufacturing Practices (GMPs) for finished products, and how you can implement them in the growing business of growing cannabis.

Personnel selection and training: The GMPs establish that “Each person engaged in the manufacture, processing, packing, or holding of a drug product shall have education, training… to enable that person to perform the assigned functions.” These include the creation of specific curricula per position and the establishment of requirements for specialized tasks. We all want to be successful so training, in this case, is what we call the vaccine for mistakes.
Facilities: “Any building or buildings used in the manufacture, processing, packing, or holding of a drug product shall be of suitable size, construction, and location to facilitate cleaning, maintenance, and proper operations.” This requirement includes segregation of spaces to avoid cross-contamination, housekeeping, the cleaning process and detergent types, material storage conditions, humidity levels, temperature, water, and even ventilation requirements to prevent contamination with microorganisms. All with the intention of protecting the product.
Pest control: “There shall be written procedures for the use of suitable rodenticides, insecticides, fungicides, fumigating agents, and cleaning and sanitizing agents. Such written procedures shall be designed to prevent the contamination of equipment, components, drug product containers, closures, packaging, labeling materials, or drug products and shall be followed.” There have been many issues pertaining this requirement. In 2010, Johnson & Johnson received many complaints claiming that the product had a musty, moldy odor. Later, the firm identified the cause of the odor to be a chemical, called 2, 4, 6-Tribromoanisole or TBA; a pesticide used to treat wooden pallets. One of the specific requirements of this section is to avoid the use of wooden pallets, but if you decide to use them, the method of sterilization by heat treatment seems like the only safe option for sterilizing wooden pallets and wood cases.
Equipment/Instrumentation: “Equipment used in the manufacture, processing, packing, or holding of a drug product shall be of appropriate design, adequate size, and suitably located to facilitate operations for its intended use and its cleaning and maintenance.” The intention is to not alter the safety, identity, strength, quality, or purity of the drug product beyond the official or other established requirements. What would happen if lubricants/coolants or any other substance, not intended to be part of the product, comes in contact with the product?
Procedures and documentation: “There shall be written procedures for production and process control designed to assure that the drug products have the identity, strength, quality, and purity they purport or are represented to possess. Such procedures shall include all requirements of this subpart. These written procedures, including any changes, shall be drafted, reviewed, and approved. When we have followable, well written, clear, and specific procedures, we avoid possible errors that can get us in trouble.
Defects Investigation: “Written production and process control procedures shall be followed in the execution of the various production and process control functions and shall be documented at the time of performance. Any deviation from the written procedures shall be recorded and justified.” We want to be successful, for that we need to learn from failures, understanding the root causes, correcting and preventing re-occurrence is what will keep you competitive. As you can see this requirement is essential for, quality, business and to evidence that such deviations did not adulterate the product.
Process controls: Besides written procedures and deviations management, operation controls are pivotal in guaranteeing the quality as well as complete documentation of your process. These controls will vary depending on your technology and your product. If you do alcohol (ethanol) extraction, for example, you want to keep an eye on the temperature, dissolution time, and even have color standards to be able to quickly and correctly identify possible abnormalities, while you can still correct the mistake. In-process product testing will allow you to monitor “performance of those manufacturing processes that may be responsible for causing variability in the characteristics of in-process material and the final product.”

Regardless of federal regulatory guidance, quality controls can be that one factor which can make or break your business. Why re-invent the wheel?

May 3, 2017

ASTM International Begins Crafting Cannabis Standards

By Aaron G. Biros

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Last week, the American Society for Testing and Materials (ASTM International) approved the formation of a committee to develop standards for the cannabis industry. ASTM International is a standards development organization that develops voluntary consensus-based standards for industries. United States regulatory bodies and the World Trade Organization have recognized the organization’s standards in other industries.

On March 1^st, the non-profit announced the formation of a committee for ““creating technical standards and guidance materials for cannabis and its products and processes.” So now that the vote has passed, what is the next step? They will begin the process of member training, appointment of leadership and writing the bylaws. ASTM will have two online briefings before their official meeting for the cannabis committee (D37) in June. Those meetings will discuss how the committee was formed and how it’ll be structured. The first official meeting of the cannabis committee will take place June 11^th and 12^th in Toronto.

Voluntary consensus-based standards means there is a balance of interests, an appeals process and an overall consensus has been reached. The areas of focus for the cannabis standards include indoor and outdoor horticulture and agriculture, quality management systems, laboratories, processing and handling, security and transportation, and personnel training, assessment and credentialing. Many standards will be developed under each of these broad categories. A large component of consensus-based standard development is openness…so anyone who wants to participate in the development of the standards is welcome and encouraged to do so. They are still looking for participants from the cannabis industry and those interested can register here.

Lezli Engelking, founder of the Foundation of Cannabis Unified Standards (FOCUS), says this is terrific news for the cannabis industry. “To have a global organization like ASTM, that federal governments actually work with and respect, is a huge stride forward for the cannabis industry,” says Engelking. “FOCUS is thrilled to be working with ASTM.” FOCUS and ASTM International have a derivative work license agreement that provides ASTM the FOCUS standards to use as a baseline for developing their standards. “FOCUS will continue to certify cannabis businesses to the FOCUS standards, but we will be able to add in the ASTM standards to our certification platform,” says Engelking. “It helps us expand our depth and reach in tools for our clients.”

FOCUS standards and ASTM standards are both voluntary consensus-based, meaning it is the businesses and stakeholders participating that ultimately write the standards. The organizations’ staff does not actually contribute to and develop the standards; they are more like a vehicle for the industry and stakeholders to come to a consensus, according to Engelking. “ASTM does the same thing that we do for the cannabis industry, just on a much larger scale,” says Engelking. “Its role is to fulfill the development, not actually develop it.” Because of that, ASTM and FOCUS standards can work in harmony.