Tag Archives: rules

Navigating Compliance: Practical Application of Fit-For-Purpose

By Darwin Millard
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What is “fit-for-purpose?” Fit-for-purpose is an established best practice used in several major industries, like information technology, pharmaceuticals, agriculture and inventory management. It is a concept that aligns infrastructure and systems specifications with desired outputs – be that product, service or bottom line. When applied to a cannabis plant, its parts, products and associated processes, it can streamline regulatory framework development, implementation and compliance.

Fit-for-purpose is simply a series of logic questions you ask yourself to determine what business practices you should implement and the regulatory framework in which you must comply. What are you making? Who is it for? Where will it be sold? All this impacts how you would cultivate, process, handle and store a cannabis plant, its parts and products regardless of the type of cannabis plant. The fit-for-purpose concept is a tool that can be applied to any scenario within the cannabis/hemp marketplace. Take for instance, sustainability: a practical example would be to design cultivation standards that are “fit-for-purpose” to the climatic region in which the plants are grown – allowing any type of cannabis plant grown anywhere in the world to meet specifications regardless of the method of production.

There is no “special sauce” here. All fit-for-purpose does is get you to ask yourself: “Are the protocols I am considering implementing ‘fit/appropriate’ to my situation, and if not, which protocols are more ‘fit/appropriate’ based on the products I am making, the target consumer and marketplace in which the products are to be sold?”“Fit-for-purpose is a powerful concept that can be used for simplifying regulatory framework development, implementation and compliance”

A non-cannabis/hemp example of fit-for-purpose could be a scenario where a banana producer wants to implement a data management system into their cultivation practices to better track production and yields. There are many data management systems this banana producer could implement. They could implement a data management system like that of big pharma with multiple levels of redundancy and access control related to intellectual property and other sensitive data. They could also implement a data management system used for tracking warehouse inventory; it cannot exactly capture everything they need but it is better than nothing. Neither example is really “fit/appropriate” to the banana producer’s needs. They need something in between, something that allows them to track the type of products they produce and the data they want to see in a way that is right for them. This idea is at the core of the fit-for-purpose concept.

Applying Fit-for-Purpose

So how do we apply fit-for-purpose to the cannabis/hemp marketplace? Fit-for-purpose reduces the conversation down to two questions: What products are you planning to make and how do those products affect your business practices, whether that be cultivation, processing, manufacturing or compliance. The point being the products you plan to produce determine the regulations you need to follow and the standards you need to implement.

Growers can use it to guide cultivation, harvesting, handling and storage practices. Processors and product manufacturers can use it to guide their production, handling, packing and holding practices. Lawmakers can use it to guide the development, implementation and enforcement of commonsense regulations. This is the beauty and simplicity of fit-for-purpose, it can be applied to any situation and related to any type of product.

Growers can use fit-for-purpose to guide most aspects of their operation

Let us look at some practical examples of fit-for-purpose for cultivators and processors. Cultivators have three main areas of focus, growing, harvesting and storage, whereas processors and product manufacturers have it a little more complicated.

Cultivation of a Cannabis Plant

Growing

Requirements for growing a cannabis plant, including those that can be classified as “hemp”, should be dictated by the product with the strictest quality and safety specifications. For example, growing for smokable fruiting tops (i.e. the flowers) may require different cultivation techniques than other products. You may not want to apply the same pesticides or growth additives to a cannabis plant grown for smokable fruiting tops as you would to a cannabis plant grown for seed and fiber.

Harvesting

The next point is important – harvesting and handling requirements should be agricultural, period. Except for those products intended to be combusted or vaporized and then inhaled. Following our previous example, smokable fruiting tops may require different harvesting techniques than other products, especially if you are trying to maintain the aesthetic quality of these goods. You may choose a different harvesting technique to collect these fruiting tops than you would if primarily harvesting the seed and fiber and thinking of the leftover biomass as secondary.

Storage

When considering the products and their storage, you need to consider each one’s quality and safety specifications. One product may have a temperature specification, whereas another may have a humidity specification. You need to make sure that you store each product according to their individual quality and safety specifications. Then consider the products with the highest risks of diversion and potentially if you need to implement any extra protocols. Continuing our example – smokable fruiting tops, whether classifiable as “hemp” or not, pose a higher risk of theft than seeds or fiber and may require additional security measures depending on the authority having jurisdiction.

Processing and Manufacturing Operations

When applying fit-for-purpose to processing and manufacturing operations, first you must choose the products you want to make and specify the intended use for each product. This allows you to identify the quality and safety requirements and the potential for diversion for each good. Which in turn allows you to specify your manufacturing, processing and handling protocols for each product related to their quality and safety requirements. Then those specific products with higher risks of diversion requiring extra protocols to be put into place depending on local regulations and/or internal risk assessments, should be considered and your practices modified, as necessary.

Commonsense Regulations

Image if regulations governing a cannabis plant, its parts, products and associated processes were based on the intended use rather than a set of attributes that vary from jurisdiction to jurisdiction. It is complicated enough for regulators to think about a cannabis plant or cannabis product without having to worry about if that cannabis plant or cannabis product can be classified as “marijuana” or “hemp.” Fit-for-purpose removes this complication and simplifies the debate.

Using a fit-for-purpose approach eliminates the need to think about the molecular constituents and focuses the conversation on the intended use rather than one or two specific molecules – in this case, d9-THC, the boogie-man cannabinoid. Considering the intended use promotes consumer and environmental health and safety by allowing operators and regulators to focus on what is most important – quality and safety instead of whether something is “marijuana” or “hemp.”

This idea is what drives the real impact of fit-for-purpose. It creates a path forward to a one plant solution. We have where we are now – with “marijuana” and “hemp” – and where we want to get to – cannabis. It is all one plant with many different applications that can be used to create different commercial products. Fit-for-purpose helps bridge the gap between where we are now and where we want to get to and allows us to start thinking about “marijuana” and “hemp” in the same manner – the intended use.

Fit-for-purpose is a powerful concept that can be used for simplifying regulatory framework development, implementation and compliance. Regulations imposed on a cannabis plant, its parts and products should be appropriate to their intended use, i.e. “fit-for-purpose.” This approach challenges the confines of the current draconian bifurcation of the cannabis plant while working within this system to push the boundaries. It creates a path forward to a one plant solution and begs the question: Is the world ready for this novel concept?

Due Diligence for Suppliers & Cannabis Supply Chain Partners

By Mark Slaugh
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Between the patchwork quilt of rules and regulations that is the modern cannabis industry, products pass through many hands before being sold to a customer. From sourcing, cultivating, manufacturing, distributing and vending, the relationships between a licensee and their vendors/partners up and down the supply chain is complex and touches many stakeholders along the way.

While the focus on quality packaging, dope labeling, delicious ingredients and consistently potent cannabis is a priority for most companies, what often isn’t thought about is the liability in bringing these components together in terms of compliance.

Compliance responsibility falls on licensees as a direct term and condition of licensure within their state. To operate, licensees must maintain and be able to demonstrate compliance with a plethora of rules and regulations. Compliance is the name of the game in cannabis.

While most operators understand this, what most do not think about is how the compliance or noncompliance of their vendors affects their own liability.

Sharing Noncompliance & Liability

Supply chain partners are automatically segregated by whether or not they are plant touching licensees or not.

Licensees are the only entities in the supply chain that can be fined, administratively held, suspended, revoked or even arrested due to noncompliance. This fundamental nature means that supply chain partners are automatically segregated by whether or not they are plant touching licensees or not.

In the case of mutual licensees such as a manufacturer and dispensary, the liability for compliance falls on both entities. A single manufacturer that makes an error on labeling language or a cultivator using the incorrect containers both pass on their liability to any downstream partners.

iComply has seen regulators quarantine hundreds of products among multiple dispensaries who never checked the compliance of the supplying manufacturer. Surprisingly, most dispensaries don’t think of the liability passed to them amid hundreds of SKUs and multiple manufacturers and cultivators. Confounding the issue further is that everyone in the industry can interpret the same rules in completely different ways.

Assuming your supply chain partners are 100% compliant is a dangerous pitfall.

By not checking noncompliance from supply chain partners, operators accumulate evidence dating back years. Like METRC being off, these issues tend to snowball until they seem overwhelmingly difficult to handle. And it doesn’t just stop at labeling issues. Noncompliance can fall on all supply chain partners and be left in the hands of a licensee in a variety of ways.

Business partners like security contractors can often run afoul of regulations and put their licensed partners at risk.

Even worse, are supply chain partners who don’t have a motive to be compliant as they do not own licenses and often have a poor understanding of cannabis compliance. A packaging provider, marketing company, CBD provider, security company, vending machine providers, waste disposal companies and other commonplace suppliers and partners can often run afoul of regulations and put their licensed partners at risk.

Since regulators can only enforce the licensed entity, many states have made it clear that licensees are ultimately and fully responsible for any actions of noncompliance taken by third parties contracted by the company – regardless if they touch cannabis or not.

Areas of Common Noncompliance in Cannabis

Like a game of “Hot Potato” (worth millions of dollars), we’ve seen common noncompliance liability get passed down the supply chain in the following areas of cannabis operations:

  • Product liability
  • Packaging and labeling
  • Test result manipulation
  • Expired licenses
  • Input or ingredient defects
  • Inventory tracking errors
  • Recordkeeping and manifest errors

Some of these areas of noncompliance rely with non-licensed supply chain partners such as packaging, ingredients or third party printed labels. Often, these folks simply don’t know what they don’t know and make mistakes – not knowing the thousands of dollars they could be costing their licensed partner down the line.

Other areas in which compliance should be expected from licensed partners lies in product liability, test result issues, inventory tracking, manifests and recordkeeping. No one usually wants to be out of compliance and usually these issues arise from licensed partners who are simply confused, mistaken or ignorant to the requirements of ongoing and changing rules.

It’s hard to keep all of one’s suppliers and supply chain partners on the same page over the long run and amid a multitude of changing rules. But what you resist, persists…

Managing Compliance in the Cannabis Supply Chain

Nothing worth it is ever easy; but it is possible to identify common areas of noncompliance in one’s cannabis operation and supply chain partners and to do something about.

To identify problem areas, iComply recommends conducting regular auditing at a macro level; but to also dive deeper into micro level audits of all of one’s books and records (covering vendor files) and packaging and labeling for at least 12 months.

You don’t know what you don’t know, so one must begin by investigating and understanding where liabilities are occurring between themselves and their supply chain partners. Once valid feedback and noncompliance is discovered, it can be remediated.

Like triage, you have to stop the bleeding before you can prevent further injury.

Consistency in quality standards requires meticulous SOPs

It is always more expensive and time consuming to continue reacting to noncompliance and trying to fix issues after the fact. This is how snowball effects happen until the problems seem so overwhelming, operators tend to simply ignore the liability. While it is human nature, it is also extremely dangerous and detrimental when multimillion dollar licenses are on the line.

An ounce of prevention is worth a pound of cure –Benjamin Franklin

By implementing proactive compliance measures, cannabis businesses can avoid costly noncompliance consequences and position themselves as proactive checkpoints of supply chain compliance. We recommend integrating the following procedures, documents, training and tools into one’s operational compliance infrastructure:

  • New vendor checklist
  • Packaging and labeling checklists by product type
  • Virtual review of labels/non-cannabis packaging
  • Calendar expiration dates for licenses and products
  • Compliance auditing of key vendors and strong contracts regarding liability
  • Input product checklists and tracking as per GMP compliance

This snapshot is just the tip of the iceberg when it comes to the depths of liability a cannabis business is exposed to by its supply chain partners. To truly manage compliance, one must be aware of shared risk and implement proactive measures to prevent suppliers and supply chain partners from inadvertently affecting the operational compliance of your cannabis business.

Selecting Supply Chain Partners

There are plenty of fish in the sea and plenty of suppliers vying to do business with you. iComply has seen the good, the bad and the ugly. We’ve been on the front lines of developing markets like California where we warned our clients to steer clear of companies like Kushy Punch long before they finally lost their license for noncompliance.

control the room environment
Preventing contamination can save a business from extremely costly recalls.

We advise our clients on the importance of being selective and conducting due diligence in vetting supply chain partners and vendors. Most fundamentally, how aligned are the values of potential partners? Are they in the business for the same reasons you are? What brought them to the cannabis space? How do they value relationships and what do they know about compliance?

Too often when focused on price or speed, people miss the more important fundamentals of relationships. We serve as vetters for our clients whether they are shopping for a POS provider, a bank or a waste disposal company. Beyond the cultural alignment, the more objective questions begin to take shape in vetting a potential partner. This can differentiate between license holding and non-holding supply chain partners.

For plant-touching licensed partners, we recommend answering the following before entering into business partnerships that affect your supply chain:

  • Copies of licenses, contracts, and a catalogue of products
  • For products being selected, prior to ordering a sample, obtain a copy of the label by email first. Or an EMPTY sample of product packaging and labeling to vet against a packaging and labeling checklist.
  • Search news articles on the company and ask if they have had compliance issues before. Obtain documentation if there have been compliance issues previously.
  • Ask how they manage their compliance and prevent noncompliance down their supply chain. Do they train their staff? Do they conduct regular audits internally? How often do they update SOPs and reconcile inventory?

For non-plant touching partners, we recommend answering the following:

  • Obtain any certifications for quality assurance or in credentials for services.
  • Ask for references from other customers who have cannabis licenses.
  • Discover how familiar they are with the cannabis industry AND the rules and regulations in your market.
  • Ensure they have an understanding of how they impact your compliance. Discover how they plan on preventing areas of concern together.
  • Make sure they know you are ultimately responsible for noncompliance and understand what they are willing to do to protect you.

Ensuring accountability across the supply chain means selectively choosing partners who share the same values of integrity and professionalism. On more complicated deals, such as licensing IP or your brand to operators in new states or markets, we recommend that you mandate a compliance program that offers third-party validation to ensure the internal integrity of your partners. Too often, brand risk isn’t considered in the fast-paced expansion of the industry and operators must not only be vetted, but held accountable, when representing one’s brand and products.

For all intents and purposes, the wild web of the supply chain in cannabis is the industry. We are a collective of collaborators who all serve the goal of delivering high quality and safe products to cannabis consumers globally. For those committed to minimizing their risk to protect their profits, cannabis compliance is the key to success.

Ensuring accountability across the supply chain means selectively choosing partners who share the same values of integrity and professionalism. In doing so, the industry elevates its legitimacy and more effectively expands in a sustainable manner that protects all stakeholders involved.

Noncompliance affects licensees the most and they must be the most vigilant, but it takes a village to raise an industry. Compliance affects most everyone in the supply chain and the loss of any operator hurts the entire industry.

An In-Depth Breakdown of Prop 207 in Arizona

By Laura Bianchi, Justin Brandt
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To say 2020 was a historic year is an understatement.

Arizona landed in a solid eighth place among the top ten most successful cannabis states thanks to its expansive medical cannabis program. To close out the year, voters approved Proposition 207, also known as the Smart and Safe Arizona Act (SSAA), making Arizona one of 15 states, plus Washington D.C., to legalize the adult use of cannabis, which is expected to rocket the state’s overall cannabis sales to new heights.

It’s essential to this conversation that we clarify the two sides of this rapidly growing industry. Medical cannabis is a form of treatment, the adult use and consumption of cannabis is a choice. During the pandemic, in many medical cannabis states, the medical cannabis industry was deemed an essential service and allowed to continue providing valuable medicine to patients and caregivers. As medical cannabis programs continue to provide safer therapeutic options which are complementary to or serve as an alternative to many traditional treatments and narcotics, especially opioids, patients can be confident the need for medical programs will continue. Arizona’s adult use cannabis program imposes greater limitations on quantity and potency, while also requiring higher standards for packaging. We saw a trend during the pandemic as again, many states prioritized and allowed their medical programs to continue, while limiting adult use facilities, in the same manner as other non-essential businesses.

It’s also worth noting that we have seen many inevitable changes in patient behaviors during the pandemic, including an increased need for medical cannabis. There was a patient demand for convenience, safety and no-contact services, increased online ordering, scheduling and curbside pick-up or delivery. Many of these services were already on the rise in popularity throughout the various legal states. While Arizona’s recreational program prohibits delivery until at least 2023, retail adult use consumers will expect some of these services to extend to the new market. As life after the COVID-19 pandemic continues on and the need for some of these safer more convenient options also continues, we hope to see them more permanently implemented from a legal and regulatory perspective. For now, here are the highlights we’ll see come into play in the first few months of 2021 as Arizona adopts its new adult use cannabis program.

Smart and Safe Arizona Act (Prop 207):

  • Legalizes the sale, possession (one ounce) and consumption of adult use cannabis for adults at least 21 years old.
  • Adds a 16 percent excise tax on adult use cannabis sales, in addition to the state’s 5.6 percent, totaling a 21.6 percent tax.
  • Allocates an estimated $300 million in Arizona revenue to be divided between community college districts, municipal police, sheriff and fire departments, fire districts, highway funds, public health programs, infrastructure, and a new Justice Reinvestment Fund.
  • Allocates more than $30 million annually for addiction prevention, substance treatment, teen suicide prevention, mental health programs, and justice reinvestment projects.
  • Provides opportunities for expungement of certain lesser cannabis-related crimes such as possession, consumption, cultivation or transportation.

But of course, state law is just one part of the equation. Adult use cannabis facilities must be licensed separately from state to local levels, including counties to cities to local municipalities, all of which may also adopt rules and requirements through zoning and land use ordinances. Swift and certain timelines established by the Smart & Safe Act dictate the speedy launch of this new program, first utilizing the existing medical cannabis infrastructure.

Many Arizona consumers are under the impression that they’ll be able to walk into a dispensary on January 1, 2021 and buy cannabis. But that is not the case. They’ll have to wait until the Arizona Department of Health Services (AZDHS) completes the early applicant licensing process, which begins in January 2021. Currently, local and multistate operators are waiting for AZDHS to complete the rules and regulations for the adult use cannabis program. Here are two of the most significant steps to be navigated in the upcoming weeks:

Smart and Safe Arizona Act (Prop 207) – Step 1: The Rulemaking Process

AZDHS has been tasked with developing the rulemaking process for the Smart & Safe Act. The first draft of the adult use cannabis program rules has already been released, primarily consisting of the application requirements for the early applicant process.  AZDHS collected its first round of public comments for consideration on Thursday, December 17, 2020.  The exact details and parameters of the adult use cannabis program will not be finalized or known for certain until AZDHS completes the rulemaking process. We anticipate the next draft of adult use cannabis rules to be released sometime in early January.

Smart and Safe Arizona Act (Prop 207) – Step 2: The Application Process

AZDHS will begin accepting early applicants under the Smart & Safe Act on January 19, 2021, closing the process on March 9, 2021. Current medical cannabis license holders who apply for and acquire an adult use license in the early applicant process will be authorized to a dual-licensed dispensary (both medical and adult use license), as well as one offsite manufacturing facility (which may later be amended to include both medical and adult use manufacturing license), and offsite cultivation.

Early adult use license applicants are reserved for those that currently hold in good standing at least one Medical Marijuana Registration Certificate (“Medical Marijuana License”) and applicants applying to counties with no current operating dispensaries. Any county with a single operating dispensary (a medical cannabis dispensary) will be allocated an adult use license (dual license) as long as the medical license holder is in good standing for the application.  All adult use licenses allocated to those counties without a current operating dispensary must keep that dispensary within that county.

AZDHS will have 60 days to process each application. Adult use licenses for counties without a current operating dispensary will be allocated through a random selection process, if more than two applications are received for that county. Additionally, upon the conclusion of the early applicant process, any adult use license that has not yet been awarded through that process, will be available to the general public and allocated through a random selection process.

This brings us to later phases of implementation of the Smart & Safe Act: within approximately six months of the adoption of the initial recreational program rules, AZDHS must develop and adopt the rules and regulations for the Social Equity Ownership Program (SEOP). The primary goal of the SEOP is to allocate 26 adult use licenses to “communities disproportionately impacted by the enforcement of previous cannabis laws.” In other words, communities disproportionately and negatively impacted by cannabis criminalization. Smart & Safe is light on the exact manner and process at this point, so Arizona voters and cannabis companies will look to AZDHS for the development and implementation of this important part of the adult use program. Stay tuned.

Surprise! A Major Cannabis Stakeholder Pushes for Ethical Marketing Standards

By Jeff Baerwalde
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As more nations across the globe embrace the benefits of legal cannabis, to say the business is booming is an understatement. But with cannabis going corporate in a big way and marketing standards still hit or miss, the reality of unethical marketing practices that manipulate consumers and run roughshod over small businesses threatens to do harm if not brought under control.

Enter Cresco Labs, a major player in the international cannabis industry. Contrary to what you might expect, and bringing in a breath of fresh air, this giant is pushing to install marketing standards that protect the ethical interests of all cannabis businesses.

In this article, we will take a look at some key elements of ethical advertising in the cannabis industry and explore the Cresco Labs proposal.

This dispensary ad appeared on Variety.com

The Power of Advertising

Advertising is a powerful medium for rebranding and influencing public perception. The messages conveyed by ads reflect the changing moral, ethical, and consumer opinions of society – and often create them in the first place. For cannabis, an industry rife with stereotypes, ads present a strong opportunity to change the popular face and perception of cannabis as nothing more than a vehicle to get high.

Today’s numbers tell a different story with a full 19% using it for pain relief and another 37% to relax. Even one successful ad campaign can change the mind of a skeptical consumer. So how to ethically harness this power?

Cannabis rebranding generally works best when it draws on four main elements:

  • Emphasize health and wellness benefits. Most new customers who are interested in cannabis these days are attracted by the inspiring health and wellness possibilities that cannabis products present. By redefining cannabis as a medical product suitable for families, the elderly and patients suffering from various ailments, and not simply as a way to get high, cannabis companies can target the audiences that will most benefit from their products.
  • Replace typical “juvenile” imagery with sophisticated graphic design approaches. With so many options for how to use and consume cannabis these days, it is no wonder that brands are embracing trendy, sophisticated, contemporary design techniques. Logos featuring minimalist and elegant fonts more accurately express the narrative behind products such as cannabis teas, cannabis-infused oils and edibles.
  • Highlight the science behind the products. For those naysayers still determined to limit cannabis to its recreational usages only, to the exclusion of its many health benefits, exploring the science is vital. By citing legitimate research studies and findings, and explaining the scientific processes at play when using cannabis, ads can debunk false myths while educating the public.
  • Tell a compelling, relatable story. Like all good advertising, the narrative is key to engaging audiences. Framing cannabis within the powerful context of a compelling story is a strong approach to making a memorable impact on consumers.

Wild West Advertising

Because cannabis is such a new industry, only recently becoming legal in many states (and countries), advertising agencies have been reticent to sign on with these companies. The lack of regular advertising standards means that cannabis advertising has been compared to the “wild west,” where anything goes. While some companies struggle to promote a more wholesome, consumer-friendly image of cannabis, marketing to broad audiences, other companies embrace stoner stereotypes and industry myths, often resulting in ads that depict unethical content.

An example of a warning letter the FDA sent to a CBD company making health claims

Unofficial social media ads may target underage customers, with slogans featuring symbols like Santa Clause, or presenting underage people in their ads next to cannabis products, as in a recent Instagram ad from one brand, Dogwalkers. The ad shows a person holding a pre-rolled joint on the beach with a caption that reads “let the good times (pre) roll.” The image also features young-looking surfers in the background, an implied invitation to underage consumers to sample these products.

Without regulation, businesses are also free to create advertisements rife with false claims. Vulnerable people, patients with chronic illnesses, senior citizens and others may be susceptible to the claims presented in these ads. The FDA has recently begun to crack down on this spread of misinformation, but putting in place industry-wide advertising standards would also have a strong effect.

Cresco Standards

Operating in nine states in the U.S., Cresco Labs is a vertically integrated, publicly traded company that has recently released a proposal for establishing marketing rules for the cannabis industry. The proposal, entitled “Responsible Advertising and Marketing Standards for the U.S. Cannabis Industry” outlines a vision to hold the U.S. cannabis industry to a higher professional and ethical standard than is the current norm, thus legitimizing the industry.

Some specific rules in the proposal stipulate that ads depicting over-consumption as a fun or desirable outcome should violate industry standards. Additionally, the widespread adoption of this proposal would ban any marketing approaches that target underage consumers, ensuring that companies are better able to enforce legal age restrictions.

The company, alongside other large cannabis organizations, has released this proposal as part of an attempt to normalize the industry, allowing it to bring in top ad companies to help promote their brands. While cannabis retains the pop culture imagery of stoner culture and its associations with reckless behavior and teenage cannabis usage, regular advertising sources will remain skeptical about getting involved.

Changing Tides

As the industry continues to evolve and expand, more regulation will be useful in terms of establishing dominant narratives to help redefine how cannabis appears in the popular imagination and what kind of clientele is attracted to cannabis products. But by redefining the acceptable standards of advertising, there is also a risk that cannabis will lose some of the intrigue and novelty that currently makes it a popular, trending topic.

Still, if rebranding campaigns can shift the story so that cannabis appeals to the masses, then everyone in the cannabis industry ultimately benefits.

It’s High Time for the Cannabis Industry to Pay Attention to Contact Compliance

By Daniel Blynn
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Communicating with consumers through the telephone—either by text messages or by calls—is a great way to engage with them. Indeed, a recent analysis of text messaging trends reveals that most consumers check their cell phones more than 20 times a day, with almost 20% saying they check it more than 50 times.1 Text messages have a nearly five-times higher open rate than email, and the average consumer has 96 unread emails in his inbox compared to about one unread text message at any given time.2 In short, used properly, text messaging is an effective medium to reach consumers. And cannabis companies have embraced texting with open arms, especially given that other forms of advertising currently are off limits to the industry.

But with the utility of text messaging consumers comes substantial risk. Cannabis companies are frequent targets of private litigation arising out of their texting practices. Over the past two years, dozens of class action lawsuits alleging unlawful text messages have been filed against cannabis companies, including well-known multistate operators and less recognizable ones. Most of these cases are ongoing and may rightfully be considered “bet the company” litigations. For example, a pending case against cannabis delivery company Eaze Solutions, Inc. alleges that unsolicited text messages were sent to 52,104 individuals.3 Assuming each putative class member received just one text from Eaze, the statutory damages exposure ranges between $26 million and $78 million. The court twice has rejected proposed class settlements of $1.75 million and, later, $3.5 million as being too low. Given the potential exposure, before cannabis companies click the send button on a text message, they need to ensure that they’re abiding by the law.

At the federal level, the Telephone Consumer Protection Act (TCPA) regulates all types of text messages, telemarketing and transactional/informational alike. Generally speaking, the TCPA governs how text messages are sent (i.e., manually versus automatically dialed), and how calls are conducted and voicemail messages delivered (live representative versus “artificial or prerecorded voice”).4 The TCPA also contains do not call rules applicable to marketing messages. The TCPA is enforced by the Federal Communications Commission (FCC) and, notably, through private lawsuits, including class actions. Under the TCPA, a private plaintiff can seek statutory damages of $500 for each unsolicited autodialed text message (or unsolicited call that utilizes an artificial or prerecorded voice or delivers a prerecorded message). If a solicitation text is sent to a telephone number registered on the National Do Not Call Registry or the cannabis seller’s own internal do not call list, the statutory damages are “up to” $500 per call or text. In all cases, statutory damages may be trebled to $1,500 if the TCPA violation was committed either knowingly or willfully.

These rules fit atop myriad state telemarketing and do-not-call laws, which may be more restrictive than the TCPA.

While I could fill up this entire website with the various calling and texting issues with which sellers generally struggle under the TCPA—such as the use of artificial or prerecorded voices and prerecorded messages, how to handle reassigned numbers, revocation of consent issues, etc.—this article focuses on the basic rules governing how cannabis companies can text consumers, and what types of consent they need to do so under the Act.

Overview of TCPA’s Consent Rules

Under the TCPA, a seller is required to have a consumer’s “prior express consent” in order to send an autodialed non-marketing text message to a cell phone; The consent rule for autodialed marketing text messages to cell phones are different in that they require “prior express written consent” (EWC). No consent is needed in order to manually send a text message (and note that “manually” does not necessarily mean that an individual must dial all ten digits and click send from a standard smartphone).

“Prior express consent” is a lower level form of consent and generally exists where a consumer voluntarily has provided her telephone number to the seller.

“Prior express written consent,” on the other hand, is a heightened consent standard requiring a written agreement bearing (1) the signature of the person called (either traditional “wet” signature or an electronic/digital one) that clearly authorizes the seller to deliver or cause to be delivered to the consumer telemarketing messages; and (2) the telephone number to which the signatory authorizes such telemarketing messages to be delivered. If the seller utilizes an autodialer to send a marketing text message to a cell phone, then the written agreement with the consumer must also clearly and conspicuously disclose both that (a) the text may be sent using an autodialer, and (b) the consumer is not required to provide his consent as a condition of purchasing any goods or services. This EWC to be contacted must have been provided by the consumer before the text is sent. Unlike the lower standard for prior express consent, the mere provision of a cell phone number to the seller does not constitute the required EWC to be contacted at that number via an autodialer marketing purposes.

Confusing enough? Don’t worry, a table summarizing the current TCPA consent rules is below:

What Type of Text Are You Sending?

Generally, the type of consumer consent that is needed to send a text message is a function of the type of text and how it is being sent. “Telephone solicitations” are subject to more restrictions than purely informational or transactional text messages. The TCPA defines “telephone solicitation” to be “the initiation of a [text] message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services.”

On the other end of the spectrum lie pure informational or transactional text messages. These are communications designed to provide information, rather than promote products and services (in the case of informational calls), and to “facilitate, complete, or confirm a commercial transaction that the recipient has previously agreed to enter into” (in the case of transactional calls). For example, customer satisfaction survey texts and texts to confirm orders and deliveries are informational and transactional, respectively.

Finally, the TCPA also covers a third category of text messages—“dual purpose” texts. These are texts with either a customer service or informational component as well as a marketing one. Because courts and the FCC take an expansive view of what constitutes telemarketing, dual purpose texts are treated as pure marketing messages and subject to the more rigorous standards to obtain the requisite level of consumer consent.

Common examples of texts that cannabis companies send and the corresponding level of consent needed are as follows: 

  • Autodialed Text Messages: Under the TCPA, an autodialer is defined to be equipment, which has the capacity to store or produce telephone numbers to be called using a random or sequential number generator, and to dial such numbers without a requisite level of human involvement. However, there currently is a “significant fog of uncertainty” as to what is and is not an autodialer, with different courts reaching conflicting decisions as to, for example, whether simply dialing from a curated list of targeted telephone numbers constitutes autodialing, or whether the numbers on that list must have been randomly or sequentially generated in order for a platform to constitute an autodialer.
  • While proceedings are ongoing at the FCC to clarify the autodialer definition, the Supreme Court recently agreed to decide the autodialer issue during its next term in a TCPA case filed against Facebook; a decision is expected by May or June 2021. Notably, in mid-September 2020, the Department of Justice filed a “friend of the court” brief taking the industry-favorable position that a platform itself must randomly or sequentially generate the telephone numbers that it texts to be considered an autodialer under the statute.
  • Texts sent by autodialer (whether the autodialing functionality is actually used to send the text or not) require consent from the recipient. Note that this rule generally applies to both individual and business cell phone numbers. As long as the text is not a solicitation message, then consent may be obtained orally. Alternatively, if a consumer provides his cellular telephone number to you via an online lead form or during the checkout process, then this should be sufficient to constitute “prior express consent” to receive autodialed non-solicitation texts, such as order confirmations or delivery updates. The key to obtaining prior express consent, however, is that the consumer provide you with his telephone number voluntarily.
  • However, EWC is required to send a text for marketing purposes using an autodialer. The EWC requirements are described above and examples of EWC are below.
  • Note that, under the TCPA, the seller has the burden of demonstrating that it had the requisite level of consent to send the text in question. Thus, cannabis companies should maintain records evidencing such consent. A good rule of thumb is to maintain such records for a period of five years from the date of text, which covers the TCPA’s statute of limitations and the limitations periods under most state telemarketing laws.
  • Manually-Dialed Text Messages: If a cannabis company manually sends text messages—e., using a device that does not have the capacity to autodial—then no special consent is needed. However, even for manually-dialed texts, applicable do not call lists must be checked.
  • Texts to Numbers on Do Not Call Lists: The TCPA also prohibits companies from sending marketing texts to consumers whose telephone numbers are registered on either the National Do Not Call Registry or the seller’s own internal do not call list, unless an exemption applies, such as calls with the consumer’s EWC or to consumers with whom the seller has an “established business relationship.”5 The TCPA’s do not call rules are agnostic to how a telephone number is dialed, whether it be manually or by automated means. Be sure to scrub against relevant do not call lists.

Best Practices for Obtaining Proper Consent

As noted above, for autodialed non-marketing text messages to cell phones, the lower level of simple “prior express consent” is required. Prior express consent is deemed to exist by virtue of a consumer having provided his telephone number to a cannabis company, either orally or in writing.

EWC for autodialed solicitation text messages, however, requires more. First, specific disclosures must be made “clearly and conspicuously” to the consumer. Specifically, a consumer should be advised and agree that, by providing his telephone number to the cannabis company, he is agreeing (1) to receive potentially autodialed (2) marketing text messages, and (3) that he is not required to provide his consent as a condition of making a purchase. This disclosure should not be placed beneath a submission button on a lead form or checkout page (unless an unchecked check box is utilized to demonstrate that the consumer has reviewed and accepted the disclosure); it needs to be unavoidable. The disclosure should be presented in readable, crisp font, both in size and in color, that contrasts against its background. For example, the following disclosures likely would pass muster to demonstrate EWC:

As you may now appreciate, the TCPA is a minefield (and this article just scratches the surface). However, with planning and a good compliance program, the law can be navigated to minimize risk while, at the same time, allowing for communications with cannabis consumers. Remember, an ounce of compliance now can lead to a pound of litigation prevention later.


Disclaimer: Using, distributing, possessing, and/or selling marijuana is illegal under existing federal law. Compliance with state law does not guarantee or constitute compliance with federal law. This informational overview is not intended to provide any legal advice or any guidance or assistance in violating federal law.


References

  1. Zipwhip, 2020 State of Texting, at 4 (2020).
  2. Id. at 11.
  3. See Lloyd v. Eaze Solutions, Inc., No. 3:18-cv-05176 (N.D. Cal.).
  4. Although the TCPA utilizes the term “calls,” courts have found the statute applies with the same force to text messages. This article focuses on text messaging but most of the principles extend to calls as well.
  5. There are two types of “established business relationships” (EBRs) under the TCPA: (1) inquiry EBRs and (2) transactional EBRs. Pursuant to a transactional EBR, a seller may text a consumer whose telephone number is listed on the National Do Not Call Registry for up to 18 months after the consumer’s last purchase, delivery, or payment—i.e., from the date of the seller’s last transaction with the former customer—unless the consumer asks the seller to stop calling him. In that case, the seller must honor the do not call request by placing the consumer’s telephone number on its own internal do not call list. Under an inquiry EBR, the seller may text a consumer who has inquired about its products or services, but only for up to three months. Again, if the consumer asks the seller to stop calling within that three-month timeframe, it must honor the request and add the consumer’s telephone number to its internal do not call list. Telephone numbers on the seller’s internal do not call list should remain on that list indefinitely or until the consumer subsequently provides her prior express written consent (or explicitly asks to be removed from the internal do not call list); a new EBR will not override an internal do not call request. Indeed, as to the latter, the Federal Trade Commission and several state attorneys general made this point clear in their briefing in a recent TCPA and Telemarketing Sales Rule litigation then-pending in Illinois federal court; the practical reason for the rule is that a consumer may wish to do business with a seller yet not receive telemarketing calls.

PJRFSI Accredited for Cannabis Certifications

By Cannabis Industry Journal Staff
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In a press release published, last week, Perry Johnson Registrars Food Safety, Inc. (PJRFSI) announced they are now officially the first certification body to be granted accreditation for cannabis certification in the United States by ANAB.

PJRFSI has developed a cannabis certification standard that uses GMP- and GAP-based scheme to help growers, manufacturers and retailers meet a wide range of different state regulations. The goal of the standard, according to the press release, is to provide guidelines for cultivation, manufacturing and retail best practices across the country.

Because each state has very different rules and requirements for cannabis companies, the certification requirements can be confusing and vary widely from state to state. With the release of this new standard, PJRFSI wants to simplify cannabis markets in the United States and hopefully get various states on a same or similar page.

According to Terry Boboige and Lauren Maloney, president and accreditation manager at PJRFSI respectively, they have a lot of hope for what the future holds in terms of unifying cannabis rules and requirements. “The team at Perry Johnson Registrars Food Safety Inc. is incredibly excited to be the first company in the United States to achieve formal accreditation for our Cannabis and Hemp Certification Program,” says Boboige and Maloney. “We believe this nationally-recognized program will help the budding cannabis and hemp industries to strengthen, legitimize, and separate themselves from companies that do not have formal certification. Certification to this standard will forever help enhance companies’ image, credibility, and reliability. Accredited certification exemplifies to the public that certified organizations who supply cannabis and hemp products and services have internal safety systems that can inspire confidence.”

The Great European Cannabis Cosmetics Confusion

By Marguerite Arnold
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If the “recreational” discussion is off the table for now except in a few local sovereign experiments (Luxembourg, Switzerland, Denmark, Holland), and the medical discussion is mired in “efficacy” and payments (Germany, UK), where does that leave this third area of cannabis products?

Namely cosmetics.

The answer? Because this conversation involves cannabis, as usual, the discussion is getting bogged down in confusion even as industry groups press for clarification and guidelines.

The Problem

Cosmetics, including externally applied creams, lotions and potions, are of course subject to regulation and testing beyond cannabinoids. Think of your favourite cosmetic product and the notices about no animal testing (et al). Yet when the conversation comes to cannabis, of course, even of the hemp kind, the current discussion in the EU is mired in confusion, and of course ongoing stigma. Not science. Or even logic.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

According to the EU Working Group on Cosmetic Products earlier this year, ingredients containing CBD (even derived from hemp) should be banned from cosmetics production because of the ban on cannabis as an illicit substance under the 1961 Single Convention on Narcotic Drugs. Guidance under the Cosing Catalogue (a database of allowed and banned ingredients)  gives individual EU member states a framework to set national rules for cosmetics.

To add to the confusion, the EU also added new entries to the EU inventory of cosmetic ingredients which outlaw CBD derived from extracts, tincture or resin. But – in a bizarre bureaucratic swerve, they did approve “synthetically produced CBD.”

Opponents of the ruling – including the European Industrial Hemp Association (EIHA) have of course opposed the newest guidelines on regs. CBD, as the EIHA has mentioned repeatedly, is not referenced specifically in the 1961 Convention.

The EIHA wants the EU to treat cosmetics like other CBD products – namely requiring that they have less than 0.2% THC.

The EIHA Proposal

The EIHA has its own proposal for setting guidelines under Cosing. Namely that extracts from industrial hemp and pure CBD should only be prohibited from use in cosmetic products if they are not manufactured in compliance with laws in the country of origin.

Further, the EIHA has also pointed out that the seeds and leaves of industrial hemp and any products derived from the same are also clearly excluded from the 1961 Convention.

However, and herein lies the rub – even within the EU, there is not yet harmonization on these standards between countries. So, what may pass for “legal” in the country of production may also not pass for products that are then exported – even within the EU and or in Europe.

EIHA also has proposed new wording for the definition of Cannabidiol based on the International Nomenclature of Cosmetics Ingredients (INCI), the most comprehensive and widely recognized international list of ingredients used in cosmetics and personal care products.

Where Does This Cross With Novel Food?

Of course there is also the confusion in the room about cannabis extracts as “novel food.” Cosmetics of course are designed for external application, but cannabis tinctures and extracts containing “CBD” are being put in that category right now by regulators in the EU. The fact that novel food is also in the room may in fact be the reason that regulators are apparently sanguine about synthetic CBD in cosmetics, but not that derived from the actual plant.

The cannabis discussion is going to be in the room for many years to come and on all fronts – from medication to food to cosmetics.Bottom line? There are, at present, no easy answers. This leaves the CBD industry in the EU, at all levels, as the planet barrels into the third decade of this century, in basically a state of limbo. If not absolute confusion.

What Is The Outlook?

While it may not be “pretty” right now, the industry is clearly moving through channels to pressure and challenge regulators at key international points and places.

What is increasingly obvious however, is that the problem with cannabis – at all levels – will not be solved soon, or easily. Even calls for “recreational reform” or even “descheduling” will not cure them.

Cannabis as a plant, if not a substance used in everyday living has been so stigmatized over the last 100 years that a few years of reform – less than a decade if one counts the organization of the industry since 2013 globally – will not come close to fixing if not ironing out the bugs.

The cannabis discussion, in other words, is going to be in the room for many years to come and on all fronts – from medication to food to cosmetics.

european union states

European Cannabis Summer Roundup

By Marguerite Arnold
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european union states

There have been many significant developments this summer in Europe that will shape the debate about reform and the legal cannabis market that trails it, for at least the next year. Here is Cannabis Industry Journal’sroundup of our biggest events and trends over the summer so far.

Medical Sales Across Europe Are Slow

In Germany, it is easy to maintain a fairly ballpark understanding of patient count. Find the number of prescriptions issued in the trade press and divide by four. Everywhere else, however, the true realization of what is going on across Europe is slowly starting to hit everyone outside producers wanting to know what is going on.Establishing territorial footprint has been what the race in Europe has been all about since mid 2016 for the Canadian LPs so far.

This is going to start to hit stock prices soon beyond the wobbles already evident in the market thanks to this summer’s breaking industry scandals (CannTrust, lawsuits in every direction) to lack of financial performance for investors (Bruce Linton’s firing from Canopy). It is becoming increasingly obvious to everyone that just because a public Canadian company issues a press release about a (cultivation, import, export or processing) “event” does not mean anything other than a slew of social media telling everyone about it. The frustration with “forward looking” statements has hit European investors big time, from the retail to the institutional kind.

Despite a lot of press releases in other words, which clearly show market penetration, there is not much else going on from the sales perspective when it comes to growing those first numbers. Establishing territorial footprint has been what the race in Europe has been all about since mid 2016 for the Canadian LPs so far.

However, from an industry, if not investor and of course, patient perspective, patient numbers are what really count. And unlike Canada, where patients remain the biggest existential threat to the industry, the same industry may not sign them up or ship to them directly in Europe. For several reasons.

Germany is still the only country in Europe with a significant patient count, and while growing, slowly, is still a group where 2/3 of patients obtain dronabinol. It should shock nobody that the most accurate patient count right now in the UK is hovering somewhere under 20. For the whole country, 9 months after the law changed. While the peculiarities of Brexit are also in the room, this is so far, compared to U.S. state markets, Canada, Israel and Germany before it, pathetic.

The Industry Says It Supports Patients…But Does It?

There are several levels to this debate which start with the still appallingly high level of price gouging in the room. 2019 and certainly this summer is a time when the Canadian companies are clearly learning that European governments negotiate for drugs in bulk. Even (and especially in the near future) this one. See the difference between the EU and the US.

UKflagThe level of industry promotion vs patient access recently reached a new nadir this summer when it emerged that despite a great deal of interest, more people showed up (by far) to the week-long cannabis industry conference (European Cannabis Week in London in June) than there are legitimate patients in the UK right now.

That is about to change, but so far, industry support for trials has not materialized. When the various trials now being planned do get going, look for new battles over a couple of issues, starting with patient access to and control of their medical data.

Novel Food: The Regulation That Keeps On Giving

The issues involved in this discussion are complex, certainly by North American standards. This of course starts with the fact that there is no such regulation on the continent. But also rapidly bleeds into puncturing the amount of hot air entrepreneurialism there is in the room.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

The CBD market in Europe that everyone got so excited about in investor releases, in other words, is basically dead for the time being. Yes, there are a few smart niche players weaving around the regs, but it is a full-time job.

Here is the reality: Since Christmas last year when Austria put the kabosh on all products containing the cannabinoid CBD, several major countries have weighed in on the issue. It is not going away. And it is here to stay, even after recreational.

Political Advocacy Is Stirring In Europe

Whether it is the vagaries of Brexit, the discussion across the continent about how the EU will work together, right wing populist screeds about “too much regulation” or national elections, cannabis is in the room from now until the end of at least 2021 as one of the hottest global political issues under the sun. That includes of course, a discussion about global climate change, sourcing, pricing and resource use so far unaddressed but rapidly looming.

german flag
Photo: Ian McWilliams, Flickr

Further, patients are still having a voice – whether it is making sure that their children obtain imported CBD, or that they can obtain their own THC prescriptions without going bankrupt or having to solicit in the black market.

Cultivation Bids Looming?

One of the surest signs yet that the German authorities at any rate, are in no mood to solve the cultivation issues still on the ground and the bid itself, is that the government just renegotiated, for the second time since last fall, the amount of medical cannabis to come over the Dutch-German border. Who is going to go next? With the Italian hybrid now done and dusted, Poland is likely to be next. And when that happens, expect a raft of similar initiatives across Europe. But probably not until then.

And in the meantime? Distributors are looking for product. The demand is clearly there. But across Europe this summer there is a clear sense that the hype machine that has been the industry’s mouthpiece is at minimum overenthusiastic about the bottom-line details behind it all.

Soapbox

4 Reasons Why Community Relations is Critical to Cannabis Industry

By Savannah Bailey
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There’s no denying that the cannabis industry is experiencing a boom. While it feels a bit like the wild west, many organizations are riding a wave of (mostly) positive publicity as opportunities increase for cannabis products and distribution.

From a public relations standpoint, relying on this initial excitement, however, is shortsighted at best. As regulations allow for increased competition in many markets such as cannabis dispensaries, manufacturers and distributors, we must find new ways to creatively garner positive attention while staying compliant with regulations.

But what do you do after the initial excitement fades? How do you individualize your company to make it stand out and sustain within the market? For many, the solution is held within a strategic community relations program.

No matter the size or reach of the organization, we encourage many of our clients, especially those in the cannabis industry, to engage with their immediate communities. Not only does this demonstrate that you’re invested in the well-being of your neighbors, but can provide long-term benefits, such as brand loyalty and improved public image.

Here are four reasons why businesses in the cannabis industry should be investing in community relations outreach:

1. Initial Publicity Only Lasts So Long

Like the gold rush, businesses are looking to help themselves to a slice of the cannabis pie. And understandably so. In 2018, the industry earned nearly $10 billion in the U.S. last year, creating 64,389 jobs, according to CNBC. With the newness of the industry comes a lot of excitement and media attention. While this attention is great for those first-to-market trailblazers, as competition increases, the newsworthiness will dwindle.So, what’s the best way to gain awareness without blatantly advertising? The answer is giving back.

For examples of this, look no further than the tech industry. Remember when apps (or websites if you want to go way back) used to be a big deal? In order to stand out in a crowded marketplace you must be different and have a story to tell. Making a meaningful connection through outreach will help you succeed long after the first wave of publicity fades away.

2. Regulations Rule

In many ways, your hands are tied when it comes to advertising or promoting a cannabis business versus a traditional retail product or location. In some states, it’s almost entirely off the table. So, what’s the best way to gain awareness without blatantly advertising? The answer is giving back. Community outreach programs through philanthropic efforts will help build your business, create brand awareness and bring people together. Community relations is a critical part of getting the word out even in the face of strict regulatory guidelines. And the best part – it can be inexpensive to do. As an added bonus, you make friends and create advocates in the process.

3. Combat the Stigma

In some states and communities, cannabis still faces a bad rap. Currently only 33 states have legalized medical cannabis, while 11 states have legalized cannabis recreationally. And even with growing legalization and acceptance, the industry must still combat outdated stigmas and misgivings. By making your business a reputable part of the community you will build trust and loyalty. Take this as an opportunity to educate the community about the facility and meet staff members.

4. Stay in Good Graces

Community relations is a great way to create ambassadors out of community leaders and influencers. Simply put, people are more interested in supporting an organization that supports them in return. Show that you’re invested in your neighbors and ingrained in the success of the local business community. As an added bonus, community involvement will also help boost public image and build the morale of employees. This is important for long-term success of your company as well as employee retention.

No matter what your reason for implementing a community relations initiative, you’ll find it to be a great addition to your public relations strategy.

The best part- community outreach doesn’t have to be extravagant, either. Coat drives, food drives or volunteering time with local events are all great ways to show your support for the community while raising your own profile.

As the cannabis industry continues to grow and competition increases, you’ll feel good about setting the bar high as a responsible and thoughtful invested member of your local business community.

Arizona To Implement Mandatory Lab Testing

By Aaron G. Biros
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Good news came to patients using medical cannabis in Arizona earlier this week: Lawmakers in Arizona unanimously passed SB1494 through the state’s House and Senate, the bill requiring mandatory lab testing for medical cannabis products. Arizona Governor Doug Ducey is expected to sign the bill and has ten days to do so.

Arizona Governor Doug Ducey

When Governor Ducey signs the bill into law it will mark the first time since the state legalized medical cannabis in 2011 that a measure to protect patient safety via lab testing will be implemented. According to the bill, beginning November 1, 2020, all cannabis products shall be tested prior to sales “to determine unsafe levels of microbial contamination, heavy metals, pesticides, herbicides, fungicides, growth regulators and residual solvents and confirm the potency of the marijuana to be dispensed,” (Page 6, Section 36-2803).

The bill requires dispensaries to provide test results to patients immediately upon request. Dispensaries need to display a sign notifying patients of their right to see “certified independent third-party laboratory test results for marijuana and marijuana products for medical use,” according to the text of the bill (Page 7, Section 36-2803.01).“There will have to be some serious planning, but other states have achieved this and we can too.”

Under the new bill, the Arizona Department of Health Services will adopt rules to certify and regulate labs, establishing requirements like health and safety protocols, mandatory quality assurance program and standards, chain of custody and sampling policies, adequate records, accreditation, proficiency testing, among other requirements (Page 6-7, Section 36-2803).

Ryan Treacy, co-founder of the Arizona Cannabis Laboratory Association (ACLA) and CEO/Founder of C4 Laboratories, says this is a major turning point for Arizona’s cannabis industry. “We have been devoid of regulations with regard to testing the entirety of the program since it was legalized; This will be a significant change,” says Treacy. “Now patients can make sure they are getting a safe and clean product and getting exactly what they paid for.”

For those in the know when it comes to cannabis testing in the United States, the new requirements will look very similar to other states with testing requirements. One particularly unique aspect of the new program, however, is the establishment of a “Medical Marijuana Testing Advisory Council,” made up of stakeholders representing different interests in Arizona’s cannabis industry. Members of the council will include representatives from dispensaries, labs, cultivators, concentrate producers, edibles producers, as well as registered patients, caregivers, a representative from the Arizona Department of Public Safety, a licensed health care provider and “any other members deemed necessary by the director,” reads the text of the bill (page 16, Section 36-2821).

Ryan Tracy, co-founder of the ACLA and founder/CEO at C4 Labs.

“Other states like California have complained about detection limits, while Arizona is taking a unique approach with an advisory council with stakeholders in the cannabis industry,” says Treacy. “So that when the Department of Health Services promulgates rules, they are taking into account the challenges in the cannabis industry specifically. We have a chance to do this right and avoid pitfalls we’ve seen in other states.”

One problem worth mentioning for Arizona’s cannabis industry: Dispensaries have not been required to test products for patients since medical cannabis was legalized back in 2011. That means many producers could be very used to operating procedures that don’t account for lab testing. With mandatory lab testing, some producers may be behind the curve when it comes to mitigating contamination.

According to Treacy, this could disrupt the supply chain a little bit. “When testing becomes mandatory in November 2020, dispensaries will need a full panel of tests performed on their samples,” says Treacy. “With the entire market now required to complete a full panel in depth analysis on each product, product testing will become a more time-consuming stop in the supply chain. So companies will need to work that into their plan to meet regulation requirements to prevent a bottleneck and maintain patients’ access to their cannabis medicine.”

Arizona has a chance to prevent that type of bottleneck seen in states that implemented testing requirements, like California for example. “When you have a habitual history of not testing products, it can be very hard to change, which adds to Arizona’s challenges,” says Treacy. “We need to make sure this does not affect access for patients and the ability of the industry to continue to flourish and grow.”

While Treacy thinks the transition will be difficult for some, it’s absolutely necessary for Arizona’s patients to access clean and safe medicine. “There will have to be some serious planning, but other states have achieved this and we can too.”