Update: On April 21, 2021, Virginia Governor Ralph Northam signed the legislation into law, making Virginia the first state int he American South to legalize adult use cannabis.
On April 7, 2021, legislators in Virginia finally came to an agreement for their adult use cannabis legalization plan. Back in February of this year, lawmakers passed a bill to legalize adult use cannabis with a launch date of 2024, but Governor Ralph Northam wanted to move quicker than that.
Virginia Governor Ralph Northam Image: Craig, Flickr
Last week, Gov. Northam issued a number of amendments to the legalization bills (Senate Bill 1406 and House Bill 2312) that essentially tapers the time frame of legalization to July of this year. With the legislature approving those amendments yesterday, the state of Virginia has now finalized their legalization plans, setting in motion the launch of the very first legal adult use cannabis market in the American South.
Beginning July 1, 2021, Virginia will allow adults to possess up to an ounce of cannabis and up to four plants per household. The commercial cannabis market, and the regulatory framework accompanying it, will be set to legalize sales July 1, 2024.
The bill establishes the Virginia Cannabis Control Authority as the regulatory body overseeing the legal cannabis market. A five-member Board of Directors in that agency will develop and issue regulations and licenses. According to the bill, the Board can set the number of licenses, with a maximum of 400 retailers, 25 wholesalers, 450 cultivators and 60 manufacturers, aside from any medical cannabis and hemp processing license already issued. The Board is also in charge of licensing testing labs.
Vertical integration is not permitted under Virginia’s new legalization plan, but all of the medical cannabis licensees in the state are already vertically integrated. According to the bill, they can keep their vertical integration for a small fee of $1 million and after they submit a diversity, equity and inclusion plan.
In addition to Virginia’s normal 6% sales tax, a state tax of 21% is added to retail sales of adult use cannabis, excluding medical dispensaries. Local municipalities are allowed to issue up to 3% in additional taxes.
By Seth Mailhot, Steve Levine, Emily Lyons, Leah Kaiser, Marshall Custer No Comments
The U.S. Food and Drug Administration (FDA) issued warning letters this month to two companies concerning the marketing and sale of over-the-counter (OTC) drug products containing cannabidiol (CBD) as an inactive ingredient. The letters allege violations of the Federal Food, Drug, and Cosmetic (FD&C) Act related to current good manufacturing practice requirements and marketing of new drugs without FDA approval.
At issue: labeling, NDAs and active ingredients
The companies subject to the warning letters market OTC drug products that contain CBD as an inactive ingredient. In the warning letters, the FDA states that it has not approved any OTC drugs containing CBD. According to the FDA, an approved new drug application (NDA) is required to legally market nonprescription or OTC drug products containing CBD, regardless of whether the CBD is an active or inactive ingredient. The FDA notes that CBD has known pharmacological effects and demonstrated risks, and that CBD has not been shown to be safe and suitable for use, even as an inactive ingredient. As a result, the FDA states that CBD cannot be marketed in OTC drug products.
Further, the warning letters noted the marketing of several CBD products that highlighted the benefits of CBD for a range of conditions in such a manner that, according to the FDA, “misleadingly suggests that [their] . . . products are approved or endorsed by FDA in some way when this is not true.” The FDA also took issue with the way products were labeled, which included callouts on the front label regarding the CBD content of the product (a requirement under most state laws that permit CBD as an ingredient). Similarly, the FDA also noted that some of the products advertised CBD as an active ingredient in a topical pain reliever product. According to the FDA, no company may legally market such a product, since there are no OTC monographs or NDAs that allow the use of CBD in an OTC drug.
What this means for you
These warning letters highlight the FDA’s vigilance regarding OTC CBD products. Regardless of whether the CBD is labeled as an active or inactive ingredient, the FDA has taken the position that nonprescription CBD drugs are in violation of the FD&C Act. Companies marketing CBD products should be careful to ensure their marketing practices, as well as their product formulations, do not present a heightened risk of FDA enforcement.
Freya Farm, a pesticide-free cannabis producer and processor located in Conway, Wash., was recently forced to issue a recall after the chemical o-Phenylphenol, listed under CA Prop 65, was found on its products. Testing traced the antimicrobial compound, known to cause cancer, back to the FDA-compliant food grade gloves used by Freya during packaging.
The reason this could happen with FDA-compliant, food grade gloves needs urgent attention. The production and manufacturing of food contact gloves is largely unsupervised, with limited and infrequent checks on gloves imported into the US. After initial approvals, non-sterile, FDA-compliant food grade gloves are not subject to ongoing controls. This may lead to lower grade and cheap raw materials being used in sub-standard production facilities and processes.
Why “Food Safe” Gloves Aren’t Always Safe
The quality and safety of disposable gloves are limited to Letters of Compliance and Guarantee on the general make and model of the glove, not necessarily the glove you are holding in your hand. There are few controls on the consistency of raw materials, manufacturing processes and factory compliance for both food contact and medical examination grade gloves. Therefore, the opportunity exists for deliberate or accidental contamination within the process of which the Preventive Controls Qualified Individual (PCQI) may not be aware.
In the words of Freya Farm, “Nothing ruins your day like testing your product, confident it will be clean, only to find it contaminated with some crazy, toxic chemical.” In tracing the issue, the gloves were the last thing Freya Farm tested, as they never suspected something sold as food safe could be the culprit.
A recall of this type can be expensive, as fines range up to $200,000. Since this incident, Freya Farm has implemented a responsible sourcing policy for gloves using supplier Eagle Protect to protect its products, people and brand reputation.
Glove inspection includes five factors of quality controls
Eagle Protect, a global supplier of PPE to the food and medical sectors, is currently implementing a unique proprietary third-party glove analysis to ensure a range of their gloves are regularly checked for harmful contaminants, toxins and pathogens. This Fingerprint Glove Analysis mitigates the risk of intentional or accidental physical, chemical or microbiological glove contamination by inspecting five factors: the use of safe ingredients, cross-contamination potential, cleanliness, structural integrity and dermal compatibility.
Harmful toxins and contaminants in gloves have been identified in many peer reviewed scientific studies. This is now a real issue for companies producing consumer products, especially in industries such as organics and cannabis whose products must be handled by gloves and test clean.
Three key areas that can be tested for in a glove analysis to ensure safe product handling include:
Dermal compatibility tests for toxins and chemicals will flag any toxic chemical, such as o-Phenylphenol
GCMS testing for consistent quality and safety of glove raw materials
Cleanliness tests for pathogens inside and outside the surfaces of gloves – particularly pathogens also required in cannabis testing, such as E. coli and Salmonella, mold and fungus and pesticides.
For cannabis producers responsible glove sourcing is vital, especially as the COVID-related demand for single-use gloves exceeds supply, with poor quality, counterfeit and even reused gloves flooding the market. For producers with a product that rests very much on its quality, it’s important to focus on quality and not just cost when procuring gloves.
A thorough cannabis product development process goes far beyond extracting and packaging. Performing advanced analytical testing at each and every stage allows producers to know the quantity, quality and behaviour of compounds in samples. Here are the four key stages from flower to consumption.
Stage 1: Flower
Developing a quality cannabis product begins with knowing the composition of compounds in your starting material. The best analytical tests utilize a metabolomics approach. Metabolomics is a suite of techniques that include a variety of instruments to run samples through in order to receive compositional data. In this stage, LC-qTOF and GC-MS are the best instruments to track all the compounds in the starting plant material. Essentially, metabolomics establishes a fingerprint of the compounds in a plant sample. This is beneficial because producers have to understand how their chosen cannabis plant differs from other cultivars and how it would potentially behave in their desired end product formulations.
Stage 2: Concentrate
After the plant material has gone through an extraction process, producers want to know precisely what is in the extract. Are there compounds that should not be there and are all the desired compounds present? The best way to test the quality of cannabis oils is again to use metabolomics (e.g. via LC-qTOF). This test reveals all the compounds in the sample in order to help the producer determine the purity and consistency of molecules beyond just THC and CBD.
When testing cannabis isolates, it is best to use NMR spectroscopy and X-ray diffraction. NMR characterizes and assesses the purity of single compounds or mixtures in solution or solid state. X-ray diffraction provides information about the crystal structure, chemical composition and the physical properties of the cannabis sample to help the producer prove the identification of desired compounds. Establishing that the concentrates are pure and aligned with what the producer intended to extract is key in this stage of product development.
Stage 3: Formulation
Designing an appropriate drug delivery formula is a universal challenge producers face at this stage of product development. Where nanoemulsion or other carrier approaches are being used, formulation characterization allows producers to understand how their active compounds behave in simulated physiological environments as well as how stable their products are over time. Specifically, nanoparticle sizing and assessing size changes over time can help a formulation scientist ensure the highest quality product is being mixed, and that the desired effect will be imparted on the consumer/patient.
Stage 4: Smoke/Vapor
Many producers might not consider this final stage, but it is critical for all inhalable cannabis products and devices. Using a smoke analyzer and metabolomics testing can identify and quantify compounds present within the formed smoke or vapor from pre-roll joints to vape devices. This is not only important for preventing the production of toxic by-products, but it can help producers create an optimal smoking experience for consumers.
One area that is often an afterthought is quality compliance testing. Despite a number of groups using the required tests well during development, many forget to continue the same robust testing on end products. In the current cannabis product development landscape, there is little guidance on how compliance testing should be conducted on every product “batch.” With these advanced analytical tests, producers can confidently develop compliant, stable and quality cannabis products.
Natural product analysis using Carbon-14 is a valuable scientific tool that can be used to confirm the naturality of cannabidiol-based (CBD) ingredients by verifying the percentage of a product that is obtained from naturally-sourced ingredients. Determining the percentage of biobased content in a product allows companies to ensure their CBD ingredients are truly natural-derived, identify the presence of synthetic adulterants, and authenticate marketing and “natural” labeling claims.
Why consider natural product analysis using Carbon-14 to validate your natural CBD products?
Carbon-14 is an isotope present in naturally-sourced materials. Natural product analysis measures the percentage of Carbon-14 present in an ingredient or product. Higher percentages indicate that a product is primarily or completely made with natural-sourced ingredients as opposed to synthetic, petroleum-derived alternatives. These cheaper, synthetic alternatives created from petroleum-based sources cannot be measured using Carbon-14. A product that is all-natural and completely plant-sourced will show a result of 100% biobased content whereas a low or zero percentage will reveal a product that is partially or completely formulated with synthetic adulterants.
The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.
Why should you be concerned with verifying the naturality of your CBD products? In recent years, the popularization of CBD extract has increased its demand as an ingredient in personal care and cosmetic products. Higher costs associated with the use of natural CBD extract instead of artificial extracts leads to the use of adulterated ingredients by some manufacturers or false label claims that a product is natural when it is not.
How can you prove your products are the real deal and ensure your customers are sure they’re getting the natural ingredients they expect? Artificial ingredients derived from petrochemical sources do not contain any carbon-14 content. The results of natural product analysis reveal the percentage of a sample that is procured from natural sources, allowing manufacturers and quality assurance teams to confirm their CBD ingredients and products are not synthetic or adulterated and to strengthen claims that their product is truly natural-derived.
Natural product analysis can authenticate the natural content of your CBD products. Validating naturality with Carbon-14 testing strengthens label and marketing claims and confirms your products and ingredients are completely natural and do not contain cheap synthetic adulterants. By verifying the percentage of our product that comes from natural sources as opposed to artificial, petrochemical sources, you can guarantee your product is genuinely made with natural CBD extract.
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?
Editor’s Note: While CIJ typically omits the word “marijuana” where possible due to antiquated nomenclature and prejudicial connotations, we understand the legal distinction between cannabis containing THC and hemp requires the use of the word when referencing federal government policies and legislative language.
Despite the rapid evolution of the cannabis industry, the assurance of safe manufacturing practices remains unclear.Both the Food and Drug Administration (FDA) and the Drug Enforcement Administration (DEA) have imposed significant hurdles for cannabis operators to remain on the “right side of the law.” Therefore, manufacturers of both hemp and marijuana products have been left to figure things out on their own, or choose to ignore existing guidance because the lack of federal oversight allows them to do so. Inconsistent regulation on manufacturing, packaging, labeling and testing of cannabis products offers the potential for unsubstantiated, non-scientific and often times blatantly false claims on product safety and efficacy.
Science vs. Law
Hemp and marijuana are both species of the Cannabis family, Cannabaceae. Genetically they are identical but are arbitrarily defined by the presence of delta-9 tetrahydrocannabinol (THC). While science does not differentiate between hemp and marijuana, the law does.
The hemp industry declared a small victory with the passing of the Agricultural Act of 2014 (2014 Farm Bill). Under this bill universities and state agriculture departments were allowed to grow hemp under state law. Additionally, “industrial hemp” was officially defined by establishing the legal limit of THC at 0.3% on a dry weight basis. The Agricultural Improvement Act of 2018 (2018 Farm Bill), under the guidance of the United States Department of Agriculture (USDA), took things a few steps further by authorizing the cultivation of hemp and removed hemp and hemp seeds from the CSA. The bill however provides no language that mandates the safe manufacture of hemp-derived consumer goods. The 2018 version also preserved the FDA’s authority to regulate products containing cannabis and cannabis-derived compounds under the Federal Food, Drug, and Cosmetic Act (FD&C Act). To the surprise of most, listing cannabidiol (CBD), even hemp-derived, as an ingredient on consumer product labels remains illegal under the bill. Furthermore, CBD product manufacturers are not protected under the current regulations. Since 2015 the FDA has issued warning letters to firms marketing CBD products as dietary supplements and/or foods, and in December 2018, FDA declared it illegal to introduce food containing CBD (or THC) into interstate commerce, regardless if it is derived from hemp. To date, the only FDA approved CBD product is GW Pharmaceutical’s Epidiolex.
Marijuana remains classified as a Schedule I controlled substance under the CSA. Thirty-six (36) states have approved comprehensive, publicly available medical marijuana programs, and now 14 states have approved adult use programs, with New Jersey passing legislation on February 22, 2021. However, the industry has seen minimal movement toward mandating GMP requirements in the marijuana market. Only a handful of medical programs require manufacturers to follow GMP. Furthermore, the requirements are inconsistent between states and the language in the regulations on how to approach GMP implementation is vague and disjointed. This fragmented guidance supports the complexity and difficulty of enforcing a coherent, standardized and reliable approach to safe manufacturing practices.
What is GMP and Why Should You Care?
Good Manufacturing Practices (GMPs) are a system for ensuring that products are consistently manufactured and controlled according to quality standards and regulatory guidelines. The implementation of a GMP compliant program ensures consumer health and safety, allows manufacturers to understand the intended use of their products, allows manufacturers to defend product specifications as being appropriate, considers the risks to vulnerable populations and minimizes overall business risk. In a nutshell, GMP equals product safety and quality, and defines the responsibilities of the manufacturer to ensure consumers are protected from the distribution of unsafe and ineffective products. Currently, the GMP “landscape” in the cannabis space is complicated. The various “flavors” (food, dietary supplements, cosmetics and drugs/devices) of GMP leave many confused and frustrated when making the decision to implement GMP. Confusion is a result of unclear regulatory requirements as well as operators not fully understanding how to classify or designate the end use of their product(s). Implementing an effective GMP program requires proper planning (both short and long term), financial commitment and qualified resources.
Where Should You Start?
As the regulatory landscape continues to evolve and mature in the cannabis space, your business model must consider GMP implementation if you wish to remain successful and sustainable.
Intended Use
Before you can implement GMP you must first understand what GMP regulations apply to the intended use of your product(s). Are you manufacturing food, beverages or dietary supplements? Get acquainted with the FDA Code of Federal Regulations (CFRs) on GMP.
Conduct a Gap Assessment
A gap assessment allows you to determine your deficiencies in relation to GMP compliance. The assessment should include, but is not limited to facility design, equipment design, supply chain, risk management and employee training.
Develop an Action Plan
Once the gap assessment is complete a comprehensive action plan will be developed to map out the steps required to achieve GMP compliance. The action plan should follow the SMART Goal principles:
Specific (simple, well-defined)
Measurable (meaningful)
Attainable (achievable, agreed upon)
Relevant (resource-based, reasonable and realistic)
Timely (time-based, defined due dates)
The plan will include prioritized deliverables, due dates and allocated resources in order to strategically plan and execute and complete the required tasks.
Schedule a Mock GMP Inspection
A mock inspection verifies that the action plan was adequately executed. Hire an experienced resource familiar with related GMPs and QMS to conduct the inspection. A successful mock inspection is a perfect litmus test if the end goal is to achieve GMP certification.
Cannabis manufacturers that ignore the obvious progression toward an FDA-like industry will not survive the long game. Those that embrace the momentum and properly plan to mitigate product and business risk – those who demonstrate integrity and are truly in this space to ensure safe, effective and quality products to consumers will come out on top, gain credibility and secure brand recognition.
References:
21 CFR Part 111, Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements.
21 CFR Part 117, Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food and the Food Safety Modernization Act (FSMA).
21 CFR Part 210, Current Good Manufacturing Practice in Manufacturing, Processing, Packing, or Holding of Drugs; General.
21 CFR Part 211, Current Good Manufacturing Practice for Finished Pharmaceuticals.
21 CFR Part 700, Subchapter G-Cosmetics.
21 CFR Part 820, Subchapter H-Medical Devices; Quality System Regulation
Congressional Research Service, FDA Regulation of Cannabidiol (CBD) Products, June 12, 2019.
United States Food and Drug Administration-Warning Letters, Current Content as of 02/19/2021.
Part One of this series took a look at how the regulated cannabis market can only be understood in relation to the previous medical market as well as the ongoing “traditional” market. Part Two of the series describes how regulation defines vertical integration in California cannabis.
If you are considering getting involved in California cannabis, imagine the following sentence in ten-foot-tall letters made out of recently ignited $20 bills:
Before you put any money down on property, carefully examine the local cannabis ordinance and tax rates.
This article is written in the form of advice to a newbie cannabis entrepreneur in California, but it will discuss issues that are also of significance to investors, as well as (to various degrees) cannabis entrepreneurs in other states.
Here are seven basic questions that you need to ask about local regulations (in order, except for Number 7).
1. What’s Your Jurisdiction?
If you’re in city limits, it’s the city. If you’re outside city limits, it’s the county.
2. Does the Jurisdiction Allow Cannabis Activities?
If the answer is yes, go to the next question. If the answer is no, pick another jurisdiction.
3. Where Does the Jurisdiction Allow Cannabis Activities?
A zoning ordinance will limit where you can set up shop. The limitation will probably vary by license type.
4. How Does the Local Ordinance Affect Facility Costs?
The short answer is: in many ways. Your local ordinance is a Pandora’s box of legal requirements, especially facility-related requirements.1 Read your local cannabis ordinance very carefully.
Generally speaking, the cannabis ordinance will set out two types of requirements – those that are specific to cannabis and those that apply generally to any business.
Looks great but . . . where are the sprinklers? Does it need a seismic upgrade? How about floor drains? Photo by Wilhelm Gunkel on Unsplash
Cannabis-specific requirements:
Typically incorporate state cannabis laws by reference.
Have significant overlaps with state cannabis laws. For example, the state requires commercial-grade locks and security cameras everywhere cannabis may be found on a given premises. Local ordinances generally include similar requirements – keep in mind that you will need to comply with a combined standard that satisfies both state and local requirements.2
Vary greatly according to type of activity. For example, manufacturers will need to comply with Health & Safety Code requirements that can have a major impact on construction costs.
Vary greatly by jurisdiction when it comes to equity programs.
General requirements:
Include by reference building and fire codes, which can require very expensive improvements. Note that this means your facility will be inspected by the building department and the fire department.
Can include anything from Americans with Disabilities Act (ADA) requirements to city-specific requirements, such as Design Guidelines.
Will be zealously enforced because you’re a cannabis business.
5. What is the Enforcement Policy?
It may be that your local jurisdiction will give you temporary local authorization after meeting some, but not all, of the requirements. For example, you may be able to begin operations once you’ve provided your city or county with your cannabis permit application, a zoning clearance and a business permit. In this jurisdiction, you would be able to bring your building up to code sometime after you begin operations.
On the other hand, your local jurisdiction may require you to meet every requirement – from cannabis-specific security requirements to general building code and ADA requirements – before you can begin operations. Depending on the type of cannabis business (and facility condition), this might be inconsequential. Or it might mean that you will have to pay more than a year’s worth of rent (or mortgage) before you can start making money.
6. Can You Choose a Facility That Saves You Time and Money?
Of course, you won’t have to spend much time or money bringing your facility up to code if it’s already up to code. How likely it is that you will find such a facility varies wildly according to the type of cannabis activity in question. In general:
Service-side activities (delivery retail, storefront retail, distribution) are in many respects similar to their non-cannabis counterparts. From a facilities standpoint, the major differences come from security requirements. So, it may be possible to save time and money by choosing a facility that is already up to code for a similar use.
Manufacturing activities are trickier, since you will need food-grade facilities and equipment. You may be able to save money by setting up shop in a commercial kitchen.
Extraction with volatile solvents is a special (and particularly expensive) case, since it is inherently dangerous and requires special facilities.
Outdoor cultivation may be relatively unproblematic if it has an appropriate water source.
Indoor cultivation is expensive because of climate-control and lighting requirements. Buildings potentially suitable for large-scale indoor grows frequently come with significant problems. Former warehouses will typically require major power upgrades, while former factories may have inconvenient architecture and/or hidden toxic waste. In all cases, internal reconstruction is likely to be necessary, and will trigger all sorts of building and fire code requirements.
7. What Are the Local Cannabis Taxes?
Cannabis tax rates may be determinative. For example, Oakland imposes a 6.5% gross receipts tax on manufacturers that have gross receipts of less than $5M, and 9.5% on manufacturers that have gross receipts over $5M. In comparison, Santa Rosa only imposes a 1% gross receipts tax on manufacturers.
Local cannabis ordinances and taxes can make or break your business, so you need to understand them before you commit to a location. The seven basic questions listed above are designed to get you started.
This article is the opinion of the author and is not intended to be legal or other advice.
In a press release sent out this week, A2LA announced they have accredited Cannalytics to ISO 17025:2017. With the finalized accreditation in December 2020, Cannalytics is the first cannabis testing laboratory in Puerto Rico to get accredited to the standard.
Jorge Diaz, owner and director of Cannalytics, says their two main objectives are business excellence and quality. “Being the first ISO/IEC 17025 accredited cannabis laboratory in Puerto Rico affirms our mission to provide continuous quality science to our clients while safeguarding the health of Puerto Rico’s medical cannabis patients,” says Diaz.
Cannalytics is a medical cannabis and hemp testing lab based in San Juan, Puerto Rico. They offer compliance and R&D analysis in their suite of testing services.
“We are glad to see the continued growth of our cannabis program in a new territory, which further promotes the value that accreditation adds in ensuring quality in this emerging industry,” says Anna Williams, A2LA Accreditation Supervisor.
There is a significant increase in demand for all cannabinoid products across the board—including CBD, THC, CBG and THCV—from recreational users, consumer packaged goods and pharmaceutical companies. And the next great race is on for the hottest arrival to scientific cannabis therapeutics: rare cannabinoids.
Research shows rare cannabinoids are poised to be the future of cannabis investing, providing better health benefits in addition to impacting the pharmaceutical, CPG, nutraceuticals, cosmetics and pet care markets significantly. According to recent reports, the biosynthesis of rare cannabinoids will be a $25 billion market by 2025 and $40 billion by 2040.
The companies that will revolutionize this market are ones with the highest quality and lowest prices, which means that biosynthetic cannabinoid companies will be the leaders in investment and capturing market share. We will also see a major consolidation in this market amongst the grow, harvest and extraction companies, increasing efficiencies and driving down costs.
What are rare cannabinoids and why should we care?
Tetrahydrocannabivarin (THCV)
Rare cannabinoids such as CBG, CBN, THCV, THCA and others have significantly better and more specific health benefits than just CBD on its own. Biotech companies like ours, Biomedican, which has a patent-pending biosynthesis platform, can produce pharmaceutical grade, non-GMO, bioidentical, synthetic cannabinoids with 0.0% THC at 70-90% less cost. Producing 0.0% THC means that rare cannabinoids can be added into nutraceuticals, CPG and cosmetics/lotions with zero changes in current cannabis regulations. Also, we produce the same exact product every time (not possible through plants), which is extremely important for pharmaceutical companies conducting clinical trials.
Why are rare cannabinoids important?
The human body contains different cannabinoid receptors that help regulate critical processes, including learning, memory, neuronal development, appetite, digestion, inflammation, overall mood, sleep, metabolism and pain perception. This considerable involvement of cannabinoid receptors, critical to many physiological systems, underscores their potential as pharmaceutical targets.
Tetrahydrocannabinol (THC), just one of hundreds of cannabinoids found in cannabis.
Pharmacological research has uncovered several medical uses for cannabinoids, which bind to cannabinoid receptors. They’ve been shown to help with pathological conditions such as pediatric epilepsies, glaucoma, neuropathic pain, schizophrenia and have anti-tumor effects as well as promote the suppression of chemotherapy-induced nausea. This ongoing research is becoming more prevalent and has the potential to uncover therapeutic uses for an array of cannabinoids.
In addition to the medical field, other prominent sectors have adopted the use of cannabinoids. There is an increasing demand for cannabinoids in inhalables, the food industry and in hygienic and cosmetic products. Veterinary uses for cannabinoids are also coming to light. The use of naturally occurring cannabinoids reduces the need for synthetic alternatives that may produce harmful off-target effects.
So how does this affect the investing market?
Where there is demand, significant and growth investments follow. All the major players from nutraceuticals, CPG, cosmetics and pet care companies are driving the demand for rare cannabinoids. We are seeing a major investment shift from commodity-based prices for cannabis and CBD to the new biosynthesis technology which offers significantly better health benefits and higher profit margins. Those unique qualities of rare cannabinoids open an enormous opportunity to create new drugs and food supplements for treating various medical conditions and improving the quality of life. This creates a massive global opportunity for all companies in these categories differentiating their products from competitors.
The structure of cannabidiol (CBD)
There will be big winners and losers in these markets, but at the end of the day, the highest quality and lowest cost producers will capture most of these markets. Biomedican has the highest quality, highest yields and lowest cost of production in the industry. Which we believe will make us the clear leader in the biosynthesis rare cannabinoid markets.
Which rare cannabinoid to invest in first?
Early reports indicate THCV (not to be confused with THC) could contain a variety of health benefits: it may help with appetite suppression/weight loss, possibly treat diabetes as well the potential to reduce tremors and seizures caused by conditions like multiple sclerosis, Parkinson’s disease and ALS.
There has been an explosion of interest in THCV due to its potential health benefits. We are seeing major players in the nutraceutical, health food and pharmaceutical industries clamoring to add THCV to their product lines. Companies can now produce THCV through biosynthesis, creating a pharmaceutical-grade, organic, bioidentical compound at 70-90% less than wholesale prices. This is exactly what the largest players in the market want: a pharmaceutical-grade, consistent product at significantly less cost. The current prices and quality have limited THCV production, but new breakthroughs in biosynthesis have solved those issues, so we expect a tsunami of orders for THCV in 2021.
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The bill establishes the Virginia Cannabis Control Authority as the regulatory body overseeing the legal cannabis market. A five-member Board of Directors in that agency will develop and issue regulations and licenses. According to the bill, the Board can set the number of licenses, with a maximum of 400 retailers, 25 wholesalers, 450 cultivators and 60 manufacturers, aside from any medical cannabis and hemp processing license already issued. The Board is also in charge of licensing testing labs.
