Last week, Oregon Secretary of State Dennis Richardson published his office’s audit of The Oregon Liquor Control Commission (OLCC). The audit uncovered a number of inadequacies with the regulatory agency, most notably the problems with their tracking system, designed to prevent cannabis form being sold on the black market.
The report highlights the need for Oregon to implement a more robust tracking system, citing reliance on self-reporting, overall poor data quality and allowing untracked inventory for newly licensed businesses. The audit also found an insufficient number of inspectors and unresolved security issues. According to The Oregonian, the OLCC only has 18 inspectors, roughly one for every 83 licensed businesses.
Auditors also found inadequacies in the application system, saying the OLCC doesn’t monitor third-party service providers and doesn’t have a process in place for reconciling data between the licensing and tracking systems. The audit found there is a risk that decisions made for the program could be based on unreliable data. It also found a risk of unauthorized access to the systems, due to a lack of managing user accounts.
This audit’s publication is very timely. Most notably because U.S. Attorney Billy Williams, who called Oregon’s black market problem “formidable,” convened a summit this week to examine how Oregon can prevent cannabis being exported to other states. According to the Oregonian, Williams said Oregon has an “identifiable and formidable overproduction and diversion problem.” The audit’s findings highlighting security issues are also very timely, given that in the same week, Oregon’s neighbor to the North, Washington, experienced a security breach in its own tracking system.
The problems with the Oregon tracking system’s security features are numerous, the audit says. They found that the OLCC lacks a good security plan, IT assets aren’t tracked well, there are no processes to determine vulnerabilities, servers and workstations not using supported operating systems and a lack of appropriately managing antivirus solutions. “Long-standing information security issues remain unresolved, including insufficient and outdated policies and procedures necessary to safeguard information assets,” reads the report’s summary.
The audit proposes 17 recommendations for the state to bolster its regulatory oversight. Those recommendations intend to address undetected compliance violations, weaknesses in application management, IT security weaknesses and weaknesses in disaster recovery and media backup testing. You can read the full audit here.
For about a month now, California’s adult use market has been open for business and the market is booming. About thirty days into the world’s largest adult use market launch, we are beginning to see side effects of the growing pains that come with adjusting the massive industry.
Consumers are also feeling sticker shock as the new taxes add up to a 40% increase in price.While the regulatory and licensing roll out has been relatively smooth, some municipalities are slower than others in welcoming the adult use cannabis industry. It took Los Angeles weeks longer than other counties to begin licensing dispensaries. Meanwhile, retailers in San Diego say the first month brought a huge influx of customers, challenging their abilities to meet higher-than-expected demand.
Businesses are struggling to deal with large amounts of cash, but California State Treasurer John Chiang may have a solution in store. Yesterday, his department announced they are planning to create a taxpayer-backed bank for cannabis businesses.
In the regulatory realm, some are concerned that a loophole in the rules allows bigger cultivation operations to squeeze out the competition from smaller businesses. The California Growers Association filed a lawsuit against the California Department of Food and Agriculture to try and close this loophole, hoping to give smaller cultivators a leg up before bigger companies can dominate the market.
The Bureau of Cannabis Control (known as just “The Bureau”) began holding meetings and workshops to help cannabis businesses get acquainted with the new rules. Public licensing workshops in Irvine and San Diego held last week were designed to focus on information required for licensing and resources for planning. The Bureau also held their first cannabis advisory committee meeting, as well as announcing new subcommittees and an input survey to help the Bureau better meet business needs.
On the lab-testing front, the state has phased in cannabinoids, moisture content, residual solvent, pesticide, microbial impurities and homogeneity testing. On July 1, the state will phase in additional residual solvent and pesticide testing in addition to foreign material testing. At the end of 2018, they plan on requiring terpenoids, mycotoxins, heavy metals and water activity testing as well.
California’s full legal cannabis market officially opened its doors for business on January 1st, 2018. Following a relatively short time frame when they announced the first licenses awarded less than a month ago, retail stores were open for business in counties throughout California. Customers came out in full force, with long lines on the opening day, with some hundreds deep stretching around blocks.
For the quick turn around time between implementing regulations and awarding temporary licenses, the grand opening of the cannabis market in the nation’s most populous state proceeded smoothly. Only a handful of minor hiccups associated with the launch were reported throughout the state. In the grand scheme of things, that’s a pretty good job for a new regulatory agency (The Bureau) tasked with regulating such a massive fledgling market.
One major and definitely foreseeable hiccup in the launch of California’s new medical and adult use markets was the failure to implement tracking software. According to Michael Blood with The Associated Press, licensed businesses are being asked by the California Department of Food and Agriculture to manually document sales and transfers of cannabis with paper invoices.
While the Department said the traceability system was implemented Tuesday, Blood says, cannabis businesses are not required to use it and will be trained on how to operate it before it becomes required to use later in 2018.
Local control regulations in California means that businesses must first seek approval from local authorities before attaining a temporary license from the state to operate. That coupled with the rolling process of awarding licenses meant that only some cannabis businesses could officially open their doors. Municipalities throughout California handle regulating cannabis differently.
Last week, the Bureau of Cannabis Control issued the first licenses for California’s new market. The first license went to Moxie, a cannabis distribution company out of Lynwood.
As of the publication of this article, the Bureau, the state authority tasked with leading the regulation of the industry, has issued 43 temporary licenses. So far, four laboratories have received licenses, along with a number of retailers, distributors, microbusinesses in both medical and adult-use markets.
The labs to receive their temporary licenses so far are pH Solutions, Steep Hill Labs, Pure Analytics and ORCA Cannalytics. Judging by the number of temporary medical and adult-use licenses awarded so far, it appears the Bureau is trying to issue a similar amount for each sector, distributing the number of licenses between the two equitably.
You can find the list of licensees here, and search between the dates of 12/15/17 to 1/2/18 to get the most up-to-date list of licenses awarded. “Last week, we officially launched our online licensing system, and today we’re pleased to issue the first group of temporary licenses to cannabis businesses that fall under the Bureau’s jurisdiction,” says Lori Ajax, Bureau of Cannabis Control Chief. “We plan to issue many more before January 1.”
According to the press release, temporary licenses are only issued to applicants with prior local authorization in the form of a license or permit from the jurisdiction where the business is. Those licenses will become effective on January 1, 2018. The temporary licenses will work for 120 days, or May 1, 2018, after which businesses will need to have a permanent license to continue operating.
More than 1,900 users have registered with the Bureau’s online system, and more than 200 applications have been submitted, according to the press release.
The various regulatory bodies in California have worked diligently for months now to roll out proposed emergency regulations, setting strict requirements for manufacturers, growers, retailers and testing labs. Manufacturing regulations, including specific labeling, packaging and processing requirements, give a good snapshot of how regulators plan to move forward. Testing requirements could also be significantly firmer, with rules for documentation, sample sizes, sampling procedures, storage and transportation.
Yet when the adult-use sales become fully legal on January 1, 2018, those regulations will not be fully implemented.
Donald Land, a UC Davis chemistry professor and chief scientific consultant at Steep Hill Labs Inc., told The Associated Press, “Buyer beware.” There will be a six-month range where existing inventory will be allowed on the shelves, products that might not meet the standards of the new rules. So dispensaries will get half a year of sales before all products have to meet the new, stricter testing requirements.
Back in November, New Jersey elected Democrat Phil Murphy for governor, who ran on a campaign of legalizing adult use cannabis and using tax revenue from that for important government programs like education and pensions. According to CNN Money, NJ State Senate President Stephen Sweeney says he wants to vote on draft legislation and have it approved within 100 days of Gov. Murphy’s inauguration.
That bill, sponsored by Sen. Nicholas Scutari back in May (the same Senator that sponsored the state’s now-implemented medical cannabis law), would legalize cannabis use, growing and sales, for those over the age of 21, while tacking on a hefty tax. The legislation, if it passes the vote and signed into law this spring, would also create a licensing framework and a “Division of Marijuana Enforcement,” the government body that would be tasked with regulating the industry.
Election victories throughout the state for Democrats means they now control the executive and legislative branches of the state’s government, opening the door for possibly legalizing cannabis within a year. This is a massive about-face for the state, previously controlled by Republican and Trump-supporter Chris Christie, a less-than-cannabis-friendly Governor who once called tax revenue from cannabis “blood money.”
But the newly revived fervor over legalizing cannabis in New Jersey comes with its own hang-ups. For one, Governor Phil Murphy claimed this could bring up to $300 million in tax revenue, which is a bit of a pipedream in the short term. The state would need total cannabis sales to hit $1.2 billion to reach that amount of tax revenue, something New Frontier Data doesn’t expect would happen until maybe 2025.
Amol Sinha, executive director of the ACLU of New Jersey, wrote an op-ed addressing Murphy’s campaign promises. Sinha says that Gov.-elect Murphy ran on legalizing cannabis “as a social and racial justice priority.” He argues that in order for New Jersey to legalize cannabis equitably, the legislation needs to have automatic expungement of previous cannabis-related criminal convictions, a provision for growing at home, fair regulations and community reinvestment of the tax revenue. On the surface, Sen. Nicholas Scutari’s bill introduced back in May of 2017 seems to have provisions in place to meet all of these requirements.
In late November, California released their proposed emergency regulations for the cannabis industry, ahead of the full 2018 medical and adult use legalization for the state. We highlighted some of the key takeaways from the California Bureau of Cannabis Control’s regulations for the entire industry earlier. Now, we are going to take a look at the California Department of Public Health (CDPH) cannabis manufacturing regulations.
According to the summary published by the CDPH, business can have an A-type license (for products sold on the adult use market) and an M-type license (products sold on the medical market). The four license types in extraction are as follows:
Type 7: Extraction using volatile solvents (butane, hexane, pentane)
Type 6: Extraction using a non-volatile solvent or mechanical method
(food-grade butter, oil, water, ethanol, or carbon dioxide)
Type N: Infusions (using pre-extracted oils to create edibles, beverages,
capsules, vape cartridges, tinctures or topicals)
Type P: Packaging and labeling only
As we discussed in out initial breakdown of the overall rules, California’s dual licensing system means applicants must get local approval before getting a state license to operate.
The rules dictate a close-loop system certified by a California-licensed engineer when using carbon dioxide or a volatile solvent in extraction. They require 99% purity for hydrocarbon solvents. Local fire code officials must certify all extraction facilities.
In the realm of edibles, much like the rule that Colorado recently implemented, infused products cannot be shaped like a human, animal, insect, or fruit. No more than 10mg of THC per serving and 100mg of THC per package is allowed in infused products, with the exception of tinctures, capsules or topicals that are limited to 1,000 mg of THC for the adult use market and 2,000 mg in the medical market. This is a rule very similar to what we have seen Washington, Oregon and Colorado implement.
On a somewhat interesting note, no cannabis infused products can contain nicotine, caffeine or alcohol. California already has brewers and winemakers using cannabis in beer and wine, so it will be interesting to see how this rule might change, if at all.
The rules for packaging and labeling are indicative of a major push for product safety, disclosure and differentiating cannabis products from other foods. Packaging must be opaque, cannot resemble other foods packaged, not attractive to children, tamper-evident, re-sealable if it has multiple servings and child-resistant. The label has to include nutrition facts, a full ingredient list and the universal symbol, demonstrating that it contains cannabis in it. “Statute requires that labels not be attractive to individuals under age 21 and include mandated warning statements and the amount of THC content,” reads the summary. Also, manufacturers cannot call their product a candy.
Foods that require refrigeration and any potentially hazardous food, like meat and seafood, cannot be used in cannabis product manufacturing. They do allow juice and dried meat and perishable ingredients like milk and eggs as long as the final product is up to standards. This will seemingly allow for baked goods to be sold, as long as they are packaged prior to distribution.
Perhaps the most interesting of the proposed rules are requiring written standard operating procedures (SOPs) and following good manufacturing practices (GMPs). Per the new rules, the state will require manufacturers to have written SOPs for waste disposal, inventory and quality control, transportation and security.
According to Donavan Bennett, co-founder and chief executive officer of the Cannabis Quality Group, California is taking a page from the manufacturing and life science industry by requiring SOPs. “The purpose of an SOP is straightforward: to ensure that essential job tasks are performed correctly, consistently, and in conformance with internally approved procedures,” says Bennett. “Without having robust SOPs, how can department managers ensure their employees are trained effectively? Or, how will these department managers know their harvest is consistently being grown? No matter the employee or location.” California requiring written SOPs can potentially help a large number of cannabis businesses improve their operations. “SOPs set the tempo and standard for your organization,” says Bennett. “Without effective training and continuous improvement of SOPs, operators are losing efficiency and their likelihood of having a recall is greater.”
Bennett also says GMPs, now required by the state, can help companies keep track of their sanitation and cleanliness overall. “GMPs address a wide range of production activities, including raw material, sanitation and cleanliness of the premises, and facility design,” says Bennett. “Auditing internal and supplier GMPs should be conducted to ensure any deficiencies are identified and addressed. The company is responsible for the whole process and products, even for the used and unused products which are produced by others.” Bennett recommends auditing your suppliers at least twice annually, checking their GMPs and quality of raw materials, such as cannabis flower or trim prior to extraction.
“These regulations are only the beginning,” says Bennett. “As the consumer becomes more educated on quality cannabis and as more states come online who derives a significant amount of their revenue from the manufacturing and/or life science industries (e.g. New Jersey), regulations like these will become the norm.” Bennett’s Cannabis Quality Group is a provider of cloud quality management software for the cannabis industry.
“Think about it this way: Anything you eat today or any medicine you should take today, is following set and stringent SOPs and GMPs to ensure you are safe and consuming the highest quality product. Why should the cannabis industry be any different?”
Ahead of the state’s implementation of their full adult use legalization in early 2018, California is working on improving their public outreach. Last week, the California Department of Public Health launched “Let’s Talk Cannabis”, a website dedicated to consumer education.
About two weeks ago, the Bureau of Cannabis Control, California’s state regulatory body for the cannabis industry, launched a rebranding effort of their own, with a new logo, website and even an Instagram account. Their “Cannabis Portal” is a website dedicated to helping those in the industry get updated information on licensing, new regulations and other news and events.
The Bureau’s upgraded website will better help business owners stay up-to-date on upcoming regulations and licensing applications, according to a press release. Judging by their Facebook (@bccinfo.dca), Twitter (@bccinfo_dca) and Instagram pages, the regulatory body seeks to have a more public presence online than other states’ regulatory bodies.
The state’s three regulatory bodies are featured on the portal. The Bureau of Cannabis Control is just one regulatory arm of the government, basically responsible for licensing dispensaries, distributors and laboratories. The Manufactured Cannabis Safety Branch, a division of the California Department of Public Health (CDPH), will presumably regulate manufacturers of infused products. CalCannabis Cultivation Licensing is under the California Department of Food and Agriculture (CDFA), which will oversee regulating growers of medical and adult use cannabis. That regulatory body is also in charge of the state’s seed-to-sale traceability software system.
The Department of Public Health’s “Let’s Talk Cannabis” website is more of a consumer-focused educational tool. It features frequently asked questions, some links to other resources, information on legalization and information for the youth, parents and pregnant and breastfeeding women. That consumer-facing website offers tips for parents on storing cannabis and keeping it out of reach of children, in addition to advice for responsibly consuming cannabis.
It will be interesting to see how they plan on using those social media pages in the future. At first glance, they could be excellent tools for regulators to communicate with licensees, to help explain common regulatory compliance errors or to provide tips and tricks for staying compliant. The consumer-facing portal could also be a great means for communicating product recalls or public health and safety alerts, things that Colorado and Oregon currently struggle with.
You’ve heard it in a lot of campaigns to legalize cannabis on a state level and even as the name of a bill in Congress for legalization on the federal level. The Marijuana Policy Project through their campaigns in several states, along with activists, politicians and lobbyists, have used the phrase “Regulate Marijuana Like Alcohol” as a rallying cry to pass legislation reforming cannabis laws. This isn’t an attack on them; those campaign names serve the cause well, moreover it was the name of successful campaigns in Massachusetts, Maine, California, Alaska and Colorado among others. It is a relatable and fair comparison, helping to normalize the concept of adults using cannabis in a legal environment.
But that feeling of validation is short-lived after lawmakers write the actual regulations. In reality, I don’t think a single state can confidently say they actually regulate cannabis like alcohol. Most states do not allow public or social consumption of cannabis; many people that would like to enjoy cannabis in a social setting are restricted to the confines of their home.
Voters in Colorado passed Amendment 64 in 2012 with this language in the very beginning of the bill: “In the interest of the health and public safety of our citizenry, the people of the State of Colorado further find and declare that marijuana should be regulated in a manner similar to alcohol.” If you look closely, you can see how important phrasing is when it comes to the specific regulations. The key words here are “a manner similar to alcohol,” not exactly like alcohol. That language is critical to understanding how regulators address the double standard.
The most obvious way lawmakers regulate cannabis like alcohol is through a tiered system of license holders: manufacturers, distributors or wholesalers and retailers. Many states might set a limit on potency, just like they do with alcohol, according to Pamela S. Erickson, former executive director of the Oregon Liquor Control Commission. Both of the drugs are taxed and there are usually regulations for both governing the advertising of products, such as preventing targeting youth or encouraging high consumption. Regulators might limit the store hours or locations for both cannabis and alcohol. Beyond those similarities, there are a number of areas where cannabis is over-regulated and alcohol is seemingly under-regulated. It is very possible that much of this has to do with the power of the alcohol lobby. In 2016, the alcohol industry spent over $26 million on lobbying efforts, according to the Center for Responsive Politics, a non-profit, nonpartisan group that tracks lobbying efforts. During election season, the alcohol industry spent more than $11 million on campaign contributions. There are several examples of the alcohol industry actively fighting legalization efforts, including paying for anti-cannabis ads in a Politico newsletter and even funding opposition campaigns. While this doesn’t exactly pertain to the regulation of cannabis versus alcohol, it gives you a glimpse of how deep their coffers go and the amount of influence they have on politics.
Last year, the city of Denver passed a ballot measure, Initiative 300, which will legalize the social consumption of cannabis in permitted venues. The Denver Social Consumption Advisory Committee met for the final time last week. That committee designed two styles of permits: one for events and one for established businesses, which would receive a designated consumption area permit (DCA). Those permitted venues must be 1,000 feet from schools, child-care centers or drug rehabilitation centers. They need a waste plan, compliance with the Indoor Air Quality Act and they cannot sell cannabis products. Rachel Gillette, attorney in the cannabis law group and shareholder at Greenspoon Marder, says the legal implications of the initiative are still up in the air. “This was a step in the right direction,” says Gillette. “You can’t pass a law to regulate marijuana like alcohol and then say people can only use it in their home. You are going to run into problems like people smoking on the street. This is why this initiative was introduced.”
The general idea here is B.Y.O.P.- bring your own pot. They cannot have a liquor license, the location cannot be accessible to the general public, they have to submit a detailed security plan and patrons have to sign a waiver to get in, according to Westword. Signing a waiver to get into a bar should seem asinine to anyone, but I have been to some dive bars where a waiver could’ve definitely been useful. The point is that cannabis doesn’t lead to violence or destructive behavior, alcohol is the drug that does that. There is plenty of evidence to support that, including a comparative risk assessment of the drugs, which found alcohol’s danger to be strongly underestimated previously.
Senate Bill 63 in the Colorado State legislature would have been very similar, issuing licenses for “marijuana consumption clubs.” However that bill was voted down last Thursday, largely due to the uncertainty of federal policy, according to ABC News.
Amendment 64 also has specific language saying you cannot consume cannabis in a public space, but that is not exactly the case with liquor, even when you consider open container and public intoxication laws. “In my previous interactions with the state and particularly the liquor licensing authority, they consider liquor-licensed premises to be de facto public spaces but you can’t consume cannabis there, which is why hotels, bars and restaurants explicitly prohibit cannabis consumption, they have a liquor license,” says Gillette. “There is a bit of conflict in the law here.”
Yet other rules, such as mandatory childproof containers for cannabis retailers, seem a bit draconian compared with buying a bottle of twist-off wine from the grocery store. “Childproof packaging isn’t required in liquor stores anywhere,” says Gillette. “Why cant responsible adults be trusted to keep it out of a child’s reach? Unfortunately there is a lot of trepidation to allow responsible adults to be responsible when it comes to cannabis.” In some ways, we are seeing states begin to regulate cannabis very closely to how they would alcohol, yet there is a long way to go. “There is still this nanny state mentality where we run the risk of regulating it to the point of absurdity,” says Gillette. For now at least, we need to be cognizant of the age-old stigma and work to normalize social cannabis use in a legal sense. Until that time comes, we will have to tolerate lawmakers regulating cannabis in a manner similar to alcohol, not exactly like alcohol.
This November 8th, voters in five states will head to the polls to decide on legalizing recreational cannabis and another three states have ballot initiatives that would legalize medical cannabis. If any of those five states pass a measure for recreational legalization, including Massachusetts, Maine, Nevada, Arizona and California, (which are all leading in the polls) they could potentially create massive new market opportunities for cannabis brands that have their eye on expansion.
Nancy Whiteman, co-owner of Wana Brands and chair of the Cannabis Business Alliance Infused Product Committee, sees great potential in capitalizing on those markets early. Whiteman has been working with Wana Brands since 2010 in Colorado, starting out in the young medical market there.
After expanding to the recreational market, Wana Brands saw its sales skyrocket. From January to August 2016, Wana had the best-selling candy brand in Colorado with 21% dollar share, according to BDS Analytics. Wana Brands has already expanded to Oregon and will launch in Nevada on November 15th, with agreements signed to expand in other states as well. “The model we are pursuing is a licensing agreement where we partner with existing or new license holders in their state,” says Whiteman. “In many ways they are doing the heavy lifting, but we are providing an enormous lift by licensing our intellectual property to them.” That model for growth is becoming increasingly common in some of the more established brands, like Steep Hill Laboratories, GFarma Labs, Dixie and others. Whiteman says that Wana Brands also has a partner in Illinois, Massachusetts and a number of other states they hope to reach.
According to Mark Slaugh, executive director of the Cannabis Business Alliance and chief executive officer of iComply, a compliance services provider, brands from Colorado expanding to other states need to ask themselves if their reputation is on the line with these new operators. “If you are licensing to companies that are not compliant, the penalties could be huge and they vary state to state- that could potentially hurt the overall brand image nationally,” says Slaugh. “People doing the licensing that are operating with full compliance really need to look at controlling that risk and mitigating that as much as possible.” With brand trust on the line, there are substantial risks that come with expansion. “We help clients ensure quality is consistent so, for example, an edible product would taste the same in Colorado as it would in Nevada or Arizona. They need to follow the intellectual property consistently but more importantly follow those specific regulations in that state to stay afloat.” Managing ongoing compliance in different states requires monitoring regulatory updates across multiple markets, which can get incredibly complex.
“Six years ago, it was much easier to get into the market in Colorado,” says Whiteman. “There were no capital requirements, no limits on the number of licenses, but there was still a lengthy application and vetting process- as long as you met those minimum requirements you could get a license.” Other new states put stringent limits on the number of licenses granted and some have extraordinarily cost-prohibitive capital requirements, up to a million dollars, as is the case for New York. “Anyone who becomes a license holder in Massachusetts has to be prepared to embark on three separate business models, which is a massive undertaking,” says Whiteman. Massachusetts requires license holders to cultivate, process and dispense in a vertically integrated model.
In other states, Wana Brands is working with exclusive partners who will have the capabilities to manufacture and distribute throughout the entire state, but in Massachusetts that won’t be the case. “To cover the state, we need several partnerships; the partner we are working with is a little south of Boston,” says Whiteman. But all that could change if voters in Massachusetts legalize it recreationally, opening a much larger market than the current medical program. “With no legislation drafted yet, the regulatory environment is still up in the air in Massachusetts so there is no way of telling what the recreational market will look like.” In terms of ongoing regulatory compliance, Whiteman believes that Colorado still has some of the most stringent rules. The universal symbol printed on every individual edible product serving is one example. “Every state has different lab testing and licensing requirements, but Colorado looks like the most stringent currently,” says Whiteman. “Colorado requires a full gamut of lab testing including homogeneity, potency, residual solvents, contaminants and soon pesticides too.” According to Mark Slaugh, Nevada’s lab testing regulations are fundamentally different from Colorado’s with regard to sampling procedures, but the broader inconsistencies in lab standards need to be addressed. “The lack of laboratory standardization state to state with regard to methods creates a big challenge to get consistent, proficient lab testing across the board,” says Slaugh.
A big differentiator between Colorado and other states is that it was a first mover. “When Colorado came online there were not any established brands to speak of anywhere in the country- we were all pioneers,” says Whiteman. “Because it is so difficult to get a license in another state, either the organization or investor groups are looking to partner with established brands.” The advantages to this business model are many. Expediting your entry to market gets you the advantage of being a first mover. Working with an established brand also minimizes risks and the learning curve. “Bigger players understand that building a brand from scratch is time consuming and expensive so I think we will see a lot of these partnerships.”
As those new states come online, similarities in their regulations might appear in the form of standard operating procedures (SOPs) or good manufacturing practices (GMPs). “We might start to see a standardization from state to state that models FDA GMPs or USDA GAPs, [good agricultural practices] moving toward a framework that is more consistent with the possibility of federal regulation,” says Slaugh. Another commonality among a number of states is the implementation of a statewide tracking system. According to Slaugh, California has no such mandated system in place yet. “They will probably have one eventually but the market is so localized there- we will see if California will be ready with a statewide compliance system for tracking by 2018,” says Slaugh. “With such a weird patchwork of local governments allowing or not allowing certain operations to exist, it is a tough business to be in and it’s getting tougher every day.”
Even though half of U.S. states and the District of Colombia now permit the possession of medical or recreational cannabis, state regulatory bodies differ greatly in their approaches to managing our industry. In Washington, anyone over the age of 21 can legally possess one ounce of usable cannabis and/or seven grams of concentrate. In Minnesota, patients are only allowed to purchase non-smokable cannabis in pill, liquid or oil form.
Given these substantial differences, it is no surprise that the application process to open a dispensary or cultivation facility also varies from state to state. The question I am most often asked (and catch myself mulling over late at night) is what can applicants do to ensure their success, regardless of where they are applying?
Recently we helped a client secure one of the first 15 licenses issued to grow medical cannabis in Maryland. The Maryland application process was particularly unique because most of the applicants had political or law-enforcement ties, or were connected to successful out-of-state growers. That experience, along with our work in places like Arizona, Colorado and Florida, has shown me the importance of teamwork, diversity and security in developing a winning application.
So here are my suggestions for ensuring a successful submission, regardless of which state you are operating in:
Build the Right Team. My dad likes to say, “Use the right tool for the right job.” I think the same is true about creating the team for your application. Do not assume one or two people will be able to fill all of the required roles. You will need experts in a range of different areas including medicine, pharmacology, capital investment, cultivation, real estate, security and law.
Focus on Diversity. I think one of the reasons we have been successful in helping clients secure applications (we are six for six, in six different states) is our commitment to gender, racial and even geographic diversity. For example, we recently helped a client secure a license in an economically underdeveloped area. I think our choice to headquarter the new business outside of the metropolitan corridor was at least partially responsible for our success.
The Devil is in the Details. According to ArcView Market Research, the cannabis industry is expected to be worth $23 billion by 2020. If you want to be one of the organizations selected by your state to sell cannabis, you need to have your act together. Most applications ask incredibly detailed questions. Therefore it is essential that you answer them thoroughly and accurately. All answers should be in compliance with your state’s regulations.
Put Safety First. You will need a comprehensive plan that takes all aspects of security into account. This includes everything from hiring security guards to purchasing cameras, and implementing internal anti-theft procedures. Regardless of the size of your operation, safety should be a primary consideration.
Secure Funding. Successful cannabis businesses require capital. It’s important to be realistic about the amount of money you will need to have on hand. Application costs typically range from $500,000 to $1 million. This will cover things like hiring an architect or leasing land. Ideally, your organization will have another $5 to $10 million or more available to start your project once you’ve been approved so that you can quickly become operational.
Connect With Your Community. It is essential to consider the impact of your business on the community. Being a good corporate citizen means being transparent and engaging in a two-way dialogue with neighbors, government officials and patients. I strongly recommend that my clients develop a comprehensive community outreach plan that designates which organizations they plan to work with, (hospitals or universities, for example) and what the nature of those partnerships will be.