Tag Archives: processor

Supplier Quality Audits: A Critical Factor in Ensuring GMP Compliance

By Amy Scanlin
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Editor’s Note: This is an article submission from the EAS Consulting Group, LLC team.


To Audit, or not to audit? Not even a question! Audits play a crucial role in verifying and validating business practices, ensuring suppliers are meeting their requirements for Good Manufacturing Practices (GMPs), and most importantly, protecting your interests by ensuring that you consistently receive a compliant and quality product. Audits can help ensure sound business procedures and quality systems, including well-established SOPs, verification and documentation of batch records, appropriate sanitation practices and safe storage and use of ingredients. Audits can also identify deficiencies, putting into motion a corrective action plan to mitigate any further challenges. While a detailed audit scheme is commonplace for established industries such as food, pharmaceuticals and dietary supplements, it is equally important for the cannabis industry to ensure the same quality and safety measures are applied to this budding industry.

If the question then is not whether to audit, perhaps the question is how and when to audit, particularly in the case of a company’s suppliers.This is an opportunity to strengthen the working relationship with each side demonstrating a commitment to the end product.

Supplier audits ensure first and foremost that the company with which you have chosen to work is operating in a manner that meets or exceeds your quality expectations – and you should have expectations because ultimately your product is your responsibility. Any issues that arise, even if they are technically the fault of a supplier, become your issue, meaning any enforcement action taken by your state regulators will directly impact your business. Yes, your supplier may provide you with a batch Certificate of Analysis but you should certify their results as well.

Audits are a snapshot of a moment in time and therefore should be conducted on a regular basis, perhaps biennially or even annually, if they are a critical supplier. In some cases, companies choose to bring in third-party auditors to provide an objective assessment of suppliers. This is especially helpful when the manufacturer or customer does not have the manufacturing, compliance and analytical background to accurately interpret data gathered as part of the audit. With the responsibility for ensuring ingredient identity and product integrity falling on the manufacturer, gaining an unbiased and accurate assessment is imperative to reducing the risk to your business.

Conducting a supplier audit should be well planned in advance to ensure both sides are ready. The audit team must be prepared and able to perform their duties via a combination of education, training and experience. A lead auditor will oversee the team and ultimately will also oversee the results, verifying all nonconformities have been properly identified. They will also work with the supplier to conduct a root cause analysis for those nonconformities and develop a corrective action plan to eliminate them from occurring in the future. The audit lead will also verify follow-up results.

Auditors should discuss with the supplier in advance what areas will be observed, what documentation will need to be ready for review and they should conduct their assessments with professionalism. After all, this is an opportunity to strengthen the working relationship with each side demonstrating a commitment to the end product.This is your chance to ensure your suppliers are performing and will meet your business, quality and product expectations.

Auditors must document that ingredient identity and finished product specifications are verified by test methods appropriate for the intended purpose (such as a whole compound versus a powder). State regulations vary so be certain to understand the number and types of required tests. Once the audit is complete and results are analyzed, you, the manufacturer, have an opportunity to determine if the results are acceptable. Remember, it is your product, so ultimately it is your responsibility to review the available data and release the product to market, you cannot put that responsibility on your supplier.

Quality Agreements as Part of a Business Agreement

There are opportunities to strengthen a partnership at every turn, and one way to set a relationship on the right path is to include a quality agreement as part of a business agreement. A quality agreement lays out your expectations for your suppliers, what you are responsible for and is a living document that, once signed, demonstrates their commitment to upholding the standards you expect. Just as with a business agreement, have any quality agreements reviewed by an outside expert to ensure the wording is sound and that your interests are protected. This is just another step in the development of a well-executed business plan and one that solidifies expectations and provides consequences when those expectations are not met.

Supplier audits must be taken seriously as they are opportunities to protect your brand, your business and your consumers. Enter into an audit as you would with any business endeavor – prepared. This is your chance to ensure your suppliers are performing and will meet your business, quality and product expectations.

NACB Releases Packaging and Labeling Standards for Public Review

By Aaron G. Biros
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Last week, the National Association of Cannabis Businesses (NACB) announced the publication of their Packaging and Labeling National Standard, initiating a comment period for public review. The NACB, which launched in June of 2017, is the first-ever self-regulatory organization (SRO) for cannabis businesses in the United States.

According to the press release, the Packaging and Labeling National Standard, the first standard for them to publish, is designed to help protect consumers and show regulators and financial institutions that members of NACB operate ethically and responsibly.

Andrew Kline, president of NACB

According to Andrew Kline, president of NACB, the standard is based on regulators’ priorities, among other stakeholder inputs. “The NACB believes that self-regulation is the most effective course of action for our members to control their own destiny in the face of regulators’ growing need to intervene,” says Kline. “The creation and adoption of national, voluntary standards that are aligned with regulators’ priorities takes input from government, NACB members, and subject matter experts into careful consideration. Through this process, the SRO identified product packaging and labeling as our first priority because it impacts so many issues related to health and safety.”

Here are some of the major areas the standard addresses, from the press release:

  • Child-resistant packaging guidelines for all cannabis products
  • Consistent labeling that identifies the cannabis product’s origin, cultivator and processor
  • Inclusion of warning statements regarding health risks associated with cannabis consumption, such as advising consumers to not drive or operate heavy machinery while using the product, and that the intoxicating effects of the product may be delayed after consumption
  • Avoiding packaging and labeling that appeal to minors
  • Requirements and methods for listing all ingredients present in the product
  • Inclusion of major food allergen warnings and information on cannabis edibles based upon U.S. Food & Drug Administration guidelines
  • Guidelines on how to address health and medical claims for cannabis products

The public review and comment period lasts until February 21st. During that time, every comment submitted will be reviewed and could impact the final language of the standard. Prior to adopting the new standard, they write a final draft after the comment period and bring it to members for a final vote.

Once the final standard is in place, the NACB enforces the standard with their members. If a member doesn’t comply, they can be removed from the organization or penalized.

Towards the end of the press release, they hint at news coming in 2018 for their members. “To help aid members in complying with the requirements of state governments and the NACB’s National Standards, the NACB expects to launch a technology solution exclusively for members in 2018,” reads the press release. “The technology platform is also expected to help members meet the rigorous due diligence required by financial institutions and business partners, by creating an auditable ledger of compliance and financial records.”

PA Cannabis Banking Committee Announces Formation

By Aaron G. Biros
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The Hoban Law Group announced today the formation of a committee to address banking access issues for the Pennsylvania cannabis market. Steve Schain, Esq., nationally recognized consumer finance litigation, banking law and cannabis law expert practicing with national cannabis law firm Hoban Law Group, is the committee’s spokesman and chair.

Steve Schain, Esq. practicing at Hoban law Group and chairperson of the committee.
Steve Schain, Esq. chair and spokesperson of the committee.

Limited access to banking is an ongoing issue plaguing cannabis businesses due to its federally illegal status. According to Steve Schain, cannabis businesses across the country are forced to pay their vendors, utility bills, payroll, taxes and insurance in cash. “At any time, a dispensary or cultivation operation could have up to $200,000 in cash on site- not having a place to bank opens opportunities for criminal activity,” says Schain. It also presents operational issues for business owners like record keeping or even personal bank accounts getting shut down.

“All of those issues could mean less jobs, less economic activity and less tax revenue for the state,” says Schain. “Fully compliant operations should not have to deal with this.”

Schain formed the committee for a number of reasons, including “Setting the table and starting a dialogue. We want this to be scalable. In the past, the great flaws in banking efforts for cannabis were a lack of cohesion and operating credibility- we hope to approach it from a multi-disciplinary angle and change that,” says Schain.

State Senator Daylin Leach introduced the bill
State Senator Daylin Leach

The committee’s members include three PA politicians: Daylin Leach, State Senator of the 17th District, who introduced the bill that legalized medical cannabis in Pennsylvania, Derek Green, Philadelphia City Councilman and Mary Jo Daley, Representative of the 148th District. Tom Fleming, former assistant director of the Office of Compliance at the Treasury Department’s Financial Crimes Enforcement Network, is also a member of the committee.

A number of committee members are actively involved in the legal cannabis industry and cannabis banking initiatives. Sundie Seefried, a member of the committee, is the chief executive officer of Partner Colorado Credit Union, which is

Lindy Snider, advisor at Greenhouse Ventures and KIND Financial
Lindy Snider, advisor at Greenhouse Ventures and KIND Financial

currently handling over half of Colorado’s estimated billion-dollar cannabis banking market, according to Schain. Lindy Snider, founder and chief executive officer of LindiSkin, advisory board member of KIND Financial and Greenhouse Ventures, is also listed as a member of the committee.

“According to the treasury department, only 301 financial institutions have reported banking cannabis cash,” says Schain. “Few federally chartered banks or credit unions will work with cannabis businesses, but two states-Washington and Maine- have banking regulators sensitive to cannabis banking and we have found 36 banks and credit unions providing financial services to cannabis enterprises.”

The goal with forming this committee is to change that and create an environment where banking for cannabis businesses is much easier. “We plan on drafting a white paper with best practices on compliant and profitable banking on behalf of cannabis-related businesses and financial institutions,” says Schain.

Working from a banker’s perspective is the key here, says Schain. They want to create a working, compliant and profitable system for banks to do business with cannabis cash. One of the problems in the meantime is the high-risk nature of dealing with cannabis companies, leading to an inability to get insurance on those accounts. In the eyes of the federal government currently, conducting cannabis-related transactions may be deemed money laundering and highly illegal. “The real issue is with the federal government and I strongly suspect this is not an issue at the top of the Trump White House agenda.”

Pennsylvania Opens Cannabis Licensing Applications

By Aaron G. Biros
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PA Secretary of Health Dr. Karen Murphy last week announced applications for growers and processors, while dispensary license applications will be available January 17, 2017. License applications will be accepted from February 20 through March 20, 2017. Governor Wolf signed the medical cannabis bill into law back in April of this year.

Philadelphia City Hall Photo: Michael Righi, Flickr
Philadelphia City Hall
Photo: Michael Righi, Flickr

“We’ve reached an important milestone in the program with the release of permit applications on January 17, 2017,” says Secretary Murphy. The PA Department of Health will issue 12 licenses for growers and processors and 27 dispensary licenses, according to Secretary Murphy’s statement. “The decision for which counties will be issued permits in this first phase was determined by using the department’s medical data, as well as comments from more than 5,000 patients and nearly 900 potential grower/processors and dispensary applicants.”

PA Capitol building in Harrisburg Photo: Harvey Barrison, Flickr
State Capitol building in Harrisburg
Photo: Harvey Barrison, Flickr

According to the Philly Voice, the highly populated Southeast region of Pennsylvania will get ten dispensary permits, including three in Philadelphia, two in Montgomery County and one in Bucks, Chester, Berks, Delaware and Lancaster counties each. The state will fully implement its medical cannabis program by 2018, but a temporary program with ‘Safe Harbor guidelines’ was effective in May of 2016, essentially allowing access for patients in the mean time, while establishing preliminary regulatory compliance guidelines.

In last week’s statement, Secretary Murphy also stressed the importance of their Physician Workgroup in developing the regulations. “We cannot underestimate the role of physicians in making sure that patients can access medical marijuana,” says Secretary Murphy. “That’s why the involvement of physicians and health care professionals through our Physician Workgroup is vital to the successful development and implementation of Pennsylvania’s Medical Marijuana Program.” The Workgroup’s recommendations include establishing quality monitoring, training for dosage recommendations while addressing rural and urban access, education and delivery.

Colorado Rule Changes Increase Costs for Edibles Producers

By Aaron G. Biros
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Cannabis processors and dispensaries in Colorado were hit with new rule changes over the weekend, going into effect on October 1st. The rule changes affect those producing edibles and dispensaries that sell retail and medical cannabis products.

The universal symbol required on all cannabis products in Colorado
The universal symbol required on all cannabis products in Colorado

As of October 1st, all cannabis edibles must be marked with the universal THC symbol, according to a bulletin posted by the Colorado Department of Revenue’s Marijuana Enforcement Division (MED). Both medical and retail cannabis products require labeling that includes a potency statement and a contaminant testing statement.

The rules also set “sales equivalency requirements” which essentially means a resident or non-resident at least 21 years of age can purchase up to one ounce of cannabis flower or up to 80 ten-milligram servings of THC or 8 grams of concentrate, according to the MED. The packaging must also include: “Contains Marijuana. Keep out of the reach of children.”

The universal symbol printed on products from Love's Oven.
The universal symbol printed on products from Love’s Oven.

It seems that cannabis edible manufacturers have two clear choices for complying with the new rule requiring the THC symbol: They can use a mold to imprint the symbol on their product or they can use edible ink. Peggy Moore, board chair of the Cannabis Business Alliance and owner of Love’s Oven, a Denver-based manufacturer of cannabis baked goods, uses edible ink to mark each individual serving. The printer uses similar technology and ink used to print on m&m’s, according to Moore. “Baked goods are difficult to find a solution for marking them because they are a porous product, not smooth.” Complying with the new rules almost certainly means added costs for processors and edibles producers.

Moore said she updated all of their labels to include the appropriate information in compliance with the rules. “In terms of regulatory compliance, there have been some disparities for labeling and testing requirements between medical and retail cannabis products, however they are coming into alignment now,” says Moore. “The testing statement rule has been in place for some time on the retail side, but now we are seeing this aligned with both medical and retail markets.” This new rule change could be seen as a baby step in making the different markets’ regulations more consistent.