What Consumers Need To Know About Phase Three Compliance Testing

Phase Three compliance testing became the official standard for all cannabis products produced within California. While this news didn’t exactly dominate headlines, the fact is, Phase Three testing is a major step forward for cannabis consumer safety — and for the industry as a whole.

Phase Three Compliance Testing Explained

In an effort to ease the transition to full regulation, California’s Bureau of Cannabis Control rolled out its compliance testing program in three phases over the course of a 12-month period, beginning Jan. 1, 2018. Phase Three — which formally took effect December 31, 2018 — added four more categories to the mandatory testing panel:

  • Terpenoids testing
  • Mycotoxins testing
  • Heavy metals testing
  • Water activity testing of solid or semi-solid edibles

Some cultivators, manufacturers, and cannabis testing labs have claimed that the extensive requirements are burdensome and costly, but the truth is, these tests are in the consumers’ best interests.

What Consumers Need To Know About Phase Three Compliance Testing

Courtesy of Advanced Nutrients

Why Heavy Metal And Mycotoxin Testing Is Critical

One often overlooked fact about cannabis is that it is extremely efficient at absorbing certain elements found in its environment, including toxic heavy metals. In fact, cannabis has been used for the remediation of soils contaminated with toxic heavy metals.

This means that toxic heavy metals present in the grow environment can be taken up by the cannabis and potentially inhaled, absorbed or ingested by consumers.

Toxicity from heavy metals — including mercury, cadmium, lead, and arsenic — can result in severe health issues, including heart disease, brain damage and cancer.

Mycotoxins are byproducts of life-threatening fungi and molds that can colonize crops. The two major types of mycotoxins associated with cannabis can wreak havoc on humans and have been linked to liver cancer. They can even suppress the immune system and mutate DNA.

Terpenoids And Water Activity Testing

The Phase Three requirements also include terpenoids testing for products that make terpene claims, as well as water activity testing.

Terpenes — organic compounds that produce aroma and flavor within plants — are not dangerous to humans. Rather, they play an integral role in determining the type of high you’ll feel from a particular cannabis product.

Water activity testing is necessary to determine the likelihood of microbial contamination in a cannabis product. High water activity means more opportunity for harmful microorganism growth — so, the lower the water activity level, the less susceptible the product is to contamination from harmful microbes.

What Consumers Need To Know About Phase Three Compliance Testing

Courtesy of Advanced Nutrients

Compliance Testing Means Consumer Safety

It’s true that Phase Three requirements are costlier for cannabis cultivators and manufacturers. However, compliance testing is all about consumer safety — and that should be priority No. 1 across our industry.

One cutting-edge company that’s embracing the new regulations and taking consumer safety a step further is BigMike’s Blends, a new line of ultra-premium, outcome-based pre-rolls. Aside from being among the first California-based companies to be completely Phase Three compliant, BigMike’s Blends is backed by the Patient Protection Promise, company founder BigMike Straumietis’s commitment to providing only the safest, highest-quality cannabis possible.

With 15 years of cannabinoid research by 25 world-class PhD’s, BigMike’s Blends Pre-Rolls are the most sophisticated, science-backed, outcome-based pre-rolls on the planet, because each pre-roll is made with 4-6 top shelf strains. These strains are blended in exacting ratios to achieve a complex cannabinoid and terpenoid profile to deliver a precise outcome unmatched by any single strain. In addition to California’s mandated Phase Three testing, BigMike’s Blends are laboratory tested both pre and post production to ensure maximum purity, potency, and standardization.

Here’s the bottom line: Tough cannabis compliance testing is the new normal, and that’s a good thing. Stricter standards are going to serve the industry by ensuring only safe, quality products reach the hands of consumers. The more contaminated cannabis we can weed out of the supply chain, the better.

Find BigMike’s Blends in a dispensary near you simply by using the BigMike’s Blends locator.

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$2.5 Million Worth of Marijuana Seized at Philadelphia Port

Agents with U.S. Customs and Border Patrol seized more than 600 pounds of marijuana at the Area Port of Philadelphia last week, according to media reports. The pot was discovered on March 7 in a shipping container that had been transported to the City of Brotherly Love from Puerto Rico. Agents found approximately 614 pounds of weed, with an estimated street value of $2.5 million, in the container.

“This is one of the largest seizures of marijuana that Customs and Border Protection have encountered in the Area Port of Philadelphia,” said Casey Durst, the director of field operations for Customs and Border Protection in Baltimore. “This is an outstanding example of how CBP keeps our communities safe from illegal drugs.”

Customs agents found 252 bricks of cannabis in the container, which was bound for New Jersey. Steve Sapp, a spokesman for Customs and Border Protection, confirmed that the seizure was unusual for the port.

“Philadelphia is not a common drug trans-shipment port, but we do get an occasional ‘ripload’,” said Sapp. “A baggage handler may have a friend in the Dominican Republic or Jamaica or Puerto Rico put a load on a plane. When it arrives here, they’ll have someone divert it from the international baggage belt to the national belt, then send somebody out from the street to run in and pick it up. Something like this is not common.”

High Tech Bust

The shipment of pot was discovered after sensitive Customs and Border Patrol x-ray scanners determined that the density of the cargo in the container was not consistent with what would be expected for the reported contents.

“All containers get some level of scrutiny,” Sapp said.

A drug-sniffing dog was then brought to investigate the shipping container further and alerted to officers. When agents then searched the shipment they found the bricks of cannabis hidden under the floor in the container. Officers then extracted a “green leafy substance” from one of the packages. The sample was analyzed and tested positive for marijuana.

Sapp noted that despite the continued reform of marijuana laws, interstate cannabis commerce is still not legal.

“Marijuana may be legal for medicinal use in Pennsylvania and New Jersey,” Sapp said. “But it’s not legal federally and it’s certainly not legal to smuggle in 614 pounds.”

The investigation into the illegal marijuana shipment has been turned over to the Department of Homeland Security Investigations and the confiscated marijuana will be destroyed. Customs and Border Protection seizes an average of 4,657 pounds of narcotics every day in the United States. The agency announced on Tuesday that it had confiscated 3,200 pounds of cocaine worth $77 million in a shipping container at the Port of New York and New Jersey in Newark on February 28. The bust was the largest seizure of drugs at the port in more than 25 years.

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The Real Problem in Cannabis: Cash Flow

California recently passed the one-year mark of recreational cannabis legalization. Many of the major regulatory problems are being addressed and enforcement is underway. Operators are adapting to the latest compliance rules, but there’s still a major problem with actually staying afloat as a cannabis business in 2019: cash flow.

It is no secret that venture-backed and Canadian operators are bringing a massive influx of capital into the U.S. market. Meanwhile, long-standing brands and farmers are fighting an uphill battle to claim their fair share. For a brand, it can take up to 60 days from the first day of production to see any payment for their products. For a farmer, it takes even longer. This has led to an imbalance in working capital where operators are struggling to pay their staff and invest in future production capacity. The resulting production lag also negatively affects retailers (dispensaries and delivery businesses) by making inventory replenishment less reliable.

Nabis, a leading licensed distributor of cannabis products, has seen first-hand how harmful this long feedback loop can be to cannabis businesses throughout the supply chain. After working with 40 brands and shipping products to 90% of all licensed retailers in California, Nabis has discovered two particular problems that cause this imbalance: rejected deliveries and payment terms.

Rejected Deliveries

Even if cannabis products pass the numerous testing requirements to ensure they are safe for consumption, there is still a substantial risk that they will be rejected by retailers. Retail delivery of products is one of the most heavily regulated parts of the cannabis supply chain. Making a successful wholesale delivery is so fraught with challenges that some dispensary owners in San Francisco estimate they accept less than half of all orders placed with brands. Nabis identified recurring patterns associated with deliveries that result in failed or rejected orders (Figure 1).

The most frequent cause of rejection is compliance—over 50% of order rejections are a result of non-compliant packaging or inaccurate documentation. There are a host of state-mandated regulatory requirements on cannabis packaging and transportation that are evolving constantly. Strict cannabis regulations encompass all aspects of an order delivery: vehicles, employment status of drivers, product, documentation, and payment. Regulations also vary by municipality, further complicating delivery requirements.

The Real Problem in Cannabis: Cash Flow

Courtesy of Nabis

As a direct response to this issue, Nabis has invested resources in developing software that automates compliance and makes close coordination between brands and retailers easier. These targeted efforts have led to a 98% order delivery success rate in 2019 – a bar Nabis looks to continue raising as the year progresses.

Payment Terms

No transaction is complete until payment is collected. So far, Nabis has seen that more than 40% of all orders are placed on net payment terms as opposed to cash on delivery (COD) (Figure 2). Net payment means that the transaction amount on the invoice is expected to be paid by the buyer sometime in the future. As the bargaining power of retailers increases due to the cap on the number of retail licenses issued by each municipality, net payments are quickly becoming the norm for wholesale cannabis transactions.

The Real Problem in Cannabis: Cash Flow

Courtesy of Nabis

According to thousands of wholesale transactions coordinated by Nabis in 2018, one out of four orders carry a 30+ day payback period. Not only do net terms strain working capital for producers, they also effectively double the logistical challenges for operators, as they must coordinate return trips for collections along with additional orders. Nabis has devoted significant operational resources to help brands keep their outstanding payment balance in check. The task has also grown more manageable as Nabis increases the frequency of return trips, allowing for more streamlined collections and order delivery efforts overall.

Operators should ensure the issues above are not bottlenecks to growth, and understand:

  • “What is our delivery rejection rate and corresponding impact on revenue?”
  • “How do we minimize order rejections and complications?“
  • “What is our outstanding account receivables balance?”

To learn more about these topics, come talk to us at Nabis and find us on Instagram. For any inquiries, please reach out to Nabis’ Director of Strategy & Information Rob Koch.

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Michigan Adds Cerebral Palsy to List of Conditions for Medical Marijuana Program

Michigan’s Department of Licensing and Regulatory Affairs (LARA) has announced that cerebral palsy will join the list of medical conditions that make patients eligible for enrollment in the state’s medical marijuana program. Its addition, approved by unanimous decision and announced on Monday, expands the number of qualifying conditions in the state to 28.

The most common qualifying condition cited by the 292,905 patients in the state’s medical marijuana program is chronic pain, followed by muscle spasms and severe nausea. 41,000 care providers are licensed to provide Michiganders with cannabis to help managing the symptoms of cancer, HIV/AIDS, PTSD, wasting syndrome, and various other conditions.

Past studies have proven that medical cannabis can have tremendous effects on the symptoms of cerebral palsy. Tel Aviv’s Wolson Medical Center hosted a study of 36 children with the condition, many who had high levels of motor disorders. They were treated with two kinds of cannabis oil, one with a THC-CBD ratio of 1:6 and another of 1:20. Within three to four months, doctors reported in 2017 that motor function, pain symptoms, and bowel movements had all improved in study participants.

A 2011 study conducted by the National Institutes of Health found that the use of marijuana was the most effective treatment for pain among people with cerebral palsy.

Michigan legalized medical marijuana back in 2008, but it took the state six years to get a regulatory system in place, and didn’t open a state-licensed cannabis dispensary, or “provisioning center” as Michigan terms the locations officially, until November 2018. In December, state lawmakers legalized recreational marijuana, authorizing the Regulation and Taxation of Marijuana Act.

But Michigan’s authorities continue to deal with fall-out from the lag in medical marijuana implementation, as the delay and the sets of “emergency rules” that it occasioned gave unlicensed growers and distributors a chance to establish themselves. The state has given these unauthorized entities until the end of the month to obtain the proper permitting or close down. At the start of the year, officials shuttered 72 unlicensed distributors.

Concerns have been raised in the past that any lock-out of these unlicensed dispensaries could cause interruption in supply to the state’s medical marijuana patients, particularly given past criticisms that the state’s system has not moved nimbly enough when it comes to processing applications for license in a timely fashion. But state officials hold that the transition is essential to guarantee that individuals are receiving high quality marijuana, arguing that unlicensed distributors are far more likely to sell un-tested product.

Earlier this month, LARA announced that medical marijuana sales at the state’s 54 licensed dispensaries have reached $42 million, amounting to roughly $2.5 million in tax revenue for the state.

Additional qualifying conditions for the medical marijuana program are added to Michigan’s list through a petitioning process. The licensing department also took the opportunity to announce that a petition for Chronic Aggressive Behavior had been denied after a review panel’s unanimous recommendation.  

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Ohio Medical Marijuana Patients May Soon Be Able To Buy Edibles

Ohio regulators have awarded the state’s first medical marijuana processor certificate. And that means there is now one company in the state, Grow Ohio, that can produce the cannabis products that are standard issue in many other medical-use states. Grow Ohio still has to run a few tests on its THC extractor equipment. But once it does, medical cannabis patients will soon be able to buy edibles, and they’ll have several types to choose from.

Grow Ohio Becomes First Licensed Medical Cannabis Processor in Ohio

Unlike the rapid, accelerated start of medical cannabis programs in places like Oklahoma, Ohio is still looking to gain its footing. Ohio legalized medical cannabis in mid-2016, but dispensaries didn’t open until mid-January 2019. And in between, patients had to wait through multiple setbacks. Businesses faced delays and threatened lawsuits over the licensing process. That bumped the growing timeline and delayed the first crop of medical cannabis. Meanwhile, the state kept missing deadlines to announce dispensary locations and certify doctors.

Since January, patients have had to deal with aggressive law enforcement, confiscations, interference from healthcare provider networks, and limited dispensary access. Soon, at least, they’ll be able to buy more than just flower at the dispensary. Grow Ohio is the first medical marijuana producer to receive a processor permit. But state regulators will soon award permits to another 39 processors.

Licensed processors will be able to convert their own harvested bud into a number of different forms, from oils, capsules and tinctures to lotions and edibles. Grow Ohio says it plans to produce gummies, edibles oils and tinctures first. After that, the company will move on to producing capsules and topical creams, likely in late-April.

Edibles and Oils Will Improve Patients’ Access to Medical Cannabis in Ohio

Like many medical-use states, Ohio prohibits patients from smoking their medical marijuana. But that rule has been a burden for Ohio patients, since flower has been the only form of cannabis available. As a result, patients have had to purchase expensive herb vaporizers to lawfully consume legal medical cannabis. Smoking cannabis can impact respiratory health, but it remains the most cost-effective means of consumption for many patients. Furthermore, inhalation is not the preferred method of consuming THC for several of the state’s 21 qualifying conditions.

States that banned smokable medical cannabis products made edible and topical alternatives available. Ohio, by contrast, is only now allowing companies to produce those alternatives. And that’s crucial for patients. “Different forms are going to be better for different conditions,” said Grow Ohio Executive VP Justin Hunt. “For arthritis, a patient would probably prefer a topical over plant material.”

Grow Ohio boasts a 60,000 square foot indoor grow and processing facility, making it a “Level 1” cultivator under Ohio’s Medical Marijuana Program. The facility, located in Zanesville, Ohio just east of Columbus, employs nearly 80 people. “We hired the right people, we have the right formulas and we are just excited to make a broader market available [for patients] that have registered in Ohio,” Hunt said. The company plans to hire more workers once its processing operations expand.

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