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Cannabis Industry Faces First Test By Federal Regulators

The vaping epidemic created a crisis for the cannabis industry. Federal regulators can point to this epidemic as a reason to ban THC, CBD, and vaping products as a public health risk. At a minimum, the regulatory pendulum will swing and produce a significant number of new laws and regulations.

So what is the industry’s playbook for moving out of crisis mode and getting back to business?

1. Acknowledge the Problem

The cannabis industry must acknowledge that it is facing a crisis. Industry leaders should join the efforts to quickly identify the cause of the illnesses, and help structure appropriate standards to protect the public. Under current circumstances, federal and state regulators are mixing together cannabis, CBD and vaping into one bucket of risk. The regulator’s solution may treat one or all with the same regulatory response.

The cannabis industry should help regulators define the issue, and differentiate between legal market products versus black market activity. The cannabis industry should avoid the pitfalls of becoming entangled in unsettled questions surrounding hemp-based CBD products and vaping technologies. Regulators should keep the three product lines separate and develop isolated regulations that address the unique risks posed by each industry.

2. Help Structure a National Response

State’s rights allow the cannabis industry to grow and innovate independent of the federal government. The downfall of this regulatory structure is that each state and local municipality develops its own regulatory response. The multitude of new laws and regulations that will be enacted in response to the vaping crisis will increase the overall operating costs for the industry. The industry should use this opportunity to do the right thing. Help develop national standards that address public health before the federal government does it for you. A national standard is easier to incorporate into an enterprise compliance program and ultimately more cost-effective.

3. Proactively Address Related Issues

Competition between the cannabis and hemp industries continues to grow as both fights for limited real estate, regulatory restrictions, and consumers. The regulated cannabis industry should proactively review product offerings such as CBD infused products, gummies, among others, to address potential public safety issues. The cannabis industry can start a consumer education program to offer suggestions on safe product use and how to limit consumption by minors.

This crisis will force CBD into a regulated environment. The CBD hemp industry should address the fundamental issues around testing, product disclosure, and labeling requirements. The CBD industry might benefit the most from a self-regulatory organization that will oversee compliance with a framework that addresses the risk posed by the industry. By proactively creating an SRO with teeth, the states may be able to push back on efforts by the FDA to completely ban CBD products.

The cannabis industry will make it through this period. However, the industry should learn its lessons and be prepared for the next one.

Washington State's Vaping Response Targets THC Products

Washington’s Governor Jay Inslee signed an executive order that requires the state’s cannabis regulator to immediately ban THC vaping products that are identified by the US CDC and FDA as the cause of the lung disease epidemic. The Governor also directed the State Board of Health to use its emergency rulemaking authority to ban flavored vaping products, including THC products, at its meeting on September 9, 2019.

Washington’s response to the vaping epidemic is broader and requires the state’s regulator to act quicker than those issued recently by California, New York, and Michigan. The order directs the cannabis industry to immediately post signs warning consumers about the risks of vaping and to disclose all compounds used in the processing and production of vape products.

The state’s cannabis regulator, the Washington State Liquor and Cannabis Board, notified licensees of these requirements, which include:

  • The posting of the vape products warning sign in each store;

  • The disclosure of all compounds contained in THC products including additives, CBD and other cannabinoids;

  • The disclosure to the LCB of all solvents, ingredients, and additives used in the processing and production of vape products;

  • Cooperating with investigators; and

  • Voluntarily educating consumers about issues related to vape products.

The cannabis industry will also be impacted by the bills that will be sponsored by Governor Inslee during the 2020 legislative session. The bills provide the state with additional oversight of the vaping industry and provide money to fund enforcement efforts in the black market.

We expect most states will propose vaping legislation in 2020. The legislation will require additional product disclosures, warning signs, flavor bans, and testing requirements. The cannabis industry may consider bolstering industry best practices to incorporate manufacturing and marketing standards. This proactive response could help shape what the legislation will look like in 2020.

California Governor Issues Executive Order Targeting Cannabis and Tobacco Vaping Products

Governor Gavin Newsom issued an executive order that directs the California Department of Public Health to develop recommendations to address the availability and marketing of vaping devices. The executive order notes that the clinical lung syndrome emerged in August 2019 that may be related to illegally produced cannabis cartridges.

The executive order directs the CDPH to reduce the availability of vaping products by persons under 21 and to enhance the disclosure of health risks. We would expect the recommendations would include further disclosures of lung related issues on cannabis vaping products. The executive order also calls for increased enforcement against the illegal sale of cannabis vaping products.

The Governor’s executive order comes one day before it was reported that a California man died due to the vaping related lung disease. The CDC announced that it opened an Emergency Operations Center to handle the inter-agency response and coordination. The CDC is working with the Food and Drug Administration to test the chemicals in the e-cigarettes used by the patients.

Cannabis companies should be proactive and prepared to act quickly in reviewing products and preparing new packaging labels. The Oregon Liquor Control Commission distributed a letter to licensees last week asking cannabis companies to be proactive and remove products that contain Vitamin E oil, “tocopheryl acetate” or “alpha‐tocopherol from shelves. The OLCC is asking processors to contact them if their recipes contain these chemicals and to set the products aside. Retailers are also being asked to review vape cartridges and to provide consumers with the CDC’s consumer advisory bulletin.

The cannabis industry is used to a high rate of change. Given the latest news, the industry must take this issue seriously and work to keep the public safe. The greatest risk the cannabis industry faces is that the government will determine that cannabis products pose a public safety threat.

How Quickly Will State Cannabis Regulators Respond to the THC & CBD Vape Product Illnesses?

The CDC and FDA are working with state governments to investigate the cause of 450 cased of lung illnesses in 33 states that have resulted in five deaths to date. The CDC indicates that many of the persons with the mystery lung illnesses used vaping products that contain THC or CBD.

The FDA released a statement warning consumers to avoid vape products that contain THC until the cause of the illnesses has been clearly identified. The FDA indicated that many of the products contained Vitamin E acetate, which is used in topical products with limited research on the effects of inhalation.

The health departments in many states including California, Colorado, Connecticut, Ilinois, Indiana, Michigan, Minnesota, New York, Oregon, Washington, and Wisconsin issued warnings to residents and offered tips on how to avoid becoming ill. The common themes on how to keep safe across the states and the FDA include:

  • Don’t buy THC or CBD vaping products off of the street;

  • Avoid THC vaping products until the investigation is concluded; and

  • Don’t make your own vape products.

The tremendous concern around public safety at the state level may ultimately reverberate into additional regulations directly targeted at vaping products. As THC and CBD products are, for now, governed by state law, the question is how quickly will the state regulators respond to these health concerns and how draconian will the regulatory response be.

The FDA’s Acting Commission, Ned Sharpless M.D., issued a statement in July on its efforts to regulate the e-cigarette market including the issuance of recommendations that require manufacturers to consider factors when designing an e-cigarette including how the e-liquid is heated, the aerosol is generated and transmitted to the user.

We would expect the state cannabis regulators to lean heavily on the FDA’s recommendations for e-cigarettes in future rulemaking initiatives due to the FDA’s expertise in understanding the risks associated with e-cigarettes and the regulations that can keep the public safe.

We also see a heavy focus on testing recently with recalls in Colorado and Michigan. Last week, Michigan recalled four vaping products that tested positive for heavy metals and arsenic. State regulators will most likely amend testing requirements after the cause of the vaping illnesses is determined.

Cannabis and CBD vaping product brands should review their manufacturing and purchasing processes to ensure there are strong controls to identify and prevent unsafe products. Manufacturing processes, including recipes, should be reviewed for ingredients that are not typically in vaping products. Companies should also pay close attention to the quality of hardware provided by third-party providers and whether they meet the FDA’s recommendations for e-cigarettes.

Most importantly, the industry should be concerned about public safety issues and proactively take a deeper look at non-vaping products. CBD product manufacturers should be especially diligent as CBD is not subject to the same rigorous testing standards as cannabis.

The industry is at a pivotal point. State regulators must show the federal government that it has the expertise and enforcement mechanisms to produce safe products. We believe that the current vaping crises will further entrench the state product silos, and it may ultimately prevent CBD products from being offered outside of a state-regulated cannabis framework.

Vape Product Manufacturers Pose a Huge Risk to Cannabis Brands

The New York State Department of Health issued a health advisory to inform state residents that using vaping products that contain THC can be dangerous. New York indicated that ten (10) residents between the ages of 18 - 49 were hospitalized after they used vaping products that contained THC and other substances. New York is working with the Center for Disease Control (CDC) to investigate the causes.

The CDC reports that there are potentially 94 cases in 14 states that occurred from June 28, 2019, to August 15, 2019. Cases are being reported in Wisconsin, Illinois, California, Indiana, and Minnesota primarily in teenagers and young adults. The CDC indicates that there is no conclusive evidence that an infectious disease is causing the illnesses.

In April 2019, the Michigan Marijuana Regulatory Agency announced that it found lead in vape cartridges during testing. Michigan warned consumers of the risks associated with vaping and cited a study on the dangers of e-cigarettes conducted by the John Hopkins Bloomberg School of Public Health. The study indicates that chronic use of a contaminated e-cigarette can cause lung, liver, immune, cardiovascular and brain damage. The study tested the e-cigarette devices of 56 daily users, including the e-liquid and aerosol, for heavy metals. Researchers found heavy metals in the aerosol produced by e-liquid heated through coils. Almost half of the samples contained lead concentrations that were higher than the health standards issued by the Environmental Protection Agency.

It is clear that e-cigarettes and vaping products will be heavily regulated in the near future. The FDA’s Acting Commission, Ned Sharpless M.D., issued a statement in July on its efforts to regulate the e-cigarette market including the issuance of recommendations that require manufacturers to consider factors when designing an e-cigarette including how the e-liquid is heated, the aerosol is generated and transmitted to the user.

Brand building is the name of the game in the cannabis industry right now. Companies are developing recipes, products and marketing materials that are designed to win over consumers. One of the biggest risks for a brand is an event that will hurt its image or reputation such as a recall or consumer safety issue. Given the recent health reports, cannabis companies should take steps to ensure vaping products are safe for consumers.

Cannabis manufacturers that produce vaping cartridges or other vaping products and retailers should take the following steps:

  • Perform a third-party risk assessment on the vaping product supplier. The risk assessment should identify whether the supplier is in compliance with the FDA’s recommendations for responsible manufacturers and whether the design of the vape product may cause lead contamination or other safety issues.

  • Ensure that effective health and safety procedures are used for the extraction of THC products and in the cartridge filling process.

  • Test the vaping products and cartridges thoroughly for contaminants in the device and the aerosol.

  • Require the supplier to notify you before it makes changes to the design or materials used in manufacturing the vaping products.

  • Request research related to the safety of products safety and any possible risks.

  • Document the rationale for determining that the vaping product is safe and routinely test to ensure that the controls are still effective.

Companies that are developing brands should ensure that appropriate due diligence is performed for all suppliers that can impact the company’s operations or reputation. The review should occur on a periodic basis, and auditing rights will help ensure that the vendor’s representations are accurate. By vetting suppliers, companies can ensure the brand’s integrity and reputation.


Michigan Destroys Cannabis Vape Cartridges Containing Lead and Other Heavy Metals

The Michigan Bureau of Marijuana Regulation has issued a warning that vape users are inhaling lead and other heavy metals that are leaking from e-cigarette heating coils. The BMR stated that ceramic vape cartridges do not appear to raise the same health issues. The regulators located and destroyed the contaminated products being sold in the state.

Michigan cites a study on the dangers of e-cigarettes conducted by the John Hopkins Bloomberg School of Public Health. The study indicates that chronic use of a contaminated e-cigarette can cause lung, liver, immune, cardiovascular and brain damage. The study tested the e-cigarette devices of 56 daily users, including the e-liquid and aerosol, for heavy metals. Researchers found heavy metals in aerosol produced by e-liquid heated through coils. Almost half of the samples contained lead concentrations that were higher than the health standards issued by the Environmental Protection Agency.

The BMR has encouraged dispensaries to test vape cartridges for heavy metals. Michigan customers may also get vape cartridges tested by going to a licensed cannabis testing facility.

Colorado Mandates Universal Marijuana Symbol on Vaping Cartridge Labels

The Colorado Enforcement Division - Marijuana published Industry-Wide Bulletin 18-11 informing medical and retail cannabis businesses that vaping cartridges, disposable vaporizer pens and syringe type devices that are intended to be used with marijuana or marijuana products must include a universal marijuana symbol on the container’s label. Colorado issued the guidance to clarify new the new requirements that come into effect as a part of the implementation of the permanent rules on January 1, 2019. The bulletin provides a phased in approach for licensees to comply with this new requirement. Licensees can choose whether to include the universal symbol on vaping cartridges, disposable vaporizer pens and syringe type devises until September 30, 2019. The universal symbol must be included on the labels on and after October 1, 2019. However, licensees can continue to sell inventory without the universal symbol until July 1, 2020 so long as it was received prior to October 1, 2019. Marijuana establishments should consider the lead time for obtaining new labels that include the universal symbol in order to ensure compliance with the phase in dates.