Cannabis Compliance Minefield

Written by Joshua B. Alper, Senior Project Manager

When you have been operating in the cannabis industry for any length of time you will have noticed that the rules and regulations don’t always make practical sense. In fact this is the question at the core of the recent massive recall in Michigan by the MRA related to operating procedures (SOPs) at one of the testing laboratories. Without boring you with details, the lab says they were following the rules and the MRA says they were not. The regulators audited the lab and then ordered the recall.The story here is that both sides have a case, and $229 Million of product and revenue are being held up. What is the strategy to protect your business from being affected by such a recall, is it your responsibility to audit your suppliers to ensure that they are being compliant, and how can you prepare yourself for an audit from your local regulatory authority? 

Best Practices for Inspections

  • Keep an Internal Regulator Communication Log - this will clearly outline the conversations with the regulator during the scheduled or surprise inspection. This also helps provide information internally to people not present during the audit. 
  • Take your own photos of what the regulators document - this is good for internal recordkeeping and general compliance. 
  • Perform internal weekly company-wide audits.
  • Who is auditing your auditors? Utilize 3rd party auditors quarterly.
  • Remember, being prepared takes the fear out of compliance.
  • It’s really about being proactive versus being reactive. 
  • Always stay with the regulator during the walk-through and take good notes around any issues or concerns - correct it in real time if possible and document the fix.  
  • Let go of the mindset of doing the bare minimum, and shoot for going above and beyond what is expected or required. 
  • Do not rely on the regulators to tell you what you’re doing wrong, it’s your responsibility to know where you’re at when it comes to compliance. 

Each state has developed their own set of rules and regulations, sometimes in a vacuum, and at times based on partial or changing data and reports. The result is a minefield for small cannabis shops, and multi-state operators that need to standardize SOPs, training and compliance. The best plan is to create the strictest rules and SOPs that allow you to still function efficiently, look for the ‘common denominators' in the markets that you are active in, and find the guidelines that you need. For example pesticide regulations are known to be strict in California, use this as your goal when designing cultivation systems and determining the pest management strategies, but also try to understand where these rules are headed by reading USDA rules for mainstream agriculture, will there be a difference in the smoking and edible rules in the future?  Outside suppliers like testing labs, and other licensed operators in your supply chain do need to be vetted completely and even dispensaries need to understand testing, how to read results, and how to prepare for audits, recalls and regulatory actions by using companies like ICS for improved inventory, self auditing, and training.  The hope is that federal legalization will create a unified set of rules and regulations for cannabis operators to minimize their liability like the alcohol industry has done, but don’t hold your breath, and if you know the liquor business you know that the laws still vary widely from state to state. So get used to it, embrace it, develop a culture of compliance in your organization so you can protect your business and be one of the leaders that move this space forward.