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Hemp, Under Who's Authority?

June 17, 2019

After almost twenty years in the FDA regulated drug and medical device industries, I have taken the challenge of navigating the Cannabis industry. During the 4 years that I have been involved with THC regulations, I have been observing the Hemp/CBD side, originally with mild interest. After the passage of the 2018 Farm Bill everything changed and many organizations realizing the potential, became emboldened with the CBD market and products, selling across state boundaries with internet sales and scrambling how to source raw materials and manufacture products, sometimes at the expense of quality, certainly with limited regulations and standards. It is fascinating to me following this unprecedented growth on many levels, particularly the development of regulations.

With the insane amount of investment money entering the market, the uptick (to put it mildly) in mergers and acquisitions and concern for the “mom and pop” businesses it is becoming a fight for market share, positioning and requisite branding, a shot in the arm for many marketing companies. All that said, the industry needs to come to terms with quality; the quality of cultivation, the quality of producing, the quality of supply chain including ancillary vendors and direct additives (fertilizers, product additives and excipients), quality of processes and record keeping and the quality and integrity of people and companies in the industry.

Industry Recognition Pathways: Examples of previous ‘new’ industry pathways

We support a conscious effort for companies to obtain some type of recognized commitment to Quality Systems. Whether that is in the form of legitimate certification programs or regulations but more to the point, of simply doing the right thing. Each path creates perceived conflict between costs and quality, but, certification aside, it comes down to individual commitment. The US Green Building Council, an NGO, started out in a similar path with certifying new construction (NC). I was part of the next phase, certification of existing buildings (EB) before the final standards for existing buildings were codified. All those involved, the USGBC and individual companies, closely followed the NC standards to strive for Gold designation as how they would be applied to EB certification. The three challenges that come to mind for the NC process was first, there are hundreds of thousands of new construction but over 5 million existing buildings! The USGBC started with low hanging fruit, design and build the quality upfront rather than retrofitting. The second challenge was that NC designation was originally bestowed forever, not requiring periodic re-certification. Unfortunately, the moment the certified building’s doors opened for business, it became an existing building. I am thankful to say that shortcoming has since been addressed and requires periodic reviews to maintain certification. The final challenge is the amount of branding associated with having obtained designation. Don’t get me wrong. This process has tremendous upsides to owners and occupants of green buildings; day lighting, energy efficiency, renewable materials, indoor air quality, etc. You can’t fake the efforts as the building and operations are readily visible or apparent and proven through reviewing the records. The big plus to this movement is the awareness of environmental impacts of building construction and operations, and for the owners, the resale value, and for occupants, healthful environments, proven lower absenteeism of employees, etc. Establishing Green Building certification continues to evolve as an iterative process.

The USDA has produced Organic requirements for certification. This process wasn’t going to happen until small farmers were reinventing/reintroducing local farming and the farm to fork movement. It wasn’t until public awareness and consumer education demanded organic practices. It is well documented there's no doubt, "organic" doesn't mean what it used to. The irony might be that the term "organic" was itself organically conceived with smaller farms offering an alternative to conventionally grown produce from mega-farms. Organic used to be the alternative, now it's mainstream. The term is bandied about and its usage can feel synthetic. That “organic thing” in the cannabis world took on a life of its own by creating “organic certification” for cultivation. Unfortunately, for various reasons, is mostly self-policing. I know of one company that obtained “organically grown” certification. The disclaimer should be and has been said the owner of this particular company was a board member of a certifying body and a financial contributor of the organization. I am not opposed to that support as start-up organizations requires participant support and funding and who better than the interested parties, so long as it doesn’t present a conflict of interest or become a marketing ploy.

Next Steps: GMP, the FDA, and International Competition

As US companies expand into foreign markets such as Canada and the European Union countries, they are already discovering international GMP requirements and must comply to do business with those countries. This is not a new concept in regulating an industry but certainly a huge shift in US hemp companies understanding what GMPs are about and in a word, quality. The only debate about whether the US will be adopting GMPs is not if but when and what those regulations will look like. Because this little plant is so many things and therefore, in many people’s opinion, will be a mixture of many already existing regulations, cultivation, food, cosmetics, etc. But make no mistake, although the FDA will have open hearings, work groups, public input, it will be creating the US standards and published in the Code of Federal Regulations, known as the CFRs. The FDA, the eventual legal authority, has enormous education, experience and resources to determine who is conducting business legitimately and maintains files on bad actors. Check out the FDA website for 483 Observations, Warning Letters and recall notifications. In 20 years of pharmaceutical manufacturing operations, the only time I know the FDA has struggled was in keeping up with pharma, medical device and biotech new technologies. Even though many in the hemp industry feel they have proprietary technology I am not aware of technological advances existing in the Hemp or Cannabis industries beyond the FDA’s capabilities.

As most participants should understand, quality programs do not cost money, they save money and by definition, make money. To prove this, build a cost model to determine the risk of failed product, of a recall or lost reputation or business opportunities. Simply put, risk management is a major component of a Quality Management System (QMS) for any company in any industry. Risk management is a two-part assessment, the cost of the risk and the probability of the occurrence happening. Because record keeping is also a major component of a QMS, a company can also make future business decisions based on data. Quality Management means more data and more data can mean a smarter business and more informed decisions. That includes keeping up with future regulation changes (reminder of the upcoming FDA Updates Guidance and Public Hearing for CBD Products, May 31st, 2019) and marketing trends. I also believe the industry will split into two markets, the boutiques and the conglomerates. Either path is not immune to the safety, purity and consistency demands of the educated consumer that will drive quality processes and products; there will be little to no difference in quality standards for either and both paths will require companies to adhere to providing quality processes and products. If they do not, they will find themselves self-policing themselves out of business.

Certifications, regulations and consumer demands help guide successful businesses. All of these factors drive quality decisions and actions. As a precursor to FDA regulations a company may choose to pursue certification from organizations such as the US Hemp Authority (another NGO) which requires annual r-certification to maintain recognition. But participants must understand that this type of certification is only a snapshot of performance and not necessarily a where-all, end-all stamp of approval similar to the initial USGBC certification for New Construction. They must maintain full time ownership and senior management commitment to quality, company wide commitment to continuous process improvement and commitment to periodic re-certification. At the end of the day, it comes down to doing the right thing. Knowing and understanding one’s processes and ethics ultimately dictate what a company can control and contribute to its success and the success of the industry.

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