The Future of the Cannabis Supply Chains

Is it time to break the cannabis supply chain into two separate discussions?

Dirk Rodgers
Dirk Rodgers

Prior to the passage of the Farm Bill late last year, marijuana and hemp were treated the same by the Federal government and by most states. But now that hemp production and commerce is legal across the entire US, we have to start talking about two different supply chains when we talk about cannabis. One is fully legal and federally regulated (hemp) and the other is locally regulated but remains illegal federally (marijuana). Talking about the “cannabis supply chain” (singular) no longer makes sense. In the rare instance where it still makes sense to use the term “cannabis supply chain”, it must become plural, because they must operate separately and independently.

More and more US States are legalizing marijuana for medical and recreational use. In fact, according to Wikipedia, marijuana is currently prohibited for all uses in only 3 states (Idaho, Nebraska and South Dakota). On October 17, 2018, recreational use of marijuana became legal in Canada. In Canada and in all US states where significant volumes of marijuana is—or will be—consumed, regulations require the careful tracing of marijuana-based products from seed planting, to the sale of finished products to the consumer or patient, and every significant step along the way. The goals of this requirement appears to ensure that illicit marijuana does not infiltrate the legitimate supply chain, and to prevent the diversion of medical marijuana into recreational uses in states where that type of use is prohibited.

Sounds familiar. The goals of government pharmaceutical serialization and traceability laws are the same: Keep counterfeit prescription drugs—illicit by nature—out of the legitimate supply chain and prevent diversion of legitimate products into unauthorized markets or uses. The lessons learned with pharmaceuticals are directly applicable to marijuana. Elements like, serialized barcodes and/or RFID tags affixed to the individual units (seeds, plants, flowers, finished product); recording events that occur to the units (planting, transplanting, relocating, fertilizing, potency testing, harvesting, drying, baking, transforming, packaging, aggregating, shipping, transporting, receiving, accepting, destroying, etc.); reports constructed or available for the government; full event history accessible for a period of years. Yes, it’s all been done before…for pharmaceuticals.

MARIJUANA TRACING VS PRESCRIPTION DRUG TRACING

But there are important differences. In North American marijuana markets, the regulating government agency tells you which tracing software they are using, and your reports and data uploads must match what their software is expecting. You are free to use whatever software you wish on your end, but it must be compatible with the government’s central tracing solution. For example, 7 states, including New York and Illinois, use BioTrackHTC. Washington State uses Leaf Data Systems by MJ Freeway. California, Colorado and 10 other states, plus the District of Columbia, all use the Metrc software from Franwell, Inc. for their central tracing system. Third-party software solutions aimed at producers and supply chain members in California must integrate with Metrc. This form of centralized supply chain tracing is distinctly different from the type of tracing required for prescription drugs in the United States.

Under the Drug Supply Chain Security Act (DSCSA), every saleable unit and homogeneous case must be serialized with a specified barcode. The data describing the movements of these products through the supply chain are kept by each owner of the products for a period of six years in case it is needed to investigate a supply chain anomaly. No data is routinely uploaded to a government repository because there is a presumption of legitimacy, which is based on the requirement for every supply chain participant to be “authorized” (licensed). It is the responsibility of each member of the pharma supply chain to confirm that their trading partners are also authorized before they trade with them. If something goes wrong, and in the ensuing investigation you are found to have bought or sold prescription drugs from/to an unlicensed party, you are in trouble—but otherwise, you are on your honor. The marijuana supply chain has a long way to go before it gets to this level of trust by the government.

The rate at which states are legalizing marijuana for recreational uses has accelerated in the last decade. It now seems inevitable that the US Federal government will legalize it in the next decade. If we assume this will occur, there will still be a major hurdle that the marijuana industry would need to get over before the US government could relax and allow marijuana supply chain businesses to operate in a way similar to today’s prescription drug businesses. That hurdle is illicit trade.

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