Pot Product Makers High on Strict Regulations

Bloomberg Law’s combination of innovative analytics, research tools and practical guidance provides you with everything you need to be a successful litigator.

By Julie A. Steinberg

The Trump administration may have yet another reason not to like some states’ marijuana policies.

Not only is recreational and medical use now legal in many places, but states like Colorado are regulating the marijuana industry tightly.

And while the generally anti-regulatory president may not like that, some cannabis product makers in the state welcome the rules.

Colorado’s comprehensive retail marijuana regulations add legitimacy to the industry and offer a shield against product liability suits, the in-house attorney and national compliance director of a large Colorado marijuana product producer tell Bloomberg BNA.

Colorado has the most robust regulatory scheme of any state where use is legal, attorneys say. And although compliance doesn’t automatically bar claims, Colorado product liability law includes some significant protections for companies that comply with applicable state regulations.

“Regulations help drive the industry,” Jessica Feingold, in-house counsel for Medically Correct LLC in Denver, said.

Medically Correct LLC is the parent company of the Incredibles brands, Colorado’s highest volume producer of edibles and other infused products, for medical and adult recreational use, according to its website.

Companies that sell cannabis products should expect an intensive regulatory system, according to Feingold.

“You’re manufacturing a product that its intended use is medication or intoxication. That should be heavily regulated,” she said.

Especially in a state where, according to the latest set of findings from the state’s Retail Marijuana Public Health Advisory Committee, one in eight adults aged 18-25 report using marijuana on a daily or nearly daily basis.

But not only should marijuana product makers expect strict regulation, they should want it, Medically Correct said.

“That’s just part of the process in the evolution of the industry,” said the company’s national compliance director, Colin Mudd.

“From a manufacturing standpoint, we want someone that doesn’t know anything about cannabis to have peace of mind because we are following standards,” Mudd said.

“We really want people to have a good experience in order to create consumer loyalty, but also as an industry we want to make sure we don’t have bad press because this is such a hotly contested issue as it is,” Feingold said.

The sale and use of marijuana, though illegal under federal law, has been shielded from federal prosecution in states that maintain active regulatory and enforcement programs.

“State regulations protect Colorado from federal oversight, but nobody knows what’s going to happen with this administration,” Mudd said.

“Everyone is holding their breath,” he said.

Warning, Packaging Requirements

Colorado, one of the first states to legalize recreational use of marijuana in 2012, has the most regulated market for medical and recreational cannabis products in the country, Mudd and cannabis industry attorney Sean McAllister said.

The rules, issued by the Department of Revenue’s Marijuana Enforcement Division, govern labeling, testing, packaging, and other aspects of manufacturing edibles, like pot-containing chocolate bars; and other cannabis products.

McAllister, of McAllister Garfield, P.C. in Denver, represents Gaia’s Gardens LLC, another marijuana product producer, in what is thought to be the only pending product liability suit against a cannabis product maker.

When it comes to edible products, the state has looked to federal food and dietary supplement rules, as well as child-proof packaging rules, for reference.

“Even though we aren’t regulated by the FDA, we want to make sure we are providing proper warnings and enough information to the consumer, especially novice consumers, so they have a good experience,” Feingold said.

“So we defer to FDA guidelines as an additional reference to further bolster our labels and warnings.”

Labels for edible products must contain information including an ingredient list that includes potential allergens, the production date, and expiration date. There also must be a nutrition fact panel based on the number of THC servings in the container.

Under the regulations, a single serving may contain no more than 10mg of active THC, or tetrahydrocannabinol, the chemical that causes the high.

Colorado requires certain statements on the label of cannabis products, including pregnancy-related health warnings and cautions against driving or operating heavy machinery.

Don’t Overdo It

Other required warnings include a statement that health risks may be associated with consumption of the product, that it was produced without regulatory oversight for health, safety or efficacy, and that its intoxicating effects may be delayed by two or more hours.

The delayed effects caution “simply means we don’t want you to take more than five or 10 mg of THC within a two-hour span,” Mudd said.

That was in reference to a New York Times column by Maureen Dowd, who came to Colorado and had a bad experience taking edible products, Mudd said.

In her June 2014 piece, Dowd, a novice user, said she ate some of a caramel-chocolate flavored candy bar and then ate more when nothing happened at first. She said she became hallucinatory and paranoid and thought she had died. It took all night for the effects to wear off, Dowd said.

“You don’t want that, especially from a product liability standpoint, you don’t want that experience from anyone using your product for the first time,” Mudd said.Colorado regulations also require both the edible products and their packaging to be imprinted with a universal symbol–a diamond shape with THC! in the center.

The imprint on the product helps identify it outside the packaging–"like identifying a pill outside the bottle,” Mudd said.

Some lobbying groups had pushed for that, Mudd said, and “there was grumbling in industry because it’s hard to make an imprint on baked goods but people figured out that you can use edible transfer paper and put on the symbol, so industry adapted based on regulations.”

Medically Correct says it goes beyond what the regulations mandate.“We also add on the label, ‘Do not consume this product until you have advice from a trusted source on its use and side effects,’” Mudd said.

“Basically we are saying, make sure you know what you are doing before you do anything. That could mean talking with the budtender at a store, or giving the store a call with questions,” he said.

The state also requires pesticide testing on recreational-use products, according to McAllister, the cannabis industry attorney.

And, even though they’re not required to, some companies that make medical-use products also test for pesticides, he said.

“People are doing more than is required, and I think that’s a good idea, " McAllister said.

Like a Conventional Commercial Kitchen

Medically Correct, whose founders have backgrounds in the food industry and packaging, approaches its edible product manufacturing the way it would if it were producing conventional food products in a commercial kitchen, Mudd said.

The company also tests every product batch of recreational edibles for potency even though that’s not required by state regulations, Mudd said.

A batch is one flavor or variety of a product of a particular potency–for example, chocolate bars containing 100 mg of THC–made with the same ingredients.The testing includes analysis for potency and homogeneity, which is the dispersal of the active ingredient throughout the product.

Such testing helps ensure, for example, that each of 10 segments of a 100 mg chocolate bar should have as close to 10 mg as possible.

“If somebody takes one of our products home and eats 10 mg and gives us a call and says ‘that 10 mg was too potent,’ well we have a test on that batch and we can do another spot-check on another bar in that batch to confirm the potency,” Mudd said.

Edible products are also tested for microbial contaminants such as E. coli, salmonella and yeast and mold.

Colorado’s yeast and mold standards are tougher than the Food and Drug Administration’s rules for yeast and mold in conventional food, Mudd said.

Uniform Rules?

Many industries generally prefer one set of federal rules over multiple states’ regulatory schemes, saying it’s too burdensome to navigate numerous sets of requirements.

That’s tough in the cannabis industry where federal law doesn’t even technically allow the product to be sold.

But Medically Correct follows Colorado rules even in states with more lenient requirements, Mudd and Feingold say.

For example, it manufactures and sells all of its edible products with child-proof packaging regardless of whether some states where the products are sold require it.

“In other states, we initially got some push back but we know the rest of the country will eventually be where we are, so we are using it even in states that don’t require it,” Feingold said.

“We don’t want to put ourselves in the position where there are products that could get in the hands of children,” Feingold said. “We can avoid that by using childproof packaging even in states where it’s not required.”

Voluntary Standards

Industry representatives and others hope also to develop voluntary standards for cannabis products.

ASTM International, a global organization that lacks industry-specific expertise but brings people together to create a set of standards, is facilitating this process. As part of the effort, individuals from testing laboratories, producers, and government have formed a cannabis committee to address cannabis product issues including quality management, laboratory procedures, and processing.

Once the cannabis committee approves the standards, they will be published and available for use. About 80 committee members met in mid-June to work on the standards, ASTM corporate communications director Nathan Osburn said.

  • 1. 

Product Liability Suits

Only two marijuana product-related suits are known to have been filed to-date.

One, Kirk v. Nutritional Elements, Inc., Colo. Dist. Ct., No. 2016CV31310, was filed by the guardians of three children in Colorado state court May 9 against dispensary Nutritional Elements Inc. and manufacturer Gaia’s Garden LLC.

The suit alleges the children’s father shot and killed their mother in 2014 after consuming “Karma Kandy Orange Ginger,” an edible marijuana product containing more than 100 mg of THC.

The defendants didn’t adequately warn about side effects such as delirium or paranoia, and failed to warn that edibles are metabolized more slowly than leaf marijuana when smoked, the complaint says.

The father’s reaction to the edible product likely caused a state of anxiety and, or panic, the suit says.

One of the primary defenses in the Kirk case is that the company fully complied with state regulations, said McAllister, who represents Gaia’s Gardens.

The other, Flores v. Liv Well, Inc., Colo. Dist. Ct., No. 2015CV33528, alleged a cannabis grower used a toxic pesticide called Eagle 20 on its crop.

Plaintiffs said in their suit, filed in 2015, that LivWell intentionally sprayed Eagle 20 on its cannabis plants and sold them to medical and recreational marijuana customers without adequate warning.

But the court dismissed the case after it found that the plaintiffs consumed the product without any injury.

Colorado later banned the pesticide.

To contact the reporter on this story: Julie A. Steinberg in Washington at jsteinberg@bna.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Litigation on Bloomberg Law