Health Canada

e-news

 

Medical and recreational marijuana producer CannTrust is about to lose $77 million worth of inventory as it fights to stay afloat, according to Markets Insider.

A classic example of what happens when you attempt to dupe Health Canada, CannTrust needs little introduction. The ironically-named company made headlines in September when its license was suspended after a lengthy investigation.

Health officials uncovered massive company negligence, incompetence, corruption and overall misconduct. This led to a huge corporate shake-up, starting in July with the resignation or dismissal of key upper management members, most notably ousting the company’s CEO, Peter Aceto.

But a lot has happened since July, when the first infractions began to unveil. After months in damage control mode, the company is making huge steps – and sacrifices – to one day again be open for business.

 

“Remediation Plan”

 

CannTrust’s board of directors is working to make its way into Health Canada’s good graces, but the goal requires some very difficult steps. The most glaring, of course, being the massive inventory loss:

 

“The cannabis producer CannTrust Holdings said it planned to destroy $65 million worth of weed inventory and roughly $12 million worth of ‘biological assets’ like plants in an attempt to gain regulatory approval in Canada.”

 

But this is just the beginning. According to an October 14th press release CannTrust has several key steps planned. This “remediation plan” is to demonstrate CannTrust’s intention to be cooperative and transparent with Health Canada, while working to become compliant:

 

“Measures to ensure that cannabis will be produced and distributed only as authorized, including measures to control the movement of cannabis in and out of CannTrust’s site;

Measures to recover cannabis that was not authorized by CannTrust’s license;

Measures to improve key personnel’s knowledge of, and compliance with the provisions of the Act and the Regulations that apply to CannTrust; and,

Measures for improving the manner in which records are kept, including a plan to improve the inventory tracking, and any interim measures to ensure that information provided to Health Canada can be reconciled.”

 

The press release also notes that, while the value of the inventory is significant, it is unsellable – returned by various patients, distributors and retail stores.

However, this is just the beginning. CannTrust is set to provide a more detailed plan by October 21st.

 

Making Room

 

Perhaps the simplest way to describe CannTrust’s purge is the desire to create a clean slate. CannTrust says that, once the non-compliant products are destroyed, it will leave room for cannabis that has been grown, processed, packaged, stored and monitored as per Health Canada’s regulations.

 

Immediate Impact

 

The news of CannTrust’s commitment garnered some positive attention from the stock market. Following the announcement, CannTrust’s stock value increased by 25%.

Granted, the value plunged by nearly 78% during the course of their ordeal, worth $1.06 per share as of October 14th.

 

WeedAdvisor’s Compliance Solutions

 

Out of all the errors producers, distributors or retailers can make, non-compliance is arguable one of the most egregious. Whether accidental or intentional, the consequences may amount to millions in fines, lost productivity and severe loss of public trust.

WeedAdvisor understands the critical balance required to ensure compliance, which is why one of our many business solutions include key functions like inventory tracking, real-time data, safety monitoring, reporting and more.

We help our clients remain compliant in a seamless, automated fashion, so they can focus on providing the best products possible.

 

 

 

e-news

 

Health Canada officially suspended CannTrust’s license, according to Bloomberg. Its ordeal began in July, when unlicensed grow rooms were discovered in its Pelham, Ontario greenhouse.

Later, its Vaughan location was also found to be non-compliant. The facility had used rooms for storage without prior approval. Health Canada also noted that the company had failed to meet minimum requirements for quality control, while security was inadequate.

They were also caught attempting to withhold key documentation, which consequently impeded Health Canada’s audit.

But the final straw came when, according to a September 6th article in BNN Bloomberg, senior staff brought in black market cannabis seeds. Employees attempted to cover it up by renaming up to 20 strains.

 

Suspended Indefinitely

 

Frankly, CannTrust should consider the suspension a blessing. Despite the violations how they were covered up, Health Canada still did not revoke CannTrust’s ability to operate.

In fact, the company can still operate as normal in a limited capacity. Bloomberg explains:

 

“The company won’t be able to sell or produce cannabis, other than cultivating and harvesting existing plants, CannTrust said in a statement Tuesday.”

 

This at least ensures that months of cultivation and product do not go to waste. But CannTrust has a long way to go.

However, this really does not affect the company much, since they already suspended sales and distribution when Health Canada started its investigation months ago.

 

An Opportunity for Correction

 

The good news for CannTrust is that a suspension means they will have the opportunity to address and correct their mistakes. This of course will be no easy feat, but it is the company’s only chance.

According to Bloomberg:

 

“Health Canada, the government agency responsible for cannabis regulations, told CannTrust that it could potentially address the suspension by taking measures to ensure pot will be produced and distributed only as authorized and to recover cannabis that wasn’t authorized by the license. It would also need to improve key personnel’s knowledge of and compliance with regulations; and to improve record keeping and inventory tracking.”

 

But these are not the only issues the company has to address. In a previous article, we addressed some of CannTrust’s employee reviews. They revealed a specific pattern that demonstrated serious issues with management and corporate culture.

If CannTrust does not address its work environment, no amount of compliance will keep it running smoothly.

 

A Well-Earned Suspension

 

CannTrust’s violations are bad on their own. But the way senior staff and employees tried to cover them up – especially with their procurement and distribution of illegal marijuana – makes them seem very corrupt and dishonest.

At this point, the chances of CannTrust regaining public confidence are probably next to nil. The jaw-dropping premeditation of these activities is an insult to the industry and the clients who faithfully purchased the company’s products.

This entire time, medical and recreational clients were consuming poorly-inspected, potentially illegal products.

Admittedly, regulations are tight and often stifling. But if licensed producers want to operate in this industry, they have to abide by those laws.

 

WeedAdvisor’s Solutions

 

CannTrust is an extreme example of what can happen when companies fail to meet compliance standards. We understand that most producers would never intentionally break regulations, but accidental non-compliance is just as bad in Health Canada’s eyes.

WeedAdvisor’s diverse array of business solutions include critical functions like inventory tracking, compliance, record keeping, safety and more. With our help, government, licensed producers and retailers can all avoid the costly complications associated with non-compliance and ensure a safe, efficient work environment.

e-news

 

Legalization brought plenty of concerns, but one issue that preceded the October 17th, 2018 deadline was how small businesses would access the industry.

One concern was that the market would favour large licensed producers, especially ones that already had years of background in the medical cannabis industry. At first, it seemed that smaller companies did have a shot.

But now, CBC News reports on a new licensing process that inadvertently favours large corporations. Much like our telecommunications industry favouring the “Big Three,” cannabis could be headed in the same direction.

 

New Regulations

 

Although under the previous rules, applicants did not have to be completely set up for production, the new requirements are much stricter.  Previously, companies could gradually work their way to readiness, with their success relying in certain “milestones” along the way. Health Canada has scrapped that old process.

CBC News explains:

 

“Under its new system, Health Canada requires a new facility to be fully built before one can apply for a licence, moving away from a process under which a company could apply for approval after meeting certain milestones.”

 

While this certainly ensures that new applicants can hit the ground running, something like this takes serious capital – something that all but the most well-funded companies have.

 

Bad News for Smaller Producers

 

Anyone wanting to become licensed now needs to have a large amount of investment or built-up capital before they even have a chance. However, industry experts say “…the new rules are making the market less accessible for smaller businesses.”

Matthew Columbro is the president of Vindica Cannabis Corp, a strategic consulting firm for marijuana businesses. He says that this new system makes it pointless for many aspiring small-time producers.

The potential to affect product supply is also a concern, but Columbro is unsure whether this will be an issue.

It is possible that, due to the rejection of so many potential growers, Canada could shoot itself in the foot as it tries to recover from a catastrophic marijuana shortage. With edible sales just around the corner, the significantly larger amount of cannabis needed to produce them could exacerbate the problem.

In response, applicants with shallower pockets are building small facilities within their budgets, hoping to satisfy the new requirements.

The worst news, however, is that even having the necessary equipment does not guarantee approval.

 

Too Many License Applications

 

Health Canada’s reason for amending the requirements stems from an overabundance of applications from companies they say are in no position to apply. But there may be some logic to this decision. As CBC News points out:

 

“Industry analysts, lawyers and producers said the new system is not necessarily a bad thing as it will free up Health Canada time and resources for more serious applicants.”

 

In fact, the backlog is substantial. Since 2013, Health Canada received 800 applications (about 133 per year). A total of 457 so far managed to pass the first review, but 70 percent of those still have not shown any readiness to start producing.

According to Health Canada’s Tammy Jarbeau, this forces “more mature applications” to wait longer, wasting time and resources.

 

Could the Black Market be a Good Thing?

 

One difference between the Big Three telecommunications companies (Rogers, Bell and Telus) and cannabis producers is that the former can hike prices due to their dominance. Customers simply have no choice, because there is no competition.

For the cannabis industry, however, there is a variable that could keep large companies from price-gauging customers the way our cellular, TV and Internet companies do.

Pricing is a huge deal-breaker for many consumers, who opted to stay with the black market due to its cheaper product. It is this competition that will force intelligent producers to keep their prices affordable.

 

WeedAdvisor’s Desire for an Equal Cannabis Playing Field

 

At WeedAdvisor, we happily provide business solutions to companies of all sizes. Health Canada’s move, while understandable, is rather disturbing.

This is not to say that large companies do not offer excellent products an service. But smaller companies can be equally good – if not better – in those areas as well.

The licensing process was certainly broken. Perhaps, Health Canada will be able to either amend it a bit or shift its application process to accommodate applicants based on their capital.