Editor’s Note: This is the third in a three-part series on top regulatory compliance infractions for medical and recreational retailers, manufacturers and cultivators in Colorado. See here for the first part on Retailers, and here for the second part on Cultivators.

The Cannabis Industry is one of the most highly regulated industries in the world, on par with financial services, pharmaceuticals, gaming and health care with regard to the depth and complexity of the regulatory framework.

Not only are cannabis businesses subject to state licensing and regulatory requirements, they must also adhere to city, county, and federal (yes, federal) regulations and authorities as well: A highly complex endeavor that is subject to many pitfalls.

Marijuana Infused Product Manufacturers (aka “MIPs” in Colorado) refers to companies that produce cannabis concentrates, edible infused products (e.g., candy, baked goods, beverages, tinctures, etc.) and/or non-edible infused products (e.g., patches, creams/salves, pens, etc. – also referred to as “topicals”). These businesses are also collectively referred to as Processors in certain markets.

All types of MIPs, and especially those that make edibles, have a wealth of additional requirements to which they must adhere, adding yet another layer of complexity.

The following list of top compliance infractions for medical and retail/recreational MIPs in Colorado was obtained from the results of nearly 400 regulatory compliance assessments conducted since August 2014. This listing combines both retail MIP and medical MIP infractions for all licensees examined.

Top 5 Compliance Infractions for Colorado Infused Product Manufacturers

1. The facility does not have a complete inventory of material safety data sheets (MSDS) where the product is used or stored.
2. The facility/licensee is not shipping MIP product that is properly labeled for all required statements.
3. The facility does not document material changes to the standard operating procedures (SOP).
4. The facility is missing manufacture documentation and safety procedures for extraction equipment.
5. The MIP licensee or premise is missing one or more of the required Permits to operate a MIP.

Material Safety Data Sheets (MSDS)

This is the number one infraction for both Colorado MIPs and Cultivators. It may seem like a minor housekeeping item, but it’s directly related to employee and public health and safety, so the regulatory authorities take this seriously.

Each chemical or pesticide used anywhere in the production process (from cultivation to extraction to infusion) must have an accompanying MSDS.  These are an important component of environmental and occupational safety and health. They contain a widely used system for cataloging information on chemicals, chemical compounds and mixtures, as well as instructions for the safe use and potential hazards associated with chemicals. Each licensed premise should have an inventory of all MSDS sheets that match one-to-one with any chemicals and/or pesticides used at the facility.

Product Packaging and Labeling

This is one of the most important and widely discussed topics in the industry today. Labeling and packaging requirements are often highly detailed and voluminous.

In Colorado, the state continues to promulgate new rules and requirements in this space, prompting sometimes expensive packaging/product re-designs, and certainly raising the risk of errors. For a detailed look at some of the major issues in this space, click here.

Standard Operating and Safety Procedures  

 A complete documentation set for any related extraction or processing equipment should be on file at the licensed premise.  These documents, along with the Standard Operating Procedures (SOPs), are the foundation of occupational safety for employees.  Extraction equipment should be certified and all related documentation should be on file and readily available for regulatory inspections.

Any time an SOP is updated or altered, material change tracking should occur.  Material change tracking involves entering a log for each update or edit to a SOP and accounting for revision history.  Retail cultivation centers and infused producers are required to have detailed SOPs in Colorado.  During our compliance assessments, we most often we see required sections missing, such as evacuation and emergency procedures, safety guidelines and operational processes.

Required Permits

Permitting occurs at the city, county and state levels. Often, the state requires that all city and county permitting and zoning is completed prior to submitting any requests or applications to the state, such as modification or change to the licensed premise. However, for MIPs, there are often a handful of additional permits that are required, such as extraction equipment and food safety certification, and enhanced fire safety inspection requirements related to ventilation and fire suppression in rooms where extraction occurs.

It is a privilege to cultivate, manufacture or sell marijuana. The value of an operational license and long-term success of the business is intimately linked with regulatory compliance. Full, holistic compliance for each license will help businesses obtain bank accounts, attract investors or partners, establish good faith with regulators and community members, as well as significantly reduce the risk of fines, administrative actions and/or possible closure of the business.

Success in this industry starts with compliance.