The governor of Delaware announced on Tuesday that he has vetoed a bill to legalize marijuana that the legislature sent to his desk earlier this month. Gov. John Carney said the law wasn’t in “the best interest of the state” despite the issue’s popularity within his own party.
In a statement, the Carney said that he supports allowing people to access cannabis for medical purposes and feels that “individuals should not be imprisoned solely for the possession and private use of a small amount of marijuana.” But he doesn’t believe Delaware should go beyond its current policies, according to Marijuana Moment.
“I do not believe that promoting or expanding the use of recreational marijuana is in the best interests of the state of Delaware, especially our young people,” he said. “Questions about the long-term health and economic impacts of recreational marijuana use, as well as serious law enforcement concerns, remain unresolved.”
The legislature could still override the governor’s veto of HB 371, which is sponsored by Rep. Ed Osienski, as it’s already received more than three-fifths of the vote in both chambers that would be required to overrule Carney’s decision.
In what could have national implications, a federal appeals court has ruled that Delta-8 THC derived from hemp is “lawful” and eligible for trademark protection.
The 9th Circuit Court of Appeals said in its ruling Thursday that because Congress legalized not just hemp but its “derivatives” and “extracts” in the 2018 Farm Bill, delta-8 THC is legal if it is derived from a hemp extract – in this case, CBD.
The ruling gives delta-8 vape maker AK Futures another opportunity to block fellow California company Boyd Street Distro from allegedly selling counterfeit versions of AK Futures’ “Cake” vapes containing delta-8 THC, according to MJ Biz Daily.
The three-judge appeals panel sided with AK Futures and said that delta-8 THC is not a controlled substance under federal law if it comes from hemp.
“Regardless of the wisdom of legalizing delta-8 THC products, this court will not substitute its own policy judgment for that of Congress,” Judge D. Michael Fisher wrote.
However, the ruling does not address the legality of selling consumable delta-8 THC products.
Though Congress legalized hemp derivatives such as delta-8 THC, it also directed the U.S. Food and Drug Administration to oversee how those products could be sold.
So far, the FDA has declined to authorize any cannabinoid products without a prescription, and the agency issued a consumer alert last September warning saying that delta-8 THC “may have potentially harmful by-products (contaminants) due to the chemicals used in the process.”
22nd Century Group has acquired GVB Biopharma. As a contract development and manufacturing organization, GVB is believed to be one of the largest providers of hemp-derived active ingredients for the pharmaceutical and consumer goods industries worldwide based on total tonnage.
GVB’s strengths complement 22nd Century’s existing upstream and downstream value chains, which includes expertise in cannabinoid receptor science with CannaMetrix, plant research and proprietary genetics through its KeyGene partnership, breeding expertise with Extractas, and cultivation capabilities at Needle Rock Farms.
GVB expects 2022 revenue of approximately $48 million, a 58 percent increase year-over-year, gross margin in excess of 44 percent and positive cash flow. Upon closing, the transaction is expected to more than double 22nd Century’s revenue, be immediately accretive to adjusted EBITDA, and generate positive cash flow from the acquired assets in the near term.
“GVB represents a transformational acquisition for 22nd Century that will enable us to rapidly grow our hemp/cannabis franchise,” said James A. Mish, chief executive officer of 22nd Century Group, in a statement.
“GVB is one of the largest CBD suppliers globally, possessing innovative, vertically integrated cannabinoid product manufacturing technologies driving industry leading scale and cost efficiency. In addition to immediately expanding our hemp/cannabis franchise capabilities, GVB represents an opportunity to double our revenue and internalize a comprehensive contract manufacturing and extraction platform which can be used to directly and exclusively monetize our differentiated and proprietary hemp/cannabis plant genetics and intellectual property. We are enthusiastic to begin working with the highly regarded and very experienced management team at GVB.”
“We are excited to combine with 22nd Century group, pairing our production and manufacturing capabilities together with the best hemp/cannabis plant science in the world,” said Phillip Swindells, chief executive officer at GVB. “Since 2017, we have built a loyal customer base and continue to add new, rapidly growing customers as demand in our industry accelerates. We sold more than five billion doses of CBD in 2021, and we look forward to further scaling our business as a part of 22nd Century’s comprehensive platform.”
GVB operates three U.S. manufacturing facilities in Oregon and Nevada, including a 30,000-square-feet hemp ingredient manufacturing facility in Central Oregon, a 40,000 square-feet white-label, finished product manufacturing facility in Las Vegas, and an industrial-scale hemp extraction facility in Prineville, Oregon.
While there are three bills in Congress competing to legalize marijuana, there are also many obstacles.
By Timothy S. Donahue
For the second time, the U.S. House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act (HR 3617), a bill that would end the federal prohibition on cannabis by removing it from the list of banned controlled substances. The MORE bill that passed the House with 220 “yea” votes to 204 “nay” votes would end the federal ban but leave legalization up to the states. The last time the House passed the MORE Act, the Senate did not take it up for a vote.
The current MORE bill is also expected to face strong headwinds in the Senate. This is partly because there are currently three bills floating through Congress competing to legalize marijuana on the federal level. The second bill, the States Reform Act (SRA), was introduced last year by Representative Nancy Mace. The SRA is the first comprehensive Republican version of legislation to end cannabis prohibition. It’s expected to have its own hearing in April (but had not at press time). Mace voted no on the MORE Act.
Mace’s legalization bill is primarily aimed at having the federal government treat marijuana in a similar manner to alcohol, and cannabis would be removed from the Controlled Substances Act, with retroactive effects for people previously punished. Prior federal cannabis convictions would need to be expunged within one year.
The third marijuana legalization bill is out of the Senate. Senate Majority Leader Chuck Schumer, Senate Finance Committee Chairman Ron Wyden and Senator Cory Booker introduced the Cannabis Administration and Opportunity Act in 2019. It was read twice and has been in committee ever since. The main features of the legislation largely align with what advocates and stakeholders expected. The bill (S. 1552) would federally deschedule cannabis, expunge prior convictions, allow people to petition for resentencing and maintain the authority of states to set their own marijuana policies.
While all the action marijuana legalization bills are receiving lately is exciting, it doesn’t mean that the U.S. is close to decriminalizing delta-9 THC. Rod Kight, founder and principal of Kight Law Office and a prominent global expert in marijuana law and legislation, said that he doesn’t expect any of the legalization bills to pass this year. Currently, cannabis is legal for adult use in 19 states and for medical use in 36 states. The legal marijuana industry generated $25 billion in sales last year, a 43 percent increase over 2020, and is expected to hit $65 billion in 2030, according to Forbes.
In an interview with Vapor Voice, Kight shared his insights into the various bills.
Vapor Voice: Do you think the MORE Act has a chance to get passed in the Senate?
Rod Kight
Kight: I think it has almost no chance whatsoever in the Senate for a couple of reasons. One is that there are competing bills. I think we may have some political showmanship as to which bill can get passed. Additionally, the Senate doesn’t get a whole lot done to begin with. It’s become an “obstructionist” legislative body, but that’s a topic for another day. So, with respect to the MORE Act, I would call this a symbolic vote by the House that, disappointingly, is almost certainly not going to pass in the Senate or even come close.
If you thought one bill had a best chance to pass, which one would you choose?
If a decent bill came from the Senate to the House, then it may have a good chance. In that scenario there, a bill is much more likely to pass than one coming from the House to the Senate. I think the hurdles the Schumer/Booker bill are going to face are that it’s competing with a Republican bill in [the] House. Additionally, it’s also just still competing with old-school prohibitionists. This is important since it will need 60 votes. I’m not sure that Schumer even has the full Democratic caucus, much less Republicans, who would either presumably say no and vote against it to continue prohibitionist policies or to vote for the Republican bill sponsored by Mace.
We talked about two of the bills; what is your opinion of Mace’s legislation?
She says she has bipartisan support. This would again have to come out of the House, though, and go into the Senate. As I said earlier, that’s a more difficult route given the way our legislative system works. That being said, it’s really hard to predict how the Mace bill will do because on the one hand, a lot of Democrats want to pass cannabis reform at almost any cost, including by voting for a Republican-sponsored bill. And so, here’s a bill sponsored by Republicans that may actually be able to get through because of presumptive Republican support and some Democratic members of Congress who will vote for it in order to legalize marijuana. All of this is to say that the Mace bill could have some traction simply because it’s sponsored by a Republican.
On the other hand, it’s not as comprehensive or thorough of a bill and doesn’t address a lot of issues that Democrats want. And then also, it’s sort of … a pride issue … for the Republicans to sponsor and pass a cannabis bill, which forever has always been a Democratic issue. I think that would be a pretty hard pill for the Democrats to swallow.
If we really look at the Mace and the Schumer/Booker Senate bills, the more that the MORE Act seems DOA [dead on arrival]. The Schumer/Booker bill is probably unlikely to pass as it stands as well. It will probably get blocked by Senate Republicans.
If you were writing the legislation, what would Rod Kight’s bill look like?
Credit: Poylock19
The most straightforward thing to do would be to just, literally, have a very, very short bill that simply removed all forms of cannabis from the Controlled Substances Act altogether. Done deal, and then it’s up to the states to regulate it, which is de facto happening now anyway. Under that scenario, it would be regulated in a similar manner to other products, such as alcohol, tobacco, kratom, etc., that are typically regulated by the states. And then the FDA [U.S. Food and Drug Administration] and other federal agencies would regulate to the extent that the various products that flow from cannabis fall within their respective jurisdictions.
That being said, and as simple as that may sound, it’s unlikely to happen. “Cannabis” comes loaded with meaning these days, from financial gain to personal liberty to health to tax benefits to social and racial equity, etc. So any cannabis law will ultimately incorporate some, and perhaps all, of these cannabis-related issues and more. So there is ultimately an opportunity for each of the different parties and many interest groups to get something that they want. Democrats want social equity, they want racial equity, they want expungement, all of which are really important and speak to a bigger set of values related to cannabis so that when it is finally legalized, we’re not just allowing big corporate interest to come in and scoop this whole thing up after prosecuting people for almost 100 years, primarily people of color. This is a major concern in a controversial medical marijuana bill in my home state of North Carolina.
On the other hand, the Republicans tend to focus more on making this thing really work for business.
For my part, and given both the history and the current state of affairs with cannabis, I favor a bill that fully removes it from the Controlled Substances Act and also addresses social and racial equity while creating a place for small businesses to thrive.
If you had a crystal ball, will a federal legalization bill pass this year? Next year?
I don’t see any advancement this year. I think the best we can hope for is some banking and potentially some tax reform as those things relate to marijuana. I don’t see any kind of legalization at the federal level. As far as when we can expect to see it, I think, at the very best, it would be next year. However, I’m starting to kind of get my head around the fact that the best opportunity is probably in a post-Biden administration setting. Biden is simply not a supporter. I think without strong support and even leadership from the executive side, [it’s] ultimately difficult to get anything through of this magnitude.
What kind of social and economic benefits would legalization bring, such as taxes, fewer people in prison, etc.? Could more money go to treating the addiction of harder drugs?
I don’t have any specific numbers, but I will say that this reform is not only good for the physical and mental health of American citizens but also for the fiscal health of the country. Taxing the products and using those taxes to fund socially beneficial programs, including expungement of marijuana convictions, while also lowering the prison population will be huge. Of course, adding an entire new industry to the market will have a huge financial impact. Finally, liberating cannabis for use by people instead of medicating with pharmaceuticals will also help. With respect to addiction and mental health opportunities, I think cannabis can play an enormous role. I think that it could help reestablish the U.S. as a leader in the world economy as well. We’re seeing Latin America beginning to legalize; we’re seeing Germany and Spain making moves to legalize. And so, if the United States gets out ahead of that slightly, then I think the U.S. retains control of what promises to be a huge sector of the economy, whereas if we allow Europe to take the lead on this, then it will be impossible for the U.S. to recover. I don’t think the U.S. could ever really gain it back.
What about on a state level—is legalization becoming more active?
Credit: Adobe
As it stands, the states continue to be the place where all the action is happening. It’s really fundamentally important to pay attention to all the various bills regarding cannabis across the board. You know, recreational marijuana, medical marijuana, hemp, hemp derivatives, all those types of things. Watch what’s happening at the state level. I think that’s really where we’re seeing some essential changes.
Will we eventually see all 50 states with legal marijuana?
I think it is unlikely but possible that we could have some form of legal marijuana in all 50 states while it is still illegal at the federal level. This would be unprecedented. In fact, it’s probably unprecedented where we are at right now. What other issue in the history of the U.S. has been like this, where you have more than a majority, maybe even a supermajority of states that have legalized something that the feds deem to be illegal or vice versa?
Just to take things to another perspective, consider that now with respect to hemp derivatives—you have THC that’s being lawfully marketed throughout the country, and in most states, it’s legal. At what point do we even really—from a policy level, not necessarily a statutory definitional level—just consider that cannabis is, in fact, lawful throughout most of the U.S. in the sense that there are all of the active compounds in marijuana, including THC, being marketed throughout the country legally through hemp. At what point do we just say cannabis is legal in this country, either de facto or otherwise?
Times are changing. You had marijuana, which was considered the “THC world.” And then you had hemp, which was considered to be the “CBD world.” Those worlds have blended. You have interesting things that the states are doing. Ultimately, what’s happening is [that] the overall tide of cannabis legalization is continuing to move forward. We may see a situation where almost every state has legalization of marijuana. Yet, marijuana is still, quote, unquote, illegal at the federal level. That’ll be a very strange state of events, but that’s how it could play out.
Last question: Is there unity between the hemp and marijuana producers? Unlike other industries, are the segments banding together to fight potential regulations?
No, I think there’s unfortunately a lot of dissension. I think there’s dissension between the marijuana industry and the hemp industry and within each of those sectors of the industry. Then I think at the level of the farmers, the farmers are the front lines, and they’re the ones that really are often not heard. They’re the ones that struggle with massive price fluctuations and the bottom dropping out and then the mass demands. Then they ramp up for demand, and then it goes away. The farmers may be the most important factor in this equation.
A key U.S. House of Representatives committee on Wednesday formally advanced a bill to federally legalize marijuana to the floor, making in order a number of amendments and blocking others as part of a final rule. A full chamber vote is expected on Friday.
The House Rules Committee took up the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, discussing proposed revisions, mostly from GOP lawmakers seeking to insert additional restrictions into the reform measure, according to Marijuana Moments.
This the second time the MORE Act has made it to floor. Last year, the bill made it to the floor but was sent back for committee review.
The MORE Act, sponsored by House Judiciary Committee Chairman Jerrold Nadler, would remove marijuana from the list of federally controlled substances, promote equity in the industry and impose a federal tax on marijuana products to fund various initiatives.
At the start of Wednesday’s hearing, Rules Committee Chairman Jim McGovern said that the legislation would “address our nation’s failed approach to the war on drugs” and “put racial justice at the heart of our nation’s federal cannabis policy.”
He noted racial disparities in marijuana enforcement, emphasizing that “none of us should be OK with a system that treats people differently based on the color of their skin” and “no life should be destroyed by decades of failed policy.”
“It’s past time that we show the moral courage to do something about it,” McGovern said.
A Georgia judge has halted efforts by a suburban Atlanta prosecutor to enforce a ban on some cannabis extracts, in a case that could set a statewide precedent, according to the Associated Press.
The Atlanta Journal-Constitution reports that Fulton County Superior Court Judge Craig Schwall on Friday issued a 30-day order restraining Gwinnett County District Attorney Patsy Austin-Gaston from prosecuting people for selling or possessing the extracts.
“I have concerns that this may or may not be a rogue DA,” Schwall said. “I think there may be some prosecutorial priorities misplaced.”
The ruling came in a lawsuit filed by two owners of Gwinnett County vaping stores seeking to have two extracts — delta-8 and delta-10 THC — declared legal in Georgia. The chemicals are similar to the main intoxicating ingredient in marijuana but cause milder highs. They are typically sold in vape cartridges, tinctures, gummies and other edibles.
Other states are also wrangling with the substances’ murky legality.
22nd Century Group and KeyGene say they have made a breakthrough in hemp/cannabis plant research leading to the successful transformation of the hemp/cannabis plant genome using a proprietary plant transformation and regeneration technology and clear protein expression by the introduced genes.
“I cannot emphasize enough what an enormous achievement it is for our company to have cracked the code to show proof of genome transformation in the hemp/cannabis plant. This is the holy grail in plant science and places us in a commanding leadership position in the race to secure patents and other valuable intellectual property in the emerging hemp/cannabis genetics field,” said James A. Mish, CEO of 22nd Century Group, in a statement.
“These newest plant transformation discoveries unlock additional revenue opportunities for the company and accelerate our efforts to create new hemp/cannabis plant lines with much higher commercial value at accelerated rates, lower cost and lower risk to our customers.”
The plant transformation breakthrough unlocked by 22nd Century and KeyGene enables the desired DNA sequences to be inserted directly into or created from a plant’s existing genetic material, creating a more expedient and focused methodology to achieve the desired outcome.
In addition to its transformation capability, 22nd Century Group has exclusive access to a battery of gene-editing capabilities, based on meganuclease technology, directed to seven of the key enzymes for the biosynthesis of cannabinoids plus four patent families that cover vital enzymes. Unlike other more widely available gene-editing technologies like CRISPR-CAS-9, this technology is allowed for use in cannabis.
The breakthrough gene-editing and transformation technology will allow 22nd Century Group to target specific hemp/cannabis biosynthesis pathways and expand the ability to engineer the modification of cannabinoids in plants.
Photos courtesy of Demecan and the German Cannabis Association
Germany’s new government plans to legalize cannabis.
By Stefanie Rossel
With Germany’s new government, a coalition of the center-left Social Democrats, the Green party and the liberal Free Democrats, taking office on Dec. 6, 2021, a long-awaited change moved closer to becoming reality. The country, the parties announced in their coalition agreement, will legalize the sale of cannabis to adults—that is, consumers from the age of 18—for recreational purposes. Although no details were mentioned and no timetable was set, the announcement sent cannabis stocks to new heights.
The Financial Times described the announcement as “game-changing precedent for the global business of growing and selling marijuana” that would be closely watched by other countries. With its proposal, Germany would join a movement of cannabis reform around the world. Canada, Uruguay as well as 19 U.S. states and the District of Columbia have already legalized recreational cannabis. In the European Union, Malta in mid-December became the first country to permit the use and growth of weed for recreational purposes. Sales, however, will remain prohibited.
After legalization, Germany will be the biggest EU cannabis market by far. For the time being, the recreational consumption of marijuana in the country is not explicitly illegal, but sales, imports and cultivation are prohibited. Germany legalized medicinal cannabis in 2017.
With further legalization, the government aims to dry out the illegal market, lower criminal justice expenditures and protect public health. According to the German Cannabis Association, illegal marijuana is often contaminated with sand, sugar, glass or spices. Increasingly, synthetic cannabinoids, up to 100 times stronger than natural psychoactive cannabinoids, are used to dilute the weed.
The proposal also includes preventive measures, such as the creation of facilities where consumers can check cannabis from the black market for harmful additives. Marijuana advertising will be strictly regulated. The coalition has agreed to keep the ban on private cannabis cultivation. Whether foreign nationals will be allowed to buy cannabis in Germany, too, remains unclear. According to the coalition agreement, the measure will be evaluated after four years, especially in terms of youth protection.
Georg Wurth
Details Unknown
What cannabis regulation in Germany will look like exactly remains unclear. The coalition is expected to introduce a cannabis tax; a recent study by Heinrich Heine University Duesseldorf estimates that such a tax could contribute €1.8 billion ($1.14 billion) annually to the state treasury. Legalization would bring in an estimated €4.7 billion per year due to additional revenues from corporate tax, trade tax and value-added tax as well as from savings in prosecution and the judicial system. It could also create 27,000 new jobs, the study found.
Apart from pharmacies, the licensed dispensaries mentioned in the coalition agreement reportedly might include tobacconist shops and perhaps even dedicated coffee shops as in the Netherlands, which tolerates recreational cannabis for personal consumption. The new government is expected to define thresholds for the content of tetrahydrocannabinol (THC), the psychoactive ingredient in cannabis, in the products to be sold. The government might also review Germany’s traffic laws, which currently allow 1 nanogram of THC per milliliter of blood serum.
The legalization proposal, long opposed by previous Christian Democrat party-led governments, has triggered a heated debate in Germany. Physicians specializing in addiction treatment warn that it would boost consumption and encourage related issues, such as dependence, depressive and anxiety disorders, psychoses and developmental delays in young people. Meanwhile, law enforcement officials are skeptical that legalization will erase the black market. A tax, they claim, would make legal cannabis significantly more expensive, thus leading to competition between legal and illegal sources.
Georg Wurth, managing director of the German Cannabis Association, does not share law enforcement’s concerns. “The black market will at least be pushed back,” he says. “Every single euro of revenue that will be generated on the legal market will be retracted from the illicit market, and every percent that moves from the black to the legal market is a progress. I’d rather have a legal and a black market than a 100 percent illegal market. If you take cigarettes as an example, there is also a black market, but there are no plans to prohibit cigarettes in order to rein that in.”
The right pricing will be decisive for deflating the illegal market, Wurth adds. “All three coalition partners are aware that they shouldn’t overplay their hand if they really want to force back the illegal market. I am confident that they will succeed if they find the right approach at pricing. In Canada, it took about two and a half years until half of the cannabis revenues came from the legal market.”
Illicit cannabis currently retails at €10 per gram in Germany. Interestingly, this is also the sales price for medicinal cannabis in pharmacies. “Cannabis already is relatively inexpensive in Germany,” says Adrian Fischer, co-founder and managing director of Demecan, which supplies medicinal cannabis. “We presume that consumers will be willing to pay a higher price for legal cannabis for recreational purposes that has a better quality than illegal weed, but the price shouldn’t be much higher than €10. In addition, it has to be guaranteed that there are a sufficient number of points of sale for marijuana. If a consumer must drive 50 kilometers to the next legal dispensary, he is more likely to stick with his dealer round the corner.” If legal cannabis is priced competitively, Fischer forecasts that the German marijuana market will be worth €5 billion in five years.
While the German Cannabis Organization opposes a limit on the THC content, Fischer suggests linking it to certain age limits, as with alcohol. In Germany, drinks with a low alcohol content, such as beer or wine, can be legally purchased from the age of 16 while liquor drinkers have to wait until they turn 18. “Similarly, cannabis with a lower THC content could be made available for 18-year-olds and with a higher THC content for 21-year-olds,” says Wurth.
Adrian Fischer
Important Considerations
The German Cannabis Organization believes the coalition should consider four aspects in shaping regulation. For starters, it should permit private cultivation for personal consumption. “In other countries that have legalized marijuana, such as Uruguay and some U.S. states, this is part of the law,” says Wurth.
Traffic laws are another issue. “Presently, limiting values and criminal proceedings are extremely strict. Cannabis users may lose their driver’s license even though they did not drive stoned, only because they have remainders of cannabis in their blood from consumption days ago that don’t have any effect on their driving behavior anymore,” says Wurth.
He also insists on an amnesty for the cannabis users who are currently listed as criminal offenders. “Their entries have to be deleted,” says Wurth. “In the U.S. states where marijuana is legal, this is regularly being done.”
Lastly, the sale of legal cannabis should remain restricted to specialist shops, according to the German Cannabis Organization. This would also guarantee better youth protection.
However, neither the legalization of cannabis for adults nor prohibition can prevent marijuana consumption among youths, cautions Wurth. “Legalization would nevertheless have a positive impact on youths, even though it cannot principally prevent youth consumption,” he says. “Youths are more susceptible to prevention measures, hence the latter should be stepped up significantly and reformed.
“Currently, police give preventive lessons in schools. They tend to get the message across that youths shouldn’t touch cannabis or else they would end up in the gutter, lose their driver’s licenses, etc. I hope that with the legalization there will also be more investment in better education and credible prevention measures so that youths seek drug counselling help earlier.”
If youths do consume cannabis, Wurth adds, it is safer if their older friends or siblings bring them legal weed from a licensed dispensary rather than potentially contaminated marijuana from a street dealer as is the case now.
Companies currently supplying medical cannabis say they will be able to scale up production rapidly when Germany legalizes recreational cannabis.
Gold Rush
The German illegal marijuana market is estimated at about 400 tons, most of which is imported from Morocco. Since Germany is a signatory to the 1961 United Nations Single Convention On Narcotic Drugs, the country will not be allowed to import or export cannabis for recreational purposes once the substance has been legalized. This means the coalition will either have to negotiate new conditions or stipulate that all cultivation has to take place in Germany.
Presently, only medicinal cannabis is grown in Germany. That business is controlled by three companies: Tilray, Aurora and Demecan. Under supervision of the state-owned cannabis agency, they jointly cultivate 2.6 tons of medicinal cannabis annually to cater to a market that is estimated at 12 tons to 15 tons per year, with demand increasing, according to Fischer. Due to the strict rules and standards, the companies grow the plants in hermetically sealed buildings, with product stored in high-security vaults. The first domestic crop reached pharmacies only last summer; a large amount of medicinal cannabis is still imported.
After legalization of recreational cannabis, manufacturers say they will be able to quickly expand production. Demecan has opened a center for medicinal cannabis in Ebersbach and recently finalized construction of Europe’s largest indoor marijuana production site. It presently has the capacity to produce 1 ton of medicinal cannabis but can supply 50 percent more at short notice, according to Fischer. “Within a year, we could step up capacity to 4 tons and in the mid-term to 10 tons per year. We are prepared to cater to growing demand. Our aim is to cultivate life quality and to ensure patient care, hence it is important to us that legalization of recreational cannabis doesn’t happen at the expense of patients. Therefore, we have built large production capacities to cater to both markets.”
The three providers of medicinal cannabis alone will nevertheless not be able to meet the demand for recreational cannabis, he admits. “To reach this target, legislature must tender licenses for the cultivation of marijuana in Germany relatively quickly and right on time before the actual legalization.”
With medicinal cannabis being a medicine, all aspects of production are subject to the narcotics act and must be compliant with good manufacturing practices and good agricultural and collection practices guidelines. A relaxation of production regulations for the cultivation of recreational weed, Fischer says, could contribute to less costly production.
Medicinal cannabis has been legal in Germany since 2017
Role Models
Wurth expects it to take another one or two years until the law takes effect—and even longer until the first licenses will be allocated, cultivation gets started and the first shops open. “The quickest part of such a law would be the decriminalization of consumers. The U.S. have shown that this can happen immediately.”
In shaping the law, he says, Germany has several role models it could draw upon. “The Netherlands are no example of a legalized market as the coffee shops are only tolerated, and supply is not regulated, so that criminal structures have emerged like everywhere else. But the coffee shops are a good example of allowing consumption on-site, which is not the case in most other countries that have legalized marijuana. As for points of sale, Germany should look to Canada and the U.S.—licensed specialist shops in a limited number; no access for youths; exact declaration of the products, their origins and their CBD and THC contents. Uruguay allows cultivation for personal use; people can even join grower communities to cultivate their weed or have it cultivated.”
In the end, the legalization of cannabis in Germany might go more smoothly, critics fear. In February 2021, the Cato Institute published a study on the legalization of marijuana by some U.S. states. It found that both proponents and opponents overstated their cases. Except for tax revenues, which exceeded some expectations, the report says state legalizations have mainly had minor effects.
Stefanie Rossel is Vapor Voice’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Vapor Voice, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco and vapor industry news around the world. She is based in Germany.
Turning Point Brands is embracing next-generation tobacco and alternative products by taking calculated risks.
By Timothy S. Donahue
It’s hard to argue the success of Turning Point Brands (TPB). In business since 1988, during the past decade, the company has been turning the typical tobacco business model on its head. It is involved in almost all aspects of the industry, generating nearly $450 million in sales every year. From its iconic brands like Zig-Zag to its more recent investments in the growing legal cannabis industry, TPB is turning heads.
Headquartered in Louisville, Kentucky, USA, TPB’s business includes three operating segments. Its main line of revenue comes from its “smoking” segment, which includes the rights to the Zig-Zag brand in the U.S. and Canada, according to Scott R. Grossman, TPB’s vice president of corporate development. Zig-Zag is one of the oldest, most recognized “other tobacco products” (OTP) and cannabis accessory brands. “Founded over 150 years ago, Zig-Zag holds the No. 1 share of both rolling papers and wraps in North America, and its products can be found in more than 200,000 retail outlets,” says Grossman. “Given that Zig-Zag generates roughly 40 percent of TPB’s revenue and a majority of our operating income, the brand and its growth initiatives are a major focus for us.”
TPB’s second segment is “smokeless,” which is predominantly the Stoker’s brand, a leading player in the moist snuff tobacco and chewing tobacco markets. The company also owns the Beech-Nut brand and a diverse collection of other chewing tobacco products. Another compelling segment of the TPB operation is its new generation of products (NewGen), which covers the company’s electronic nicotine-delivery system (ENDS) and cannabis brands.
NewGen includes an assortment of brands serving multiple industry segments, such as TPB’s business-to-business (Vapor Beast) and business-to-consumer (International Vapor Group) distribution platforms and its new product engine, Nu-X Ventures. The company has online platforms under brand names such as VaporFi, South Beach Smoke and DirectVapor. TPB also owns the e-liquid brand Solace and within its NewGen segment includes recent minority investments in the emerging cannabinoid space, including brands such as Old Pal, Dosist, Docklight and Wild Hemp.
TPB was one of the first traditional tobacco companies to publicly announce its foray into the legal cannabis market. That decision came under the leadership of TPB’s former president and CEO, Larry Wexler, who retired from the company and was succeeded by Yavor Efremov on Jan. 11. “Larry took the company public in 2016 as an OTP business, and over the next five years, he successfully drove significant initiatives to drive value, including the investment in new talent to drive TPB forward,” says Grossman. “We’ve been strategically focused on introducing new products to serve both B2B and B2C customers across on-premise retail and online channels.”
Yavor Efremov
Bump in the Road
Being a business with major assets in ENDS comes with challenges. TPB was one of the first major companies to receive a marketing denial order (MDO) from the U.S. Food and Drug Administration after the agency’s Sept. 9, 2021, deadline to decide on premarket tobacco product applications (PMTAs). Convinced that the FDA’s decision was unjustified, TPB immediately filed a legal challenge. Before the lawsuit made its way through the courts, the FDA rescinded the MDO it issued to TPB. The term “Fatal Flaw” was used by the FDA for PMTA submissions that lacked certain studies. The term has been at the center of nearly all lawsuits filed against the FDA for its handling of the PMTA process.
“The Fatal Flaw standard is obviously one that departs from the pre-September 2020 guidance. In fact, it’s in direct conflict with that guidance. It’s helpful that [our MDO] was rescinded and that the agency admitted it had not reviewed certain [TPB] studies,” explains Paul Blair, TPB’s vice president of government affairs, adding that TPB made the decision to file suit because there was information that the regulatory agency overlooked in its review process. TPB wasn’t unique in that respect; however, the agency didn’t look at specific study data for several businesses.
“[The rescission] is an important recognition that our denial was not related to nitpicking over data. The science we submitted about transitioning combustible cigarette consumers to our products in particular … It was an oversight. And that’s helpful not only as we try to navigate the process moving forward but also because it doesn’t seem it was an attack on the body of our application generally,” explains Blair. “We maintain that we provided data that is sufficient for the agency to authorize the marketing of our PMTAs. It’s fair to say, though, there’s not a publicly announced standard for the approval process, whether it’s for open system products, closed system products, flavors and, honestly, even tobacco and traditional flavored products.”
That’s what Blair believes the FDA is doing now; the agency is probably reviewing its communications plan on how to reassess the PMTA process and come to some conclusions on deciding on a standard for authorizing products. Traditionally, the FDA would engage in good faith conversations with businesses trying to get products approved and offer some clarity on what information the agency needs. According to critics, the FDA’s Fatal Flaw analysis for ENDS products proved this isn’t the case anymore.
Paul Blair
Embracing Change
Unlike most traditional tobacco companies, TPB isn’t shy about its cannabis investments. The company’s management team and its board have embraced legalization, according to Grossman. Currently, 37 U.S. states have legalized medical cannabis and 18 have approved it for recreational use. During the past few years, the company has invested in several cannabis operations. In 2021, TPB completed an $8 million strategic investment in Old Pal Holding Co., a cannabis lifestyle brand, and an $8.7 million strategic investment in Docklight Brands, a consumer products company led by its anchor brands Marley Natural and Marley CBD. In 2020, TPB entered into a long-term distribution and profit-sharing arrangement with Wild Hempettes, the Texas-based manufacturer of Wild Hemp Hempettes brand smokable CBD, and made a $15 million strategic investment in the global cannabinoid company Dosist.
Grossman says that while every investment needs to be able to stand on its own, TPB’s strategy is focused on finding highly synergistic companies that strengthen the current TPB platform. Old Pal is a good example of how its strategy is being deployed—Old Pal sells roll-your-own (RYO) cannabis products with rolling papers inside the packaging. “Zig-Zag has historically been mainly focused on the convenience store channel, so this investment enables TPB to further accelerate growth in under-indexed stores such as dispensaries and head shops while supporting the growth of Old Pal,” says Grossman.
In August, TPB made its first move into the international market by increasing its stake in ReCreation Marketing, a Canadian distribution company with ties to Canada’s recreational cannabis culture. In December, ReCreation Marketing rebranded as Turning Point Brands Canada. “TPB Canada has a number of proprietary branded products in its portfolio, and we are exploring strategies to leverage that proven model and its portfolio to increase distribution within the U.S.,” says Grossman. “We are one of a select group of established companies—especially public companies—that are actively looking to deploy capital in the cannabinoid space. Historically, we’ve been predominately focused on brands given our expertise, but we’re exploring many verticals within the cannabinoid sector. Our pipeline is very healthy, but at the same time, we have to remain highly disciplined with how we spend our time and capital.”
It’s not just vaping and cannabis products in TPB’s future. In July, the company acquired certain cigar assets of Unitabac. The acquisition was for a portfolio of cigarillo products and all related intellectual property, including cigarillo non-tip, homogenized tobacco leaf, rolled leaf and natural leaf cigarillo products. “The cigar business is a $2.5 billion wholesale business in the United States. We’ve historically participated in that market, but we didn’t have the scale necessary to be really competitive. The Unitabac acquisition allows us to further extend into the cigar market,” says Grossman. “You’ll see a number of initiatives with that asset rolling out natural leaf products and other cigar assets, both under the Unitabac portfolio of brands as well as extending it to Zig-Zag.”
Scott Grossman
Facing Uncertainty
The FDA will soon have a new leader (Biden’s appointee, Robert Califf, had yet to be confirmed at press time). The FDA’s Center for Tobacco Products (CTP) will also have a new leader; its current director, Mitch Zeller, plans to retire in April. Blair says that the individuals in those positions will have a significant role to play in determining how the agency and CTP will work with stakeholders and communicate policies about how those regulations will go into effect. The FDA, he says, doesn’t have any previous experience regulating vaping products, so there is going to be a lot of action, reaction and learning along the way.
“It’s not as if Congress explicitly wrote how the approval or denial process might look. In fact, they didn’t write the details,” says Blair. “At least [the FDA is] thinking about the process, and they’re thinking about the consequences. But there is this opportunity beyond vapor product PMTAs in 2022 for a future generation of products to have some certainty because at the end of this, whether it’s because of litigation, because it’s further issued guidance, because it’s approvals or denials, there will be a pathway for companies and a better understanding of how the process works.”
Blair says that overcoming the challenges of getting a PMTA approved will be stepping stones toward determining how the company approaches the future regulation of other products, such as cannabis. He says there is a real opportunity for TPB to play a critical role in the future of cannabis regulation and policy. “I think our action is going to be guided by our business’ experience as a regulated tobacco business. There are other tobacco businesses that have cannabis interests or investments, but there aren’t many that are willing to publicly engage in the way that ours is as an advocate for legalization, as an advocate for appropriate regulations. There needs to be a balance of consumer protection with entrepreneurship and opportunities in the investment space.”
Grossman says the future of TPB is to align itself with the growth of the cannabinoid industry and possibly make more direct cannabis investments outside its current portfolio. “We are concentrated on trying to learn and execute on a variety of cannabinoid initiatives,” he says. “Although we’ve historically focused on brands, we are deeply embedded in the sector and are actively studying many verticals across value-added products and services, brands and distribution. We believe the U.S. cannabis market will exceed $50 billion over the next five to 10 years, which we clearly think will benefit TPB over the long term.”
Timothy Donahue is the managing editor
of Vapor Voice. Since helping start the magazine in 2014, he has become an
expert and well-respected voice in the rapidly evolving
vapor industry. Tim spends much of his time on the
road, attending conferences and interviewing industry representatives.
His networking skills, work ethic and quick mind
are valuable assets to the industry’s diverse audience.
Pennsylvania regulators recalled hundreds of medical marijuana vape products because the state says they contain ingredients unapproved for inhalation. The state health department released a list of more than 500 cannabis vape products with ingredients not approved by the U.S. Food and Drug Administration.
“Although some of these added ingredients may be considered safe in other non-inhaled products, patient safety is the top priority of the Medical Marijuana Program,” the state wrote in an email announcing the recall, according to the Pittsburgh City Paper (PCP), as reported by MJBiz Daily.
Credit: Promesa Art Studio
The PCP stated that the agency did not respond to a request for more information. The FDA has not approved any cannabis product for marketing. The agency does not have the authority to approve the marketing for or the regulation of any cannabis products, unless a company makes health claims.
The recall comes after a months-long process in which Pennsylvania officials reviewed medical marijuana vaping products. In November, state regulators gave licensed grower/processors two weeks to resubmit vaporized cannabis products that contain additives, including flavors or terpenes, for approval.
