In early August, Wisconsin health officials urged people in the Badger State to refrain from using vape products. A mysterious illness had stricken 11 teens and young adults who were hospitalized with severe lung disease.

At the time, Wisconsin’s health department had little information about why these young people were experiencing “unexplained breathing problems.” Less than a week later, reports of new illnesses popped up in neighboring Illinois and Minnesota and as far away as California, according to an Aug. 14 New York Times article.

During the next two months, health officials attributed hundreds of new cases, including dozens of deaths, to e-cigarette use and vape products containing THC. As of press time, Oct. 28, that number had ballooned to 1,604 lung injury cases and 34 deaths across 49 states (all except Alaska); Washington, D.C.; and one U.S. territory, according to the Centers for Disease Control and Prevention (CDC).

While many theories exist about why people are getting sick, no single cause has been verified by government agencies. Meanwhile, licensed manufacturers of cannabis products and state-legal retailers are grappling with a host of supply chain, quality and safety issues on a scale not previously experienced in the nascent industry.

The Cannabis Business Times staff has covered the issue closely since it was first considered a public health threat. Here, we recap some of this coverage, including the impact on the industry, how it’s responded to the crisis and what cannabis growers, producers and retailers can expect in the future.

What Do We Know So Far?

The earliest theories on the cause of vape illnesses focused on the use of vitamin E acetate in illicit-market products. Vitamin E acetate is a preservative often found in nutritional supplements or beauty products. The New York State Health Department cited the chemical when calling out the flood of unregulated cannabis products that have hit streets around the Northeast, Midwest and beyond.

While most major news media outlets have picked up the department’s advisory on vitamin E acetate (including Cannabis Business Times), the actual public understanding of oil vaporization and degradation is a bit murkier.

Dr. Arup Sen, CEO of Infusion Biosciences, a biotech company focused on discovering and commercializing cannabis technologies, said in a September interview with CBT that legally manufactured vape products could contain substances that may pose risks, as well.

“Given the shockingly low bioactivities reported for THC and CBD preparations of the present day, I would not be surprised if we find compounds in the current preparations that are 100 to 1,000 times more potent than THC or CBD,” he said. “In fact, synthetic molecules similar to THC have been reported to be more than 2,000 times more potent in a number of cell culture assays that determine biochemical effects at the cellular level.”

Sen said he wasn’t “convinced that anyone really knows what vitamin E acetate preparation is being used and what impurities there might be.”

Not much information exists about the impact of heating primary substances in vape products and the minor components in cannabis liquids used in the vape pens, including propylene glycol, a common thinning agent in vape pens of all types. “Very little is known about the interaction between the materials used to make the cartridges and compounds present in vape liquids at high temperatures,” Sen said.

Of course, cannabinoids are far from the only chemical compounds found in the oil that cannabis consumers and patients are vaping. Much of the industry conversation has turned to terpenes—both organic and synthetic—and their role in the safety of these products.

“Terpenes can be dangerous,” said Dr. Robert Strongin, chemistry professor at Portland State University. “Their use should be limited.” He noted that his research shows terpenes degrade more rapidly during vaping than THC and that adding relatively large concentrations of terpenes to relatively pure cannabinoid distillates is not recommended based on his research team’s findings.

Mojave Richmond and Robert C. Clarke, CBT columnists and co-founders of BioAgronomics Group, said, “Not all terpenes are good terpenes.” Richmond added, “We should tread lightly when it comes to adding large quantities of what are essentially solvents into cannabis products.”

In early October, a new theory emerged related to the possible cause of the vaping illnesses. Following a recent report from Mayo Clinic researchers in the New England Journal of Medicine, scientists at Colorado Green Lab, a cannabis product development and consulting company in Denver, had begun publishing a blog series hypothesizing that the illness (referred to as vaping-associated pulmonary injury, or VAPI, or more recently named by the CDC: e-cigarette, or vaping, product use associated lung injury (EVALI), is due to metal fume exposure.

The Mayo Clinic researchers noted that VAPI lung micrograph images of patients from Illinois and Wisconsin appear to more closely resemble chemical burns.

“The underlying cause is now believed to be chemical exposure, and not an infectious disease,” Colorado Green Lab co-owners Frank Conrad and Cindy Blair wrote. “The VAPI syndrome is strongly correlated with the use of black-market THC vape cartridges, but the CDC has yet to conclusively identify a vaping product, or additive common to all cases.”

The lab posited that the exposure is due to cadmium in silver solder used in “lower-end vape pens” commonly found on the illicit market. Producers of these products use silver solder because it’s a low-cost material, the lab contends. But cadmium is highly toxic.

However, Conrad and Blair stressed that the CDC had not confirmed any correlation between specific causes and effects in the VAPI matter. “The full range of findings is conflicting, and no clear pattern has emerged regarding the source or cause of the illness,” they wrote.

Still, the hypothesis is noteworthy—especially when considered in the broader industry conversation already taking chemical constituents of cannabis oil into account (like vitamin E acetate, which remains at the center of the discourse).

Industry Impact and Risk Avoidance

The illnesses have sent a ripple effect throughout the industry, which faces increased scrutiny from regulators and the general public. On Sept. 26, Medicine Man announced that it was pulling cannabis vape cartridges containing propylene glycol or vitamin E acetate from its shelves. The dispensary business operates four adult-use storefronts and one medical cannabis location in Colorado.

The uncertainty around vaping has industry veterans offering words of caution to their peers and consumers as the crisis continues to unfold. “The devil is always in the details, and safety must come first,” Richmond told CBT in September. “Anytime we add new ingredients of varying quantities into the beaker we risk an explosion in the lab. So, let’s not use consumers and patients as guinea pigs and take a step backward before we tarnish cannabis’ reputation as a safe, beneficial, medicinal plant that has been an integral part of the human experience.”

In the same CBT article, Nick Jack, chief retail officer of Denver dispensary Diego Pellicer - Colorado, said consumers should stick with legal products only sold by licensed cannabis retailers.

“I would hope that the recent series of unfortunate events will persuade [illicit] market users to purchase products—if they’re available to them—that go through regulatory testing and compliance procedures that have been put into place in the legal cannabis market, rather than purchasing a product from unverified and unregulated sources,” he said.

States also are mobilizing. Massachusetts Gov. Charlie Baker announced at the end of September that the state would become the first to enact a temporary ban on all online and retail sales of nicotine and cannabis vaping products and devices through Jan. 25, 2020.

Other states have focused on flavors. In an effort to immediately decrease interest for underage and casual consumers, Oregon Gov. Kate Brown rolled out a plan to ban all non-cannabis derived flavoring agents in both the nicotine and cannabis markets. Her office has stated that exemptions for additives like botanical derivatives that can prove inhalation safety will be considered in the future.

New rules in Colorado propose a ban on polyethylene glycol (PEG), vitamin E acetate and medium chain triglycerides (MCT oil) in cannabis concentrates or products meant to be inhaled. These additives are generally used as thinning agents to cut THC oil, rendering it able to be vaporized. As of press time, the State Licensing Authority had not yet signed off on the proposal; if it does, the new rules will go into effect Jan. 1, 2020.

Emergency rules adopted by the Washington State Liquor and Cannabis Board in October require that cannabis licensees “disclose all compounds, including but not limited to ingredients, solvents, additives, preservatives, thickening agents, terpenes and other substances used to produce or added to marijuana concentrates for inhalation or marijuana-infused extracts for inhalation at any point during production and processing, regardless of source and origin.” The board also worked with “industry representatives and marijuana licensees” to develop vaping risk warning signs that will be posted at retailers selling vapor products that contain THC.

Ben Bodamer, an attorney in Dickinson Wright’s cannabis practice group, advises cannabis companies to examine their supply chains to ensure their products are safe and compliant. He noted that class-action lawsuits have emerged in the cannabis space, and it helps to identify and address weak spots in a business’s interactions with third-party vendors or other partners.

“First of all, we don’t really know enough to know the kinds of claims that will emerge,” Bodamer said. “I know that the plaintiff’s bar is creative, but they’re also attentive. And in this context, they’re going to be following the results of ongoing investigations at the state level and at the federal level. And to the extent that [those] investigations reveal specific sources, and if those specific sources have been supplying product to individual companies, if that supply chain is in any way illegal, … I think the ease with which the plaintiff’s bar could bring claims would go up significantly.”

Getting out in front of the national news narrative with public statements on social media is one thing; showing proof of Good Manufacturing Practices or other standards and certifications will make a clear statement to the consumer base—and to public officials and private attorneys interested in parsing businesses’ tangential roles to a story with an expansive reach.

“You’re going to see scrutiny and the emergence of good actors versus bad actors from a supply chain standpoint,” Bodamer said. “It’s incumbent on good actors to point out their best practices, but it's also incumbent on people to not be bad actors.”

Jonathan Katz is managing editor for Cannabis Business Times and Cannabis Dispensary.

Eric Sandy is the digital editor for Cannabis Business Times and Cannabis Dispensary.

Melissa Schiller is the assistant digital editor for Cannabis Business Times and Cannabis Dispensary.

Andrea Sparr-Jaswa is science editor for Cannabis Business Times and Cannabis Dispensary.

^ In an Oct. 7 op-ed in The Philadelphia Inquirer, Massachusetts Cannabis Control Commissioner Shaleen Title and physician, lawyer and research fellow at Harvard Medical School Michael S. Sinha argued that vaping bans would not stop the recent illness outbreak, as those bans only drive patients and consumers to the illicit market. Source: The Philadelphia Inquirer

^ Mary Lynne Vellinga, spokesperson for Sacramento Mayor Darrell Steinberg, said the city’s top elected official will be reviewing the city’s cannabis licensing process following the revelation that Andrey Kukushkin, a Ukrainian-born man indicted in a campaign-finance scheme along with two associates of President Trump’s personal attorney Rudy Giuliani, is an officer in a Sacramento cannabis dispensary controlled by a local businessman with a considerable share of the city’s cannabis business. Source: Sacramento Bee

The American market is undeniably the largest the world has ever seen and is likely to remain so for a very long time. Look at it this way: We can each produce something, then sell it in the same language and using the same currency across a jurisdiction spanning nearly 3,000 miles. In terms of geography, there is no other market like it and never has been. Given that America is a $20-trillion economic powerhouse, we are also unlikely to see any other economy nearly as valuable. The opportunity to sell into that market is why everyone wants to bring their products to the U.S., no matter what market cap their companies currently have.

While an ongoing flood of companies, most notably conglomerates, entering the U.S. market may incite fear, we prefer to look at the opportunities as we perceive them.

Niche products that have gained access to the U.S. market and have prospered include Ben & Jerry’s, Honest (maker of Honest Tea, among others) and Tom’s of Maine. Sierra Nevada used to be a craft beer company, and KIND used to be a niche health food company. Companies like Trillium Brewing Company in Massachusetts and Vermont’s Alchemist are now at craft scale, while Sierra Nevada and KIND have grown to be larger operators.

What each of these current and former niche businesses have in common is an understanding of their existing and potential customers. In the context of the American market, each of these players learned to understand its customers and to deliver what these customers wanted. Each of these success stories features a company that gained the confidence and trust of a large part of its potential market. By the time the larger players in their respective industries became aware of these niche brands, the larger players had to either live with the niche players or try to acquire them. Once the niche players had gained the confidence and trust of American consumers, the large players could do very little about it.

The question for the cannabis industry is whether we can do the same thing in our industry before Big Pharma, Big Alcohol or Big Tobacco figure out how to gain the confidence of our natural market with products similar to our products before we do.

The First-to-Market Advantage

It appears to us that we, as current operators, have the advantage of being first into this market. Our products are not easy to handle, and our market and our customers have their quirks. The big guys will throw their money at the problem by bringing in their marketing experts and focus groups to try to understand our market’s customers. We do not believe the big guys can do this any more quickly or more effectively than current cannabis businesses can. We believe that we can deliver the products, the packaging and the labeling that our customers want better than the big guys can.

We are not saying that this will be easy. Today’s cannabis businesses will have to work to understand their markets better than they do now. Some of this market, in particular some of the larger conventional American consumer market, will be strange to us. That is, some of our potential market will be entirely new to whatever we might call the “cannabis experience.”

Nevertheless, we have a head start. We know our natural customers, and we know the nuances of our products that we will have to explain to new customers. This means that current operators should be able to do the focus groups and the marketing better than the big guys. It seems to us that this is exactly what Ben and Jerry’s, Sierra Nevada and other companies like them have done.

Furthermore, we have an extremely large market to motivate us all. We should be able to exploit market niches within our markets and, indeed, to exploit the entire market before the big guys can.

On the whole, we believe that they have more to fear from us than we have from them. We all know that they could spend an awful lot of money going down rabbit holes in this industry and end up with nothing. The big prizes will mostly go to the companies that learn how to create and serve American customers. Those should be our companies.

Build Trust, Reduce Costs

We have recognized certain significant cost drivers that, within the American market, are unique to the cannabis industry, including one of the biggest thorns in the side of producers: mandatory third-party testing.

Mandatory testing is required of conventional food, beverage and drug producers, but they all do their testing in-house, subject to FDA audit. Even after absorbing the costs of internal testing, bringing that testing in-house would save our company (Connecticut Pharmaceutical Solutions) roughly $400,000 per year in comparison to the costs of independent third-party testing.

To bring testing in-house, we would have to do a lot of work to convince both our regulators and our customers that they could rely implicitly on our in-house testing. Furthermore, our legitimacy in our customers’ (and regulators’) eyes is invaluable and must never be subject to question. Nevertheless, we have several hundred thousand dollars of motivation regarding this issue.

Another area for very large potential cost savings is tax reform, specifically with respect to Section 280E of the Internal Revenue Code. If the big guys get into this industry, we can expect them to talk to politicians through their lobbyists about how many people they employ and about how important their industries are to local economies to persuade them to revise these unfriendly codes.

This perhaps is the biggest advantage larger companies have over current cannabis industry operators: They already work together. They generally do this through large industry organizations. The cost of that unification is that even big guys like Procter & Gamble, Johnson & Johnson or Unilever can’t simply go their own way, no matter how big they are. They have to figure out how to cooperate as to their common industry interests, which tend to overwhelm their competitive interests. No matter how big they may be, they would never fight 280E as individual companies, but rather as an industry. They would present a united front as an industry that contributes a great deal of money to the American economy and that employs a large number of people. They would direct their lobbyists at a common target.

Our industry already has multiple associations and lobbyists, and already employs a lot of people. Presenting ourselves with a unified voice as the source of legitimate product and as significant to local economies, however, remains a challenge. So long as we leave legitimacy and economic significance to the big guys, we will be exposed on that front. We would like to control product legitimacy and economic significance from the high ground. We already know about regulation. We already know about testing. We already know how to hire lobbyists. From our point of view, our industry should be the one to remove Section 280E from the tax code. This will take a unified industry. We will need producers working with dispensaries, dispensaries working with producers, and industry organizations that help us to work together.

With the exception of cooperation, we see those big guys as no better than we are and probably not nearly as good.

The Value of Getting It Right

We argue that the door is open for us to be as sophisticated as any big company or as any big industry in working together politically to do something that benefits all of us, all of our communities, and all of our customers. We can do all of this as a legitimate industry that employs thousands of people, contributes its more-than-fair share of taxes, and supports the growth of the entire economy.

We acknowledge how esoteric this sounds. It sounds like a lot of effort for something other than this month’s revenues and profits. But either we control these matters, or we leave them to someone else to control. As Aristotle said: Nature abhors a vacuum.

Thomas Schultz: President, Connecticut Pharmaceutical Solutions (CPS), CTPharma.com

Rino Ferrarese: COO, Connecticut Pharmaceutical Solutions