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Organigram takes Canadian government to court over cannabis lozenge dispute
Canadian marijuana operator Organigram Holdings is asking a federal court to quash a Health Canada decision that the company’s popular ingestible cannabis lozenges should be classified and regulated as edibles instead of extracts.
The legal challenge could have broader implications for Canada’s regulated cannabis sector and affect millions of dollars in sales of high-potency lozenges and similar products.
Toronto-headquartered Organigram is seeking an application for judicial review.
In Canada, such reviews give stakeholders, including companies, the opportunity to challenge decisions by government authorities, explained lawyer Ranjeev Dhillon, a partner with Toronto-based McCarthy Tétrault and co-lead of the firm’s cannabis law group.
“I think a lot of people in the industry will be waiting to see what the result of this is, because if Organigram is successful, I think that could lead to more challenges in the future,” said Dhillon, who is not involved with Organigram’s case.
Organigram revealed the court proceeding against the federal health department when it posted quarterly results earlier this month.
The dispute between the cannabis company and Health Canada revolves around the regulatory classification of Organigram’s Edison-branded Jolts cannabis lozenges.
The outcome could impact Organigram’s revenue: Retail sales of Jolts lozenges totaled nearly 10.9 million Canadian dollars ($8 million) in Alberta, British Columbia, Ontario and Saskatchewan in 2022, according to point-of-sale data from Seattle-based cannabis analytics firm Headset.
Organigram CEO Beena Goldenberg told MJBizDaily the dispute was also “reputational.”
“We believe we have a compliant product. … We believe that the regulatory requirement for a product to be an edible is that it has to be consumed in the same manner as food,” she said.
“And we don’t think our Jolts are intended to be consumed in the same manner as food.”
Timeline of regulatory dispute
Jolts cannabis lozenges contain 10 milligrams of THC each and 100 milligrams of THC per package, exceeding the 10-milligram-per-package limit established by Health Canada regulations for cannabis edibles.
However, Organigram – and other companies that make similar products, such as Indiva Limited – have, until recently, successfully sold the lozenges as a cannabis extract, which have a higher THC limit than edibles.
Jolts “were developed out of a growing and unmet consumer need for a higher-potency, legal product that would be quality controlled,” Goldenberg said.
“This would offer consumers, including medical patients, an option for higher-potency products that aren’t inhalables, for people who have difficulty swallowing capsules and those who can’t tolerate the mouthfeel of oils,” she added.
“We really believe we’ve developed a compliant product that would meet those consumer needs.”
In January, Health Canada said ingestible cannabis extracts should be classified as edibles and asked companies including Organigram to voluntarily stop selling them.
Organigram told the regulator it disagreed and would not stop selling Jolts as it sought “further dialogue.”
On March 1, Health Canada issued a “non-compliance determination” to Organigram requiring the company to stop producing and selling Jolts, the filing shows.
A few days later, the regulator issued a public advisory about “cannabis edibles incorrectly sold as cannabis extracts,” warning consumers that users of such products “may accidentally consume higher than expected levels of THC, which can cause adverse reactions ”
Health Canada also released industry guidance outlining its position on the difference between cannabis extracts and edibles.
Organigram announced it was pausing production of Jolts and considering its legal options later in March.
The company must stop selling Jolts to provincial cannabis wholesalers as of May 31, Goldenberg said.
Seeking judicial review
Cannabis industry attorney Dhillon said it’s the first time he can recall a cannabis company seeking judicial review of a Health Canada decision.
“And if it’s not the first, it’s exceedingly rare to challenge someone like Health Canada on something like this,” he added.
Dhillon cited factors including the time and cost involved in such challenges and cannabis companies’ concerns about maintaining good relationships with the regulator.
“If there’s disputes, a lot of times they’re discussed behind the scenes so it doesn’t get to this point,” he said.
Organigram’s recent application for judicial review seeks “an order quashing or setting aside the decision and requiring Health Canada to make a determination that the lozenges are a cannabis extract and do not constitute edible cannabis.”
Alternatively, Organigram seeks the order to be suppressed and the matter to be returned to Health Canada “for redetermination.”
The cannabis company argues that “Health Canada acted unreasonably, including by erring in law and basing its decision on erroneous findings of fact unsupported by the material before it.”
Organigram’s court filing argues that:
- Jolts lozenges are meant to be dissolved under the tongue or through the skin inside the cheek, “distinct from the manner in which food is consumed.”
- The lozenges contain “a harsh menthol flavor that is designed to limit consumption” and all the components are “permitted ingredients for a cannabis extract” according to regulations.
- Organigram “has received no reports of serious adverse reactions despite widespread distribution” of the lozenges.
Another aspect of the disagreement between Organigram and Health Canada revolves around Jolts ingredient oligofructose, which Organigram said “assists in forming a solid and glassy lozenge and provides for even dispersion and dissolution.”
“Health Canada incorrectly and disproportionately focused on the use of oligofructose in the lozenges,” Organigram’s filing says.
Organigram CEO Goldenberg believes resolving the application for judicial review could take until late summer or longer, in light of court backlogs.
“We are trying to engage with Health Canada to perhaps find a solution in the short term,” she said.
A Health Canada spokesperson told MJBizDaily in a statement that commenting would be inappropriate, “as this matter is currently before the courts.”
Source: https://mjbizdaily.com/organigram-takes-health-canada-to-court-over-cannabis-lozenge-dispute/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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