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What track record does Metrc have in other states for cannabis quality control?
UPDATED 2/15/2021: Contracting records online show Metrc will be paid $3.5 million by the state to administer this contract. That’s in addition to the $40 per month, $0.45 for each cannabis plant, and $0.25 for each cannabis product, that businesses will pay to Metrc. The company has not yet charged the $3.5 million, and the administrative cost cannot exceed this amount.
UPDATED 2/24/2021 The $3.5 million appears to be a cap on how much Metrc could charge the state in the event that unexpected costs emerged outside the scope of the contract. It doesn’t necessarily mean Oklahoma would have to pay administrative costs of this sort.
If there’s any doubt in your mind about the rapidly growing influence of Florida-based Metrc within the cannabis industry, consider the words of Karan Wadhera. He’s a manager for Casa Verde Ventures, the cannabis-forward venture firm co-founded by Snoop Dogg that poured $50 million into Metrc two years ago.
“Compliance is the backbone of the cannabis industry,” Wadhera told TechCrunch in 2018. “If a license holder isn’t compliant, their business will cease to exist.”
The state of Oklahoma hired Metrc in September to digitally track every cannabis plant and product reaching retailers and consumers. With a six-month timeline for rollout, Metrc commands the fate of 10,000 Oklahoma cannabis business license holders in 2021.
The contract with Oklahoma brings Metrc’s total number of state clients for cannabis tracking to 16. The company grew 60 percent during 2020 alone and has emerged as a market leader among the small number of companies offering cannabis-tracking technology for government regulators.
But what do you really know about them?
Some important facts first
Metrc’s customers are government agencies more than they are cannabis businesses. The company’s name is an acronym for Marijuana Enforcement Tracking Reporting & Compliance, and its chief operating officer is a former state regulator of cannabis in Colorado.
The company has not disclosed its revenues. One part of Metrc’s income derives from government contracts it pursues for tracking and tracing cannabis plants and products on behalf of regulators. Another stream of revenue is what cannabis business licensees pay: $40 per month for the privilege of accessing Metrc’s required software, plus $0.45 for each cannabis plant, and $0.25 for each cannabis product.
The state of Oklahoma is paying Metrc nothing at all as part of the contract and funding the tracking program entirely through the fees paid by cannabis businesses. Compare that with neighboring Missouri where the company was awarded a $5 million contract by the state. There’s now a dispute over whether Metrc should also be permitted to charge tagging fees to cannabis entrepreneurs.
Using the system is mandated even if you already subscribe to your own business software for tracking transactions and inventory in Oklahoma. But a method is available for connecting third-party business management software to Metrc’s own system.
Metrc’s products are designed to make it easier for government regulators to track the life cycle of cannabis plants from “seed to sale.” The company achieves this by using radio frequency identification technology. Special RFID tags are affixed to cannabis retail packaging and the plants themselves.
Data is collected from the tags at different stages of the product life cycle: marijuana dispensaries, cultivation-and-manufacturing facilities, and distribution centers. This then allows Metrc to monitor the location of cannabis at any time, determine the origins of a cannabis product, retrieve it from the supply chain if needed, and identify and report trends and activity.
State regulators at the Oklahoma Medical Marijuana Authority say a major intent is to shield both marijuana dispensaries and medical patients from cannabis that doesn’t meet safety and quality standards required for other consumer products.
Lawmakers at the statehouse also want the system to prevent medical marijuana from being diverted to underage people or for unlicensed purposes.
“This system will revolutionize our compliance abilities and improve our response time on complaints and recalls,” interim OMMA Director Kelly Williams said at a December state hearing. “ … There are also algorithms in that program that will help us to identify patterns that might indicate diversion and will notify us automatically.”
Metrc will be responsible for training the cannabis industry on how to use its system, including instructions on what to tag, how to do it, and when. The company believes its pricing structure offers a measure of fairness since smaller businesses with smaller inventories pay lower prices.
But cannabis businesses elsewhere at times have struggled to adapt to the system. There have been reported slowdowns and outages. The company has acknowledged that the rollout of its system in some states has not gone smoothly. Metrc officials say they are not afraid of feedback as they adjust to the needs of a still-young but quickly growing industry.
“We welcome the constructive criticism, and we welcome the ideas, because we’re committed over the long haul to continually reinvest back into the system and make it better and more efficient over time,” Metrc COO Lewis Koski told a trade publication in December.
Given that so many Oklahoma cannabis businesses will suddenly be beholden to Metrc’s products for tracking cannabis from seed to sale, it’s worth looking closer at the ways they’ve been received in other states. Here are some things you need to know.
Where Metrc has earned high marks
It’s not just state regulators who would benefit from access to Metrc’s system. Cannabis dispensaries and customers would have greater assurances of safety and quality in the products they’re purchasing. Think of it like the labels that list nutrition facts on U.S. food products.
Buyers and sellers would be able to check packaging information online and view independent laboratory results for quality testing before receiving cannabis inventory from wholesalers. The state would also more quickly be able to identify poorly made products that may require a recall to protect consumers.
Metrc meets these needs while checking other important boxes. The company has acquired a lot of experience in a short amount of time. It has several competitors with names like Leaf Logix, BioTrackTHC, and MJ Freeway. But the company dominates this small area of the industry. In addition to Oklahoma, Metrc added Maine and West Virginia as new clients in 2020.
“All bidders were evaluated by a team of reviewers using the same scoring formula that was determined prior to review of the proposals,” Oklahoma regulator Williams told the media. “This formula included the ability to meet OMMA’s requirements, cost to the state, and cost to our licensees. Metrc scored the highest using this formula.”
Company officials boast that no state so far has declined to renew their contracts. Three of the nation’s pioneering cannabis states -- California, Colorado, and Oregon -- are counted among its clients.
Wadhera from Snoop Dogg’s Casa Verde Ventures says Metrc has become “one of the de facto track-and-trace systems” relied upon by governments for regulating an industry still in an embryo stage.
Metrc COO Koski told Marijuana Business Daily in a December profile that its success stemmed from fast rollouts, the company’s leading market position, a dedicated workforce of some 130 employees, and its quickly accumulating experience and institutional knowledge.
“I think the other thing that sets us apart is exclusivity,” Koski said. “Unlike all the other track-and-trace providers, we don’t offer any ancillary services to the industry (such as point-of-sale systems or consulting services). … We’re primarily focused on the inventory accountability as required in law and through regulation.”
A longtime dispensary owner in California required to use the system told a trade publication in 2019 that Metrc’s system didn’t come without challenges. But he said more value from the software arrived with time.
“With the implementation of Metrc, there has been a strong learning curve. But with that learning curve has come great ease in the process. … Being able to check harvest dates more quickly has also been a massive improvement. This ensures a quality experience from seed to sale for the consumer. … Metrc is here to make life easier. Let it.”
Where Metrc has earned low marks
But as noted, there’s criticism of Metric, too.
One software expert in Nevada who has trained people on Metrc said last year that it was “not user-friendly.”
“It’s very hard to learn. There’s not an easy undo button. So, when you make a mistake, it’s very hard to correct that mistake and find it and undo it. And so the learning curve is incredibly steep.”
In neighboring Missouri, Metrc is in a lawsuit over the fees it’s charging cannabis licensees for RFID tags placed on each plant and products. As bidding was underway between software competitors to win Missouri’s contract, Metrc reportedly removed the tag fees from its bid to comply with a requirement that offers be “fixed-price.”
After winning the contract, however, Metrc then filed a lawsuit asserting that it was permitted to charge cannabis businesses the individual tag fees after all. At the very least, it leaves businesses unsure about their future costs.
Cannabis businesses in other states have complained about slowdowns, outages, and difficulty simply understanding how to use Metrc’s mandated software.
Some cultivators in California have said uploading data can be time-consuming. A distributor told the media that $15,000 of product was relegated to a “purgatory” as California regulators held it up in the supply chain. The product had already passed testing 45 days prior.
Months into 2019 when California businesses were expected to be up on Metrc, just a fraction of retail dispensaries, processors, and cultivators were utilizing the system. Maryland’s marijuana industry reportedly experienced slowdowns and interruptions. Michigan reported brief glitches that prevented patient license lookups in early 2020.
Metrc COO Koski says the company hears these complaints. He responds that enhancements are made to the system some 150 times a year. “Those types of outcries are things that we take very seriously and we take a very close look at.”
How about here in Oklahoma?
State lawmakers held a mid-December hearing in Oklahoma City where they received updates about the implementation of medical marijuana since voters approved it in 2018. Among other things, they had questions about the Metrc contract awarded by Oklahoma in September.
Republican Rep. Scott Fetgatter of Okmulgee has emerged since the passage of medical marijuana as a close observer of how Oklahoma is implementing cannabis rules. Fetgatter said at the hearing he believed the cost to businesses of the RFID tags was high, added burden to Oklahoma cannabis businesses, and pushed costs downstream.
“Currently, we have a very low barrier to entry as far as licensing,” Fetgatter said at the hearing. “However, once you start adding the fees different municipalities and counties are adding on top, now we’ve added another $0.45 per plant. For patients, I see this as a loss. For businesses, you are now driving up their costs as well.”
One cultivator growing on 90 acres in Oklahoma said the new mandate would require him to purchase 50,000 of the tags in order to become compliant. In addition to being a burden, he testified at the hearing that rulebreakers would still seek to exploit loopholes in the system.
Republican Rep. T.J. Marti of Broken Arrow is a pharmacist and expressed concern that the state was handing too much control over to a single contractor. He also worried about the cost to Oklahoma cannabis businesses of the RFID tags saying he’d seen them elsewhere for as little as $0.12 each.
“The more complex a business can make its business, the more it costs the public. We go through this in my business of pharmacy. What I’m afraid of is the more integrated we are with the company, the less control we have.”
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