Springfield-area cannabis producers feel the financial burden of a three-month-long recall even after the state regulator released more than 20% of held products at the end of October.
The Missouri Department of Cannabis Regulation (DCR) rolled back its recall on nearly 15,000 cannabis products in late October, allowing those products to return to dispensary shelves, according to a department press release. More than 48,000 products remain held in quarantine under the recall across the state.
Springfield producers are sitting on hundreds of thousands of dollars worth of finished cannabis products. Across Missouri, producers are sitting on millions of dollars worth of marijuana distillate that may be contaminated with out-of-state product.
Background of the Missouri marijuana recall
In August, the Missouri DCR issued a recall on 62,800 cannabis product lines, claiming Robertsville-based Delta Extraction may have included out-of-state components in its manufacturing of distillate. Under Missouri law, all components of marijuana products must be manufactured in Missouri.
Delta then sold the possibly-contaminated distillate to producers across the state, which used it to produce all kinds of cannabis products.
DCR has provided no timeline for its review of recalled products, nor has it laid out an order of destruction for the products. Producers are left waiting on the regulator's orders with little communication from DCR, all the while dealing with the financial loss the recall poises.
“Look, I understand that these investigations take some time,” said Josh Mitchem, CEO of Kansas City-Based CLOVR Cannabis. “But when you're the one sitting with millions of dollars on hold inside your vault that you can't do anything with, it can certainly become frustrating.”
Finished products, raw distillate
CLOVR, the largest manufacturer in Missouri, has products in many Springfield dispensaries. CLOVR had some products removed from the recalled product list in late October.
However, about 95% of its finished products that were placed in quarantine in August are still being held there, Mitchem said. Those products total about $100,000 in value, he said.
For CLOVR, the biggest fallout of the recall is the 125 liters of raw distillate the company is holding in quarantine, which is valued at about $1.7 million, Mitchem said.
CLOVR and other infused-product manufacturers purchase raw distillate from other producers, such as Delta Extraction. The raw product is then used to make all kinds of concoctions such as gummies, vape pens, chocolate bars, tinctures and many more.
Display packaging for assorted cannabis infused product The actual products are kept in the store's product vault. (Photo by Jym Wilson)
Humansville-based Flora Farms also has both finished products and raw distillate still held in quarantine under the recall, said Mark Hendren, president and co-owner. The updated recall at the end of October did not release any of Flora's products, according to an updated list of recalled products from the Missouri Department of Health and Human Services, which oversees cannabis regulation.
Spread across its five retail dispensaries in Missouri, including one Springfield location, Flora Farms has a little more than $100,000 worth of finished products on hold, Hendren said.
Flora Farms also has 39 liters of distillate under quarantine that it purchased directly from Delta, Hendren said. With a liter valued at $10,000 to $15,000, he said, that amounts to over $500,000.
“We feel like we did what was our responsibility and we're hopeful that this will get resolved,” Hendren said. “Some of [Flora's] capital is tied up statewide, and we'd like to see that released.”
Stash House Distribution brands and Agri-Genesis products are included in the products list removed from the recall from the Department of Health and Senior Services. Stash House declined to comment for this story. Agri-Genesis did not respond to a request for comment for this story.
Elkland-based Bison Infused, which sells to the majority of dispensaries in Missouri, has about $30,000 to $40,000 worth of products still on hold, said Matthew Campbell, chief executive officer. Bison, which is also the sole licensed provider of Zen Cannabis products in Missouri, does not have any distillate on hold.
Bison had about 85% of its products released from the recall in October, Campbell said. In August, the infused-product company had about $200,000 worth of products tied up in the recall.
“We had the bulk of our products released,” Campbell said. “We were very blessed in that sense.”
Producers say there is a lack of communication with Missouri regulator
Throughout the entire recall process, DCR has communicated with Bison on a single occasion, outside of its normal regulatory communication with its DCR liaison, Campbell said.
“Even in the product release” that occurred at the end of October, “there was no communication [from DCR] on that for at least a week,” Campbell said. “We sat with released products and didn't even have any communication [from DCR.]”
CLOVR's Mitchem said he also lacked any clear communication from the regulator on the three-month-long recall.
“Lack of communication has been one of the biggest struggles that we've faced with with the DCR since the beginning,” Mitchem said.
Campbell said he heard other producers had products removed from the recall only to discover that they had been added back some time later.
“There were some things I heard that were released that shouldn’t have been released and then got put back on hold,” Campbell said. “So even in the [recall] release it was chaotic.”
Regulator responds to manufacturers' frustrations
Hendren of Flora Farms said he wishes the regulator would move faster in the recall, but said ultimately he understands the state has a lot of steps to go through in the process.
“Would we like [the regulatory recall process] to go more quickly? Of course,” Hendren said. “Obviously we prefer not to have our capital tied up. However, we do understand that the state has a regulatory obligation to ensure...the product is safe.”
Lisa Cox, communications director for the Missouri Department of Health and Senior Services, said by email that the state regulator must limit communication with marijuana producers during an open investigation.
“In cases where a recall is associated with an ongoing investigation, it is unlikely that we will be able to convey more than 1) notice of recall and reasons, 2) notice of process to lift holds or destroy product, if applicable, and 3) notice regarding whether product has been deemed safe, can be remediated, or must be destroyed,” Cox wrote in a message to the Hauxeda. “However, we are always happy to answer questions from our licensees if we can, and we always encourage our licensees to be sure their designated contact is current so that they are receiving all of our communications.”
Cox wrote that she understood the desire for more communication on the part of the producers.
“Unfortunately, while we understand licensees’ desire for additional information when their operations are impacted by investigation of another licensee, we are rarely able to share details related to ongoing investigations,” Cox wrote.
Campbell said he hoped communication from the regulator would improve.
“This is a lot of people's livelihoods and we're kind of sitting in the unknown a lot of times, just not understanding what's going on,” Campbell said. “I would suggest the biggest room for growth for DCR is just better communication with the licensees that are impacted.”
Grown outside the Missouri market
The recalled products “contained THC sourced from cannabis grown outside of the Missouri regulated market,” presenting a “potential threat to public health and public safety,” according to a DCR press release.
After review, the state regulator verified that some of the products on recall contained THC that did, in fact, come solely from the Missouri market. That triggered the release of those products from administrative hold inside METRC, Missouri's track-and-trace program for cannabis products.
Delta Extraction has denied accusations that it illegally imported marijuana into the state by arguing it actually imported a non-psychoactive hemp product that was converted into THC once in Missouri, according to reporting from the Missouri Independent.
Delta has asked the Administrative Hearing Commission to rescind the company’s license suspension and fully rollback the recall, according to the Missouri Independent. A trial is scheduled for the beginning of December, if the division and company can’t work out an agreement before then.
The recall initially affected more than $30 million worth of products across the state, Greenway Magazine reported. As of March 2023, there are 230 retail stores, 87 producers and 67 growers in Missouri, according to Greenway analysis.
Next steps in the recall
Producers are waiting on DCR to take one of two actions. The regulator could issue a notice of destruction of the products, in which case all of the recalled product would be destroyed according to state guidelines in a variety of methods.
For instance, the bags of Zen gummies held in Bison’s vault would have an agent like cat litter dumped all over them, Campbell said in an earlier interview. A third party would then be responsible for picking up the destroyed products and distributing them to a disposal site.
If an order of destruction is issued, producers across the state will be liable for the financial loss of millions of dollars. Some companies may sue the regulator to fight the destruction of property, Mitchem said. Some companies may also sue Delta for financial relief, he said. CLOVR is not part of any suits at this time.
Flora Farms also has not filed any suit at this time, but is preparing for the possibility, Hendren said.
“We have not made a final decision on [any type of suit], but we have consulted with our council and are trying to be prepared for whatever happens,” Hendren said.
The destruction of all remaining recalled products would cause an economic stir in the industry, Mitchem said.
“You've got [about] 20 manufacturers” involved in the recall across the state, Mitchem said. “You're going to force them to destroy these things, it's going to have a big economic impact.”
That impact of a destruction order will ultimately hit consumers and would give the illegal market more activity, Mitchem said.
“It just helps stand up the black market because our prices will go up inside dispensaries,” Mitchem said.
DCR could also release all the recalled product, deeming it safe for consumption. The fact the agency released some of the recalled products gives Hendren confidence that they could come to the conclusion the rest of the products are also safe, he said.
Mitchem does not share the same belief.
“I never once believed that it would all be released,” Mitchem said. “But I'm hopeful it still can be,” he added.
