Since the outbreak of vaping-related illnesses was first reported this summer, coverage has been both constant and bleak. To date, there have been 1,888 cases and 38 deaths in 49 states. Young and otherwise healthy individuals are falling critically ill across the country and there is still no singular known cause of this unprecedented epidemic. What had been communicated as a cleaner and safer method of ingesting nicotine or cannabis now appears to have serious, in some cases deadly, side effects. Consumers, regulators, and businesses are scared and rightfully so. How could such a widespread illness develop so unexpectedly? What is causing it and how can it be prevented?
While politicians have taken initial steps to prevent the wrong products from getting into consumers’ hands by declaring public emergencies and restricting sales, the fact remains that there is a clear breakdown in the current system of enforcement and that trust, even in the legal industry, is damaged. When a consumer purchases a product in-store they deserve the right to be confident that it will not cause them harm. However, current regulations and taxes in cannabis have created an ecosystem that has allowed an illicit market to thrive and has restricted transparency into the industry for both government and consumers.
Legal distributors work to combat the illicit market
In the absence of federal government supervision of the cannabis market, third-party distributors have played a key role for both legal brands and consumers. As the intermediary between the two, distributors are positioned as gatekeepers of safe, affordable, and relevant cannabis goods. Their job is to ensure that independently tested and compliantly packaged products are delivered only to licensed retailers. This is a model based on efficiency and safety, which enables third-party distributors to save brands money and translates into more affordably-priced legal products for consumers.
The cause of the outbreak of vaping-related illnesses is still unknown, but there is clear evidence that indicates the black market is responsible. In a study done recently by NBC news, vapes were purchased from both licensed California dispensaries and unlicensed delivery services. They were then tested by an accredited testing lab and the results indicated that a substantial amount of the illicit products contained harmful substances like pesticides and hydrogen cyanide that can lead to potential death, while the legal products contained none. Armed with this knowledge, it is difficult to understand why a consumer would turn to the illicit market; however, it is often a matter of cost. While a legal vape pen of THC on average retails close to $55, an untested and illicit product could cost only $25 or less. Beau Kilmer, Director of the RAND Drug Policy Research center was quoted as saying, “ The size of the illicit cannabis market is largely a function of the prices in the legal market, availability of legal outlets, and resources dedicated to enforcing the law against unlicensed producers.”
Until clear vape production regulations can be established and tracked at a federal and state level, distributors will continue to play an essential role in streamlining the logistics and compliance processes for legal brands. On average, brands that leverage a third-party distributor reduce their distribution spend by 15% per unit of product sold. Without a distributor, each brand has to communicate individually with each dispensary. However, a distributor can bundle products and deliver multiple brands at a time, saving on fuel, labor, and communication overhead. At Nabis, we are able to use a pure play distribution model to achieve optimal economies of scale. By helping to lower the input costs for licensed brands’ products to get to market, we push for safer and higher quality products to be sold at more affordable rates at more retail dispensaries. In light of the current vape issue and massive illicit market, it is clear that an affordable and legal product makes a significant difference for the end consumer.
Preventing another crisis
The current approach to preventing another epidemic, as well as solving the existing one, is to prohibit the use and sale of these products legally. However, there is little indication that this is an effective strategy. Prohibition only pushes consumers to buy on the illicit market. This is the case in many industries, alcohol being the most prevalent example. What is needed now is a clear set of federal regulations and strict enforcement so that those operating in the legal market would not be incentivized to work outside the system and consumers do not turn to unregulated and unsafe products because they are cheaper. Leo Beletsky, a professor of law and health sciences at Northwestern was quoted by Vox as saying “What federal legalization would do is allow for a more uniform and predictable and clear set of rules that would draw on the experience and expertise of the federal agencies in regulating consumer markets.” Through legalization federal agencies would be able to implement strategies that have been proven to protect consumers.
Another key piece of the puzzle is education. The cannabis industry is at the very beginning of a long road to undo the impact of the ‘War on Drugs’. The health and safety of consumers will always be the top priority, but turning to prohibitionist tactics does not solve the underlying problems. Public education that supports clear regulations and enforcement is essential so that consumers are aware of risks and can make responsible decisions. Forbes cited a similar example of this approach in, somewhat ironically, the progress made to reduce tobacco smoking. According to their research of CDC records, from 1965 to 2017, the number of cigarette smokers decreased 67%. This was not done through prohibiting tobacco use or arresting smokers, but through standardized regulations and large public awareness campaigns. This approach has resulted in one of the most significant public health accomplishments in recent American history.
The most meaningful immediate step for licensed brands and consumers right now is solidifying trust. There needs to be absolute assurance that legal products have gone through the proper channels and are safe to consume. Mandate METRC compliance is a key step forward in tracking and tracing products from seed to sale, but there is still work to be done. Third party distributors are a critical link in the existing regulatory framework, coupled with effective federal legalization, education, regulation, and enforcement. Until then, partners in the legal cannabis industry must communicate and work together to prevent another cannabis ‘crisis’.