M2M Goes to Pot in Colorado

Oct/Nov 2014

On my second full day as a resident of Colorado, a friend invited me to join him on a tour of a large-scale medical cannabis grow an hour or so north of Denver. The acre-plus greenhouse was breathtaking, not only for its verdant rows of marijuana, some heavy with buds, but also for what lurked below. M2M.

Every (legal) medical and recreational cannabis plant in Colorado is affixed with a barcoded RFID (radio-frequency identification) tag once the plant is transplanted into a container larger than 2×2 inches, or into the ground. This identification follows the plant and its products all the way through the production and distribution process. Additional tags are assigned when the plant’s buds are dried and packaged, when samples are sent to testing labs, when a package is broken into smaller packages for retail sale, or when a package is used in an extraction or conversion process. The Colorado Dept. of Revenue’s MED (Marijuana Enforcement Division) hired Florida’s Franwell, Inc. to develop the cannabis compliance tracking system, which is called METRC (formerly “MITS”).

The state also requires all parties in the cannabis distribution chain to record video at every point where the product is stored or changes hands, using IP-capable cameras with minimum four hour battery backup, and to keep the video for 40 days in case it’s needed for a audit. Alarm systems and access controls are also mandatory. These tools provide the state with detailed information about where legal cannabis and cannabis products are at all times, and who handled them, until they are sold to a consumer. (A legal challenge to video surveillance at the point of sale is making its way through the courts, based on asserted conflicts with the HIPAA medical privacy law.) METRC also issues manifests for cannabis shipments that comply with regulatory requirements, as an aid to law enforcement should a vehicle transporting cannabis be stopped.

State revenue and local law officers can quickly verify that a cannabis grow op, storage facility, or transportation truck contains the items that it’s supposed to, simply by pulling an instantaneous RFID inventory count and comparing that to METRC counts. Should a batch of finished cannabis products turn up tainted, the system can trace the cannabis that went into the product back to “birth.”

The MED is developing a series of algorithms that run against the huge dataset METRC generates to indentify anomalies and/or enforcement opportunities. Discrepancies between the weight of items shipped and received, a dispensary that appears to have more than 70% of its inventory from sources other than their own grow, or even an unusually low crop yield can trigger a visit from a Colorado revenue enforcement officer. Per MED Communication Specialist Natriece Bryant, the state’s top three objectives for METRC are to “ensure proper collection of state tax revenues, ensure public safety, and prevent diversion to other states across the country.”

The residents and leaders of Colorado realized they needed a statewide cannabis compliance system in 2009 after U.S. Deputy Attorney General David Ogden issued a memorandum stating it was an unwise use of Federal resources to prosecute medical marijuana patients and caregivers who were “in clear and unambiguous compliance with existing state laws.” Colorado’s medical marijuana law, passed in 2000, by 2009 had faced multiple challenges and there was no centralized control over cannabis distribution. Dispensaries were operating in a gray area, since the law did not explicitly allow for retail sales. Cannabis advocacy group Sensible Colorado convened a series of community stakeholder meetings in late 2009, during which all parties agreed that Colorado needed a centrally regulated medical marijuana distribution system. The State Legislature passed the Colorado Medical Marijuana Code in 2010, which set up the regulatory system that’s in place today. The system is being expanded to support recreational marijuana sales, as Colorado legalized non-public recreational use in 2012. That law became effective in January of this year.

According to Mark Slaugh, CEO of cannabis compliance consulting firm iComply, the tracking, surveillance, and security tools required by Colorado’s 500-page marijuana regulations are “analytical equipment for Colorado’s experiment with legalization … instruments to examine results” and provide the MED and Colorado’s citizens with detailed information about the cannabis trade. Slaugh points out Colorado’s approach to regulating cannabis relies on the free market: rather than designating a handful of authorized growers as is the case in Washington, New York, and British Columbia, Colorado allows anyone who has the means and background to qualify for a license to open a cannabis business.

While METRC provides the state of Colorado with the information it needs to monitor cannabis distribution, it’s not all that useful for cannabis growers. METRC is designed as a chain-of-custody system, not a business inventory system. Littleton, Colo.,-based software firm MJ Freeway is one of the businesses filling this gap. Founded by IT and Web veterans Amy Poinsett and Jessica Billingsley, MJ Freeway provides a complete business software platform for cannabis growers, processors, and sellers through its GrowTracker, MixTracker, and GramTracker modules. “Growers and business owners already have so much on their hands,” says Poinsett. “MJ Freeway makes [cannabis] regulations easy to follow and maintain.” All aspects of cannabis cultivation, conversion, packaging, and sale can be handled within the system, including when and how each plant was pruned, fertilized, treated for pests, harvested, tested, converted to oils or edibles, and packaged. MJ Freeway has been licensed to over 1,000 users, in 17 U.S. states, the District of Columbia, Canada, and Europe.

Colorado cannabis entrepreneurs complain about the need to double-enter data into METRC and the business’s enterprise information system. So far, the only integration available between METRC and enterprise systems such as MJ Freeway is an API (application programming interface) by which cannabis retailers can upload their daily sales to METRC by way of a comma-delimited data file (.csv). MED’s Bryant says Colorado, “is currently working with the point-of-sale companies to develop tools that can generate interfaces as well as simplify the businesses computer operating systems,” and that these discussions “will continue into the new fiscal year.”

Colorado’s cannabis compliance system, which would not function without the automation available from M2M, is the first and most comprehensive state-operated cannabis inventory and control system in the United States, and possibly in the world.

Denver-based Laurie Lamberth leads the Internet of Things, M2M, and telematics consulting practice for 151 Advisors, a strategic consulting firm that helps technology companies solve problems, seize opportunities, and achieve results. Learn more about Laurie and 151 Advisors at www.151advisors.com

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By | 2015-06-23T17:09:30+00:00 9/11/2014|

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