Published 12 hours ago | By Matt Lamers

Health Canada handed out three noncompliant ratings to cannabis producers from the nearly 260 inspections the federal regulator conducted in the last fiscal year, according to its recently released compliance report.

The inspection data illustrates the state of compliance – and, in some cases, shortfalls – for Canada’s fast-growing medical cannabis producers for the fiscal year ended March 2018, although experts said a more complete picture of quality and compliance should also consider recalls and end-user complaints.

Of the 257 inspections, 63 “major” and two “critical observations” were noted by Health Canada’s experts.

Major observations are issued for infractions that may increase the risk of diversion and/or may increase health risks, whereas critical observations are made for a deficiency that will increase diversion and/or will cause health risks.

A producer can be assigned a compliant or noncompliant rating based on the number and seriousness of the violations found by Health Canada.

Samuel Bouabane, director of quality and regulatory at Cannabis Compliance, a consulting firm in Mississauga, Ontario, said license holders should treat both major and critical findings seriously.

“If left unaddressed, these types of observations could escalate and place the licensed status of the site in jeopardy,” he said.

Bouabane cited examples of major observations as cases where there could be insufficient quality-assurance oversight of certain activities, personnel following unapproved procedures, or missing steps in standard operating procedures.

Examples of critical observations may include batches released with clear problems such as failed testing, known or unaddressed manufacturing or packaging issues, contamination, any evidence of fraud, or illegal activity, Bouabane said.

Sherry Boodram, CEO of Toronto-based regulatory consulting firm CannDelta and a former Health Canada senior inspector, told Marijuana Business Daily the inspection summary reflects the new streamlined approach the regulator adopted early in the fiscal year.

“All of the cannabis producers would have undergone at least one inspection, with the frequency depending on the license holder’s risk level,” she said.

“Certainly, with more government resources, it would be advantageous for everyone involved if Health Canada inspected producers more frequently to ensure producers are also receiving as much guidance and feedback from Health Canada as possible.”

The number of federal authorizations to cultivate, process or sell medical cannabis more than doubled in the same period to just under 100.

Regulator actions

Health Canada issues compliance actions if and when deficiencies are identified during an inspection.

Among the compliance actions taken in the fiscal year were five warning letters:

  1. Agrima Botanicals was issued one in November 2017 for activities at the site that were not authorized by the license, according to the report. A critical observation was noted by the regulator, and the company was found to be noncompliant. Health Canada said compliance with the regulations was achieved after the warning letter.
  2. CannTrust was also warned by Health Canada via a letter in November 2017 for changing the production process for cannabis oil without submitting a license amendment application. Major and minor observations were noted in an annual inspection.
  3. After a targeted inspection in September that year, Natural Med Company was given minor, major and critical observations, resulting in a noncompliant inspection rating. The company was given a warning letter due to noncompliance with Good Production Practice.
  4. In a regular inspection in April 2017, Aurora Cannabis received minor and major observations. A warning letter was issued and products were seized because of a contravention of the Physical Security Directive, the report states. Despite the letter being issued, Health Canada concluded that Aurora was compliant with the legal and regulatory requirements.
  5. During a regular inspection in April 2017, Natural Med Company earned minor and major observations and an inspection rating of noncompliance. That caused a warning letter to be issued for noncompliance with Good Production Practice.

No licenses were revoked.

At the tail end of the previous fiscal year, the regulator started unannounced random testing after two licensed producers recalled medical cannabis because of unapproved pesticides.

One of the 17 surprise inspections in the 2018 fiscal year resulted in a voluntary recall by Broken Coast Cannabis after test results found the presence of an unapproved pest-control product.

Remediation

If Health Canada makes an observation after an inspection, Cannabis Compliance’s Bouabane said the producer should take it seriously, regardless of the type.

He said the producer should:

  • Take special consideration to internally investigate the observation.
  • Identify root causes.
  • Establish corrective or preventative actions to address any shortfalls immediately.

A company can also appeal to the regulator to downgrade an observation based on the findings of its own investigation.

Bouabane said the company should prepare a timely written response to Health Canada, including an action plan.

A license holder’s business relies on the company staying compliant with federal rules, CannDelta’s Boodram noted, including the brand they’ve built.

“The best way to remediate a situation of noncompliance is to be transparent with Health Canada and diligent with correcting the issues immediately should there be the opportunity to do so,” she said.

Matt Lamers can be reached at [email protected]