Earlier this week, regulators in New York announced the largest recall of cannabis products in the state’s short history of legalization.
Three days have passed. Yet there has been no official notice about how the recall affects more than $30 million worth of cannabis products that regulators said were slipped into dispensaries by companies without the proper licensing. The backdoor channel was made possible by illegal arrangements made with Omnium Health, one of the state’s largest makers of cannabis goods.
State regulators do not have a deadline to start the recall. But some experts in the cannabis industry say that officials are taking too long to take the action, which has stirred confusion in the industry, risked the safety of consumers and could renew doubts about legalization all together.
“The unknown of what’s coming out of Omnium is a headline or two away from causing a loss of consumer trust in this industry,” Mack Hueber, the president of the Empire Cannabis Manufacturers Alliance, a state trade association, said in an interview. “And if that happens, everything that New York has been building could go away very quickly.”
The Office of Cannabis Management did not immediately respond to questions from The Times about the recall. In a LinkedIn post, Felicia A.B. Reid, the acting executive director, said the agency had carefully built its case against Omnium to avoid unintended consequences for consumers and dispensaries.
“O.C.M. does not take action against Omnium impulsively,” she said, adding that “to move without considering short- and long-term impact would be woefully shortsighted.”
State regulators said on Monday that Omnium, based on Long Island, had illegally rented out its licenses to out-of-state companies, allowing them to make their own products and sell them to dispensaries without proper authorization. Officials said the company had 24 hours to tell regulators what products had been made under its contracts with Stiiizy, Mfused, Grön and Liberty Leaf, all major companies in the cannabis industry based in Western states that worked with Omnium in New York.
As of Thursday morning, officials had provided no update on the recall.
The episode underscores the controls and oversight New York regulators have yet to put in place that would help make a recall possible, industry experts said. Regulators have no way to independently determine what products need to be recalled and must rely on Omnium, the company they have accused of the wrongdoing, to tell them.
That’s because nearly three years after legal sales started, New York has yet to implement a centralized system that tracks cannabis from where it is grown to where it is sold to consumers. Tracking systems have given regulators in about 30 states valuable insight into the products circulating in their legal cannabis markets. A plan in New York to put such a system in place was delayed until December.
Regulators in New York currently rely on licensed cannabis businesses to keep extensive internal records of everything they make. Officials said early in their investigation into Omnium that the company could not provide some records, which has likely complicated the question of what products need to be recalled.
Stephen Geskey, director of compliance for the Office of Cannabis Management, said that officials would need to review the list of affected products provided by Omnium before ordering the recall or taking any additional steps.
“Should it appear to be suspect, should it appear to be dubious, then that will be a cue for us,” he said. “We’re not done yet.”
He added that since the investigation began in February, many of the products from Omnium had already been purchased and consumed with no reports of consumers being harmed. So officials felt it was prudent to focus on the companies’ business practices over public safety concerns, he said.
Some of the items were cleared for sale by Lexachrom, a testing lab that surrendered its license after the agency accused the company of falsifying results showing the products were safe. Officials ordered dispensaries to pause sales of those items, but Mr. Geskey said the testing issues did not justify recalling “absolutely everything and anything” from Omnium.
Kim Anzarut, a former cannabis regulator in Denver, said the gaps in Omnium’s production records would have quickly prompted officials there to recall everything the company made, under the assumption that it was all contaminated.
Consumers “think if it’s on the wall at the dispensary, it’s a safe product that came from here,” she said. “And if it’s not, then the regulators need to do something about that.”
Some of Omnium’s products remain on sale at dispensaries, and some of the brands that officials said were parties to the backdoor deals have been allowed to obtain licenses to make their own products.
Critics and even some supporters of the cannabis agency said the agency’s refusal to declare the items unsafe reflected a misguided attempt to protect dispensaries from losing millions of dollars on returns and unsold products.
Tyler Williams, the chief executive officer of ASI, a food-safety company approved by the state to audit cannabis companies’ manufacturing practices, said regulators appeared to be trying to figure out how to recall all of the products they believe have illegally entered the market, which involves unraveling “a spider web of potential fraud.”
ASI certified that Omnium’s manufacturing practices met the state’s standards, he said, but was not involved in vetting Omnium’s licensing deals.
Mr. Geskey, the cannabis office’s compliance director, said officials had been unaware of Omnium’s arrangement with the out-of-state companies before its investigation was opened in February.
But one of the companies under scrutiny, Grön, a cannabis candy maker based in Oregon, said that its products were made by Omnium’s workers under a contract that both companies had disclosed to regulators more than a year ago, but that regulators had not commented on the contracts before announcing charges against Omnium this week.
“In short, any assertion by O.C.M. that it had no knowledge of Grön’s permissible licensing arrangement with Omnium is demonstrably false, and any assertion by O.C.M. to the contrary is entirely inaccurate,” the company said, using an acronym for the Office of Cannabis Management.
Tak Sato, the president of Stiiizy, said the company had cooperated with regulators after being notified of the recall by Omnium. The company, which is the best-selling cannabis brand in the country, left Omnium earlier this year and most of its products that were made on Long Island had already been pulled from dispensary shelves. “This is an unfortunate situation, but we will come out of it stronger, and our customers will stand by us, as they always have, because we deliver the best products,” Mr. Sato said.
Hundreds of products from Omnium were pulled from dispensary shelves in April, weeks after investigators conducted a surprise audit of the company’s facilities. But regulators later allowed about a third of those batches to be released for sale.
Grön’s products were not affected. But officials said the company’s reputation had been unfairly tarnished.
Ashley Southall writes about cannabis legalization in New York.
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