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Shoppers Drug Mart inks blockchain deal to protect cannabis quality

A pedestrian walks past a Shoppers Drug Mart in Ottawa on November 10, 2010. REUTERS/Chris Wattie

Shoppers Drug Mart is partnering with TruTrace Technologies Inc. (TTT.V) to bolster its medical cannabis retail platform. The Vancouver-based company’s blockchain-based software is designed to guarantee product quality and genetics throughout supply chain from genome-to-patient.

The pharmacy giant said the move brings medical cannabis closer in line with standards for other drugs in a statement to Yahoo Finance Canada, ahead of the deal’s announcement at the World Cannabis Congress in Saint John, N.B. on Monday.

“Medical cannabis should have the same levels of traceability and accountability as any other drug therapy in order for patients and prescribers to feel confident about it as a treatment,” said Ken Weisbrod, Shoppers Drug Mart’s vice president of pharmacy business development and initiatives.

“When a patient takes any other medication there is an expectation that the medicine is standardized, and they can expect consistent clinical outcomes and results. Although that’s not always a guarantee with medical cannabis at the moment, we’re hoping this new program can help change that.”

TruTrace’s pilot project with the wholly-owned subsidiary of Loblaw Companies Limited (L.TO) will allow the company to track real-time data from licensed producers and testing labs, including product genetics, providence, quality and shipment information. The data will be securely added to a blockchain ledger where it can be viewed by Shoppers Drug Mart, and accessed to varying degrees by authorized labs, licensed producers and patients.

The pilot phase, which is expected to last until the end of July, will see the technology applied to a limited number of products for sale on the Shoppers Drug Mart medical cannabis website. The program is expected to ramp up to handle a larger volume of products by November.

TruTrace chief executive officer Robert Galazara said his company was initially met with skepticism by the Shoppers Drug Mart team.

Due to its former name, BLOCKStrain Technology Corp., the company was swept up in investor hype around both cryptocurrency and cannabis. TruTrace ditched that moniker in April to better reflect its focus.

Galazara said he spent nearly a year selling Shoppers Drug Mart on the merits of a secure digital ledger to track cannabis before orders reach distribution warehouses.

“In cannabis, testing and providence has been a big issue. People just don’t know what they are getting,” he told Yahoo Finance Canada in an interview.

He points to recalls issued by California’s Bureau of Cannabis Control after a lab was caught falsifying pesticide test reports. TruTrace hopes to one day gather data directly from testing equipment in order to eliminate the risk of human interference.

The company’s StrainSecure software tracks cannabis from genome-to-patient, assuring retailers and end-users that products are authentic by securely adding information to the blockchain at each stage of growth and processing.

“If am regulating a product, and I can't tell the difference between any of that product, how do I have any chance of having real oversight over who is growing legally, who is buying legally, who is labelling or mislabelling products, and who is actually holding themselves to a higher business standard?”

The company’s existing contract with Shoppers Drug Mart includes a payment of $300,000 for the proof of concept build, plus ongoing service fees.

“We have become such a value proposition for organizations like Shoppers. I don’t really care what you want to call a particular strain. We need to be able to authenticate that when you sell the product six months from now, that a product is the same exact product that you were selling previously,” Galazara said.

“Part of the reason we utilize blockchain is to be able to say that this cannabis was tested on this date. That record exists forever.”

By capturing plant genetics directly from labs, StrainSecure helps licensed producers protect intellectual property and streamline reporting with regulators.

The company expects to work with about a dozen producers in Canada, including several that supply Shoppers Drug Mart with medical cannabis such as Aurora Cannabis Inc. (ACB.TO), Tilray Inc. (TLRY), and Aphria Inc. (APHA.TO)

For dispensaries and consumers, the platform uses QR codes to instantly deliver a wealth of product information. Shoppers Drug Mart customers will scan codes from the company’s website, and eventually on product packages, if regulations allow it.

TruTrace can also mitigate the risk of companies like Shoppers Drug Mart taking delivery of cannabis they cannot sell.

“Shoppers is going to have visibility and verification that a product is exactly what it is supposed to be before it hits their doors,” Galazara said. “Today, if it's not the right product, or it doesn't test out the right way, or the COAs (certificate of authenticity) don't match . . . you are dealing with massive backlogs where you have to destroy product you are now financially responsible for.”

Galazara sees the company as a much-needed conduit for transparency in an industry were all the regulations and procedures are new and largely untested.

Verifiable data will play an important role in keeping cannabis industry players honest, especially in the event companies fall on hard times and attempt to cut corners.

Galazara predicts that risk will be particularly acute in Canada, as competition from the United States intensifies.

“We all know out of all the licensed producers in the marketplace, at least half of them or more are going to be gone in five years,” he said. “What is going to happen when any sort of difficulties fall into play? You are going to see people cutting corners.”

Yahoo Finance Canada