A PotNetwork Exclusive

In late May, Khiron Life Sciences Corp. (TSX-V:KHRN), the Canadian medical cannabis company with core operations in Colombia appointed former Drug Enforcement Administration (DEA) Chief of Pharmaceutical Investigations, Matt Murphy, as their Vice President, Compliance. A veteran law enforcement official with 25 years as a Career Special Agent with the DEA, Murphy’s career took him to the front lines of the opioid epidemic, where he saw it evolve first-hand almost from the beginning as he handled pharmaceutical diversion investigations. He retired from the agency as the Assistant Special Agent in charge of the DEA's Boston office.

As almost everyone in the country these days, Murphy knows the opioid epidemic’s human toll, having seen, in his own words, “friends of my children and children of my friends” fall victim. Though it may seem odd at first, his post-DEA career in the medical marijuana industry is directly informed as much by these personal connections as it is by his vast expertise in security, regulatory compliance, and drug law enforcement.

At first a member of Khiron’s Company Advisory Board, Murphy now uses what he knows to help the fledgling Colombian medical cannabis company plan, design, coordinate, and implement security efforts while also staying in compliance with the country’s new regulatory framework. It’s almost fitting, in a way, as Khiron helps Colombia shed its narcotraficante image, so too does Murphy use his knowledge of the DEA, and his more personal understanding of the current drug epidemic to reshape the image of medical cannabis.

We sat down with Matt Murphy to discuss his new role at Khiron, his time at the DEA, and his thoughts on medical cannabis. Moreover, we dove into the opioid crisis, and how medical marijuana is helping to turn the tide of this terrible epidemic.

Khiron Vice President, Compliance Matt Murphy

Before joining Khiron, you spent the bulk of your career in law enforcement, with the Drug Enforcement Administration (DEA). Can you give us an overview of your background —how your career started and some of the things you’ve done?

I was with the DEA for close to 30 years. I was hired out of the Boston office. I was assigned in New York as a criminal investigator. I was transferred from New York to Quantico, where I was an instructor at our Academy for five years. After that, I was a supervisor in our office in Hartford, Connecticut, and then Worcester, Massachusetts. In Worcester, I was focused on targeting criminal organizations that trafficked in prescription drugs illicitly, like OxyContin. Then, I worked at Headquarters in Washington, and I was the Chief of Pharmaceutical Investigations. I had more of a focus on opioids. Then, I was transferred out to Boston again, and I retired there as the Assistant Special Agent in Charge in 2011.

And now, of course, you’re the Vice President of Compliance for Khiron. Talk about how you came to be involved with the company and what your day-to-day responsibilities are with them.

When I retired from DEA, I started a business —a pharma compliance group. We provide DEA regulatory assistance to pharmaceutical companies for controlled substances. A friend of mine, he was the head of our office in Nassau, Bahamas, and he was friends with a Canadian, Mark Monahan. Mark is an investor. He got involved with Khiron’s team. He asked my friend, Mark did, if he would help with their compliance. He said, “I can’t do that but I can point you in the direction of somebody who can,” and he introduced us. What we’re doing is, we’re taking the DEA regulatory compliance standards, and we’re wrapping them around the cannabis industry, specifically as it pertains to Khiron. Even though I’m talking about U.S. standards and Khiron is in Colombia, the DEA regulatory standards and the DEA, in general, has a good reputation around the world. So, if we are adhering to the same standards as the DEA mandates, those are pretty good standards, and I think the industry realizes that. So that, in a nutshell, is kind of how this whole thing evolved.

And if we could dive into the weeds, so to speak, can you break down some of those standards?

So, it’s regulatory and security, are the two main points here. Regulatory, you need to have record keeping with inventory, you need to have track- and traceability, you need to be able to put your hand or your finger, for cannabis, on a plant or a seed, at any point in the distribution chain or the manufacturing facility and the manufacturing operation. You need to be able to determine, at any time, whether cannabis is being dispensed. You also need to provide security for the operation with both high-tech CCTV-type of coverage. You need to have certain fences, certain vaults, certain manpower personnel. You have to have contingency plans, you have to be able to try to be proactive and determine, up front, what the risks are and you need to mitigate the risks.

Speaking of security, it’s become its own sector that’s grown around the cannabis industry. Can you talk about the security issues facing legal cannabis today, what you see as some of the more significant obstacles, as well as some of the solutions that you are implementing?

I look at cannabis like I look at any drug, as far as a controlled substance. [It has] the same security issues you would have with moving oxycodone, for example. You need to control every aspect of the operation and ensure that the product is secure in the sense that it can’t be diverted. Diversion is a buzzword in DEA from a controlled substance perspective, and I think it’s the same with cannabis. Now, if you want to get outside of the chain and talk about how you secure a dispensary, for example, yes, it’s a little bit different; but it’s not. It’s probably like the way you would secure a bank. You have to have vaults; you have to have alarms, you might have armed personnel depending on where the dispensary or bank would be. You know the neighborhood, what the local laws and regulations pertaining to that kind of security are in place. So, there may be certain towns or cities where you can and can’t do certain things, and you work around that or within it. Obviously, states all regulate cannabis differently, so that’s going to impact the operation. I think that when we have some consistent federal regulatory standards, things will become a lot more clear.

Khiron's semi-enclosed greenhouses are supported by a state-of-the-art hydroponic growing system.

And you’re working with a counterpart down in Colombia, former Lieutenant Colonel of the National Police of Colombia Henry Tibaduiza, currently the Security Manager of Khiron. What are some of the security issues unique to the legal cannabis trade in Colombia? Moreover, for our readers whose opinions are shaped by television help us to separate fact from fiction.

Henry was a former Colombian National policeman; he’s very high-ranking. And, in fact, the reason they came to him was because we have connections in Colombia, in the DEA, because we have offices there. I spoke to some former counterparts, and they recommended him. He’s vetted by the DEA; he worked with the DEA in counternarcotics. He was very well respected and came very highly regarded. The beauty of it is that he can, for lack of a better way to say it, talk the talk with the Colombian National Police near our operation and the army in Colombia because he’s one of them —he’s former counternarcotics. And we have military bases near our grow site. Henry has been doing quite a bit of the liaison work for us with his former colleagues. He’s really good at what he does.

You previously said that “the Colombian government has formulated a highly impressive legal framework to both create and regulate the medicinal cannabis market.” Talk about that framework if you will, and how you see Colombia shedding it’s, for lack of a better term “Narcos” image.

It wouldn’t be right to say that Colombia doesn’t have a history that’s kind of in that “Narcos” vein where a lot of significant drug lords came from there, and it’s a source country for cocaine. In that regard, we have to be very careful in how we operate because right now we don’t have issues with cartels, we don’t have issues with criminal groups, but we are obviously concerned just like we would be if we operated anywhere, that criminal groups would try to infiltrate our operation or steal from us. I think that’s going to happen no matter where you are. Let’s face it, in the U.S.; the Italian mafia is notorious for —was, anyway, in a different day and age, collecting a vig from shop owners. Even in South Boston, the Irish, you had to pay Whitey Bulger to own a liquor store in South Boston. There’s always going to be organized crime no matter where you are, but we’ve not had to deal with it. We’re hoping that we can get ahead of it and our operation is going to be so tight that it won’t be worth trying to infiltrate us, but we have to be concerned with crime no matter where we operate and, of course, we are in Colombia as we would be if we were in New York City.

You’ve also said the Colombian government formulated a highly impressive legal framework to both create and regulate the medicinal cannabis market. Can you talk about the framework and the Colombian government’s control of the cannabis trade?

They’re excellent, and we have on our staff a gentleman who helped write those. They’re very concerned about ensuring that theft, loss, and diversion doesn’t take place. We’re appreciative that they have put so much time, effort and thought into the regulatory standards in Colombia. We look forward to working with the government, and upholding those standards and being a model company. And hopefully, since we are the first licensed seed-to-sale company in Colombia for medical cannabis, we hope that we can be the standard there for the industry. I applaud the government of Colombia for the job they’ve done and their efforts in the regulatory standards that have been adopted and that we will be proud to uphold.

If I could bring the conversation back stateside for a moment, you spent nearly a quarter of a century with the DEA, in a country where cannabis was and still is considered a Schedule I Controlled Substance. Do you agree with that classification? What if anything you saw over the past 25 years informed your opinion one way or the other?

Because of my work in the DEA as it pertained to controlled substances and opioids and because of society in general, what I’ve seen in, just, friends of my children and children of my friends that have become addicted or have overdosed, opioids in my mind are bad drugs. And with fentanyl on the scene and overdose stats related to these things, I’ve become just totally disgusted with opioids. I think if more resources were put forth towards cannabis research that it would show there is medicinal value. I think there’s a gap in education in how these drugs are supposed to be prescribed; I think that’s one big issue. And then, I think that they’re overprescribed. Early on, they were oversold because the drug companies sent their sales reps to doctors to get people to prescribe them in ways that weren’t intended, and now we have an epidemic. That’s what I think of that.

Of course, Khiron deals specifically with medical cannabis. As a former DEA Agent, do you see a distinction between medical and recreational cannabis?

Yes, to the extent that I believe that cannabis has medicinal value and can help people as medicine. People have asked me, “You used to be with the DEA, how can you sign off on some of this stuff?” I’m like, “Well, first of all, I did not have any say in these drugs being legal, and so if I can help the industry with regulatory expertise, and help them be legitimate, and have credibility, I’m all for it.” Because I think, if we’re going to legalize it, we want it to be legitimate. So, if I can help the industry, whether it’s recreational or medicinal, with their standards, I’m all for it, but I don’t really have an opinion one way or another about recreational cannabis. As far as the medicinal cannabis, I think there’s value, and I want to see it justified in that way. I do think that you’re going to see pharma companies, when it’s federally legal, jump in like there’s no tomorrow because they’re going to lose profits, and people are going to substitute cannabis for other drugs for pain relief.

Over your time in the DEA, especially as the Chief of Pharmaceutical Investigations, I assume you saw the opioid crisis grow from the beginning into what it is now. Everyone has an opinion on what caused the problem, but with your experience, where did things go wrong? Doctors? Big Pharma? Something else?

I think everybody is to blame in the healthcare industry. It started when people could buy drugs online. Not just drugs like you’d think, but controlled substances. They would fill out this online questionnaire that served as a medical exam, and that would get electronically transferred to a doctor, and he would approve it. Then, the pharmacy would fill, and it was a back-alley pharmacy. And FedEx, UPS would pull up five times a day, shipping these drugs all over the country. And that’s how a kid name Ryan Haight died because he ordered them online with a credit card. So the Ryan Haight Act legislation mandated that there be one face-to-face, doctor/patient visit before a controlled substance prescription could be written. Okay, so that did away with opioids being sold online in that matter, but what happened then was pain clinics, because they had a doctor on site, a doctor would be there, and it would just be the same thing. The whole thing evolved from companies like Purdue Pharma that were overselling it, prescribers who were over prescribing it, and then pharmacies that were just sending the stuff all over the country, and then pain clinics which pretty much did the same, and then we have a huge problem.

Finally, tell me something I don’t know, something about the cannabis industry you think people should be talking about that they’re not right now.

I think that Khiron, the first Colombian seed-to-sale cannabis company, or cannabis company in general in Colombia, has a great management team and a great business model, support from the government, and I think that it’s going to be huge. I think the company is great. I think they’re doing great things, and I’m really enjoying working with them. I think the sky's the limit.