Utah is preparing to strike a deal with a Denver-based software company to build the digital backbone of the state’s emerging medical cannabis program, despite the business’ problems with outages, crashes and hacks in other states.
The vendor, MJ Freeway, rose to the top largely by lowballing the competition — offering its services for less than half the price of the other finalist for Utah’s five-year contract. The winning bidder will be tasked with launching a electronic system that will be woven into each aspect of the state’s new cannabis program: It will prevent cannabis diversion by tracking each plant from cultivation to the point of sale, will store sensitive patient registration records and will act as a portal for doctors to make treatment recommendations.
In seeking out this system, Utah is following the trail blazed by other cannabis states, which have long used similar platforms to control and monitor product flow. But the two states that have active contracts with MJ Freeway haven’t had an easy time of it.
In Washington, which launched the company’s software early last year, the pot-tracing system has been dogged by bugs and other problems that have made it hard for growers and sellers to do business, according to The Seattle Times.
In February 2018, a hacker broke into the system and nabbed cannabis delivery information, and Nevada cut ties with the company after a 2017 cyberattack that caused outages for retailers, Forbes reported. The software’s source code was posted to Reddit later that year, and while investigating the 2017 attacks, MJ Freeway discovered some customer and patient contact information and dates of birth were stolen in a 2016 incident.
The Philadelphia Inquirer has dubbed the MJ Freeway software “chronically glitchy” because of its many problems, some that have stalled cannabis sales at dispensaries in Pennsylvania.
A spokesman for the Utah Department of Health, which helped conduct the search for the tracking technology, said medical cannabis is a developing industry, and the systems that support it are growing and learning as well.
“We are aware of the challenges MJ Freeway, and many other companies operating in this space, have faced in the past. We believe these challenges have motivated MJ Freeway to evolve as a company and to improve the quality of its product,” spokesman Tom Hudachko wrote in a prepared statement. “Our highest priority will be securing the data in the two systems, and ensuring they support the continuous operation of the program.”
The chief executive officer of BioTrackTHC, which also bid for the Utah contract, said going with the cheapest option can be dangerous when choosing seed-to-sale software.
“You can end up with a system that either doesn’t deploy on time or has other major issues that can really be detrimental to a brand new industry that has enough challenges as it is to be successful,” said Patrick Vo, the Florida company’s CEO.
Utah officials earlier this week sent out a notice that they intended to award the software contract to MJ Freeway. BioTrackTHC had seven days to protest the decision, and a company spokesman on Thursday said they hadn’t done so yet but were evaluating their options.
Eleven contractors placed bids to become Utah’s software provider, and seven of those met the minimum mandatory requirements, according to the state’s award justification statement (BioTrackTCH provided the statement, and Hudachko confirmed its legitimacy).
MJ Freeway was by far the lowest bidder, offering to launch and run Utah’s system for $1.34 million across five years. In a news release announcing its search for software, the state estimated the contract could be worth up to $5 million, and Vo said his company’s asking price was just shy of $3.5 million.
MJ Freeway did not earn the highest technical score, the state’s award justification statement indicated, but clinched top berth because of its low cost.
Hudachko said the state and MJ Freeway are still negotiating the software contract, so the final price and terms are still being worked out.
MJ Freeway’s spokesperson — when asked to comment on landing the Utah contract and reports of past difficulties in other states — said the company “looks forward to working with Utah and commenting further after the process is complete.”
Technical troubles are not unique to MJ Freeway; there have been some reported glitches with Metrc, the system used in the greatest number of states. And BioTrackTHC’s software generated complaints among Washington’s growers before the state switched to MJ Freeway; Vo says this was because his company was among the first in the nation to run a seed-to-sale system and was at a “first mover” disadvantage. BioTrackTHC’s cannabis tracing software is currently in place in seven states and Puerto Rico, and it just won a Maine contract, Vo said.
Tom Paskett, executive director of the Utah Cannabis Association, a trade group representing the state’s marijuana industry, said individuals he’s spoken with aren’t particularly concerned about MJ Freeway.
“This industry is very much in its infancy, and they’re of course going through some growing pains," he said. “But it remains to be seen if it’s something to be worried about or not.”
After sealing the deal for a pot-tracking platform, officials now can move on to selecting cannabis cultivators. The “drop-dead” date for beginning to accept cannabis patient applications is March 1, 2020, but state said officials are trying to beat this mandatory deadline.