Ask anyone in the cannabis industry and they will tell you, 2020 was a great year for the industry. Several states legalized marijuana products for recreational and/or medicinal use, consumers have more access to products, the industry continues to enjoy massive growth, and other industries are opening up their services to this market. The industry is getting smarter and more respected as a legitimate industry.
But with this growth, comes a responsibility to the consumer to provide a safe, quality product. Reputable operations have done their best to test their product and create quality assurance practices on their own. Some states have created testing requirements to ensure product safety and create processes to manage the supply chain.
Still, issues have arisen and point to a larger need for uniform, comprehensive practices. Waiting for a mandate could be costly to the effort of national legalization across the US, liability insurance access and costs, and most of all to consumer confidence.
Two states that were early in the legalization effort, Colorado and Oregon, had state regulators recall contaminated cannabis products within the first weeks of 2021. As most are aware, these states are among the most developed when it comes to cannabis industry regulation. Lawmakers in both states have worked hand-in-hand with cannabis growers and retailers to create oversight and regulations to manage the industry.
In March 2020, Oregon-based Ecolab gave a passing inspection to flower and extracts which were sold into the adult-use program. Upon further review, Oregon Liquor Control Commission (OLCC) found these products were contaminated. The two contaminated products were from Emerald Treasure LLC and Bernie’s Universal Dispensaries.
After a number of alleged violations, and loss of accreditation from the Oregon Environmental Laboratory Accreditation Program, the OLCC shut down Ecotest in September 2020. However, it wasn’t until December 29, 2020 that the contamination issue was reported to the OLCC by a second processor whose extracts failed pesticide testing.
Once reported, the OLCC was able to verify the failed test using data from the seed-to-sale tracking system, trace the affected material in the system, and inform licensees to set aside the contaminated product. This recall was finally issued January 6, 2021, over nine months after the products were approved and distributed to retailers.
On January 8, 2020, the Colorado Marijuana Enforcement Division (MED) issued a recall for products from Denver-based Veritas Fine Cannabis, alleging yeast and mold issues. MED was joined by the Department of Public Health and Environment in issuing the recall which applied to two harvest batches and includes concentrated products extracted from the Grape Oz and Biker Oz strains.
As the products mentioned in the recall were sold two months ago in November, it is likely that the products have already been used by consumers.
In 2019, Colorado had a large recall when 20 marijuana dispensaries failed mold and yeast testing. The testing took place over a two-day period in September 2019 at 25 dispensaries, with over 80% failing inspection.
The issue of testing and quality assurance is a widespread problem throughout the industry. Contributing factors to this include:
Just as with Ecolab in Oregon, many state regulators are taking action against testing labs for allegedly reporting results that don’t match up with audits.
Last month, the Washington State Liquor and Cannabis Board (LCB) suspended the license of Praxis Laboratory for allegedly falsifying testing data on more than 1,200 samples of cannabis. Their tests indicated higher THC numbers than an audit actually found. The lab was suspended on December 10, 2020 for 180 days. While the lab is shuttered, state regulators are taking aim to have the lab’s license permanently revoked.
Among other findings, the LCB stated, “during the investigation the lab owner attempted to destroy evidence of falsified data in an effort to obstruct (the agency’s) ability to conduct a complete investigation.”
Praxis responded to the suspension saying that the LCB’s decision was “in error and based on inaccurate information.” The lab appealed the ruling and went on to say, “This is a clear cut case of agency overreach and libel and we will be pursuing legal action immediately.”
This is not an isolated incident. Nevada Tax Commission began an investigation of marijuana testing labs in September 2019. This lead state regulators to suspend the license of Certified Ag Labs and fine the business $70,000 in February 2020. Their report found “inaccurate and misleading” potency in cannabis products that boosted THC levels by as much as 10%.
Despite the issues, the lab was allowed to reopen. A spokesperson for Certified Ag Labs said the company “had some bumps, but our data was plus or minus 10% and we stand behind it.”
Labs aren’t like other business resources. Any service provider such as a window washer can be selected based on price or quality. An accountant can be chosen based on fee schedule or expertise. An HR company can be engaged based on services provided and expediency.
But when it comes to labs, these are companies more in line with real estate appraisers than services providers. Their very job affects a clients’ ability to sell their product and how much profit they can earn.
When cannabis growers or product makers have the ability to look for a facility that will provide favorable results, it creates a vested interest in altering results to attract more business. This reduces the value to consumers by way of altered THC levels, and can even potentially endanger them with favorable results for contaminants.
Dr. Kelly Greenland, CEO of Keystone State Testing from Pennsylvania said this practice nearly put her company out of business. “We have clients who test with us and never come back because their numbers are higher elsewhere,” she said.
“There are a few labs out there saying, ‘Tell me what you want it to say, and I’ll put it on the label,’” Greenland said.
Greenland feels the regulations are adequate, but they’re not being enforced. “If you want to make sure this market is safe, you need to have safe regulations and you need to have your enforcement enforce the regulations that you’ve made.”
One red flag is testing labs that promise a quick turnaround time, less than 48 hours. This suggests they might be cutting corners. Greenland said 72 hours is a typical testing period to return results.
According to Greenland, it isn’t very difficult for cannabis companies to find good testing labs. But she added that it’s often more advantageous for them to not play by the rules.
And she’s right, the current oversight and regulations, or in some cases the enforcement of them, is inadequate. Incorrect potency labels, even contaminated products, can take months to be discovered. And these findings typically happen long after consumers have used the products, creating a massive liability issue for growers, processors, retailers, labs, and even government agencies tasked with ensuring public safety.
There are ways the industry can step in and become the solution to the problem of their own making. If change doesn’t happen quickly, we could see further legalization efforts hindered, or damaging laws passed, or even attempts to repeal legalization.
First steps cannabis companies can take on their own are simple:
Further action should be taken at the industry-level, in preparation for the day federal legalization becomes a reality.
Previously, a parallel of labs performing cannabis testing to real estate appraisers was made. Though these industries are vastly different, the cannabis industry can learn from the mistakes of the real estate industry.
After the real estate market crashed nearly 15 years ago, one of the issues uncovered was appraisals that were drastically inflated, or undervalued. This was due to real estate brokers engaging the appraisers of their choice to secure values that benefitted them or their clients.
Sound familiar? It should, as it falls in line with the same practice of lab shopping to gain a favorable result.
The solution for the real estate market was a change in laws that required appraisals be assigned randomly. No longer can brokers engage their preferred appraisers for the values they want.
This should also be considered as a solution for the cannabis industry. All labs are already required to be licensed through their state’s agency overseeing marijuana and cannabis growing, cultivating, and sales. Products must be tested prior to their sale, which is also monitored by each state.
Requiring the testing to go through each state’s agency to be assigned randomly to a licensed lab would make sense to ensure no favor was given and results were accurate. Samples provided for testing could also be anonymized to further ensure the accuracy of tests.
This is just one area where the industry can take a step forward to ensure they are taking a proactive approach to testing and product safety. It’s in the best interests of the industry to take these steps before legislators with less knowledge of the industry step in with their own mandates which may be detrimental.