During October, I have been covering the changes to Oregon’s legal, regulated cannabis system. We discussed the slow rollout of the recreational system, as well as some significant changes to the medical rules. But the most disruptive change, the one that threatens to bring down the entire industry, implicates both the medical and recreational programs. I’m referring, of course, to the new Oregon cannabis lab testing rules.
I believe strongly that as purveyors of cannabis—growers, processors, retailers and others—we owe it to the public to be as certain as possible that our products are safe to consume. Quality control testing by analytical laboratories plays a major role in assuring public safety, along with a number of other checks and balances; including site inspections, prohibited pesticide lists, ongoing education, and development of best practices.
The state also has a duty to assure public safety, which includes creating rules for testing cannabis. These rules must be reasonable, effective, grounded in science, and not so expensive that they become cost prohibitive for the industry. Unfortunately in an effort to make Oregon cannabis the safest in the world, the state has gone too far.
The current situation is dire and the potential costs are high. This testing regime presents an existential threat to Oregon’s cannabis industry and we are already seeing commerce begin to grind to a halt. The cost of flower has increased by hundreds of dollars per pound, but processors are being hit hardest. As we’ll see below, the cost of testing actually makes it impossible to bring most extracts and edibles to market.
Retailers and wholesalers are feeling the squeeze as well. At Pure Green, my dispensary in Portland, we have six or seven varieties of shatter, instead of the usual 15 or 20. I currently have two vendors able to sell me compliant edibles, compared to the hundreds I used to choose from to stock my shelves with scores of different products.
The current testing regime has a number of flaws, but they generally fall into the following categories:
- Not enough labs
- Too many required tests
- Cost is too high
- Other technical issues.
Not Enough Cannabis Testing Labs
An important outcome of the new rules is that analytical labs testing cannabis are now subject to state licensing and oversight. I support this change wholeheartedly, as it brings much needed accountability to the lab testing process.
Unfortunately, the state has not licensed nearly enough labs to serve the market. Before October 1, we had approximately 40 labs serving the state. A full compliance test cost $100 and results were usually back in 72 hours. In fact, some of the labs I worked with didn’t charge if I didn’t have my results in 72 hours.
Now we have fewer than 10 licensed labs. Only three are accredited to test for pesticides, which is the longest and most difficult portion of the testing. That means three labs (down from somewhere around 40) are now performing all pesticide testing on cannabis products in Oregon, resulting in a huge bottleneck. As you might imagine, the cost of testing has skyrocketed to $400 or more per test and businesses are waiting up to three weeks or more for results.
Too Many Tests Are Required
Each batch of cannabis or cannabis product (extracts, edibles etc.) required a single compliance test prior to October 1. Now, many more tests are required.
For flower, one test is required for each batch, with a maximum batch size of 10 pounds. But a batch is defined as being composed of only a single strain. This can create some significant inequities.
Say, for example, that I build two identical grow rooms and grow ten pounds of flower in each, following identical practices and standard operating procedures. The only difference is that one room is growing ten pounds of one strain while in the other has five different strains of two pounds each. The first room will require one pesticide test at a total cost of $400 ($40 per pound) while the second room will need five pesticide tests for a total cost of $2,000 ($200 per pound).
There is no scientific basis for requiring four additional pesticide tests just because the crop includes multiple strains. This rule discourages smaller batches, which often result in higher quality products, and penalizes small businesses that are more likely to produce these smaller batches. It also compromises our goal of creating a craft cannabis industry with businesses of all sizes, rather than one dominated by a small handful of corporate behemoths.
The situation is worse for extracts and edibles. While batch size is a huge issue for flower, at least with flower the rules require only one test per batch. For extracts and edibles, a batch requires a minimum of four tests and may need as many as 32 test for a single batch. As with the flower example above, there seems to be a lack of scientific support for these requirements.
Testing Costs Are Too High
The lack of labs, the increased cost per test and the large number of tests required all work together to make the cost of lab analysis so high that growers and processors simply cannot afford the testing required to bring products to market. Many businesses are stopping production; others are laying off employees. Some have already gone out of business and others will certainly follow.
Let’s look at an example of how this plays out for processors. Imagine I am a processor who makes BHO. I have access to four pounds of quality material that I want to process. At a 15% return, which is a successful rate for any processor, four pounds of trim will yield approximately 272 grams of BHO. At $15 per gram, that’s a wholesale value of $4,080.
The four pounds of trim will cost about $1,200. Subtracting that from $4,080 leaves $2,880. Processing costs—labor, gas, etc.—typically run around 15%, or $612 here, leaving $2,168. Under the current lab rules, 272 grams of BHO will need eight separate lab tests at a cost of $400 each or $3,200 total. And don’t forget the eight grams worth of lab samples, another $120.
When you subtract the lab fees and sample costs you are left with a net loss of -$1,052. It reminds me of the old cartoon where two colleagues are talking about their company.
One says, “We lose $5 on every unit we sell.”
“Yes, but we’ve already sold a million of them,” says the other.
It’s no wonder processors aren’t bringing products to market.
Other Technical Issues
In addition to these issues, a host of others exist. One is the lack of the ability to remediate. In the agricultural industry, if a sample fails a test, the producer has the ability to clean up the impurities, dilute the product down to safe levels or otherwise remediate the problem.
In Oregon, a cannabis product that fails a test must be destroyed. This is entirely unnecessary, as many options for remediation exist. Some products can have the impurities removed through chemical processes. Another option is to use failed extracts to make edibles, as this process will dilute the residual pesticides down by several orders of magnitude to safe levels.
Safe options exist that would avoid a complete economic loss on failed product. Why not allow some of these options?
The Path Forward
The good news is that most of these problems can be fixed fairly easily with a two-track approach that includes short-term action to stop the bleeding, followed by a long-term solutions grounded in science.
In the short-term, we should change the rules for flower to allow one pesticide test per ten-pound batch, regardless of how many strains the batch included. Different strains could be tested separately for potency. For extracts and edibles, we should continue to pull multiple samples, say four or eight per batch, but combine them into one homogenized sample that is tested once.
This system would remain a significant upgrade over the pre-October 1 rules. It would still require all testing to be performed by licensed labs subject to state oversight and would follow enhanced sampling protocols. Such a system would already be the most comprehensive in the nation. It would be more than adequate to protect public safety.
In the long-term, we need a comprehensive, scientifically validated system that will protect the public at a cost and won’t bankrupt the industry. Fortunately, this type of testing already exists in a number of industries for a variety of products like agricultural crops, processed food, distilled spirits, beer, wine, tobacco, nutraceuticals, and a host of others.
A group of qualified scientists could review the available literature and testing techniques in order to determine which ones will work for cannabis. Then we can draw from these parts to create a system grounded in science to replace the current system—which appears to have been created on the fly by non-experts, many of whom had a financial stake in the outcome.
I have said many times that it is far from easy to bring a multibillion dollar industry from the shadows of the black market into the light. No template exists, so we are certain to make mistakes along the way. When you live on the cutting edge, sometimes you bleed.
But still, the lab situation in Oregon is serious. We have the opportunity to create a regulatory framework that can serve as a model for the rest of the nation and the rest of the world. But not if that framework suffocates the businesses it is supposed to develop and protect.