On October 1, the Oregon implemented new rules governing the laboratory analysis of cannabis products. The state had already mandated that all products be tested for potency, pesticide residue, water content, microbiological activity and (where applicable) residual solvents. The October 1 rules created a system for state licensing and oversight of the labs. They specified the policies and procedures that the labs (and the rest of the industry) must follow, and the consequences for failure to comply.
Oregon’s cannabis industry offered broad support for overhauling the lab rules. Labs were operating without any supervision or accountability. We hoped that new rules would standardize the process of lab testing and provide greater credibility to the process, while continuing to assure that the supply of cannabis products remained safe for public consumption.
We got a little more than we bargained for!
The October 1 rules may look good on paper (and even that is debatable), but they simply don’t work in practice. The system is too strict and cumbersome, with devastating results for the industry and its customers.
Problems With Oregon’s New Cannabis Rules
Issues with the rules generally fall into two broad categories: (1) the new changes resulted in a lack of lab capacity, causing severe delays in obtaining results; and (2) the rules make lab testing so expensive that it is difficult or impossible to bring most products to market.
Once we understood the impact of these new rules, Oregon’s cannabis industry sprung into action. Industry leaders and organizations like the Oregon Cannabis Association began sounding the alarm. We spoke with and met the Governor, her advisors, a number of key legislators, and the leaders and staff of various agencies that regulate the cannabis industry—including the Oregon Liquor Control Commission (OLCC), the Oregon Health Authority (OHA), and the Oregon Department of Agriculture (ODA).
After a great deal of effort, we were finally able to convince the powers in charge that these rules were destroying our industry. Unfortunately by the time they began to believe us, many businesses already closed or laid off employees. Some processors halted production, while others decided to continue processing but hold off on lab testing, in hopes that the regulations would change. Still, stores are struggling and shelves are bare, leaving many patients without their medicine.
Against this backdrop, we heard a couple of weeks ago that the state would soon be announcing new emergency lab testing rules. We were cautiously optimistic that our industry would soon see some relief. Boy, were we wrong!
More New Rules in Oregon
The newest rules announced last week do little, if anything, to address the issues we are facing. In fact, they will almost certainly exacerbate some of our problems. The reaction from the industry has ranged from mild disappointment to outright rage.
As I mentioned, the problems around the lab rules fall into two groups. The first of which was a lack of lab capacity. I read last week that prior to October 1, we had more than 20 labs testing cannabis in Oregon. We currently have ten that are licensed to do any cannabis testing. Of those, only three are certified to test for pesticides.
That’s right, we went from more than 20 labs testing cannabis for pesticides to only three. We used to get our results in 72 hours. Now we wait a month or more for results.
The Oregon Environmental Laboratory Accreditation Program (ORELAP), the division of the OHA in charge of certifying laboratories, has repeatedly stated that they lack the resources to perform the task of lab accreditation. These rule changes did nothing to address this and, in fact, they may make this problem worse.
Impact of Oregon’s New Cannabis Rules
Many businesses have been amassing products and waiting to run labs, hoping that the new rules would make this process more affordable. Businesses that the new rule helps and those that simply can’t wait for the next iteration will be bringing their backlog of samples to the labs, who are already operating beyond capacity. Since the new rules do nothing to address the capacity issues, the bottleneck will only get worse.
What about the cost of lab testing? Do these new rules do anything to help here? The answer is very little. The biggest issues involve the testing of extracts and edibles. A batch that used to require one sample and one test may now require as many as 32 separate samples, of which each must be tested individually. In addition, the cost of one test has increased from $100 to as much as $400. This means that testing one batch of one product could cost more than $12,000.
The old rules contained something called process validation, which was designed to assure that a batch of extracts or edibles is homogeneous throughout. Once a process is validated, batches produced using that process still needed multiple samples. Those batches could be combined into one field sample that would be tested once, dramatically reducing the cost.
Process validation was extremely expensive—$20,000 or more—and one failed test would negate that validation, leaving the processor to start from scratch. The new rules replace process validation with something called a ‘control study.’
The ‘control study’ is also designed to assure that a process yields homogenous products. It is less expensive and easier to execute, but remains a cumbersome and costly process. It represents an improvement, but not by much. That is essentially the entire upside of the new rules for the industry.
There are a few other crumbs hidden in the fine print. They have removed the requirement to test for certain residual solvents and they have created a bit of wiggle room for edibles concentration. Recreational edibles remain capped at a maximum concentration of 50 mg THC, but the state will now allow a 5% variance, so that a product with 50.1 mg THC no longer fails. Beyond that, little has changed.
The Industry Perspective
The members of Oregon’s cannabis industry have worked hard to build not only our own businesses, but also to create a functioning, compliant industry. We have given our time to serve on committees and task forces, and to educate the regulators and lawmakers about how our industry works. We have asked to be regulated and taxed and have generally been model corporate citizens.
All we asked for is a leveled playing field; a fair system that allows us to run our businesses, and to grow and process cannabis, and bring those products to market. That simply hasn’t happened. As a result, hardworking employees are losing their jobs and conscientious entrepreneurs are losing their companies, their livelihoods, and in many cases, their life savings.
No provision in the newest lab rules gives any Oregon business any significant relief. The best that can be said is that their promulgation serves as an acknowledgment by the state that problems exist. That feels a lot like saying that the state deserves a participation trophy.
We need new lab testing rules that address the real issues that the current system creates. We need this to happen before the industry that we have worked so hard to create is decimated.