A new round of regulations in California will cause laboratory testing fees to increase more than 40%-55% for some of the state’s licensed cannabis cultivators as well as makers of concentrates and infused products, according to industry experts.
The so-called Phase 3 rules take effect Dec. 31.
They require all harvested cannabis and marijuana products to be tested for heavy metals and mycotoxins, or toxins created by mold. Products whose labels make terpene claims will also be subject to terpenoid tests, and solid and semi-solid edibles and inhalable cannabis products will be subject to water activity tests to measure the amount of available water in them.
The regulations are the state’s latest effort to phase in tougher testing standards for growers and manufacturers.
They already are raising concerns among MJ businesses because:
- Some are worried there are too few labs prepared to do the new tests.
- The cost of compliance testing for marijuana and cannabis manufactured goods is increasing significantly.
- Heavy metal tests are a wild card and could cause many products to fail, sources said.
Phase 3 testing “is another absolutely enormous burden” on cannabis businesses, said Clayton Coker, the co-founder and head of product at Somatik, an infused product manufacturer in San Francisco.
However, MJ businesses will get some wiggle room at the outset, sources noted. All cannabis goods harvested or manufactured before Dec. 31 can be sold if they meet Phase 1 or Phase 2 testing requirements.
Here are three concerns marijuana businesses confront ahead of the new testing regulations:
1. There may be a shortage of testing labs.
According to state data, there are thousands of licensed cannabis cultivators, processors and product manufacturers in California and 52 licensed laboratories.
Only 14 of those laboratories confirmed they are currently offering Phase 3 compliance testing. Six labs are not offering Phase 3 testing, more than a dozen others didn’t respond to a request for information, and some could not be contacted for comment.
The numbers illustrate a massive disparity in the number of testing labs that are prepared to serve California’s cannabis industry.
“My sense is there are not enough qualified laboratories that are able to do (Phase 3 testing),” said John Oram, the president and CEO of Nug, a vertically integrated cannabis company in Oakland.
Labs might not be prepared because they lack the capital needed to start the new testing. Moreover, lab operators must ensure the services they offer correspond with industry demand for such services.
“You have to be ready to test before the deadline. But you have to be able to afford the equipment and the infrastructure upgrades first,” said Emily Richardson, vice president of business development at CW Analytical, an Oakland-based cannabis testing lab.
Among the added costs for labs are:
- Purchases of new instruments to test for heavy metals. The price for an inductively coupled plasma mass spectrometry unit to perform those types of tests is about $250,000, said Lori Glauser, chief operating officer of Evio Labs, a multistate laboratory with a Berkeley location.
- The hiring and training of additional analysts to perform tests for heavy metals, which cannot be automated and must be done by skilled technicians, according to Swetha Kaul, the chief scientific officer at Santa Ana’s Cannalysis Labs.
- Chemicals not used for other tests – highly concentrated nitric and hydrochloric acids for example – are needed to conduct Phase 3 tests. Some labs have had to upgrade ventilation systems or fume hoods to accommodate working with volatile new compounds, said Brian Lannon, the CEO and co-founder of Cannalysis Labs.
2. The cost of compliance testing is increasing, in some cases up to 55%.
Coker said Somatik’s costs for compliance testing will increase more than 40%, from $620 to $890 per batch of the company’s cannabis-infused, cold-brew coffee.
Nico Enea, the founder of Nug, wrote in an email to Marijuana Business Daily that the cost of testing for the firm’s edibles and concentrates will increase nearly 50%, from $615 to $915 for its edibles and $665 to $965 for its concentrates.
The cost of testing for Nug’s flower will increase more than 55%, from $565 to $890 per 50-pound batch.
Those costs add up, he noted, for cultivators who have multiple harvests a week.
The prices for compliance tests don’t include the money that businesses spend on R&D testing, which some cannabis cultivators and product manufacturers perform to ensure their product is clean before having a final test done for compliance.
Failed final tests cannot be appealed. Product must be remediated – flower sold to be processed for extraction, for example – or destroyed.
3. ‘Disturbing patterns’ are already emerging in heavy metals tests.
New tests for heavy metals could be the biggest challenge for cultivators and product manufacturers, according to industry officials.
“We still don’t have enough data to predict trends (in tests for heavy metals), but we are seeing some disturbing patterns,” said Kaul at Cannalysis Labs.
She said some cultivators have provided soil or flower samples that have already failed R&D tests for heavy metals. In some cases, Kaul added, the failed tests had levels of heavy metals 10-20 times higher than what’s allowed.
Kaul also noted that plated rather than metal THC oil cartridges are at risk for leaking heavy metals into oils. That could cause a higher fail rate for cartridge products.
Sources said the lack of data for the presence of heavy metals in cannabis makes it hard to know which levels should be a concern.
For the time being, the regulations require the tests to be done, but “it’s going to be a problem,” said Richardson at CW Analytical.
Joey Peña can be reached at [email protected]