The trials encountered by the cannabis lab testing industry in 2018 were notable as it adapted to new regulations. We got the take from the labs, distributors and producers on how it all went down.
Apart from big fees setting the bar higher than many hoped, taxes, and most municipalities in California generally flipping the bird to marijuana sales, lab testing was surely the biggest challenge for the cannabis industry in 2018. The decade-old science was pushed to its maximum depth but by a debatable margin was not crushed by the weight of the world's largest legal cannabis market coming online.
While consumers saw flash deals last summer that will go down in history, when that happened it meant the labs were hitting 2018's big midyear testing deadline, where standards actually began to be enforced. Since the Bureau of Cannabis Controls' strictest testing limits came into play on the first of this year, we reached out to a full spread of industry experts to get the full story on 2018 and how clean our cannabis actually is now.
In the first of our two-part series, this week we’ll get the labs' take on what they had to face in 2018. Next week we'll hear from distributors and dispensaries.
The unified voice
Josh Drayton oversees the California Cannabis Industry Association’s quality control committee, which features some of the biggest labs in the state.
“Ultimately I feel like, starting in November and December, there started to be a lot of concern about the implementation of phase-three testing. Both from our manufacturers and cultivators but also our testing labs.”
Drayton says that testing labs were under extreme pressure in 2018. Theye had to adapt to all the different regulation changes, the different emergency regulations and other deadlines as they hit. “At the same time, they’ve been expected to build out their facilities to meet these standards, so their multitasking has been incredible,” he said. “They’ve needed to find funding to buy new equipment and to ultimately start the testing process for phase one, two and three all in the same year. They’ve needed to create their proper methodologies, get the right variables in place, and they’ve been expected to do that on a very short timeline.”
We asked Drayton if labs that had been around a bit longer were more prepared for this than newer ones just getting in the mix.
“A lot of these folks that are considered leaders in the industry, they’ve all been under so much pressure that I tend to think that everyone is on a fairly level playing field,” he said. “The chicken before the egg conversation really is relevant when it comes to the testing labs. Here we are testing cannabis at a level we don’t test any other agricultural product, any of our pharmaceuticals, kind of the whole way through.”
Drayton believes one of the hurdles yet to be cleared is a bit of a disconnect between regulators and the labs. “We’ve had a very difficult time working with the testing regulators, explaining to them some of the concerns, the difficulties, the realistic expectations.”
In the industry’s eyes, the numbers that regulators have been putting forward for testing are unrealistic, and they’ve shared their concerns. Drayton argues maybe this is going further than testing of any other product and we need to be a little bit more concerned about public safety and public health, compared to any of these other issues that have come forward, such as testing for label claims.
“If we’re not prioritizing public safety and public health, then some of these regulations are erroneous,” he said.
We asked Drayton if the idea of labeling the products before sending them to the lab was kind of stupid when they’re mandated to be so accurate. “Yeah,” he replied with a laugh, “I think we need to revisit the whole testing process and where it’s falling within the supply chain, and we need to be more realistic about expectations.”
The old guard’s take
Tony Daniel is the chief revenue officer at Steep Hill Lab, the oldest operating cannabis testing facility in the United States. Yet Steep Hill faced the same challenges its peers did with the regulations.
“This has been a rough gauntlet for the industry. It’s hard for folks to get compliant,” Daniel said. “The battery of tests and limits that people have to adhere to are really tough, tougher than most other industries.”
Daniel said that the introduction of the final standards at the start of 2019 brings on issues that are a bit more of an unknown, including the heavy metals that just became a mandatory part of testing.
“There’s not a whole lot of data yet, but early word is there are a couple heavy metal issues on the horizon,” Daniel said. “One is metal leaching from Chinese cartridges on the vape side, and then just soil, what is going on with the various soils around the state. But again, it’s a little early to say we have an actual problem yet.”
According to Daniel, the level of scrutiny that came with Jan. 1 is what’s going to allow the industry and regulators to pick up on any serious trends. “Cannabis is the safest product on Earth, and the problems are going to be revealed now for sure,” he said.
He mentioned that passing numbers are trending upward, and with the vast majority of samples failing testing over labeling claims, according to the BCC data, it’s not a public health issue.
“When you lay regulations on top of a multibillion-dollar black-market industry, there are going to be some bumps,” Daniel said. “The industry has grown with the regulations in other states [but] it’s sort of the reverse here in California. It makes for an interesting set of business questions and challenges.”
Some would claim the actual timing of the testing is where the problems begin. We asked Daniel if he would like to see compliance testing happen at a different point in the supply chain.
“Let’s take concentrate cartridges in particular,” he said. “The regulations state that you have to test the final product, in its final form. This is problematic because we have to go out to the distribution centers and sample the product ourselves.”
Daniel used the example of a variety pack of flavors for a vape pen. The lab has to take the whole product with all the packaging and battery. They then throw it all away, aside from the oil, creating hazardous waste or, in their case, cannabis waste, which they have to pay to dispose of.
“But the biggest problem is we spend so much time scraping cartridges to try and get a sample mass for a representative test that if we could test in bulk, just one step prior in the supply chain, and just spot-check the final products to a degree that would ensure consumer safety in the final products on that, it would save a lot of hassle for the labs.”
Daniel noted they have to go into each cartridge individually with a metal spatula; if they heat it up, they risk changing the chemical consistency and altering test results.
The lack of regulation in the wholesale marketplace also proves a challenge for labs as producers shop for the best numbers to show prospective buyers. That wholesale test usually involves the most premium buds the grower has, to ensure high test numbers. The product then goes to a distributor, where often another lab will come into play for the certificate of analysis required by the BCC. When the second lab goes out, they have to take a sample that is more representative of the entire batch as a whole than the grower's choice nugs the first lab saw. The results from the second lab come back and are immediately put in the crosshairs when THC and other numbers drop.
“Then I get the blowback because it comes back at 15 percent. But I have to take 50, 60, 80 chunks of bud that represents the whole batch, not the choicest colas at the top of the plant,” Daniel said. “So people are going to have to adjust their expectations about overall potency, and that’s going to be a hard switch for the industry.”
Daniel says currently potency is king, and hence directly correlates with the return on their effort cultivators are able to get. He hopes we can move on to looking at the terpene profile and other subtle indicators of the impact cannabis will have when consumed.
Another big impact on the numbers from lab to lab is that the actual process isn’t some agreed-on best practices. The methodology each lab uses is proprietary. Basically, there are a bunch of different roads to the same destination picked by the BCC, and all the labs are fighting to build the highway that’s the most cost-effective in the eyes of their customers while meeting the regulatory standards.
Waiting for expensive answers
Josh Wurzer co-founded SC Labs in 2010 after stints in analytical and synthetic chemistry during his career in the pharmaceutical and electronic materials industries. When we first asked him about the trials the lab faced in 2018, he asked if we were writing an article or a novel.
The trouble started in late 2017 when the final lab regulations didn’t come out until November. The labs had a general idea of the tests they were going to do, “but we had no idea when we had to have them ready by, what the parameters of those tests are,” Wurzer explained. SC Labs was doing plenty of tests already but there was only so much it could do to prepare for what was to come. Managers guessed wrong in the early going, buying two $200,000 machines that weren’t up to par for the tests SC Labs needed to perform. They figured it out, set a plan and staffed up for the first of the year, expecting mandatory testing to be huge.
“Jan. 1  comes, and it’s crickets,” Wurzer said. “We — and almost all the labs are in the same boat — did almost no compliance testing the first six months of the year.”
This was caused by a lack of enforcement by the state.
“We did very little and a lot of the customers that had been testing under the voluntary program dropped off because this disincentivized doing testing. Because if they do test and fail, they’re in trouble,” he said.
SC Labs was now doing less testing under the mandatory rules than it had under the voluntary rules.
“We had six months where we invested all this money, and we don’t have any deep-pocketed investors or anything like that,” Wurzer said. “We’ve always bootstrapped the company, and we ’re one of the bigger labs, so we were fortunate to be able to do some big things and get ready for the first of the year.”
Wurzer calls the first six months of 2018 the most difficult the company has faced in five or six years, which came as a bit of a surprise to them. July’s mandated testing deadline saw things pick back up fast, as nobody wanted to draw the ire of the BCC. In talking with the other labs, Wurzer said, he found SC’s situation was far from unique.
The second half of 2018 was all about keeping up with compliance testing, which is a lot more involved than R&D testing. But according to Wurzer, there certainly isn’t as much testing as the experts were predicting in the build-up to legalization.
“The BCC publishes all the numbers. You kind of extrapolate that out and there’s certainly not billions of dollars in testing in California. We’re figuring out where we fit in that, and it’s a lot less stressful than the first six months of 2018,” he said.
We asked Wurzer about the concerns others in the industry had in regards to communication with regulators.
“I think the BCC has done a really great job from the testing point of view. I mean, we have data going back years,” Wurzer replied. “Before 2017 we didn’t even have the number of pesticides on our list we’re required to do now.” He said about 50 percent of flowers and upwards of 70 percent of concentrates SC Labs is testing for those taking part on a voluntary basis has pesticide residue.
“I was really concerned with testing, if the light switch was just getting flicked on, it would just bring the industry to its knees. Because I knew how much questionable material was on the market before regulations kicked in,” Wurzer said. “That hasn’t proven to be the case, and maybe for the industry it was good testing kind of ramped up.”
As proof of success, Wurzer points to the roughly 3 percent of flowers that now fails compliance testing. “It just goes to show people are going to do whatever they think they can get away with when they can. But if you put some regulations in place and people are actually getting tested, it’s really easy to clean up our act and we can have clean, safe cannabis.”
The only issue SC Labs has that is still hanging out there is establishing action limits for certain Category 1 pesticides. Otherwise, Wurzer thinks the updates in the regulations have addressed a lot of concerns.
The 70-year-old pot startup
One of the newer faces to the cannabis testing space, Anresco Laboratories has been keeping consumers safe with food testing since World War II and is recognized by the FDA for its quality. We asked Josh Richard, who leads the cannabis testing effort at Anresco, to give his take on how the three years in cannabis and seven decades in food safety prepared the company for what was to come in 2018.
“[The experience] definitely got us used to the analysis we had to do, but it was definitely a big change when the BCC rules came into play,” Richard said. “Coming from the food side, the limits were definitely a lot lower.”
Richard wonders how many people’s cannabis products failed because of the food ingredients they add. “People will test the oil or trim all the way up the supply chain. Then they’ll add lemon flavoring and that fails them, which is crazy to me.”
With Anresco being such a major lab, you would think they were ready to go for 2018.
“It’s funny because you think we wouldn’t but we did have to buy a bunch of new equipment just to specifically hit the detection levels required by the BCC. We still have a lot of instruments that are perfectly fine for FDA testing, and they just didn’t cut it for BCC standards,” he said.
The labs did not face these challenges alone in 2018, as the rest of the industry was certainly along for the ride. Next week we’ll get input from dispensaries and distributors on how it all went down.