Analytical Laboratories, also known as testing laboratories, are responsible for testing cannabis products for quality and safety pursuant to state regulations prior to release to consumers. In many states significant bottlenecks at this phase of the cannabis supply chain have created tremendous business opportunities for qualified laboratories. In the interest of addressing these challenges many states have implemented measures to encourage participation by laboratories. These can include expedited review of laboratory applications, exempting laboratories from license caps and deadlines imposed on other license types, and more.
Analytical Laboratory Keys to Success
1. Capacity
In general, lots and batches of cannabis and cannabis products produced by cultivators and manufacturers must undergo testing before retail sale to consumers. Long wait times for test results, particularly in states with not enough testing capacity to go around, have an immediate and significant impact on sell-through and cash flows. Lots and batches on quality hold also take up precious warehouse space that could be used for essential operations. Producers understand these impacts and prioritize relationships with labs that can consistently provide fast, accurate, turnarounds. Labs with greater capacity can, accordingly, relatively easily market themselves to more and larger clients.
2. Accuracy and Transparency
Unfortunately, many, if not all, state markets have struggled with inaccurate and inconsistent test results, a problem that has been exacerbated by the practice of “lab shopping.” Researchers conducting statistical analysis on state-reported laboratory results have found striking evidence of systematic manipulation of laboratory results in virtually every state studied. This crisis of consumer and regulator confidence has led regulators to deploy similar analyses along with other measures to catch cheaters; a trend that is sure to continue. As understanding of these issues becomes more mainstream, a lab’s reputation for accurate and transparent test results will become even more important.
Analytical Testing Requirements
There is significant variance from state to state and product to product in required analytes and action levels. In general, analytical laboratories can be expected to test for cannabinoid and terpene potency, pesticides and other growth regulators, microbial and mycotoxin contamination, heavy metals, residual solvents, foreign matter, and moisture/water activity. In certain states laboratories may be expected to conduct and/or validate shelf stability.
Tests are almost always required prior to retail sale to consumers, however testing at intermediate phases of production may be required or requested. Laboratories may also be expected to conduct their own sampling or otherwise validate that samples provided to the laboratory are representative. This diverse array of activities can make cannabis testing more labor intensive than other third-party analytical laboratory activities.
Analytical Laboratory Standards
From a cannabis producer’s perspective, the diversity in compliance requirements from state to state can be dizzying. However, for obvious reasons, analytical laboratories enjoy a refreshing degree of standardization from state to state in an industry that is more often fractured than not. Many states require compliance with ISO/IEC 17025 standards for testing and calibration laboratories, but are, apart from requiring the application of certain standards, the presence of certain security features, and the completion of relevant proficiency testing, relatively hands-off with analytical laboratories; opting to instead regulate them in general like analytical laboratories serving other industries.
There are a number of emerging standards for cannabis testing. ASTM International has a dedicated committee focused on developing consensus-based standards for cannabis testing. Currently the committee has published roughly 50 standards, including 9 for analytical laboratories specifically, with dozens more being developed. As cannabis science continues to evolve at a rapid pace, analytical laboratories must be prepared to adapt to changing methods and standards.
Conclusion
Tune in next Monday for the next installment in our “Business Overview” series: The Transporter. For more on how Fire Business Strategies can help set your business up for success, please visit our contact page to schedule a free initial consultation!
