Are Reference Labs the Antidote to Cannabis Lab Shopping?

You pick up a cannabis pre-roll off a dispensary shelf. The label says its total THC is 27%. Do you believe it? You might not if you’ve been paying attention to the ongoing lab shopping crisis plaguing the cannabis industry.

You haven’t? Well, it goes like this: a cannabis company offers (shops) their product to different testing labs and then ultimately partners with the one that provides the most favorable test results.

Often, the “most favorable test results” are the ones with the higher THC potency numbers. If one lab says an edible contains 34% THC and another says it contains 42% THC, well, many edible manufacturers would be inclined to partner with the latter lab.

Why? Because there’s a ravenous consumer appetite out there for high-THC products; the higher the THC, the more a company can charge for its edible, flower, or concentrate.

So, back to our dispensary dilemma. The pre-roll label says it contains 27% THC. Do you believe it? Maybe not now. But what if the label also said the product had been verified by a reference lab? Would your faith be restored then?

A referee in Oregon

It would go like this: a state would have its own cannabis testing lab, overseen by a state regulator, which would double-check the work of the third-party labs, outing the ones committing fraud and validating the ones that produce genuine results.

Sounds like a good idea, doesn’t it? The folks at the Oregon Liquor and Cannabis Commission (OLCC) think so; they’ve got plans to launch their own reference lab later this year.

“We did get a reference lab through the legislature, this last legislative session,” TJ Sheehy, director of analytics and research at the OLCC, told Analytical Cannabis. “The bill passed in June and we’re waiting to see if it gets signed by the governor.”

This forthcoming reference lab could help stem the tide of THC inflation Oregon has seen in recent years – an issue so prominent that Sheehy and his colleagues couldn’t even wait for the reference lab to open to address it.

“Even if we’re on the path to get one, it’s going to take a while to really fully stand it up and make it an actual reference lab,” Sheehy said. “And based on the nature of the issue, and the volume of complaints we were getting, we just couldn’t wait until we set up a reference lab.”

So, ahead of the lab’s launch, Sheehy and his colleagues advocated for a new law that requires third-party labs to surrender their samples if they come under suspicion. These samples are then tested at another third-party lab and the new and old results are compared. The practice is known as round robin testing.

“If there’s a statistically significant difference between the round robin average and the prior test result, we can require the product on the market to be relabeled with that new round robin result,” Sheehy said.

The new rule came into effect this January; but even before then, it was catching unscrupulous companies out.

“We did a couple of pilot tests late last year and found results that motivated us to implement the rule,” Sheehy said. “The highest results that were on the market were the ones that had the biggest drop off in the round robin testing.”

Now that the rule has been in effect for six months, Sheehy hopes it has given cannabis labs an incentive to be more honest ahead of the launch of the state’s reference lab.  

“We stood up the round robin testing to shift the incentive structure for the testing labs, from ‘get the highest results,’ to ‘get the most accurate results that’s going to withstand scrutiny.’”

“As far as I’m aware, we’re the only state to have something like this,” Sheehy said.

Other reference labs, other ideas

Oregon isn’t the only state prepping for its own cannabis reference lab. The notion has caught on in the Midwest, too. Earlier this year, Michigan Governor Gretchen Whitmer included $4.4 million in funding for such a lab in her proposed 2024 budget, which passed in June.

“We are planning to implement a rigorous audit and oversight program that would include direct auditing of the laboratories as well as direct auditing of products in final form,” David Harns, public relations manager of Michigan’s Cannabis Regulatory Agency, told Analytical Cannabis.

“This procedure will have a set of clearly defined parameters to ensure that all licenses are audited equitably. Increased oversight will include auditing and testing of products and licenses that are under investigations,” he added.

Vermont, too, is keen on the oversight a reference lab could provide. The state’s governor, Phil Scott, approved a bill in June that would help create such a state-certified cannabis testing lab.

“If we do it well in Vermont, and we can demonstrate the value, I think every state will have one,” James Pepper, chairman of the state’s Cannabis Control Board, told Vermont Public radio in June.

“The challenge is we have an existing agricultural lab that does all of the same compliance testing for every other agricultural product, but they’re not allowed to touch cannabis. They’re not allowed to run cannabis through their machines, so we had to build our own.”

But not everyone’s so hyped about regulator-run labs. Michael Kahn, for one – founder and CEO of MCR Labs – says such expensive endeavors may be less use than other, more cost-effective policies.

“I’m just not sure I understand exactly how a state-run lab would be in any way incentivizing more honesty than something like the current proposal in Massachusetts, which is to publish all the lab data,” he told Analytical Cannabis. “That to me seems more straightforward, cheaper, and ultimately has a chance of success.”

The proposal Kahn mentions is a bill that, if approved by the Massachusetts legislature, would require the state’s Cannabis Control Commission to “collect, compile, and make available to the public on its Open Data Platform” all relevant lab data on product testing. Pesticide levels, cannabinoid content, which products passed and which failed – all testing information from every licensed lab would be accessible. With this public spreadsheet in place, the hope is, that with nowhere to hide and every competitor looking, the unscrupulous labs will stop inflating their numbers.

“I’m more interested in this solution than any other because it’s the one that has worked in other states,” Kahn continued.

“There are state-run labs in other states, and I have no idea if they work. I do know that in Washington State, when all the laboratory data was published, what actually happened there a few years ago was somebody combed through all the data, Dr. McCray, and he pointed [out] the obvious discontinuities and impossible inconsistencies in that underlying data set. He pointed that out to some regulators, who then investigated those labs further, and suspended several of them. And they were ultimately shut down. So that did work.”

A cure for lab shopping or an expensive error?

Everyone in the cannabis testing sector can agree that something needs to be done about lab shopping. It’s a blight that’s claimed several high-profile testing companies, from California to Colorado. But opinion seems divided as to whether reference labs are the solution. States like Oregon, Vermont, and Michigan are keen on the idea, but analysts like Michael Kahn say cheaper policies like public data transparency may be better suited to curbing the wave of THC inflation. Who’s right? Well, thanks to the patchwork landscape of regulations in the US, the cannabis industry can watch the different experiments unfold to find out. Time will tell.