The Promising Future of Cannabis Testing Laboratories
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Thanks to the recent and rapid state-by-state adoption of regulated cannabis for medical and adult-use, the demand for cannabis testing services has boomed. In the US, regulations are currently promulgated at the state level, which results in inconsistencies state to state. But following the recent advancement of House Bill H.R.3617 to the Senate, federal legalized markets seem more imminent than ever before.
What can we expect for the future trajectory of cannabis testing, as the cannabis industry as a whole hurtles toward the changes likely to be ushered in by federal oversight?
The MORE Act advances to the US Senate
The Marijuana Opportunity Reinvestment and Expungement (MORE) Act, H.R.3617, passed by 220-204 votes in the US House of Representatives on April 1, 2022, and was received in the Senate three days later where it was referred to the United States Senate Committee on Finance. While the ultimate fate of this particular bill is still unknown, cannabis has gained broad public support and bipartisan sponsorship in Congress. The act, if signed into law, would remove cannabis from its current status scheduled under the Controlled Substances Act (CSA), eliminate many criminal penalties associated with possession, distributing and manufacturing, create an expungement process for previous federal offenses, put in place a framework for taxation, and remove barriers to basic financial services. All together, these provisions would have major implications for financial equity and access to traditional banking services for cannabis businesses.
In a future landscape of federally legal cannabis markets, where businesses have greater access to capital and other benefits, the laboratory testing segment of the industry will presumably see increased revenue growth based on the upward trajectory of cannabis wholesale and retail sales. Access to cannabis in the US will widen geographically, and sheer volume of cannabis produced will dictate more testing demand. Another potential effect to consider is consolidation, given that the expanded geographies will need testing services.
If cannabis can move freely cross state lines, testing services may not need to be stood up in every locale. Existing courier services such as USPS, Fedex, and UPS, which are currently prohibited from transporting cannabis products in most cases, would be allowed to deliver samples to cannabis laboratories, as is common for clinical and environmental testing services. As cannabis testing experiences some sort of standardization at the federal level, and with products able to cross state lines, the doors to consolidation at the nationwide level may fling wide open. The production and retail sides of the industry have certainly begun to experience consolidation, as hyper-successful brands look to expand their footprint and do so by acquiring smaller operations willing to sell. The testing services segment of the industry will likely follow suit.
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More robust QA/QC to be required in future federal markets
The requirements for quality assurance (QA) and quality control (QC) surrounding routine cannabis product compliance testing are likely to align more with established testing industries for water quality or pharmaceuticals under a national regime. Federal oversight tends to standardize quality control, data integrity, and data traceability criteria across state lines. For now, some states require accreditation to the ISO 17025 international standard, which mandates certain quality system elements required for conformance with the standard. However, at the state level the overlay of QA/QC requirements are vastly inconsistent. With standardization of methods and associated method/analyte/matrix QC a likely outcome of federal regulation, many pre-existing labs will need to strengthen their QC procedures. Adding QC samples does add cost to testing by spending consumables, reagents, and human resources for preparation, analysis, interpretation, documentation and reporting of those additional samples. The current pricing structure seen across markets may therefore be a low estimate of what true costs will look like in a future scenario.
Modernized operations: innovations in automation and built-for-purpose software for data handling
Laboratory work for cannabis compliance testing involves a seemingly never-ending cycle of repetitive tasks carried out in a predetermined sequence according to standard operating procedures (SOPs). Once established SOPs are in place, the overarching goal is to execute these processes in the exact same manner, for all samples, all the time. Automation can play a key role here, simultaneously accomplishing the consistency necessary for repetitive steps of sample preparation while also freeing up human hands to direct efforts elsewhere, where human interaction is required. For a laboratory with ambitions of processing hundreds of samples per day, automated sample prep becomes not just a differentiator, but a necessity. At a time when all segments of the industry are introducing automation solutions to help ease the burden of manual labor shortages, labs that seek out innovative scientific equipment employed in other testing settings will increase sample volume capacity and throughput ahead of their competitors, without necessitating a corresponding increase in personnel.
The copious amounts of raw data produced by cannabis testing operations requires secure handling and storage, best accommodated with customized laboratory information management system (LIMS) software. The LIMS is the central nervous system of the lab, receiving data from instruments (and feedback from humans), processing information and making interpretations based on pre-defined calculations, and sending reports of the compiled inputs. The LIMS also acts as the memory of the laboratory, a vast repository for all data generated over time. Some degree of customization is necessary based on the specific suite of instruments in the lab, the list of state-required analytes, and their action limits. A thoughtfully built-out LIMS can also act as a dispatch system for lab personnel - surfacing bottlenecks and issues earlier than otherwise possible in a “paper and whiteboard” system. The value of the efficiency gained with a properly functioning, built-for-purpose LIMS cannot be overstated.
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Beyond the basics: expanded scopes of testing to support industry needs
Cannabis cultivators and manufacturers are required to test according to state regulations, but what about meeting the needs of these entities beyond the scope of mandated testing? In addition to the demand for compliance testing of cannabis products in their final form, there are a plethora of opportunities to support cannabis operations in their endeavors to cultivate, formulate, innovate, and troubleshoot. In-process testing at various stages of cultivation or manufacturing can be extremely valuable and ideally includes screening of all inputs to the processes of cultivation (soil, water, nutrients, etc.) or manufacturing (raw ingredients other than cannabis). Environmental monitoring of facilities in accordance with good manufacturing practices (GMP) is also a beneficial value-added service to cannabis clientele. Screening for plant pests, nutrient deficiencies, infections, or other maladies further bolsters the types of offerings a lab can consider providing. Until cannabis businesses are able to bring capabilities and talent in-house to conduct GMP-style testing and facility and/or plant-health monitoring themselves, offering these services can help foster a strong relationship and build trust between the laboratory and its clients.
The future outlook: a promising trajectory
The cannabis testing space is dynamic in nature due to its recent indoctrination as a discipline in its own right, where method development and optimization are still ongoing, and new compounds are added to analyte testing lists as the industry as a whole expands and matures. The future outlook of cannabis testing is promising as it becomes standardized nationwide, automated, quality-controlled, expanded in scope, and market-valued. It is likely to arrive imminently, ancillary to the geographic broadening of the industry and increased demand resulting from federal legislation for legalization and regulation of cannabis and cannabis infused products.