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Contaminated & Mislabeled: How Testing Could Save the Cannabis Industry

SEATTLE, WA / ACCESSWIRE / June 26, 2015 / The cannabis industry has become one of the fastest growing industries in the U.S. overnight, with several states legalizing medical and recreational marijuana, but the rapid growth hasn't come without its share of growing pains. Without a precedent in place, many states have failed to setup effective testing and labeling programs, creating a dangerous situation for many customers that can only be remedied by stricter standards and better testing.

GreenWave Advisors, LLC, an independent investment research and advisory firm serving the cannabis industry, published a report titled "Marijuana Lab Testing: An in depth analysis of investing in one of the industry's most attractive plays," which projects marijuana lab testing revenues could reach $850 million a year by 2020.

Dangerous Contamination

The Oregonian's Noelle Crombie published a scathing critique of the cannabis industry's abhorrent testing standards in June, which has helped to shed light on a critical roadblock to the industry growth over the coming years. With lax state regulations, inconsistent lab practices, and inaccurate test results commonplace throughout the industry, the article suggests that consumers may be getting dangerous doses of pesticides, carcinogens, and other chemicals.

In her investigation, Ms. Crombie discovered that marijuana samples obtained from dispensary shelves had 14 chemicals, including a half-dozen chemicals that the federal government has classified as having possible or probable links to cancer. These chemicals included a common household roach killer that was taken off the shelves decades ago by the federal government following concerns about potential health risks.

These problems stemmed from the fact that many states didn't take the time to craft high-quality testing regulations. For instance, Oregon permits marijuana growers to use pesticides that aren't explicitly forbidden in its guidelines, which far exceed anything allowed on food crops that are produced in the state. The concentrations of these chemicals are also rarely limited by the law, which has led to potentially dangerous levels.

Many laboratories also produce inconsistent testing results, which means that sellers can use multiple labs until they achieve a desired result. A dispensary that purchases ten thousand dollars worth of wholesale product that one lab concludes is contaminated may choose to have samples tested by multiple labs to increase its chances of obtaining more favorable testing results, especially given the relatively low cost of testing.

Mislabeled THC Content

Johns Hopkins researchers found that the vast majority of edible cannabis products sold in a small sample of medical marijuana dispensaries carried labels that overstated or understated the amount of delta-0-tatrahydrocannabinol – or THC. After collecting 75 different edible products across multiple dispensaries and cities, the group found that just 17% of products were accurately labeled, while 23% were under labeled and 60% were overlabeled.

The underlabeling of THC content could be dangerous for medical marijuana patients, since it could lead to an overdose. According to the researchers, overdoses could result in extreme anxiety and psychotic reactions. Some of these effects were seen in recreational marijuana cases, such as a Colorado case where a college student abruptly jumped to his death from a balcony after consuming a large amount of edible THC.

The researchers also tested the products for cannabidiol – or CBD – which is a component of cannabis that's believed to have medical benefits and potentially reduce the side effects of THC. After testing the same samples, the team discovered that just 59% had detectible levels of CBDs with the average ratio of THC to CBD being 36-to-1. Only one product had a 1-to-1 ratio, suggesting that medical marijuana may be lacking in a much-needed component.

While many states have labeling mandates based on laboratory results, these inaccurate labels suggest that laboratories are again failing at correctly characterizing samples of marijuana before they hit dispensary shelves. The mislabeling of THC may not be quite as dangerous as the presence of dangerous contaminants, but it could result in a lack of medical efficacy or overdoses in some cases – big problems if left unchecked over time.

Evolving Regulations

Regulators have had a tough time enacting cannabis laws on a relatively short notice, since there's very little precedent in terms of how the industry should operate. Unlike agricultural products like corn or wheat that have been harvested for centuries, cannabis plants are usually grown indoors under very different conditions, which means they require different techniques for controlling pests and optimizing yields over the long run.

Colorado – the first state to legalize recreational cannabis – began by certifying labs to conduct cannabis testing, although they didn't establish any uniform rules for testing for potency, homogeneity, and contaminants. As a result, these labs began producing very different results when testing the same cannabis strains due to the usage of different methodologies. A bill is now on the table to regulate these methodologies and finally standardize testing.

The good news is that regulators like those in Colorado have finally started to take note of these early problems and take corrective action. In addition to Colorado, Nevada, Illinois, Minnesota, New York, and Washington have similar programs in place to test for contaminants before allowing product to hit dispensary shelves. These efforts should help to nip the problem at the source rather than letting it fester for much longer.

The bad news is that many states – including California, Oregon, and Florida – don't have any state mandated testing requirements, while even the states with standards don't have tight enough standards to avoid many of the problems with labeling and contamination. Some regulations, such as Colorado's SB 260, may also be quite a ways off into the future in terms of an approval timeline, which means these problems could persist for some time.

High-Quality Labs

The second critical piece of the puzzle following the arrival of additional state mandates for laboratory testing are high-quality labs capable of producing reliable and consistent results. While there are many publicly traded companies in the cannabis testing space, including CannLabs Inc. (CANL) and Pazoo Inc. (PZOO).

The most successful cannabis laboratories also have experienced management teams and scientific personnel. For example, DigiPath Inc. (DIGP) is led by Dr. Cindy Orser, Ph.D., who has more than 20 years of experience in academia and private industry. In the past, she served as a key intermediary between Big Sky Biosystems Inc. and regulatory compliance agencies like the FDA, CDC, and ARC, which could prove invaluable in working with state mandates.

In June, the company announced the opening of one of just two labs operating in Southern Nevada and already completed its first tests. The lab contains approximately one million dollars worth of equipment that's designed to generate highly accurate and reproducible testing results for clients within the Nevada cannabis industry. Marijuana Business Daily estimates that the state's market could reach up to $100 million due to Las Vegas' tourism.

These high quality testing operations will be essential for companies like Café Serendipity Holdings Inc. (OTC:FOFU) and others producing edibles or selling products in dispensaries. By earning the trust of both regulators and consumers, these companies could realize a significant competitive advantage over time, particularly as consumer awareness of these problems continues to rise following media reports like the one appearing in the Oregonian.

Looking Ahead

Investors in the cannabis industry may want to take a closer look at high-quality testing companies, such as DigiPath, given the influx of state mandates and rising awareness of problems among consumers.

For more information, visit the company's website at www.digipath.com and www.digipathlabs.com.

Legal Disclaimer:

Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Important factors that could cause these differences include, but are not limited to, the demand for the company's services and the company's ability to execute its business plan. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claim to provide investment advice or recommendations to readers of this release. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, has been compensated for its services in the form of cash and equity securities by DigiPath. For full disclosure please visit: http://www.cannabisfn.com/legal-disclaimer/.

SOURCE: Cannabis Financial Network