Arizona’s medical marijuana market has been around for more than a decade, but it wasn’t until a year ago that the state began requiring dispensaries to test its cannabis for safety.
The law that initiated the testing, SB 1494, was passed in August 2019 and took effect on November 1, 2020. The rule requires medical marijuana products to be tested for potency and various contaminants, including microbial contamination. , heavy metals, pesticides, herbicides. , fungicides, growth regulators and residual solvents, before going on sale.
Somewhat confusingly, Proposition 207, which legalized recreational marijuana in Arizona, was approved by voters on November 3, 2020, just two days after SB 1494 took effect. (The proposal has similar testing rules for recreational cannabis written into law.) Adding to the confusion was COVID-19, which found the Arizona Department of Health Services, the agency that regulates all legal marijuana in the state, distracted by the pressures of a pandemic. .
As the November 1 deadline approached, the Arizona Dispensary Association and other stakeholders lobbied the Governor and ADHS to postpone the implementation of SB 1494 until there were a sufficient number of labs ready for the challenge. and recreational sales were underway.
But the law went into effect anyway, and labs across the state began to see a large influx of business. Two things were clear: The pandemic was making it difficult for labs to get the supplies they needed, and some dispensaries had been procrastinating.
“On October 31, we all started getting a lot of samples and ADHS was still busy trying to formalize the rules,” said a lab owner who did not want to be named. “Everyone was doing the best they could, but it was during COVID, so we couldn’t get supplies: we couldn’t get items that we needed to test with (like vials and syringes) because they were the same items they were for. they were using vaccines. ”
The volume of cannabis being tested created a delay; in some cases, it took weeks to process the results. To address that, ADHS implemented a rule that requires a one week deadline; otherwise, the lab would be fined the cost of testing and the funds would be deposited into the state’s medical marijuana fund.
However, shortly after that initial rush, business slowed to a trickle, leading some lab owners to tears.
“We had to deal with it, and we got over it, then it came on January 1,” said a lab owner. “I don’t know what happened, but [business] it just stopped short. ”
Then, on January 28, 2021, ADHS surprised the Arizona cannabis industry with its sudden announcement that recreational sales could begin immediately, much earlier than even insiders had suspected.
While most dispensaries planned for sales to begin in March at the earliest, a handful, including 15 Harvest stores owned by Tempe native Steve White, had lines that spanned blocks. There was talk of a major marijuana shortage across the state.
As the market stabilized, some in the testing business believe the business fell because dispensaries were circumventing the law and giving up testing entirely, the fear of shortages disappeared, but there were still problems with the system while I was looking to find the balance.
In March, a report On Channel 5, television depicted what looked like an industry in complete disarray, with distributors playing fast and relaxed by the rules and untested cannabis making its way onto dispensary shelves, while state regulators stood by and allowed happen.
The article noted that several labs spent millions of dollars on state certification in the months leading up to mandatory testing. Of the six labs that were listed as certified in May 2020, three labs reported testing reduced by 65 to 95 percent, one reported that business had stabilized, and two did not respond to requests for information. The owners of C4 Laboratories and Pure Labs, Ryan Treacy and Barbara Dow respectively, reported that testing was significantly reduced in their labs; Treacy noted that the tests had dropped from 200 samples per week in November to 80 in February. They blamed the precipitous drop on providers who took shortcuts and failed to try everything the law requires. There were also allegations that providers switched laboratories or simply stopped testing when they didn’t like the results.
But many, on both the dispensary and testing sides, say that is not an accurate description of what was happening. They say that problems are solved as the market matures and the rules evolve.
“The reality is that November 1, 2020 was less than a year ago and our member dispensaries have been operating for nearly a decade prior to that date,” said Sam Richard, executive director of the Arizona Dispensary Association. “From a regulatory and compliance standpoint, our members have been working with the folks at ADHS for the better part of a decade. So I think there will be a lot of frustrations for the labs community. And I think many times [lab owners are] putting their frustrations out on the wrong part of the ecosystem. ”
The testing side had another apparent setback in June when several dispensaries voluntarily recalled a handful of products tested by OnPoint Laboratories in Snowflake that were suspected of having salmonella and Aspergillus (mold), although ADHS is still investigating the matter.
ADHS Communications Director Steve Elliott declined to comment on the OnPoint investigation directly, as it is still ongoing.
“When there are major changes affecting the industry, as has been the case with recent state law and the availability of laboratory tests, our initial focus is to draw attention to deficiencies and provide technical support to assist licensees. to comply, “he wrote in an email. “That is the case here.”
He added that if a dispensary continued to be substandard, there could be fines, but it would take “an unwillingness to comply with the law” for a dispensary’s license to be revoked.
Emails and a phone message to OnPoint were not returned, but in the wake of the May recall, OnPoint CEO Jeff Cardot praised DHS and its testing requirements, issuing a statement reading in part that, “While this recall was issued out of an abundance of caution, it exemplifies the excellent teamwork of the cannabis agency, labs and companies serving Arizona consumers.”
It was the first time the testing program exposed a problem with Arizona’s cannabis supply, but many in the industry believe it is part of the business learning curve.
“It has been really impressive to see the dispensaries master their craft and at the same time follow the line as the rules are decided and implemented,” said Nate Allen, owner of the Delta Verde Laboratory in Phoenix. “On the rare occasions that we find something in a potentially dangerous amount or that indicates a discrepancy with a label claim, I have seen first-hand the extent to which these licensees and the industry are trying to correct it, and not only sure are they not. it ends up on the store shelves or in the hands of the consumer, but they also methodically search for the origin and work to prevent it from happening again ”.
Established in 2014, Delta Verde is the oldest test lab in the state, but going into that end of the business is not for the faint of heart and costs millions of dollars in highly skilled facilities, equipment and employees. Delta Verde is not fully accredited, but can provide “full scope compliance” evidence to its customers.
Allen says the rules allow him to contract for heavy metal testing, which is the one thing he can’t do internally.
The tests also cost dispensaries thousands of dollars a month, averaging $ 500 to $ 600 each. The average dispensary / licensee requires 100 to 150 tests per month, according to Richard.
Richard says he believes that the flow of business to the labs is based in part on building long-term relationships and that ultimately everyone wants safe products on the shelves.
“Most of the operators have found a lab partner that they are happy to work with,” he said. “We do our best to be fully legal and compliant participants in a regulated market because that is what separates us from the illicit market.”
Even critics of the system believe that ADHS is on the right track, but it should be open to input from those in the industry and also more proactive in enforcement.
“I think some adjustments need to be made for us to have a more robust and reliable program,” said C4 Labs founder and CEO Ryan Treacy. “There is an education, enforcement and standardization that needs to take place on the people who are testing products, and also for ADHS to the people who are responsible for making sure the tests are run as outlined in the statute and as intended. . “