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A Bright Future for Cannabis Testing Services

Despite regulatory challenges, the future of testing services is promising

by Bernard B. Tulsi
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In a much anticipated decision in early August this year, the Drug Enforcement Agency (DEA) left the Schedule 1 classification of cannabis as “a dangerous narcotic” unchanged. The agency’s decision, however, will increase the number of registered marijuana manufacturers, signaling an additional green light for research—a move that could increase the demand for laboratory services. A cursory search of the PubMed research repository shows more than 4,000 articles on medical uses for cannabis, such as pain treatment.

Despite regulatory brakes, the cannabis business is growing fast—researchers New Frontier and Arc View estimate that legal cannabis will command a market value of $7.1 billion this year, up 26 percent from 2015. The biggest growth driver is adult recreational use, which is legal in just a handful of states. Meanwhile, cannabis for medicinal use enjoys growing support—89 percent of Americans reportedly support legalization now versus 74 percent in 2011—and already 25 states have legalized medical cannabis, while several more are on track to do so.

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Dr. Robert Martin, executive director, the Association of Commercial Cannabis Laboratories, which has about 30 of the estimated 40-50 cannabis labs in the country as members, considers the DEA decision to maintain cannabis on Schedule 1 unjustifiable because “we are looking at a compound generally regarded as safe.” He insists that this decision will continue to block investment support and hinder the infusion of research money into the sector, and interfere with the scientific and medical progress associated with cannabis. As to how this will impact research— the DEA’s decision retained the Food and Drug Administration’s (FDA’s) approval process—Martin says, “That’s a catch-22. The FDA won’t approve any product that’s Schedule 1, so how can they approve any cannabis research?”

Martin says that operating a cannabis lab is fraught with ongoing legal and financial challenges. “We walk a fine line every day to perform our duties. Survival requires considerable money and some courage.” He says that the average cannabis lab requires about $2 million to $4 million in equipment and highly trained staff. He adds that cannabis labs do not benefit from the favorable financial arrangements equipment vendors extend to other industries, or from banking services such as checking and lines of credit, forcing them to operate with large sums of cash, which is cumbersome and dangerous. These factors, along with inflated rents and taxes, drive up operating costs and negatively impact profit margins, he says.

He says that analytical companies trying to get into the cannabis industry face financial hurdles because of the banking strictures, the lack of financing, and the overall unavailability of capital to cannabis labs. He suggests that interested vendors may consider providing instruments to recognized, credible cannabis labs and jointly conduct hands-on research on real cannabis materials. This could help demonstrate the robustness of the instrumentation, and the results of the work could form the basis of a white paper or other publication. In addition, the instruments could be offered to the lab at a discount at the end of the project. Martin says he is trying to promote this approach nationwide as a creative way to get instrumentation into the industry, and especially to labs that cannot afford to buy them.

1. CW Analytical‘s David Egerton, VP of Technical Services, monitors the cannabinoid and residual solvent runs on GC-FID and HPLC.Photo credit: Benjamin Krantz. Training on GC-MS/MS. Standing (left to right): Becca Stevens, Innovations chemist II, Chris English, Innovations lab manager. Sitting (left to right): Dan Li, Innovations chemist I, Julie Kowalski, senior chemist.Photo credit: Kelsi Burris, Restek Corporation.
 Dr. Robert Martin, co-founder and COO of CW Analytical, reviews data before release to clients.Photo credit: Benjamin Krantz.  CW Analytical’s associate scientist, Charisse MacDula, prepares microbiological samples of cannabis products.Photo credit: Benjamin Krantz.

“There’s an overall assumption that if you run a cannabis lab, you’re wealthy, because the business is highly profitable. That’s absolutely untrue. We don’t have any dispensing and we don’t distribute cannabis. We don’t factor into the profit side of the business at all,” says Martin, who, after spending 30 years in the food industry, co-founded and is currently the chief operating officer of CW Analytical (Oakland, CA), which provides a range of quality and potency testing and product development services to the medical marijuana industry.

Noting the growing role for quality cannabis testing based on observations from across the country, and particularly in California, in 2014, biochemist and molecular biologist Dr. Anthony Smith founded Kenevir Research - Southern Oregon’s Cannabis Laboratory, a commercial analytical facility. “The mission is to match the levels of method validation, data integrity, and transparency of ISO 17025-accredited commercial natural products labs,” says Smith.

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Smith says his facility tests for cannabinoid content, an HPLC UV assay that includes THC, THC acids, CBD, and CBD acids, among others. The lab also screens pesticide panels based on different lists covered in Oregon state regulations. In Oregon, tests are mostly conducted on cannabis flowers and concentrates, such as resins or purified oil, for cannabinoid potency, yeast and mold content, and, mostly, cannabinoid potency for edible products such as cookies, other baked goods, and chocolate. The lab can also perform a range of other microbiology testing for E. coli and salmonella total plate count, but that is not a requirement, according to Smith.

In Oregon, retail cannabis dispensaries serve card-holding medical cannabis users. These dispensaries may also be accessed by adults without a medical prescription. One new aspect is that taxes are now collected for cannabis purchases. There are also limits on what products and how much an individual can purchase. Harmonization measures slated to take effect by October this year could change some of these arrangements.

The main customers of Smith’s lab are cannabis producers and dispensaries; the lab rarely tests samples directly for patients. In fact, direct- to-patient testing appears to be diminishing as retail services grow. “Our real clients are actual producers, including cannabis farmers and extractors of cannabis resins for bulk sales and prepackaged retail formats, and as products for infused cannabis production. We also have direct testing relationships with the retail dispensaries themselves.” He notes that several dispensaries are cannabis producers as well.

Turning to features that differentiate cannabis labs, Smith says instrumentation and reagents are largely consistent across analytical labs; however, there are key alterations in the methodology. “Most of the procedures we use are direct adaptations of validated methods from the natural products or food industry, and in some cases agriculture.” But the challenge is that the cannabis matrix is really dramatically different from matrices used to develop existing validated methods, he says.

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“Several private labs specialize in pesticide testing on fruits, berries, or other agricultural commodities. Generally those products are juicy or watery, whereas cannabis consists of thick, waxy resins—we have a real challenge with sample cleanup,” he says.

These difficulties extend to the reliable evaluation of extraction recovery efficiencies for the many products into which cannabis is infused, including chocolate, cookies, and confectionary goods. “We have a lot of experience with these, but we see a lot of odd, unique items not encountered in other industries, such as cannabis-infused popsicles, soda pop, herbal chewing tobacco, and topical lotions, and nuts and granola mixes with a salty cannabis coating, among others. “It’s hard for labs to keep up with validated methodologies for extraction recovery efficiency in all these weird matrices,” says Smith.

Josh Wurzer, president of SC Labs (Santa Cruz, CA), holds the distinction of having been the lab director of the first facility to accept cannabis samples for testing. Wurzer, who has been in the field for at least seven years now, says that the posting for his first job in the cannabis field ended with a note that the applicant “must be comfortable with cannabis testing.” He says his initial thinking was that he would take the job for a while and move on to a real job. “This could be fun, but I can’t ever put it on a resume,” he thought.

“Since then, that’s changed. I was leery about working for a medical marijuana lab, but now I think it’s a great career choice for people coming out of school with technical degrees because it supports a product that’s behind the fastest-growing industry in America.” He says that the products have numerous medical applications and medical marijuana “will certainly be a big recreational alternative to alcohol and tobacco.” Wurzer says that marijuana is a “kind of connoisseur crop that needs technically intensive production methods, and there’s a variety of secondary products that can be made from it.”“There’s a lack of technically proficient people in the cannabis industry, but that is changing every day. Certainly, there is no problem now finding interested people—I get at least a half-dozen unsolicited emails a week from outside the United States,” he says. According to Wurzer, there are numerous overtures from people who have just completed their PhD degrees offering to intern for free at his lab for six months or a year. “People who are way too qualified to be an intern here are offering to come work for free,” he says. He says that the company stopped the practice of unpaid internships a long time ago for a number of reasons— but based on the interest, attracting qualified staff does not present a challenge anymore.

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Wurzer says that a few years ago, about 95 percent of SC Labs’ customer base consisted of marijuana dispensaries. “Until a few years ago, there were still people going to jail for producing cannabis, but the dispensary outlets were visible enough that they did not mind contracting with a lab and having their names written down along with the number of samples they wanted tested. So, all our business was with storefront dispensaries.”

He anticipates that his company’s customer base will shift from the retail side to cannabis producers in the future. “Over the past few years, testing started to switch to the producers because the dispensaries started asking their vendors to bring in tested products—and going forward, starting in January 2018, there will be a requirement for all cannabis to be tested in the state of California.”

Required testing in the future has not gone unnoticed. Julie Kowalski, senior innovations chemist at Restek (Bellefonte, PA), who has extensive experience in the food safety area, started looking into cannabis testing about six years ago, especially regarding pesticide testing. “With more labs in more states becoming involved in this market, I personally got into the pesticide part of cannabis mainly because states were starting to get serious about required testing.” She says that Restek provides solutions for cannabis testing labs, which constitute her main contact point with the industry, although there have been occasional interactions with other players, such as growers.

Focusing on likely trends in cannabis labs in the future, Kowalski says, “As the market gets larger and there’s enforcement for testing, there’s no doubt that there’ll be more need for testing services. I think that a lot of these labs will grow, and at the federal level I anticipate that you’ll see labs that are now servicing other markets, including big contract labs, cross into cannabis once some of the grey areas of regulation are cleaned up.”

Sample material being weighed and logged in the prep lab.Photo credit: SC Labs. Cannabis sample material is mixed with solvents, homogenized, and liquefied.Photo credit: SC Labs.
Headspace vials of cannabis concentrate placed on the GC-FID for residual solvent analysis.Photo credit: SC Labs. Josh Wurzer, president of SC Labs.