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Put to the Test

New state law requires a closer examination of cannabis products on dispensary shelves

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As the calendar turns to November, third-party testing is about to become mandatory for medicinal marijuana, which could lead to shortages at your local dispensary in the short term and higher costs for medicine down the road.

With the passage of Senate Bill 1494 in August 2019, Arizona joined most other states with medical cannabis laws, requiring marijuana product testing before it hits the shelf.

The bill states, in part, that testing will "determine unsafe levels of microbial contamination, heavy metals, pesticides, herbicides, fungicides, growth regulators and residual solvents and confirm the potency of the marijuana to be dispensed."

It is also likely the state will ban several toxins, including pesticides and heavy metals such as arsenic, lead and mercury, in your favorite edible or leaf.

The Arizona Department of Health Services is in the process of certifying labs to do the work, but with coronavirus raging throughout the state, AZDHS has had its hands full with matters unrelated to SB 1494, leading some in the industry to call for a delay in the rollout of the testing program.

Groups such as the National Organization for the Reform of Marijuana Laws and the Arizona Dispensary Association have lobbied the governor and AZDHS to hold off implementation until there is sufficient testing infrastructure, citing critical shortages should the state pull the trigger on Nov. 1.

There are currently eight labs listed on the AZDHS website in line to conduct testing, with few certified for all the tests that must be conducted. Seven testing sites are in the Phoenix area with one in Snowflake, leaving a large Tucson market reliant on labs outside the area.

Moe Asnani, director of Downtown and D2 dispensaries and board member for the ADA, is convinced fears of shortages might be overblown and that lobbying efforts to slow the process have been effective.

"There's quite a few things that you can blame it on, but the simplest thing is the COVID-19 pandemic," he said.

He recently sent a letter to lawmakers urging a delay, citing the need for more testing sites and the difficulty of implementing the program during a global health crisis.

"The reason the laboratories are not at the scale they should be today is because of the COVID-19 pandemic and the ability to get ... certification and in-person inspections from non-governmental accreditation agencies," he wrote.

Asnani referred to an Aug. 20 meeting in Phoenix with lawmakers and stakeholders in the MMJ industry, where AZDHS assured the group that help was forthcoming.

"I think the problem is with everything going on, that didn't get communicated out," he said in a subsequent interview. "We're just waiting for written communication to back up what's been said."

Senate President Karen Fann (R-LD1), whose representative was at the Aug. 20 meeting, said that the state has allowed other departments like the Motor Vehicle Division extra time to conduct business, and while she would not commit to that being the case in this instance, she thinks there is a possibility for more time.

"It was supposed to be set up, but because of COVID there have been a lot of difficulties," she said. "We've done that for other departments and we hope to be able extend the deadline."

Asnani also called for a geographic exception, since the nearest testing facilities are at least 50 miles away. He believes Southern Arizona—with 15 dispensaries and 10-12 large-scale cultivation facilities—has a sufficient economic heft to support a blossoming testing industry.

"If anything I'm flying a flag and saying: 'Come do business in Tucson if you're allowed,'" he said. "If you're a national lab and want to transition into testing, come to Southern Arizona and do business here. There's plenty of it."

Aside from a deficiency in labs, Asnani is concerned with the added cost of testing, which may lead to cost of medicinal cannabis products going up as the program is implemented.

Asnani estimates a full-panel test will cost dispensaries about $800, which would increase costs by as much as $50,000 to $100,000 monthly to keep product on the shelves, with fines up to $5,000 a month for non-compliance.

While some businesses might absorb the economic hit, others will likely pass along increased costs to the consumer.

On the other side of the issue, at least one of the labs preparing to take on the task of getting the program underway is ready to roll.

Ryan Treacy, founder and CEO of C4 labs in Scottsdale, says that even though there might be short-term pain, that will eventually go away once the program reaches maturity.

Treacy says his four-year ramp-up includes big increases in lab space, six-figure investments in equipment and increased staffing in preparation for what he expects to be an influx of product to be tested in order to maintain supplies in the marketplace.

It has been a difficult road to get to certification, but Treacy expects to be able to run the gamut of tests when the clock strikes midnight on testing day.

As the testing program rolls out, Treacy said that consumers might see fewer products available. For instance, instead of 15 or 18 types of lollipops, there might only be five or six. But growing pains are to be expected; Both California and Oregon saw shortages and increased costs once testing went into effect.

That can be attributed, in part, to residual chemicals in the soils that growers might not even be aware of that can take generations for the plant to eliminate. Treacy said a 10 percent to 20 percent failure rate can be expected, adding that California was seeing as much as 60 percent failure rate in the beginning.

"The dust will settle and we will normalize at some point," he said.

No matter what the outcome with the start date for testing—whether it begins on time or gets the delay advocates hope will come—both Asnani and Treacy gave kudos to AZDHS for the way the department has handled the issues its been handed during the pandemic.

"The team at DHS, from a laboratory standpoint, has done as good, or better of a job than could be expected," Treacy said. "Why aren't more labs certified in the state? I believe it's because of how thorough DHS has been."

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