The cannabis industry has blossomed into a multi-state behemoth with budding markets in all corners of the United States and across the globe. As the industry continues to grow, various aspects of its inner workings are highlighted, from tip-toeing around precarious government regulations and messaging, to the limitations of cannabis stocks and banking. A core component of any cannabis business is testing compliance to ensure final products are free from pesticides, metals, and other toxic components.
Unsurprisingly, it is far from cheap to ensure one’s product is compliant with state standards. “Just how expensive” you might be wondering? An April 2020 study explored this question in depth by analyzing the average cost per pound for testing compliance under California regulations. Per state standards, all cannabis products must be tested for cannabinoid content (N=6), foreign material (hair, insects, feces, packaging contaminants, and manufacturing waste), pesticides (66), heavy metals (4), mycotoxins (5), microbial impurities (6), moisture content, solvents (22), and terpenoids (as labeled). [1] Contaminants like mycotoxins and pesticides have limits regarding what’s acceptable quantity-wise.
All batches that pass testing receive a certification, effectively green-lighting distribution to dispensaries throughout the state. Any batches that fail to meet the stringent standards can either be remediated or reprocessed twice. [1] Additional rounds of testing can be conducted, and if the batch fails a third time, then it must be completely destroyed, vaporizing one’s investment. So, how does this shake out in terms of cost?
For starters, the study found that a substantial economic investment is required to create testing labs, with a minimum investment of $1.1 million to equip a small lab (~2,000 samples per year). Large-scale labs (~23,000 samples per year) for testing usually require equipment demanding a $2.8 million investment. This does not include annual operating costs, which also hover in the million-dollar range depending on the size of the lab. For example, large-scale labs have an average operating cost between $6.2–$8.1 million per year. Large-scale lab budgets are hit the heaviest by consumables (e.g., extraction and mobile phase solvents, glassware, etc.), while small-scale lab budgets face relatively high labor costs. Average costs per sample are lower for large-scale labs, however, with “four times the total costs of a small lab but 10 times the testing capacity.”
Valdes-Donoso P, Sumner DA, Goldstein R. Costs of cannabis testing compliance: Assessing mandatory testing in the California cannabis market. PLOS ONE. 2020;15(4):e0232041. https://doi.org/10.1371/journal.pone.0232041. CC BY-4.0.
From the cultivator’s perspective, the average cost per testing sample is $504, according to a simulation created by researchers. [1] “Batch size significantly affects the per-pound testing cost of cannabis marketed, especially when batch size is smaller than 10 pounds,” the researchers said. Looking at failure rates for batches under testing, California found that about 5.6% of batches failed testing in 2018. For comparison, in Washington, 8% of samples failed the second year after testing was implemented. In terms of cost per pound, a one-pound batch size costs on average $641 “when the expected rejection rate is equal to zero.”
References:
- Valdes-Donoso P, Sumner DA, Goldstein R. Costs of cannabis testing compliance: Assessing mandatory testing in the California cannabis market. PLOS ONE. 2020;15(4):e0232041. https://doi.org/10.1371/journal.pone.0232041. [Impact Factor: 2.740; Times Cited: 1 (Semantic Scholar)]
Image: National Cancer Institute, Unsplash
