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Lab Shopping, THC Inflation & Bogus Lab Purity Statements Leaves Licensed Growers and Producers Wide-Open to Heavy Losses: Are You Covered?

18 March 2020 / Category: Blog
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The one concept that convinced even the most resistant politicians to cannabis legalization was the argument that, if cannabis were to be legalized, at least cannabis consumers could feel safe from any possibility of toxins hidden in their Medical Marijuana and be certain of the percentage dose of THC in the cannabis products they were buying.

Due to out of control “Lab Shopping”, THC inflation and most importantly, bogus lab purity statements, many cannabis consumers in legalized states, still don’t know what they’re getting!

And from the production end of the cannabis industry, many licensed growers and producers have been left wide-open to heavy losses after government audits of their products FAIL.

A licensed indoor grower for example, puts his trust and money to pay a government licensed or “accredited” independent laboratory to make sure his product is compliant, that it has an accurate THC percentage count and is free of toxic biological and chemical impurities like pesticides, herbicides, mold, and microbial infections.

His lab comes back with a glowing report that the THC count is higher than expected AND is clean—that is, free of any toxic impurities. Then a random state government lab audit is run on a sample from the same batch—which in most cases is in the hundreds of pounds—and the sample is found to be lower in THC than claimed, AND also includes sky-high levels of toxic impurities way over state limits. The grower is ordered to recall and destroy the whole batch and in many cases is slapped with a huge fine, while the lab itself loses its license or “accreditation” and is put out of business.

It’s not a pretty picture. Sadly, this scenario occurs regularly in states where cannabis has been legalized but mostly in the original legalized states of California, Oregon and Washington. Millions of dollars in potential profits for licensed growers, concentrate producers and dispensaries have been lost and literally go up in smoke due to fraudulent laboratory reports.

Outdoor growers know they cannot be insured against these heavy losses.

Indoor growers however, including greenhouse growers and concentrate producers who can obtain Product Liability policy coverage by specialty cannabis insurance agencies but delay in doing so, (thinking surprise government audits and inaccurate lab reports will never happen to them), are hurt financially when they are forced to recall and destroy their uninsured products.

Licensed indoor producers however, who have the foresight to obtain Product Liability insurance realize they need a cannabis-specialty insurance agency to successfully fulfill their insurance claim, should they need to make one.

Standard insurance agencies are not equipped, and do not have the knowledge or expertise needed to prove their clients were not at fault for trying to sell their tainted products because they unknowingly hired a lab which fraudulently passed their products for purity.

The irony of these situations is that, by the letter of the law, labs are not doing anything illegal at all because lab testing for purity, and THC percentages is such a new science, that labs are allowed by most states to make up their their own rules and parameters for determining purity levels and THC percentage content!

“How the scientist interprets the output and reports the results, is up to them.” Oregon Health Authority audit, 2019, Oregon Secretary of State

When a grower can fire its lab for producing true scores at say, 16% THC and hire a new lab to give them a much higher score of 30%, this is called, “Lab Shopping”. Many large licensed growers can afford to PAY EXTRA (bribery) for licensed labs who are willing to inflate the THC percentage content of their indoor products. Higher THC percentage content is perceived by cannabis consumers to be more potent, and therefore, more “valuable”.

Producers can then print that percentage number on their product labelling legally because their accredited lab of choice tested it for that. But then, when the product is government audited by its own scientists, and found to be WAY below in THC percentage at true numbers of 16% for example, compared to the 30% on the labelling, the producer FAILS compliance and as a result, is forced to pay heavy fines for doing so. In these situations, the labs themselves lose their accreditation, go out of business, but by then its too late for uninsured producers to recoup their losses.

These labs that go out of business can ironically get back into business under a new company name—legally. They do so because the lucrative opportunity outweighs the risk of being busted again. For labs willing to take that risk, their doors are open to many growers willing to bribe them to inflate their THC percentages and the whole cycle just repeats itself!

So how did this confusing mess, which is extremely damaging to the new legitimate cannabis industry get started anyway?

In 2012 during the unregulated medical marijuana era in California, consumers started seeing THC scores on their cannabis packaging labels. To arrive at a THC percentage rating, lab technicians used, and still use, mass spectrometry, and gas and liquid chromatography, to detect minute amounts of cannabis’ main active ingredient, THC, and other molecules.

Meanwhile, 2 years later, state-licensed lab verification testing for cannabis purity and potency began in Colorado in 2014. Since its inception, consumers showed a marked preference to high THC scores because they falsely assumed that the higher the THC rating, the “higher” they would get. They assumed THC works like alcohol in wine—the more alcohol percentage means the wine imbiber would get intoxicated quicker on a relatively smaller quantity of wine.

Unfortunately, cannabis doesn’t really work that way. Recent scientific studies have proven that THC % is only one factor. Depending on the adeptness of the grower and the strain itself, it is the terpenes and all the other combined cannabinoids with THC in the maturing process of the flowers that actually determines the potency of their intoxicating and medicinal effects…and this is not apparent simply in the lab testing numbers.

This means that, in ordinary layman’s terms, a plant that’s grown correctly by master growers may only have a 17% THC rating but can be much more intoxicating and have more potent medicinal effects than a plant that’s improperly grown but produces flowers coming in at a legitimate 30% THC rating!

But because the cannabis market originally showed its preference for high THC scores, the signal travelled up the supply chain to the stores, distributors, growers, and labs. When labs started producing low test scores, growers and distributors would switch to a different lab that consistently offered higher ones—even if they weren’t “authentic”.

And that’s how THC shopping started…

Marc A. Nascarella, PhD, chief toxicologist at MDPH, and a contributor to the Association of Public Health Labs for cannabis guidance stated in 2017 that,

“Who’s to say who is right? Higher lab results can be accurate, or they can be inaccurate due to error, or sometimes, fraud. The science is so new, every lab can legally come up with their own method for arriving at a THC score. The truth is, there is no single guidance that works.”

Since then, Colorado got its act together and now there are only 6 licensed labs in the state. They have all agreed to do peer testing with each other to ensure that lab scores in the state stay accurate. California’s new regulations have also greatly improved just this year (2019). Unlike many other states, where labs are subject to varying levels of accreditation, California has mandated that all labs be ISO certified by end of 2019… but not all are yet.

ISO is the world standard for cannabis lab testing for THC content and purity and stands for The International Organization for Standardization. And yes, the capitalized initials do not match the actual order of the words in the name.

According to Wikipedia, “The ISO is an international standard-setting body composed of representatives from various national standards organizations. Founded on 23 February 1947, the organization promotes worldwide proprietary, industrial and commercial standards.”

Unlike the US, growers and producers in the entire country of Canada are regulated by Canadian mandated ISO standards where the federal government runs a, “tight ship”. All its licensed growers and producers must comply with ISO standards. There is no room for Lab Shopping or bogus purity ratings. That’s why news hounds can always find in Canadian news media sources like CBC or Global News, reports where the federal Canadian government is regularly failing even top licensed producers for either inaccurate THC scores or purity or both!

Back in the USA, Oregon and Washington on the other hand, still do not require ISO certification and this could explain why they are still plagued with Lab Shopping and bogus purity ratings. In fact, both states actually hire outside vendors to “accredit”—not “license”—labs. The Washington State Liquor and Cannabis Board (WSLCB) for example, doesn’t even employ a single chemist! Instead, it’s all “private enterprise” and their vendor, RJ Lee, runs the show and has “accredited” 13 labs all doing, “their own thing”…

When it comes to compliance in cannabis purity issues, licensed indoor growers (greenhouse growers are considered indoor growing facilities), and concentrate producers who operate under full compliance, but mistakenly choose a lab with questionable laboratory procedures, can still get nailed for marketing toxic, impure product by state auditing.

But there is a redeeming light at the end of this gnarly tunnel of lab corruption…

Licensed indoor growers, concentrate producers and the dispensary businesses who rely on the latter two, can still be protected!  If they operate under the strict letter of the law, and are fully compliant, but get audited by their state’s regulator, and FAIL in the audit, they may still be able to recoup their losses.

Fortunately, their businesses can be saved and their losses covered IF and only IF they have taken out insurance policy coverage with Product Liability from a reputable cannabis-specific insurance agency.

Cover Cannabis, is the leading cannabis-specific insurance agency and protects licensed cannabis businesses from coast to coast in the United States. Cover Cannabis can insure your indoor facility products with “Product Liability”. This policy protects businesses from loss should their cannabis products be audited and fail for THC % count and, or, impurities such as mold, chemical toxicity and microbial counts exceeding state limits due to inept, corrupt or questionable laboratory procedures.

No cannabis business is perfect and even when you are fully compliant and following all of your state government’s regulations, we at Cover Cannabis understand that you can still unknowingly release a “bad batch” into the market. When you put your trust in a lab and end up “flying blind” when it falsifies your test results and passes your product for purity, relying on the likelihood your products will never be audited, but ARE, your lab will suffer the consequences.

But with Product Liability working on your side, your business doesn’t have to!

With over 12 years of experience and expertise specializing ONLY in the cannabis industry, Cover Cannabis is here to help protect your unique cannabis business should you fail compliance, or a purity audit through no fault of your own due to false lab testing.

If your cannabis business is not insured yet, or does not have this one crucial cannabis-specialized policy in place, call Cover Cannabis today. Our agents are friendly, knowledgeable professionals who can expertly guide you around the pit-falls like third party laboratory fraud, with our custom Cannabis Product Liability Coverage so you can stay profitable on your exciting journey of business growth in the legitimate cannabis industry.