If one were to put their finger on just where the biggest risk may lie in cannabis, it could be from product liability and recalls. The industry took a hit from an outbreak of vape injuries a few years back, and that was largely because of association – vaping is one way to consume cannabis, as well as tobacco products.
Cannabis products, as with any consumables, are heavily regulated and they’re tested long before the products get into the hands of consumers. Preventing potential harm, or the damage that can be wrought by recalls, is where product testing comes in.
Cannabis testing isn’t a big business – not yet anyway. There are only a handful of operators in the nation’s cannabis testing industry, making it a specialized business to be in, and an even more specialized business to insure.
It may not stay so specialized for long. Market Data Centre in mid-May reported the global cannabis testing services market is projected to expand at an annual rate of nearly 17.4% from now to 2030. This is due in part to the cannabis industry’s growth, but the biggest driver of the anticipated expansion appears to be an increase in cannabis contamination cases.
These cases include contamination due to heavy metals from soil, pesticides, fungus, and molds – pollutants that can cause fatalities and respiratory disorders. So, a number of regulatory authorities like the U.S. FDA have set up limits on use of things like residual solvents, pesticides, and heavy metals, in farming activities, according to the data firm.
Beth Medvedev, the division manager in life sciences at James River Insurance Co., and Matt Johnson, a vice president at Quadscore Insurance Services, talked with us for our latest podcast about insuring testing labs.
Following are takeaways from that conversation.
Medvedev said insuring labs, and labs themselves, are such a niche market because they are highly scientific, requiring a great deal of expertise, making the sector difficult for businesses to easily break into.
“Yeah, it is very scientific. It’s a little different,” she said. “The people who are operating labs usually come from science backgrounds, so it is a little different than growers or dispensaries or manufacturers. I think it’s important to remember that the legitimacy and the accuracy of labs is very, very important to the industry. So that’s to protect all the operators and their product. It’s to protect the consumers. And I think having that accuracy and legitimacy allows the cannabis industry to have and maintain a really good reputation.”
Medvedev noted that product testing requires an errors and omissions form, to respond appropriately to the actual exposure, so documentation is a large part of the risk management procedures at these labs.
“Well, I think the major purpose of having lab testing is to ensure the product safety,” she said. “So, if the contaminants or unsafe substances are missed, it can obviously ruin the product for the lab customer and potentially cause injury to the consumers. Also, mix-ups and not being able to track the product could actually cause a false negative, and people might be destroying the product when they really don’t have to.”
Johnson stays busy making sure his cannabis clients are protected before the products ever get into and out of their hands. Quadscore has a few labs as clients, but he mostly sees them as a “risk management tool.”
“…we are focused on insuring the plant touching operations themself and we can insure testing labs and we do, but they are more important as a risk management tool for cannabis operators across the country to ensure that a quality product is being delivered to their consumers,” Johnson said.
He laid out four concerns he has when insuring his clients who are selling or distributing cannabis products that must be tested: Consumer safety; lack of mandatory testing for novel products (like Delta-8 THC); a lack of a national standardization of testing; and lab shopping (in which some states allow cannabis operators to test their product with multiple testing laboratories).
Johnson places a lack of federal standardization, because cannabis is still federally illegal, as among the biggest of those concerns.
“You hate to see an industry like cannabis pay as much in taxes as they do, and still receive this absolute backseat treatment from the federal government,” he said.
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