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Accusations of ‘lab-marketing’ create a challenging environment for cannabis testing facilities

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Theinda Palmatier recently closed its cannabis testing facility in Kalamazoo, Spot Labwith the hope that state regulators will create what it considers a more level playing field for business owners.

Palmatier, which opened The Spott Laboratory in 2014 while Michigan has only legalized medical marijuana, and others say the state’s business climate for state-licensed safety compliance facilities has gone astray.

These facilities are important linkages in Michigan’s nearly $2 billion market of cannabis, ensuring that commercially grown products are safe for human consumption and free of harmful chemicals.

However, controversy has clouded the sector, including a major legal dispute between the Michigan Cannabis Regulatory Agency and one company that has captured the majority of the testing market. Veridis LaboratoriesTwo sites in Lansing and Bay City test more than 60 percent of the state’s product, according to Veridis officials.

Additionally, both operators and regulators have accused the company of supporting “laboratory shopping” where farmers and processors seek a specific lab to achieve higher results than THC, which usually creates higher-priced products. As of June 30, 2022, Michigan had 19 active Safety Compliance Facility licensees.

“When a lab has this kind of percentage of the entire business in Michigan, it’s not because they are better than everyone else,” said Palmatier, whose company stopped accepting samples for testing on July 30. “I am still here, but I refuse to participate in a market where accuracy is not the priority. Staying open is too expensive.”

Veridis controversy

TThe Cannabis Regulatory Agency (formerly Regulatory Marijuana) agency) in November 2021 recalled an estimated £64,000 and nearly $229 million worth of products tested by Viridis. In December, a Michigan Claims Court judge partially dismissed the lawsuit and limited the summons to half of the initial product.

Most recently, the CRA filed formal complaints against Viridis Laboratories on May 19, raising questions about the effectiveness of THC on test results and laboratory testing methods. Viridis also filed its own lawsuit late last year against the CRA and several agency employees. Litigation continues in both cases.

“I can’t really get into it, but we’re in the midst of it with (CRA) at the moment,” said Todd Welch, co-founder and chief operating officer of Viridis. Maybes. “Before the summons, we were testing about 70 percent of the Michigan flower market. Obviously, the recall affected us, but right after that, the judge dropped half of the summons and our customers started coming back to us, as well as new customers.”

In response to claims that Viridis tests disproportionately produce higher levels of THC than other labs, Welch said the company has spent months developing a more accurate extraction method.

“We know our results are more accurate and accurate than a lot of other testing labs in the industry,” said Welch, a retired Michigan State Police forensic scientist. “This is private information, just like the CRA and maybe some of our competitors would like us to share this method. We have to share that with the state and we had to before we got approval.”

However, the CRA claimed in court proceedings that Viridis Labs’ testing methods were not approved.

Operators such as Palmatier wonder why the CRA appears to be struggling to enforce its own rules.

Palmatier, whose company was also the subject of research from a state regulatory investigation in 2019 of inaccurate THC test results, said the issue was quickly resolved.

Agency spokesman David Harnes said by email that the TRA’s official complaints against Veridis “speak for themselves.”

“The TRA has always strived to consistently enforce the law and rules on licensees across the industry,” added Harnes.

Chris Silva, Account Manager at cannabis redemptionIt is critical for cannabis growers and retailers to work with labs that have built public trust, he said.

“It’s important to us that the lab works,” Silva said. “We want to support all the good actors we can. Most people do a good job, it’s just extreme values.”

Silva added that the main focus on elevated THC levels is “one of the worst things that has happened with mass rationing.”

Palmatier agrees.

“Consumers think THC is the most important thing on the planet,” Palmatier said. “As long as the entire industry operates with profits entirely dependent on high THC numbers, we will never get out of this situation.”

The recent drop in cannabis prices in Michigan is also likely to exacerbate lab shopping. The average price of a medicinal flower per ounce was $112.30 in June of 2022, compared to $209.87 in June of 2021..

“In general, there is a problem in the whole industry, with the financial barriers to entry and the capital that you need to get into the industry,” Silva said. “Especially going into the lab side, that’s really expensive.”

As for safety compliance operators, Palmatier said it’s “very frustrating for someone trying to do good here to succeed. The worst thing is that it’s patients and consumers who are paying for it.”

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