Want to Win? Cheat! Inflated Test Results Are No Surprise.

Have you ever been to a retail shop in Washington State and seen flower boasting eye-popping 30%+ THC potencies? Did you purchase it? If so, you may have been sold a lie. While 30% flower has become less common over the years, inflated test results are still an ongoing problem, and they’re back in the spotlight again. On Friday, the Washington State Liquor and Cannabis Board suspended the license of Praxis Laboratory. Praxis conducts quality control tests for the i502 legal cannabis market and stand accused of falsifying data on thousands of potency analyses.

At first glance, this seems like a story of a bad actor being caught – a win for enforcement and consumer safety! The reality is a lot more complex than that.

Note: Walden currently uses Integrity Labs for most of our potency testing. Our pesticide testing is usually performed by Confidence Analytics. We have tested with Praxis in the past, but have not within the past year. We sometimes source pre-tested flower from other reputable farms, and on occasion those tests have come from Praxis. Some of the extraction processors we outsource to have used Praxis as a lab they test their final products with, before returning them to us. That said, we had not heard of anything untoward about Praxis’s testing practices before the WSLCB bulletin was issued, and I would not assume that every producer or processor that tests with them was aware of their sample manipulation.

The Incentive Structure

Let us start our lesson with a foundational conversation about incentives within the cannabis industry. I think we can all agree that the following statements are generally true:

1. For-profit cannabis companies want to make money (this includes producers, processors, retailers, and labs)
2. Exact THC and CBD percentages are required on labels, and this data is a critical part of the decision-making process for many cannabis consumers.
3. Potency is often conflated with quality. As a result, product that tests higher can be sold for more – a lot more.

If there is a glut of product on the market, increased competition drives prices lower. In the first few years of i-502, fierce competition amongst producers and processors resulted in significant competition for retail shelf space. It was challenging to break into the market even with high potency, high quality product. Trying to sell product that tested below 20%? Forget about it.

Many producers, desperate to save their businesses, started adulterating their samples to juice their potency tests. And why was that so easy? Well…

Broken Chain of Custody

When the legislature wrote the laws to govern the legal cannabis market in Washington State, they decided that licensees (i.e. producers and processors) should self-select samples that get sent to labs.

To gain market share, these labs must compete for customers (i.e. producers and processors). So, let’s think of some of the competitive advantages that labs may offer to licensees.

1. Competitive pricing
2. Quick turnaround times
3. Sample pickup
4. “Friendly” (ie. inflated) results

Let’s discuss which of these aspects are most important to the lab customer (i.e. cannabis producers and processors).

First up to bat – competitive pricing. Prices for a Quality Assurance lab panel in Washington State range from around $70 – $120. That may seem like a huge difference in cost, but each test covers approximately 2265 grams. That means that testing ranges from $.03-.05/gram, and the most a producer can save by choosing a price-competitive lab is around two cents per gram.

Quick turnaround times and sample pickup are convenient and save the producer/processor a little bit of headache and money, but I won’t spend much time talking about them here. These rarely make a huge impact on a producer’s or processor’s bottom line.

But number four, actual test results… this is where for-profit labs can really set themselves apart from the competition.

The difference between wholesale prices for a low potency gram of flower and a high potency gram may be upwards of 300 percent. Therefore a single potency test for a flower lot can swing the value of that lot by $2000 – $3000 for the exact same product.

Once you understand that value proposition, it becomes clear how the willingness to offer “friendly results” is by far the most financially enticing competitive advantage a lab can offer to its customers.

You don’t even need a lab to actively conspire with licensees in order for this to happen. The cannabis industry in Washington State is still small and tight knit – people talk. If a producer wants to find a friendly lab, it would not be challenging to ask around. A lab could gain market share based solely on word-of-mouth and market forces. Praxis is not the only lab to inflate numbers. A few years ago, there were rumors about a different lab. When it got shut down, yet another lab started doing the same thing.

Praxis may have been the first to be publicly caught and reprimanded for potency inflation. But they were not the first to do it, nor will they be the last. And that is because the most effective way for a lab to gain market share in the Washington State cannabis market is by flat out cheating. The system is set up to reward it.

So Who is to Blame?

You could blame the labs that are willing to cheat. You could blame the producers who are willing to pay the labs that offer higher results. You could blame the retailers who buy high potency cannabis or the consumers who demand it. But ultimately, the aforementioned businesses are just trying to compete, and the consumers are just trying to get stoned on the cheap. Can you really blame them?

This is an issue of a fundamentally flawed testing structure created by the state legislature, and implemented by the WSLCB. It needs a complete overhaul. Unfortunately, it appears the WSLCB is forging ahead with new pesticide and heavy metals requirements that use the same flawed testing system. If it does nothing to fix the structural issues, bad actors will continue to thrive, but this time, it won’t be inflated potency numbers. It will be pesticides that slip into products. The stakes are higher than ever.

How do we fix this?

It is unsurprising that the WSLCB has struggled to figure out how to implement potency  and pesticide testing. It is simply not what they do. Historically, the WSDA handles consumer safety testing of agricultural goods. Rather than use existing infrastructure, however, the state legislature created this flawed incentive structure and handed enforcement of it to the WSLCB.

It is understandable that the WSLCB would want to make an example out of Praxis. It is understandable that when faced with pressure to implement mandatory pesticide testing, that they may want to tack that onto the existing structure in place. Structural change is hard. It is made harder when the post powerful industry groups in the state allow labs to be part of their membership. After all, conversations about the WSDA taking over testing are an existential threat to for-profit labs. No industry group with labs at the table would dare suggest structural change.

So the structure of our current testing system remains fundamentally flawed, and there is little incentive within the industry to do anything about it.

So what can you, as a concerned citizen, do? Call your state representative and tell them that you want them to put cannabis quality assurance testing in the hands of the WSDA. They created the problem when they wrote the WAC seven years ago. We’ve learned a lot since then. It’s time we acknowledge our mistakes, and fix them.