The cannabis industry could reach $35 billion in size by 2020, if all 50 states legalized marijuana and the federal government ended prohibition, according to GreenWave Advisors. Despite the industry’s explosive growth, state governments have been slow to implement consistent regulations when it comes to cannabis safety standards, while the federal government has remained all but absent from any cannabis-related discussions.
DigiPath Inc.’s (OTCQB: DIGP) Dr. Cindy Orser, Ph.D., believes variations in states’ cannabis laws are hurting patients because their lack of uniform requirements makes standardization impossible. In a recent interview with United Patients Group, an online resource for medical marijuana patients, she outlined many of these issues in detail and argued for the development of uniform standards, particularly when it comes to cannabis testing.
High Time for Some Rules
A joint investigation conducted by the Oregonian and Oregon Live found that lax state laws, inconsistent lab practices, and inaccurate test results have introduced dangers to medical marijuana patients. Earlier this year, they tested ten popular marijuana concentrates in Oregon and found that nearly all of them contained pesticides. A total of 14 chemicals were found in eight of the samples, including six that the federal government considers carcinogenic.
Other studies have found that many medical marijuana products may be inaccurately labeled in terms of THC and CBD content. When it comes to THC, inaccurate labeling can lead to serious consequences as individuals ingest more of the psychogenic substance than they need. A lack of CBD may be less troublesome in terms of safety, but significantly reduces any efficacy that may be seen by the use of the concentrate or strain of marijuana.
While pharmaceutical companies like Merck & Co. (NYSE: MRK) must undergo extensive clinical trials before bringing a drug to market, cannabis concentrate manufacturers must simply submit samples to state-certified independent laboratories for a small fee. The problem is that the sample is just a sample and state rules don’t cover many pesticides that are commonly used in marijuana cultivation – including many toxic substances.
Working Towards a Solution
The good news is that states are starting to realize that safety and labeling are becoming a public health risk. Oregon, Massachusetts, and most new medical marijuana states have at least begun including lab certifications in their regulations. Moreover, the Association of Commercial Cannabis Laboratories has even promised to help produce consistent, accurate results using a common set of testing criteria across different states.
Dr. Orser has been working with the State of Nevada to draft the nation’s most stringent medical cannabis testing protocols, while working with the Conference of Western Attorney Generals to adopt those standards in other states that have legalized the drug. The hope is to create a uniform set of standards that’s actually enforced by governments rather than a set of voluntary standards created by an industry association.
“Standards are how we live,” said DigiPath Inc. CSO Dr. Cindy Orser in a recent press release. “They’re seamlessly incorporated into our life. When you go get sixteen gallons of high-octane gas, you don’t worry that that’s not what you just put into your tank. You take an aspirin, and it’s 325 mg—you don’t even think about it. We need that kind of reliability in the medical cannabis industry.”
DigiPath is Uniquely Positioned
There are many different opportunities to invest in the legal cannabis industry, ranging from MedBox Inc.’s (OTC: MDBX) consulting approach to Cannabis Sciences Inc. (OTC: CBIS) scientific approach, to MassRoot’s (OTC: MSRT) MyDx marijuana analyzer. However, the cannabis testing industry may be the most attractive subset of the industry given its regulatory-driven growth and significant unmet need in a market that’s poised to continue growing over the coming years.
According to GreenWave Advisors, the cannabis testing industry could generate close to a billion dollars in revenue by 2020. The firm points to a number of factors that make lab testing such an attractive business, including the large barrier to entry, high gross margins, and predictable recurring revenue.
DigiPath Inc.’s initial testing laboratory in Nevada is also well-positioned to benefit, as one of the first to open in Las Vegas. With a booming tourism industry and reciprocity rules, the state could generate upwards of $100 million per year in cannabis-derived revenue, according to some analysts. The potential for recreational legalization during the November 2016 elections could further drive growth over the coming years.
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