D.C.’s medical cannabis industry is poised for growth this year as local regulators open up a fresh round of licensing to entrepreneurs hoping to cash in on medicinal weed.
Last month, D.C.’s Alcoholic Beverage Regulation Administration (ABRA) announced an open application period for the registration of two new cultivation centers, one dispensary, and two testing labs. Applicants have until April 21 to submit a Letter of Intent to ABRA.
For aspiring growers and dispensaries, competition will be stiff. The potential legalization of recreational-use cannabis sales in D.C. has set off a “green rush” among investors, and getting a medical license could give businesses a head start once recreational sales get the green light. (The D.C. Council is currently considering two new commercial regulated cannabis bills.)
“I think both of the cultivation licenses will be heavily competed for, both by out of state players and by the existing dispensaries that we have in the District,” says Grace Hyde, Chief Operating Officer of District Cannabis, a cultivation center based in Ward 5.
It’s unclear, however, whether ABRA will succeed in attracting a new cannabis testing facility to the District, a resource that local growers say is sorely lacking.
D.C. has been without a licensed testing facility since medicinal cannabis was legalized in 2014. In fact, no one has ever submitted an application for a lab license, even before ABRA took over the medical cannabis program from D.C. Health in October, per the two agencies.
Nevertheless, D.C. law requires cannabis cultivators to test their products using a third-party lab, though the requirement only goes into effect once a registered lab opens in the District.
For cultivators, that day can’t come soon enough. Growers say lack of access to a testing facility is slowing the industry’s growth. “It’s been quite a challenge,” says Hyde.
Without a third-party lab, District Cannabis has resorted to testing its own products. The company bought a high-performance liquid chromatography system, a sophisticated testing rig that costs around $100,000. Unfortunately, the machine only tests for potency, measuring cannabinoids like THC and CBD. More testing would mean buying more expensive machines.
Specialized labs can test more granularly for things like heavy metals, mold, and pesticides. That gives cultivators more control over product quality. Labs also offer testing for terpenes, naturally-occurring compounds that determine the effect and aroma of cannabis.
In neighboring Maryland, dispensaries are legally required to list terpenes on the labels of cannabis products. Knowing the “terpene profile” of weed can help users pick a strain that fits their needs. For instance, strains that contain linalool, a terpene found in lavender, have relaxing properties, while strains containing humulene may help reduce inflammation.
In-depth testing can get pricey. Labs charge between $200 and $400 per test, and growers can test dozens of samples each week. Still, Hyde says it’s worth the cost: “It’s expensive but it’s really valuable information, and it adds a lot more legitimacy to the market and everybody’s products.”
So why aren’t cannabis labs flocking to D.C.? Hyde says strict staffing requirements could be scaring labs off. In previous applications, D.C. required that labs list several staff members with advanced science degrees.
“Paying somebody with that level of education in conjunction with only having eight facilities as your potential customers—it’s just not financially viable,” she says.
According to ABRA’s website, it costs $3,500 to apply for a new cannabis testing facility license in the District. Labs must then pay $7,500 to renew the license each year,
ABRA says some D.C. cultivators have been working with out-of-state labs. But cannabis can’t legally be transported across state lines, so they are limited to labs that offer portable testing solutions.
There are arguably better testing options on D.C.’s gray market, where a loophole in D.C. law allows vendors to sell people legal goods while “gifting” them cannabis. Steep Hill, a national cannabis testing company, has operated a lab in D.C. for several years.
Licensed growers can’t work with Steep Hill because it isn’t registered with ABRA. But the lab has enough clients –– whether on the gray market or elsewhere– to stay in business.
Despite testing difficulties, D.C.’s medical cannabis industry has been on the upswing.
The number of D.C. patients with cannabis cards grew from 6,217 to 9,276 in 2020 –– a roughly 50% increase. The uptick is in large part due to a freeze on cannabis card expirations that will last until Mayor Muriel Bowser lifts D.C.’s current state of emergency.
Medical cannabis could also get a boost if the D.C. Council passes the “Medical Cannabis Amendment Act of 2021,” a bill that would lift some restrictions on the industry. The legislation, introduced in February by Council Chairman Phil Mendelson, would eliminate a cap on the number of plants cultivators can grow, and double the number of permitted dispensaries in the District from eight to 16.
In the meantime, growers are still waiting for a laboratory.
“We’re here in the nation’s capital and supposed to be leading the way on policy,” says Hyde. “And here we are and we don’t even have the most basic tenet of regulated markets.”
