First and most straight forward is the cost of compliance with security measured including video surveillance and archival, disposal and quarantine, and other compliance costs that we estimated were equivalent to $4.88 per pound for small labs, $4.06 per pound for large labs and $3.25 per pound for large labs for a weighted average of $3.62 per pound. The cost of testing requirements on a retail cost basis is best expressed as the full cost per unit of cannabis that reaches the market. Expressing the full cost in this way raises two additional costs. The first is simple: the value of the cannabis used up in the testing procedure. Based on MAUCRSA, the sample size must be at least 0.35% of the total batch of cannabis tested. We use an average wholesale value of $1,360 per pound of cannabis flower equivalent at the testing stage, which represents a recent weighted average price across outdoor grown, greenhouse grown and indoor grown cannabis and products . Thus, for each pound of cannabis tested, flower worth $4.76 is used up. The second issue, costs associated with a failure to pass the test, is more complex. These costs include the cost of the testing process as well as the cost of the cannabis that must be destroyed when it is considered unacceptable to be marketed by virtue of a failed test. Stringent maximums for pesticides,indoor cannabis grow system microbials and other contamination mean that there will be a significant chance that a sample is rejected. In some cases, the owner will attempt to remediate or process that batch, intending to eliminate the cause of the non-passing the test.
A batch can be remediated up to two times. If a batch fails its testing after its second remediation, regulations mandate that that batch must be destroyed in a verifiable way. This is a major cost of the testing regime required by California legislation and regulation. To estimate the cost of such rejections, we used a range of potential rejection rates, drawing from information that was available on contamination of cannabis in other states. However, the experience of other states is of limited value and must be adjusted based on information from industry sources. Washington state mandates tests on potency, moisture, foreign matter, microbiological and mycotoxin screening, residual solvent and heavy metals, but, unlike in California, testing on pesticide residues is not mandatory . Washington state enforcement is based on spot checks. Based on Washington state data, we found that in 2017, the second year after the testing began, 8% of the total samples submitted failed one or more tests. Colorado state mandates tests on residual solvents, microbial, mycotoxins, heavy metals, pesticides and potency. The Colorado Marijuana Enforcement Division reported that during the first six months of 2018, 8.9% of total samples of adult-use cannabis failed testing . Testing on pesticide residues only became mandatory in August of 2018 in Colorado, so systematic data on test results were not available. However, the Department of Agriculture in Colorado informed us that 60% of spot-checks based on complaints or concerns between 2015 and 2017 found pesticide residues . Given the cost of cannabis that must be destroyed in case of failed tests, cultivators and manufacturers may pre-test to decrease the chances of failing official tests.
For our cost analysis, we assume that 25% of cannabis is pre-tested before being submitted for the formal and binding tests. To express costs in terms of the pounds of cannabis legally marketed, and account for pretesting and pounds lost because of testing, we need to express the ratio of pounds tested to pounds that pass testing.We set the pretest share at 25%, the retest share of failed samples at 50% and the failure rate of retested samples at 50%. We explore costs associated with three initial failure rates — 7%, 12.5% and 25% — to reflect the range of information we gathered. With these inputs to the equation, the ratio of tested cannabis to passed cannabis is 1.365 if the initial failure rate is 7%, 1.448 if the initial failure rate is 12.5% and 1.692 if the initial failure rate is 25%. These factors must be multiplied by all the costs per pound tested to calculate the cost per pound of cannabis actually marketed. Table 6 reports, in three components, the costs per pound of cannabis marketed: the cost of laboratory testing, the value of lost inventory and the relatively small cost of remediating failed batches. For small batch sizes, laboratory testing costs are an important testing cost, especially when the rejection rate is low. For a 50-pound batch size, laboratory costs are a small share of overall costs, especially as rejection rates rise.
In the medium case of a 25-pound batch and a 12.5% rejection rate, which might be fairly typical, lab costs are $30 per pound and the cost of cannabis lost in the testing process is $148, so laboratory testing represents only one-sixth the total cost of complying with laws and regulations regarding mandatory testing. In this case, the total cost of testing, including the loss of the potential value of marketable cannabis, is $179 per pound, or about 13% of the wholesale value of cannabis assumed in this research. Testing is expensive, but the lost value of cannabis that fails tests to enter the legal retail market is an even bigger issue. It is difficult to predict rejection rates with great confidence; the data we present, however, is consistent with reports of pesticide detection in California food crops and information available from other states. Evidence suggests that major drivers of both direct laboratory costs and lost cannabis costs are low or zero tolerance levels set for pesticides and the difficulty of dealing with microbial contamination. We have shown that if these low tolerance levels were applied to other California food crops, a significant proportion would have failed tests in recent years . Thus California’s safety standards for cannabis are tight compared to other states’ standards and to standards for other products within California. We note that there may be safety reasons that cannabis is subject to such tight tolerance levels, but they are not in the literature and are beyond the scope of this article. California’s system for testing cannabis has been under pressure since the implementation of the state’s testing regime in July 2018 because of difficulties in supplying the market with product that has passed the tests and has been labeled correctly. Some producers, after receiving inconsistent test results for contaminant residues from different laboratories, have voluntarily recalled product . However, California has not yet reported detailed data on official test rejection rates. Costs of testing will be reflected in the price of marketed legal cannabis. Thus it is crucial to understand the value that testing creates for consumers compared to the costs. Competition between legal cannabis and untested illegal cannabis is a major issue in cannabis policy. Rules that help ensure safe and high-quality products for consumers of legal cannabis can encourage some consumers to shift from the illegal supply chain to the legal, licensed supply chain. Before the passage of AUMA in 2016, the low prevalence of testing in California’s essentially unregulated market for medicinal cannabis indicated that many consumers entertained a limited willingness to pay for higher safety standards. This suggests that at least some consumers may remain today in the illegal, low-priced market, even though certified,cannabis grow setup tested products are available in the licensed supply chain. Taxes and regulations will make legal cannabis more expensive than illegal cannabis. However, safety testing is the basis of product differentiation for legal cannabis sold through licensed retailers. In some agricultural product industries, growers have urged product safety and consistency standards, as well as more stringent testing standards, to increase demand . As the regulated cannabis market develops, we expect that increased access to data will help clarify the impact on demand of mandatory testing rules. Recent changes in the marijuana environment in the United States include decreased restrictions on use , decreased perception of marijuana as harmful , and increased adult prevalence .
As of January 1, 2020, recreational use was legal in 11 states, and decriminalized in 15 others; medical use was legal in 33 . A primary concern about legalization is increased use among youth, but this concern has not been realized to date . However, there is evidence of increased marijuana use and cannabis use disorders among adults that appears to be concentrated among adults aged 26+ . While extant research suggests that legalization has not led to increased overall use among youth, some recent findings suggest possible increases among young adults . Repeated cross-sectional data suggest increased frequency of use among Oregon undergraduates after legalization in that state in 2015 . Additionally, early marijuana use may lead to cigarette smoking and to poor occupational and educational outcomes in young adulthood. It is also important to note that previous research on the impact of changing marijuana restrictions is largely limited to repeated cross-sectional data. There is a need for longitudinal cohort studies to identify not only trajectories of use but also predictors and correlates. Additionally, it is unclear whether loosening restrictions may have a differential impact on 18–20 year old young adults, for whom use remains illegal, compared with 21–24 year olds. Despite decreasing public apprehension, there are reasonable concerns about young adult marijuana use. Acutely, marijuana increases risk for accidents , emergency department visits , and psychosis . Persistent use predicts poor psychosocial outcomes and neuropsychological and cognitive decline in humans , and animal models suggest cognitive deficits and social anxiety . Persistent use is associated with addiction , including withdrawal . However, continued movement toward increased access makes it important to understand potential public health effects. Marijuana users appear less likely to quit tobacco , and changes in use of either product are positively associated with changes in the other . Marijuana legalization could send the message that tobacco is also less dangerous than previously believed. In other words, legalization may undermine negative perceptions of tobacco use due to similar routes of administration, use of similar devices, and frequency of co-use . This risk is particularly important during emerging adulthood, when tobacco initiation peaks and patterns of long-term use are established . Marijuana use may also impair continuing brain development during this period . California was the first state to legalize medical marijuana in 1996. At that time marijuana use was already high compared with other states, and the impact on prevalence was minimal . However, in 2016 California legalized recreational marijuana use, including possession of up to 1 ounce and individual cultivation beginning in November 2016, with commercial sales permitted as of January 1, 2018 . . State authorities began to plan for regulation of recreational sales in late 2016, and began issuing licenses for cultivation, manufacturing, distribution, testing, and retail sales at the beginning of January, 2018 . Local jurisdictions may still prohibit cultivation and sales. As of February 2018 there were 261 active retail licenses statewide; as of October 2020 that number had increased to 753, including 46 in San Diego County where this study was based . A recent report based on a survey from 2018–19 indicates that young adults generally utilize legal avenues to access marijuana and only rarely acquire it from strangers or dealers . To our knowledge, no research has evaluated changes in frequency of marijuana use in California following legalization of recreational sales, and there are few cohort studies from other states. The current study is one of the first to examine a sample of the same participants before and after legislation was implemented. Participants were at high risk for marijuana use given that all had smoked cigarettes recently at time of enrollment . This study was a secondary analysis of a study of non-daily cigarette smokers in California who were aged 18–24 when they enrolled in 2015–16 and who were followed quarterly for 3 years. Although possession and individual cultivation were permitted during 2017, we focused on legalization of sales in the belief this would have greater impact on availability based on both increased direct sales to young adults and on diversion from peer groups. Based on recent studies among young adults and on the fact that their tobacco use status likely increased risk of marijuana use, we sought to test the hypothesis that frequency of marijuana use would increase following legalization.