7 Total Laboratories For All Of Michigan. Charging Whatever They Want.

Testing Backlogs and High Prices Add To Legal Weed's Regulatory Headaches

By: WeedClub Team, Monday, January 20, 2020 at 10:20 AM PT

Founders of state-licensed marijuana laboratory testing businesses enjoy first-mover advantages today that enable them to price gouge the emerging cannabis industry.  

Due to a lack of options in the supply chain, legal producers- of products that must be tested in order to be sold and in the name of public health- suffer economically in two critical ways.  It takes longer to get their products to market since they are quarantined for one, and it costs up to $800 per batch for the hard cost of each test.

Vape scandals, illicit products entering the unregulated markets, medical necessity, potency- there are so many reasons that laboratory testing is a helpful service.  

As if running a cannabis startup is not difficult enough with weird tax regulations, local oversight, a lack of working capital, and banking challenges- next, entrepreneurs will wait for lab certifications and they will pay a premium for the "privilege".  Lack of competition means that there is a lack of choice for businesses that rely on laboratories in order to exist. 

At $800 per full test, businesses are paying mostly the profit of the laboratory aka building castles in the sky.  

An expert who owns a laboratory in Oakland, California said that profit margins in the vertical are currently 60%-80%.  

Why does everyone treat cannabis entrepreneurs like they are a bank machine that the world can insert a card into and extract cash out of? 

Very few states have fostered and enabled competition in their local cannabis markets.  Oklahoma is one state that has enabled competition by issuing business licenses to those who qualify, having lower tax rates and regulations in general.  States that tightly control their licenses are disabling competition. Over-taxation on the regulatory side has boosted the prices consumers pay at the register too.  

Congratulations to those visionary founders, like Ben and Lev of PSI Labs in Ann Arbor, Michigan, on being the early birds to get the worms; however, there needs to be more competition throughout the cannabis supply chain in order to stimulate growth for the industry.  This would result in a better experience for customers with more variety, lower prices and easier access to legal products.