The cannabis industry is about to take a giant leap forward in its quest for legitimacy and long-term stability. On March 1, 2017, the American Society for Testing and Materials (ASTM International) announced that it will form a committee of industry representatives and experts to develop a set of standards in six technical areas:

  • Indoor and outdoor horticulture and agriculture
  • Quality management systems
  • Laboratory standards
  • Processing and handling
  • Security and transportation
  • Personal training, assessment and credentialing.

ASTM International’s announcement is welcome news to an industry that operates with no federal oversight and with requirements that vary between states and localities. Uniform standards should provide additional assurance to insurance carriers, the medical community and the federal government as the pathway to full legalization continues. There are definite benefits to the cannabis industry from the creation of published standards, which should assist manufacturers and distributors in establishing baselines for testing and quality control, provide practitioners and dispensaries a standard by which to prescribe and dispense, and allow insurers to better underwrite the risks being covered.

The growth and stability of the cannabis market stands to improve when insurers are more confident in the ability to use objective risk management metrics through accepted practices and standards for manufacturing, transportation and testing of these products. This should encourage more carriers to write policies for the industry.

Areas likely to benefit from the creation of industry-specific standards include:

  • Pesticides. Distributors, prescribers, users and insurers want to be assured their product is free of toxic sprays and treatments.
  • Contaminates. Distributors, prescribers, users and insurers need assurance that the products are free of contamination, such as mold, bacteria, yeast and other microorganisms. There is growing demand from medical marijuana patients for higher-quality packaging that either displays an expiration date or provides greater protection from oxidation and degradation over time.
  • Potency. Not all marijuana plants, products and derivatives are the same. They differ in their pharmacology, potency and appearance. They also can be distinguished by variables such as whether they are cultivated indoors or outdoors or grown organically. Distributors, prescribers, users and insurers need to know that the potency is accurate.
  • Worker Safety. A 2017 study by New Frontier Data predicts that marijuana industry hiring will eclipse manufacturing hiring by the year 2020. Inherent in this growth is an increased potential for workplace injuries and the risks related to cannabis businesses and their carriers. The U.S. market needs to know that employees are receiving the necessary training, instruction, education and protection in the cultivation, transporting, packaging, extracting and sales operations. ASTM International is expected to produce standards − ranging from best manufacturing practices to protective equipment and proper ventilation − that address workplace dangers.
  • Labeling. Every cannabis-legal state currently has or is drafting its own labeling requirements. A uniform labeling standard will give distributors, prescribers and insurers confidence that the product is labeled consistently with a national standard.
  • Quality-Control Testing. Ensuring a relatively uniform method of testing from state to state and facility to facility should improve product quality and consistency, and reduce the exposure from product liability and contamination claims along with the potential for product recalls. Reliably consistent testing also will allow patient-users to evaluate levels of all known useful cannabinoids (the chemical compounds secreted by cannabis flowers that provide relief of an array of symptoms such as pain, nausea and inflammation), including levels of THC, CBD and CBN, to help them choose strains or products better suited to their needs.

Twenty-eight states have decriminalized or regulated cannabis or its derivatives. The cannabis market cannot reach its full potential, however, without widespread acceptance from the medical community and the insurance industry. As Corey Tobin of Bolton & Company, a full-service insurance brokerage, explains, “Insurers usually move slowly, although ASTM International’s creation of a set of standards will help the insurers get a better understanding of the needs of these corporations.” While drafting and vetting the standards will take time, the creation of uniform standards will be an important step forward for the industry in terms of its legitimacy and its long-term stability.