Audit of Oregon’s Framework for Regulating Marijuana

SALEM, OR — Today, Secretary of State Dennis Richardson released an audit examining how Oregon regulates marijuana, a responsibility shared by the Oregon Health Authority (OHA) and the Oregon Liquor Control Commission (OLCC). Auditors found gaps in the state’s developing regulatory framework that increase the risk of legal marijuana being diverted to the black market and out-of-state. Auditors also found the state must do more to protect public health and improve laboratory testing by considering more robust testing requirements, enhancing oversight, and ensuring labs meet accreditation standards.

“Preventing diversion is imperative to ensure federal authorities maintain confidence in Oregon’s ability to adequately regulate the use and sale of marijuana,” said Secretary of State Dennis Richardson. “As the market is still developing, agency tracking of Oregon’s marijuana supply and inspections is lacking. This increases the risk that marijuana businesses in Oregon will find themselves subject to federal scrutiny.”

OLCC has already had experience with diversion. In September 2018, the agency revoked a recreational grower’s license in response to 13 compliance violations. Two of the licensee’s plants reported as destroyed were found at a residence where a butane explosion had occurred earlier in the year, linking the grower to black market activity.

OLCC, which is responsible for regulating the recreational market, has put many controls in place for preventing diversion, such as requiring seed-to-sale product tracking and surveillance cameras. However, data errors in the state tracking system hamper the agency’s ability to use the information to identify potential black market leakage. This underscores the importance of regular inspections to ensure marijuana products are tracked. Though all businesses are inspected prior to receiving a license and OLCC maintains contact with licensees for other types of compliance work, the agency has lagged in performing proactive compliance inspections. As of October 2018, OLCC had only conducted proactive inspections of an estimated 3% of 591 retail shops and 32% of 1,094 growers.

Structural weaknesses in the medical marijuana program, which is administered by OHA, also greatly increase the risk of diversion. The agency has only four permanent staff to inspect thousands of grow sites and has struggled with decreasing revenues, turnover, and performance management. From January 2017 to September 2018, OHA’s medical program had inspected only 2.9% of the 6,850 sites that grow marijuana for patients other than themselves. In contrast to OLCC, OHA lacks the authority to put important controls in place, such as requiring medical growers to have surveillance cameras.

State mandated testing of marijuana and its products is required by statute and is critical for minimizing consumer health risks. While all recreational marijuana in Oregon must be tested for pesticides and solvents, OHA does not require testing of most medical marijuana, putting these vulnerable users at risk. Furthermore, in contrast to medical marijuana programs in other states, OHA does not require heavy metal and microbiological testing.

Industry pressures increase the risk of labs misreporting test results. A 2017 media investigation of marijuana products sold by Portland retail stores claimed to have found unacceptable levels of pesticide contamination in three out of 10 sampled extracts. The resulting article stated that all the extracts had previously passed state mandated testing.The state still does not have a mechanism to verify test results and has not assured consistent practices among licensed labs to confirm products are reasonably safe. All marijuana labs in Oregon must be accredited by OHA’s environmental lab accreditation program. However, limited authority, inadequate staffing, and inefficient processes reduce the program’s ability to ensure labs consistently operate under accreditation standards.

“Confirming the accuracy of marijuana tests would help safeguard public health from harmful pesticides and other contaminants, which is particularly important for vulnerable users,” said Kip Memmott, Director of the Audits Division. “The recommendations from this audit will help ensure that consumers can trust what is on the label and get what they pay for.”

The audit provides 23 recommendations to OLCC and OHA to help prevent diversion of legal marijuana to the black market and out-of-state and improve accuracy of test results, lab data, and accreditation. For example, the audit recommends OHA work with Oregon’s Legislature and the Governor’s office to assess the level of authority needed to improve its regulatory framework, or to consider moving the program under OLCC’s authority. The audit also recommends OLCC continue to improve data controls in its marijuana tracking system and set inspection frequency goals and metrics to determine inspector staffing needs.

Read the full audit on the Secretary of State website.