Obtaining a License to Test Medical Cannabis in Alabama

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Alabama became the 36th state to allow cannabis for medical use when Gov. Kay Ivey signed into law the Darren Wesley ‘Ato’ Hall Compassion Act on May 17, 2021. The act establishes a process through which applicants will compete for a limited number of licenses in the following categories: (1) cultivator; (2) processor; (3) dispensary; and (4) “integrated facility” (which can cultivate, process, transport, and dispense medical cannabis under one license), as well as a to-be-determined number of licenses for secure transporters and testing laboratories. A 14-member Medical Cannabis Commission licenses and regulates the medical cannabis program, with input from the Alabama Department of Agriculture and Industries on cultivation matters. The act requires that the Commission and the department adopt regulations that allow license applications by September 1, 2022.

What is a state testing laboratory license?

State testing laboratory licenses allow entities to “test cannabis and medical cannabis to ensure the product meets safety qualifications” required under Alabama’s Medical Cannabis Act.    

How many state testing laboratory licenses will be issued?

Unlike dispensary, cultivator, or processor licenses, the act does not lay out clear limits on the number of testing laboratory licenses that will be issued. 

What are the requirements for obtaining a state testing laboratory license?

Applicants for a cultivator license must pay a non-refundable application fee of $2,500. Each “owner, shareholder, director, [and] board member” of an applicant, along with each “individual with an economic interest in an applicant,” must submit to a “state and national criminal background check.” If any “owner, director, board member, or individual with a controlling interest” has been “convicted of or released from incarceration for [any] felony” or “convicted of a controlled substance-related felony” within the last 10 years, the applicant is ineligible for a license.

The act requires that applicants include a bevy of information in their applications, including: 

  • The identity of all individuals with “direct or indirect ownership interests” in the applicant.
  • The identity of entities that are involved in the cannabis industry and related to the applicant or individuals with an ownership interest in the applicant.
  • A complete criminal history of the applicant’s owners, directors, board members, and controlling shareholders.
  • The applicant’s anticipated or actual number of employees.
  • “Financial information” in the “manner and form” required by the Commission.

Under the act, licensees must maintain at least $2 million in “liability and casualty insurance” coverage, and the Commission may promulgate regulations that “establish minimum levels of other financial guarantees” that licensees must maintain. If an applicant fails to demonstrate its ability to meet these requirements, it cannot receive a license.

The act lists numerous criteria the Commission may use to evaluate license applications, including:

  • The applicant’s “ability to capitalize and conduct operations as proposed in its business plan, including business experience in related fields.”
  • Several other criteria aimed at the applicant’s financial backing and business acumen.
  • Any history of non-compliance with any regulatory requirements.
  • That the applicant’s “proposed location[s] of all proposed medical cannabis facilities” are “suitable for all activities” and “not inconsistent with applicable zoning.”
  • The applicant’s “ability to serve an identifiable geographic area.”

Before issuing a license, the Commission must open a 30-day period during which anyone can submit “written comments regarding the applicant,” and the Commission is required to consider all comments received. If an applicant is denied a license, it can request that the Commission “provide a public investigative hearing at which the applicant is given the opportunity to present testimony and evidence to establish its suitability for a license.” The Commission must provide such a hearing upon request.

Each applicant (for all license types) must certify in its application that it “does not have an economic interest in any other [Alabama medical cannabis] license.” Licenses and ownership interests in licensed entities cannot be transferred absent approval by the Commission.

What does the act require from a state testing laboratory?

To comply with the act’s requirements, a licensed state testing laboratory must:

  • Perform tests to certify that medical cannabis is reasonably free of heavy metals, chemical contamination, residual pesticides and growth inhibitors, and residual solvents;
  • Use validated testing methods to determine cannabidiol levels;
  • Perform tests that determine whether medical cannabis complies with standards for microbial and mycotoxin contents;
  • Perform tests necessary to determine compliance with good manufacturing practices;
  • Have a secured laboratory space inaccessible to the general public; and
  • Have one employee with an advanced degree in medical or laboratory science.

How competitive is the licensing process?

Bradley’s dedicated Cannabis Industry team and Governmental Affairs Practice Group are here to help. Our Cannabis Industry team can help navigate the applicable provisions of the act and any regulations issued by the Medical Cannabis Commission and Department of Agriculture and Industries, while our governmental affairs advisors stand ready to work with you and public officials to maximize the likelihood of obtaining one of the limited cultivation licenses.