The Time Has Come

In 1970, Nixon signed the Controlled Substance Act (CSA), and the federal government listed cannabis as a Schedule I drug alongside LSD, heroin and ecstasy. Nearly five decades later, the DEA has decided to rethink their position. In April, the DEA told lawmakers that it was reviewing information on rescheduling and “hopes to release its determination in the first half of 2016.” Tension is mounting within the cannabis industry after the DEA missed its self-imposed June 30 deadline. With medical cannabis legal in 25 states and for recreational use in four states and D.C., it’s long past due for cannabis to be rescheduled. But what could happen if, or rather when, cannabis is rescheduled?

Opinions differ on what will happen if the Drug Enforcement Administration (DEA) moves to reschedule cannabis. Many people believe that if any change is to occur, cannabis will be moved to Schedule II. Schedule II drugs have “high potential for abuse” but the DEA recognizes limited medical benefits. To put it into perspective, cocaine, oxycontin and methamphetamine are Schedule II drugs. Many opinions represented at the NCIA Annual Business & Expo in June expressed worry that cannabis will become regulated like pharmaceuticals, or that the requirement to acquire approval from clinical testing and the FDA in order to sell a new product would eliminate much of the competition. These concerns arise because the FDA heavily regulates Schedule II drugs. The cost to bring a Schedule II drug to market is astronomical and very few companies will be able to afford the process. The overall fear is that “big-pharma” will take over the industry and all cannabis businesses will be shut down.

“Nearly five decades later, the DEA has decided to rethink their position. In April, the DEA told lawmakers that it was reviewing information on rescheduling and ‘hopes to release its determination in the first half of 2016.’”

Fortunately, much of this fear is largely overstated. Such concerns stem from misconceptions about how and why the cannabis industry has been able to evolve over the past several years. The good news is that rescheduling will not shut down the thousands of existing cannabis enterprises. The bad news is, that a move to reschedule cannabis is merely symbolic because it does not actually solve the main problems plaguing our industry (think access to banking and IRS tax code 280E).

John Hudak helps illuminate the topic in his article, “Clearing up misconceptions about marijuana rescheduling: What it means for existing state systems,” where he notes that the legal authority keeping the cannabis industry afloat has absolutely nothing to do with scheduling or the CSA. Rather, the authority under which the cannabis industry has flourished is owed to a series of memos issued by the Justice Department. Specifically, the Cole Memo allows state approved medical cannabis businesses to exist so long as they are heavily regulated by the state and they do not violate certain priorities of concern, such as selling to minors.

Hudak also addresses the concerns about cannabis products being required to go through FDA hurdles to get a product to market. He explains, “it is highly unlikely that the FDA would ever approve smoked whole flower marijuana even after rescheduling. Instead, cannabis pharmaceuticals will come in the form of tablets or liquids.” At present, the FDA has approved two trials for cannabis drugs—Sativex and Epidiolex. The worry is that if the FDA won’t allow whole flower cannabis, the existing system of cultivation and dispensaries will end. However, as explained above, the FDA is not the entity that is allowing the cannabis industry to remain open, nor does the FDA have the power to reverse the Cole Memo.

The only scenario that could truly threaten the burgeoning cannabis industry would be a reversal of Cole Memo and a tremendous recommitment of federal funds to shut everyone down that is very unlikely to happen. In summation, cannabis rescheduling is likely to have very little impact on the cannabis industry. It does not solve any of our major problems nor does it create impossible barriers to bring a product market.