Tag Archives: DEA

What’s Happening on Capitol Hill? Part 3: The Medical Bills

By Brian Blumenfeld, J.D., M.A.
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This article continues the bill-by-bill review begun in the August 1st article on cannabis reform legislation proposed in the 115th Congress. In the next article and final piece in this series, we will examine the banking and tax reform bills related to cannabis.

Medical Cannabis Reform Bills 

S. 1008 – Therapeutic Hemp Medical Act of 2017

HR. 2273 – Charlotte’s Web Medical Access Act of 2017

Policy: These bills would amend the CSA to end federal prohibition over all CBD products and all hemp plants with THC content levels of below 0.3%. In other words, people and businesses would be free to grow hemp and/or manufacture CBD products without any fear of federal prosecution. These products would most likely then fall under the regulation of other federal and/or state agencies, but the bills do not specify what agencies they might be or what controls might be put in place.

Impact: The impacts from these bills nationwide have the potential to be massive. Hemp is a plant that can be put to highly effective use in many different industries, from textiles and construction to foodstuffs and seafaring. The efficiency of its growth and the breadth of its utility will make it a highly valuable commodity and a competitor with many other raw materials. For state-legal cannabis businesses, the legalization of CBD and hemp at the federal level could fundamentally change the market for those products. States that legalized cannabis already have provisions in place dealing with hemp and CBD—sometimes alongside their cannabis laws, sometimes handled by a separate state agency—and they could either leave those as they are or open up those markets to interstate activity. In states that have not legalized, CBD and hemp are typically included in the state’s definition of cannabis, and therefore they will remain illegal under state law unless further action is taken. Most likely, if federal prohibition ends on hemp and CBD, state prohibition will follow suit. Because legalization at the federal level will allow for interstate commerce in hemp and CBD, expect the emergence of a nationwide market, driven by online sales and interstate marketing, and developing independently from a cannabis industry still constrained to in-state activities.

Procedural Status:

Senator Cory Gardner (R-CO) Photo: Gage Skidmore, Flickr

S. 1008

  • Introduced: May 2, 2017 by Senator Cory Gardner (R-CO)
  • Cosponsors: 7 Republican, 4 Democrat
  • Referred to Senate Committee on:
    • Judiciary

 HR. 2273

  • Introduced: May 1, 2017 by Representative Scott Perry (R-PA)
  • Cosponsors: 10 Republicans, 10 Democrats
  • Referred to House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health
    • Financial Services

S. 1276 – Cannabidiol Research Expansion Act

Policy: This bill would accomplish two objectives: First, it would open channels for researchers to access and experiment with cannabis and cannabis extracts. Second, it would initiate the process at the end of which the Attorney General must make a determination as to which Schedule of the CSA is most appropriate for cannabidiol (CBD).

Impact: The impact on this legislation to state-legal cannabis businesses is rather remote—in both time and practice. The research access provisions will certainly create an uptick in medical and psychological research activity, the outcomes of which will add to our knowledge of how consuming cannabis in different forms and amounts effects the brain and body. This type of government-regulated research takes many years to process and complete, as both bureaucratic and scientific standards must be met. As for initiating the re/de-scheduling review process for CBD, this is a direct response to the 2016 denial by the DEA to re/de-schedule cannabis. That determination, published in the Federal Registrar on August 12, 2016, was made following a comprehensive study of the medical benefits and harms of cannabis conducted by the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA). Although such an in-depth study and its resulting negative determination pronounced so recently would normally rule out the chances of success for another re/de-scheduling attempt so soon after, the DEA did leave the door open with its statement that it “did not focus its evaluation on particular strains of marijuana or components or derivatives of marijuana.” It is just this door that S. 1276 seeks to exploit. By focusing the re/de-scheduling process on CBD specifically, the presumption is that the outcome of the scientific CBD studies would have a far better chance at satisfying the re/de-scheduling criteria set forth in the CSA. If such a determination was made, then the impact would come in two potential varieties. One, CBD would be rescheduled and become available for medical use according to FDA rules applicable to other prescription drugs. Two, CBD would be descheduled and would fall under the prerogative of the states, in which case the above analysis for S. 1008 and HR. 2273 would pertain.

Senator Dianne Feinstein (D-CA)
Photo: Daniel Torok

Procedural Status:

S. 1276

  • Introduced: May 25, 2017 by Senator Dianne Feinstein (D-CA)
  • Cosponsors: 3 Republican, 2 Democrat
  • Referred to Senate Committee on:
    • Judiciary

S. 1374 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017

HR. 2920 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017

HR. 715 – Compassionate Access Act of 2017

HR. 714 – Legitimate Use of Medical Marijuana Act (LUMMA) of 2017

Policy: All four of these bills would make an exception to the CSA for state medical cannabis laws. Federal prohibition, in other words, would end for medical cannabis in those states that have legalized, and it would be left to those states to devise how it would be regulated. In states that have not legalized, both state and federal prohibition would remain. The companion CARERS Acts in the House and Senate, along with HR. 714, would also amend FDA rules to widen access to cannabis for research purposes.

Impact: The impact of these bills on the rules for state-legal medical cannabis businesses would be relatively minor in terms of functionality. This is so because they leave not only the determination to legalize up to the states, but they leave the design of the regulatory system up to the states as well. In other areas, however, big changes will be seen that benefit the industry: banking will open up for state medical businesses, and so will the opportunity to write-off ordinary business expenses. Investment risks over legality will end, making for easier access to capital. Questions about contract enforcement and risks of federal prosecution will become moot, and when state regulatory bodies make decisions on how to govern the industry, they will no longer have to concern themselves with U.S. DOJ enforcement and/or prosecutorial policies. Enactment of any of these bills would be a big win for medical cannabis.

Senator Cory Booker (D-NJ) Photo: David Shinbone, Flickr

Procedural Status:

S. 1374

  • Introduced: June 15, 2017 by Senator Cory Booker (D-NJ)
  • Cosponsors: None
  • Referred to Senate Committee on:
    • Judiciary

HR. 2920

  • Introduced: June 15, 2017 by Representative Steve Cohen (D-TN)
  • Cosponsors: 1 Republicans
  • Referred to House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health
    • Veterans’ Affairs
      • Subcommittee on Health

HR. 715

  • Introduced: January 27, 2017 by Representative Morgan H. Griffith (R-VA)
  • Cosponsors: 2 Republicans, 1 Democrat
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations

HR. 714

  • Introduced: January 27, 2017 by Representative Morgan H. Griffith
  • Cosponsors: 1 Democrat
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health

HR. 2020 – To Provide for the Rescheduling of Marijuana into Schedule III of the CSA

Policy: As its wordy title indicates, this bill would bypass the schedule review process and by legislative fiat move cannabis from Schedule I to Schedule III of the CSA.

Representative Matt Gaetz (R-FL)

Impact: Businesses handling drugs in Schedule III must register with the DEA and comply with DEA record keeping and security requirements. Doctors would be permitted to prescribe cannabis products. Importing/exporting will become available by permit, which would bring state businesses into competition with foreign cannabis firms. The biggest impact will be that cannabis sold pursuant to federal law will have to undergo the FDA’s New Drug Application process conducted by the Center for Drug Evaluation and Research, the largest of the FDA’s five centers. This includes clinical testing and a comprehensive chemical/pharmacological review. The drug would then be subject to FDA regulation for marketing and labelling. For states that wanted to maintain their legal medical cannabis systems, a conflict would remain because cannabis cultivators and dispensaries could operate in compliance with state law while simultaneously failing to meet new FDA and DEA requirements. States will then have a choice: bring state laws into line with federal laws, creating all of the advantages of federal legality discussed above, yet causing major disruptions to the industry; or retain the status quo, allowing the industry to grow as is with all of the in-state advantages but without the advantages of federal legalization. This all would of course leave behind recreational cannabis which would remain in the legal gray zone.

  • Introduced: April 4, 2017 by Representative Matt Gaetz (R-FL)
  • Cosponsors:
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health
    • Judiciary

HR. 331 – States’ Medical Marijuana Property Right Protection Act

Policy: Section 881(a)(7) of the CSA subjects to federal forfeiture all property involved with cannabis activities. This bill would make an exception to that provision for all property in compliance with state medical cannabis laws.

Impact: Although not legalizing medical cannabis, this bill would be a strong step in the direction of legitimizing state-legal medical cannabis businesses. As a result of the property forfeiture clause of the CSA, two impediments faced by the medical cannabis industry is that investors are hesitant to invest and land lords are hesitant to lease or otherwise engage the medical cannabis market. By eliminating the risk of such property loss due to the federal-state conflict, this bill would have the very welcomed impact of easing access to capital and expanding opportunities for land use.

  • Introduced: January31, 2017 by Representative Barbara Lee (D-CA)
  • Cosponsors:
  • Referred to the House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health

National Hemp Association Board Chairman Meets With USDA Senior Officials

By Aaron G. Biros
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According to a press release yesterday sent out by the National Hemp Association (NHA), on Wednesday, June 28th, Board Chairman Geoff Whaling met with senior U.S. Department of Agriculture staff, along with Erica McBride from the Pennsylvania Industrial Hemp Council. The press release says this is the first time that Agricultural Secretary Perdue has had his staff meet with the hemp industry. “The meeting reaffirmed critical elements of the working relationship that the hemp industry has established with the USDA since the enactment of Sec. 7606 of the 2014 Farm Bill,” reads the press release put out by the NHA.

The press release says the USDA will support hemp pilot projects, considering grant and loan applications and other means of funding under the USDA and NIFA. “All hemp industry participants are encouraged to participate in these funding opportunities,” says Whaling. “USDA confirmed that nine Industrial Hemp funding requests to NIFA are being processed and that USDA has encouraged those who submitted previous requests to resubmit them.”

“USDA also offered to provide a quick response to any Secretary or Commissioner of Agriculture who is looking for clarification on either the Farm Bill or SOP, which may be preventing the States that have enacted enabling Industrial Hemp legislation from advancing research,” says Whaling.

A big driver of the meeting was the support of the Industrial Hemp Farming Act of 2018 on behalf of the NHA. That bill, which Congressman James Comer (R-KY) plans on introducing in July, would essentially remove hemp from the Controlled Substances Act, allowing industrial cultivation of the plant. It also would set a THC limit and give states the power to regulate their own hemp industries.

“There is new leadership in the USDA, on the Hill and within our industry,” said Whaling. “I am confident that this group will advance our industry to a level never before achieved.”

DoJ Task Force Moves to Review Federal Cannabis Policy

By Aaron G. Biros
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In a memo sent throughout the Department of Justice on April 5th, attorney general Jeff Sessions outlines the establishment of the Department’s Task Force on Crime Reduction and Public Safety. That task force, largely focused on violent crime, is supposed to find ways that federal prosecutors can more effectively reduce illegal immigration, violent crimes and gun violence.

The task force is made up of subcommittees, according to the memo, and one of them is focused on reviewing federal cannabis policy. “Task Force subcommittees will also undertake a review of existing policies in the areas of charging, sentencing, and marijuana to ensure consistency with the Department’s overall strategy on reducing violent crime and with Administration goals and priorities,” the memo reads. “Another subcommittee will explore our use of asset forfeiture and make recommendations on any improvements needed to legal authorities, policies, and training to most effectively attack the financial infrastructure of criminal organizations.” Those existing policies that Sessions refers to in the memo could very well be the 2013 Cole Memorandum, an Obama administration decree that essentially set up a framework for states with legal cannabis laws to avoid federal enforcement of the Controlled Substances Act.

In the past, Sessions has said he thinks the Cole Memo is valid, but remains skeptical of medical cannabis. In the last several months, comments made by Sessions and White House press secretary Sean Spicer have sparked outrage and growing fears among stakeholders in the cannabis industry, including major business players and state lawmakers. As a general feeling of uncertainty surrounding federal cannabis policy grows, many are looking for a safe haven, which could mean looking to markets outside of the U.S., like Canada, for example.

Sen. Jeff Sessions (R-AL)
Photo: Gage Skidmore, Flickr

Washington State’s former Attorney General Rob McKenna, Washington State’s former Chief Deputy Attorney General Brian Moran, and Maryland’s former Chief Deputy Attorney General Kay Winfree recently went on the record identifying the BioTrack THC traceability system as fully compliant with the Cole Memo. “The key to meeting the requirements of the Cole Memorandum is ‘both the existence of a strong and effective state regulatory system, and an operation’s compliance with that system’,” says the former attorney general and chief deputy attorneys general in a press release. “As described above, Washington State has a robust, comprehensive regulatory scheme that controls the entire marijuana supply chain.

The email sent to Colorado prosecutor Michael Melito

The flagship component of this regulatory scheme is the WSLCB’s seed to sale inventory system, the BioTrackTHC Traceability System.” Those commendations from a former attorney general could provide some solace to business operating with the seed-to-sale traceability software.

Still though, worries in the industry are fueled by speculation and a general lack of clarity from the Trump Administration and the Department of Justice. In an email obtained by an open records request and first reported by the International Business Times, a DEA supervisor asked a Colorado prosecutor in the state attorney general’s office about a number of cannabis-related prosecutions. The DEA supervisor asked for the state docket numbers of a handful of cases, including one involving cannabis being shipped out of state, according to The Denver Post. “Some of our intel people are trying to track down info regarding some of DEA’s better marijuana investigations for the new administration,” reads the email. “Hopefully it will lead to some positive changes.” So far, only speculations have emerged pertaining to its significance or lack thereof and what this could possibly mean for the future of federal cannabis policy.

Hoban Law Group Files Lawsuit Against DEA

By Aaron G. Biros
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The Hoban Law Group filed a petition on behalf of three clients against the DEA in the U.S. Court of Appeals for the Ninth District on January 13th, according to a press release. The clients represented by Hoban Law Group in the suit are Hemp Industries Association, RMH Holdings, LLC and Centuria Natural Foods, Inc. The companies are based in California, Colorado and Nevada respectively and are all active in the legal hemp trade. The press release says RMH Holdings “sources its products from industrial hemp lawfully cultivated pursuant to the Agricultural Act of 2014 (also known as the Farm Bill).”

San Francisco's United States Court of Appeals for the Ninth Circuit Photo: Ken Lund, Flickr
San Francisco’s United States Court of Appeals for the Ninth Circuit
Photo: Ken Lund, Flickr

In December, the DEA published a ‘Final Rule’ that classifies cannabis-derived extracts, such as CBD oil, in their own category with a code number to “better track these materials and comply with treaty provisions.” The announcement by the DEA ultimately serves to make any cannabis extract a Schedule 1 narcotic. “Extracts of marihuana will continue to be treated as Schedule I controlled substances,” says the document.

BobHobanAttorney
Bob Hoban, managing partner

Bob Hoban, managing partner of Hoban Law Group says the action is clearly beyond the DEA’s authority. “This Final Rule serves to threaten hundreds, if not thousands, of growing businesses, with massive economic and industry expansion opportunities, all of which conduct lawful business compliant with existing policy as it is understood and in reliance upon the Federal Government,” says Hoban.

The lawsuit states that they want a judicial review of the DEA’s actions “on the grounds that the Final Rule is (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, e.g. the CSA, the Farm Bill, and the DEA’s regulations; (2) contrary to constitutional right, power, privilege, or immunity; (3) in excess of statutory jurisdiction, authority, or limitations; and, (4) without observance of procedure required by law.” The suit also claims that the ‘Final Rule’ conflicts with other federal laws like the Data Quality Act, Regulatory Flexibility Act and Congressional Review Act.

According to Garrett Graff, associate attorney at Hoban Law Group, the entire Cannabis genus is not unlawful and the DEA is overstepping its authority. “As the Ninth Circuit found in 2003 and 2004 there are certain parts of the plant like the stalk and seed that are congressionally exempted from the Controlled Substances Act and thus the DEA’s rulemaking authority,” says Graff. “By creating a drug code for ‘marihuana extract’, the DEA is saying that they are a controlled substance, but that goes against a number of existing laws.”

Garrett Graff, associate partner at Hoban Law Group
Garrett Graff, associate partner at Hoban Law Group

The definition of ‘marihuana extract’ under the ‘Final Rule’ also references extracts containing one or more cannabinoids, which goes beyond the realm of cannabis altogether, according to Graff. “The DEA and many other sources have acknowledged and confirmed that cannabinoids can be derived from other varieties of flowers, cacao and other sources, making it virtually impossible to distinguish which cannabinoids would be subject to this drug code,” says Graff. “The DEA’s rule effectively makes the presence of cannabinoids a determinative factor of a controlled substance, which is inconsistent with what Congress has said.”

The petition filed is essentially the initiation or commencing of a lawsuit. Graff says their case is rooted in statute. “We hope to accomplish a striking of the rule, permanent injunction of the rule and for the DEA to engage in the appropriate processes and procedures when making rules in the future,” says Graff. “Alternatively, an amendment to the rule to make the definition of ‘marihuana extract’ consistent with existing law and reflect those portions and varieties of the plant which are in fact lawful could be considered.” It may still be roughly 30 days before the DEA responds with briefing and possibly an oral argument to follow on the various issues surrounding the petition, says Graff. The Ninth Circuit petition, including briefings and hearings, is likely to take at least several months.

Biros' Blog

2016 Year in Review: Why the Cannabis Industry Needs Resiliency

By Aaron G. Biros
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2016 was a tumultuous, but productive year for the cannabis industry. Larger companies began to take interest in the fledgling market, like Microsoft and Scotts Miracle-Gro. This year brought major innovations in technology like market data tools, advances in LED tech, efficient cultivation tech and patient education tools. The Supreme Court set an important precedent by shutting down a challenge to Colorado’s cannabis market.

Voters legalized cannabis in 8 states last month Photo: Nicole Klauss, Flickr
Voters legalized cannabis in 8 states on Election Day.
Photo: Nicole Klauss, Flickr

Election Day brought a renewed sense of vigor to the market with voters in eight states legalizing forms of cannabis. California, Nevada, Maine and Massachusetts passed recreational cannabis measures, making legalization’s momentum seem exponential.

But November 8th also gave Donald Trump the presidency, and his cabinet appointments, namely Sen. Jeff Sessions as Attorney General, gave many a feeling of uncertainty for the future of federal legalization. Adding insult to injury, the DEA repeatedly stood by their antiquated and ludicrous judgment for cannabis to remain a Schedule 1 narcotic.

Gage Skidmore, Flickr
Trump nominated Sen. Jeff Sessions (R) for Attorney General Photo: Gage Skidmore, Flickr

A lot of the fervor surrounding public safety could be described as overdramatic or somewhat unwarranted. 2016 was the year of misinformation. Fake news spread like wildfire with people sharing stories like this or this that turned out to be very misleading or just downright false.

States with legal cannabis came under heavy public scrutiny and addressed problems like consumer education, public safety and lab testing. Pesticides became a highly publicized and persistent issue in a number of areas, with some states regulating it heavily and addressing public health concerns. Plenty of new rules were formed surrounding labeling and testing, with Oregon, Colorado and Washington experiencing some regulatory growing pains.

Those growing pains shed light on the need for regulators to craft rules that allow for changes, adding rules where necessary and getting rid of cumbersome rules that might thwart market growth. Rules need to be able to adapt as the industry grows, much like businesses need to adapt to a changing market climate to stay afloat. This is all the more reason why cannabis businesses need to make their voices heard and work with regulators to move things forward.

Pesticide Use was a major issue of 2016 Photo: Michelle Tribe, Flickr
Pesticide use was a major issue in 2016
Photo: Michelle Tribe, Flickr

With so much uncertainty surrounding the future of legal cannabis in America, the word of the year for 2017 should be resiliency. In a social-ecological context, resiliency is “the capacity of a system to absorb or withstand perturbations and other stressors such that the system remains within the same regime, essentially maintaining its structure and functions. It describes the degree to which the system is capable of self-organization, learning and adaptation.”

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A warning label for cannabis in Oregon after the October 1st compliance deadline

Self-organization, learning and adaptation are three very important attributes of a resilient system. Without knowing what will happen when Trump’s cabinet takes the reigns of federal agencies, it is important to prepare for the unexpected. Adhering to standards like FOCUS allows cannabis businesses to prepare for unexpected events like recalls or product safety failures.

Those standards could also become the law down the road, as government officials often look to an industry’s voluntary consensus-based standards when deciding how to regulate it. In 2017, a number of state governments will embark on the heavy undertaking of writing the regulatory framework for legal cannabis.

2017 will bring opportunities and challenges to the cannabis industry. The industry’s rapid growth juxtaposed with political, economic and regulatory uncertainties create a climate that requires resilience to be built into the system at all levels. It is critical, now more than ever, that cannabis businesses build strong relationships with industry groups, advocacy groups and regulators to craft the institutional capacity and mutual trust needed to weather the uncertainty ahead.

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No Surprise Here: Federal Gov’t Still Butting Heads With States Over Cannabis Legalization

By Aaron G. Biros
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On August 11, 2016, the widely anticipated Drug Enforcement Agency (DEA) announcement on federal cannabis policy yielded fairly anticlimactic results. According to the statement, the federal agency denied two petitions to reschedule cannabis under the Controlled Substances Act (CSA). The U.S. Food and Drug Administration (FDA) and the National Institute on Drug Abuse (NIDA) conducted a scientific and medical evaluation that deemed cannabis “does not meet the criteria for currently accepted medical use in treatment in the United States, there is a lack of accepted safety for its use under medical supervision, and it has a high potential for abuse.” The announcement reiterates the agency’s previous statements on the matter, stating that they believe clinical trials under the investigational new drug (IND) applications and the drug approval process are how the FDA can assess the safety and effectiveness of cannabis-derived medicine.

This avenue for bringing a cannabis-based drug to market is extraordinarily cost-prohibitive, allowing only pharmaceutical companies with deep coffers in the space. The DEA did however make one announcement in the statement that has the potential to lift many barriers to researching the plant’s medical value. The policy change allows more institutions to grow cannabis for research, which was previously allowed only at the University of Mississippi under a contract with NIDA. This is a very significant policy change that could be viewed as a step in the right direction. There is plenty of research currently that proves cannabis’ medical value and its safety and efficacy, but allowing more research opportunities signals that the DEA could be open to revisiting a rescheduling recommendation in the future.

One can speculate endlessly about when the DEA may reschedule cannabis, but in reality, no one knows when that might happen, no one knows what a new administration would do, if Congress would act on it or if the courts would. It seems even the FDA and DEA are sitting on their hands as the federal government does what they do best– inaction.

However, one important ruling in the U.S. Court of Appeals for the 9th Circuit highlights the baby steps taken toward some form of federal acceptance of legal cannabis. The court ruled that the Department of Justice couldn’t prosecute individuals in states where cannabis is legal. More specifically, the court ruling “prohibits the Department of Justice from spending funds to prevent states’ implementation of their medical marijuana laws.” The ruling basically reaffirms the Rohrabacher-Farr amendment, which states that the DOJ cannot interfere with states where cannabis is legal, but this time also for those individuals complying with state law.

The DEA’s inaction on rescheduling cannabis should not be perceived as a loss to the legalization movement, rather as an upholding of the asinine status quo. Policy change in the United States is an arduous and very slow process. These things take time. One can look to the same-sex marriage movement and find striking similarities to the cannabis legalization movement. For example, Massachusetts and California were some of the first states to introduce legislation legalizing same-sex marriage and are also some of the first states that have introduced legislation legalizing cannabis. These states that are typically drivers of national policy have opportunities to pass important ballot initiatives this November that could have ripple effects throughout the country. Five states have ballot initiatives for recreational legalization and potentially up to eight states with initiatives for medical legalization, all being voted on this November.

What can the average citizen do to help with progress in cannabis legalization? For starters, you can vote. If you live in a state that has a ballot initiative for legalizing cannabis, show up at the polls and make your voice heard. If you live in a state where no such ballot initiative exists, you can still take action to get cannabis legalized. You can sign this petition or write your member of Congress to support the Compassionate Access, Research Expansion, and Respect States (CARERS) Act (S. 683). The CARERS Act, among many other important changes, would most notably reschedule cannabis to Schedule II.

So not all is lost with the DEA’s inaction. As more states legalize cannabis, we are seeing a rising tide lift all boats.

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A Case To Not Reschedule Cannabis

By Tyler Dautrich
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As many probably already know, last month the DEA announced that the organization was going to reconsider its position on cannabis and would come to a decision about whether or not to reschedule cannabis on The Controlled Substance Act (CSA) by June of this year. Many would say this is long overdue, considering the DEA has cannabis listed as a Schedule I drug, the same as heroin and LSD.

Rescheduling cannabis to Schedule II would place it in the same category as Vicodin, cocaine, methamphetamine, Adderall, oxycodone, and many more. These substances are defined as drugs with a high potential for abuse, with use potentially leading to severe psychological or physical dependence. However, they are recognized as having some potential medical benefits.

If cannabis were to become a Schedule II drug, it would allow further research on the plant. This could be beneficial to the industry because further medical research would finally provide the scientific validation that cannabis does have medical benefits and that it should be accepted as a form of medicine.

Those benefits come with a steep cost.

If cannabis becomes Schedule II it means the federal government finally sees cannabis as a plant (drug) that can provide some medical value. Which, at face value, is good because that is what many advocates have been fighting for. On the other hand, the only reason that larger pharmaceutical companies have largely kept out of the industry so far is because it is a Schedule I drug and the government did not officially recognize that it had any medical value. If this were to change, there is no reason for those pharmaceutical companies to continue watching from the sidelines. There is also no industry better fit than the pharmaceutical industry to run, manufacture, control, and profit from medical cannabis. The infrastructure is already in place.

There is also not another industry that has the money and the historical relationship with the FDA like the pharmaceutical industry. If the FDA were to regulate cannabis, it would have to regulate every single product on the shelf of every single dispensary, which would require more stringent lab testing guidelines. Just because one of your brownies made it through the FDA regulation process, does not mean the cookie next to it will. Entering into this process would take companies years to complete and cost more than $1 billion per product. Think about how many products some dispensaries have. Think about the number of different strains that dispensaries carry. That requires years of testing and multiple billions of dollars, just for the strains.

Big Pharma is positioned perfectly to come in and take control of the entire process if this happens. It will be a mad rush from all pharmaceutical companies to come in and quickly obtain market share. I know that as an industry we think we are seeing a lot of money in sales and profit, but compared to the pharmaceutical industry, it is merely a drop in the bucket. These companies will easily, and willingly, out-spend every company currently in the industry to the point where we can no longer compete. All the work that advocates and business professionals have put in to get the industry to where it is today could be lost.

Schedule II status would also turn the adult-use industry into utter chaos. The only reason we are able to have an adult-use market right now without the interference of the FDA is because cannabis is federally illegal. If cannabis is moved to Schedule II it will be recognized by the government, which means the FDA will have to come in and start the approval process for every product on the shelf. How smoothly do you think that will go for the adult-use retail centers in the industry? The cost alone will force shops to close. There is also not another substance that has a Schedule II classification that we have an adult-use industry for. Could cannabis be the first? I would not want to take that chance with the government or have to go through that process as an adult-use cannabis business owner.

When discussing this matter with several colleagues, some would ask “But what about now? We are in direct violation of the federal law right now, and they are leaving us be.”

Yes, that is for the most part true, but it is true because cannabis is now a Schedule I, federally illegal drug. Meaning the government does not even recognize it. The FDA will not regulate anything that is not recognized by the federal government because they are a federal agency. If the FDA were to implement regulations and an approval process, that would mean that a federal agency is recognizing cannabis as a consumer product. Right now that goes directly against the government’s public stance on the issue. And pharmaceutical companies cannot start selling a drug that is federally illegal and has been classified by the government as having no medical value. But as soon as the government recognizes cannabis as a form of medicine, it opens the doors for these organizations to get involved because it is justifiable now.

If that were to happen all the money that has been generated in this industry, and has made several people very wealthy and successful, will slowly, but surely get stuffed into the pockets of Big Pharma, the FDA and the government.

That is a lot of individuals that stand to lose a very significant amount of money. This could be devastating for Colorado. Colorado’s entire economy is booming right now largely because of the cannabis industry. Colorado’s Real Estate market has seen tremendous growth since legal cannabis took effect with home values going up 13%, which is nothing compared to commercial properties. Cannabis is the driver behind half of Colorado’s tourism, and provided the state with $35 million to put into schools.

In my mind, rescheduling cannabis to a Schedule II substance will create more issues for the industry than it will benefits.

If the government were to take any stance on cannabis, it should completely declassify it. It should not be listed on any type of controlled substance list by the government. It is a natural plant, not a man-made substance. If the government will not declassify cannabis, I would rather them keep it as a Schedule I substance. At least this way it protects the industry and keeps it as is, belonging to the people.

Opportunities like the cannabis industry are once in a lifetime. It would be a shame to see it taken by Big Pharma, or controlled by the government.

For those that have made it this far down on this post, please understand that this is a worst-case scenario. A very drastic, but realistic outcome down one of the many paths the industry could go. But the motto in this industry since the beginning was, “prepare for the worst, and pray for the best.” I think we should follow those instructions now more than ever.

Editor’s Note: This article represents the opinion of the author, not necessarily that of Cannabis Industry Journal. We invite all readers who agree or disagree with the author’s opinion to join the conversation in the comments section below the article.

Marijuana Matters

Let’s Talk CBD

By David C. Kotler, Esq.
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Let’s talk about cannabidiol, CBD, a non-psychoactive component of cannabis. Let’s not talk about CBD from the whole plant. This is a conversation about the proliferation of hemp-based CBD marketed everywhere from gas stations to specialty health and wellness stores. Heck, “its legal in all 50 states”, right?

On the Federal Level, pursuant to Title 21 USC 802 Section (16) The term “marijuana” means all parts of the plant cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. The term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.

Proponents of the position that hemp-derived CBD is legal point to the lack of a specific definition under the above description (often asserting that their oil is not processed from the flower) and the Ninth Circuit’s opinion in Hemp Indus. Ass’n v DEA, 333 F.3d 1082 (9th Cir. 2003). They buttress their belief by citing the DEA’s clarification of hemp in the Federal Register released in October 2001 and the 2013 Farm Bills’ adoption of the following definition of industrial hemp (adopted from plant scientists research in the 70’s: “The term ‘industrial hemp’ means the plant, cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol H. R. 2642—265 concentration of not more than 0.3 percent on a dry weight basis.” Much of the foregoing has been extended to even support opinions that hemp-derived CBD from domestic sources under the 2013 Farm Bill is legal for distribution nationwide.

Opponents of the hemp-derived CBD is legal argument (putting aside the issues with imported hemp and contaminants, etc.) point to the exception in the definition of “marijuana” i.e. to actually get a workable form of CBD from hemp, the preparation of the stalk puts you into the resin category which is excepted from the terms that are specifically not included in “marijuana.” In regard to HIA v. DEA cited above, opponents posit that the court decision, never mentions CBD, and the HIA maintain that this ruling did not legalize CBD.

In February 2015 and again in February 2016 the FDA issued warning letters to CBD companies. The overall context of the letters dealt with mislabeling and improper claims in addition to the most recent round of letters addressing CBD products’ exclusion from the dietary supplement definition under the FD&C act and how that is affected by CBD’s consideration as a new drug in one or more new drug applications. What has not been addressed or asserted by the FDA is the legal status of CBD under the Controlled Substances Act.

Although I have seen many commentators and attorneys opine on the legality as the case may be of hemp-derived CBD and its ability to be shipped to and sold in all 50 states (often with a caveat that readers should consult them for further advice), I have never seen the issue addressed from a practitioner that deals with the United States Patent and Trademark Office. I am not that practitioner. However, I do represent a company that has recently made application. I, not being a trademark attorney, but being sensitive to the federal government’s position collectively on CBD, found the examiner’s questions in her Office Action Letter surrounding CBD to be quite interesting. They were as follows:

  1. Do applicant’s identified goods contain marijuana, marijuana based preparations, or marijuana extracts or derivatives, synthetic marijuana, or any other illegal controlled substances?
  2. If the applicant’s goods contain Cannabidiol (CBD), is this derived from marijuana or from industrial hemp?
  3. Are the applicant’s goods lawful pursuant to the Controlled Substances Act?

I searched for another application and Office Action Letter from 2016 for another CBD product (both were vaporizer products rather than the lotions, balms, etc. that have been the subject of other applications). The questions to that applicant mirrored those above.

What I take from the questions that trademark examiners are asking is that perhaps the debate raging in academic and legal circles is for naught. It looks like at least the USPTO has resigned itself to there being a difference between cannabis or whole plant and hemp-based CBD in terms of definition and proscription under the federal controlled substances act.

So we have come full circle in my question, ‘Is it legal in all fifty states?’ If you answer yes to that question then please provide me the definition of marijuana/cannabis from the Controlled Substance Act from each of the fifty states individually and a copy of the documentation from a source showing how the industrial hemp was grown and processed and verifiable lab reports of the particular product’s contents.

DEA To Consider Rescheduling Cannabis, Could Mean Policy Shift

By Aaron G. Biros
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In a letter sent to lawmakers last week, the Drug Enforcement Agency (DEA) announced plans to make a decision on rescheduling cannabis by mid-2016. The announcement could represent the culmination of a shift in the federal government’s attitude toward cannabis legalization.Dea_color_logo

Currently, cannabis is a Schedule I narcotic, meaning the government views it as lacking medical benefits and have a high potential for abuse. The rescheduling of cannabis has the potential to open the floodgates for research, including much needed clinical trials.

Derek Peterson, chief executive officer at Terra Tech, a cannabis-focused agriculture company, believes this bodes well for the growth potential of the cannabis industry. “From the perspective of quality and safety standards, I find it unlikely that rescheduling it would negatively impact the degree to which cannabis is examined,” says Peterson. “It’s unnecessarily high position on the DEA drug schedule does nothing but limit the industry’s potential for growth, stall any meaningful pharmaceutical testing and increase law enforcement’s ability to prosecute non-violent drug offenders,” adds Peterson.

The rescheduling could also potentially allow for the prescribing of cannabis for patients. Stephen Goldner, founder of Pinnacle Labs and president of Regulatory Affairs Associates, is hopeful this will lead to a greater shift in public attitude towards cannabis. “The DEA’s announcement is a clear message to all States and possibly even to United Nations policy makers: even the DEA is willing to reconsider cannabis,” says Goldner. “Since the DEA is reconsidering cannabis, state politicians and local police departments can also be flexible and move away from prohibition, towards the regulation of cannabis.”

The rescheduling of cannabis could have a tremendous impact on the growth of the cannabis industry, including more clinical trials, medical research and physician participation. It could also open the door for more federal agency involvement, as the Schedule I status inhibits any EPA research on cannabis pesticide use or FDA guidance on food and drug good manufacturing practices. When reached for comment, the FDA’s press office said they could not speculate on any involvement in the matter.