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The US Department of Health and Human Services (DHHS) recommendation to reschedule cannabis to a less restrictive schedule could be the boon that the besieged cannabis industry needs.
The DHHS has reportedly recommended to the Drug Enforcement Administration (DEA) that cannabis be moved from schedule I – the most restrictive category under federal law – to schedule III as part of the ongoing scheduling review ordered by president Joe Biden last autumn.
Ultimately, the decision on cannabis’s status under federal law remains in the hands of the DEA, which will now undertake its own review with the DHHS’s non-binding recommendation in mind.
CannIntelligence predicted last year that cannabis would most likely be rescheduled to schedule III as a result of the scheduling review, based on the wide medical use of cannabis in the US and recent stances taken by the US government regarding cannabis’s status under international law.
Schedule III – a huge problem-solver for the industry
The impact of moving cannabis to schedule III would be tremendous and could address many of the problems facing the industry in one fell swoop. The areas that such a move could immediately impact include:
- Taxes. Due to cannabis’s status as a schedule I drug, cannabis businesses have not been able to deduct business expenses incurred from their federal tax returns, in accordance with 26 US Code § 280E. However, 280E applies only to schedule I and II drugs. Therefore, cannabis companies would be able to deduct their expenses from their federal returns like other businesses if cannabis were to be rescheduled to schedule III. This would have a massive impact on cannabis companies that are struggling to turn a profit while competing against the illicit market. It could also have the downstream effect of increasing investment into the sector.
- Research. Unlike with drugs in other schedules, researchers of schedule I drugs must apply for and receive approval for a research protocol, as set forth in 21 CFR (Code of Federal Regulations) 1301.18. This added burden can cost a significant amount of time – and thus money – for researchers studying cannabis. To add to the burden, there are also tighter controls over how researchers must store schedule I drugs.
- Banking. Rescheduling cannabis, in theory, could make some financial institutions more comfortable working with state-legal cannabis businesses, though financial institutions will still ultimately have to decide their comfort level. Rescheduling cannabis might not cure all woes cannabis businesses seeking financial services currently face, but the same could be said for bills like the Secure and Fair Enforcement (SAFE) Banking Act that have been trudging through Congress for years. If cannabis were moved to schedule III and the SAFE Banking Act were passed, though, this would be a significant step towards normalising banking for state-legal cannabis companies.
The obvious upside to the potential rescheduling is that all of this could be accomplished in a relatively short amount of time without needing to wait any longer on the glacial pace of Congress.
All eyes on the DEA for the next move
All eyes now turn to the DEA, which must conduct its own review. Although there is no established timeline for the DEA to complete its review, there will undoubtedly be significant political pressure to finish before the November 2024 general election, which would allow the Biden administration to claim a policy success on an issue that has wide popular support if cannabis is in fact rescheduled.
There is reason for optimism that the DEA will concur with the DHHS recommendation, as the DEA has historically never gone against a DHHS recommendation to reschedule a drug.
Bloomberg reports that the DHHS recommendation was based on an extensive review undertaken by the Food and Drug Administration (FDA) and that the National Institute on Drug Abuse (NIDA) agreed with the recommendation. The apparent consensus among some of the most influential public health and drug policy institutions in the US will undoubtedly weigh in favour of the DEA concurring.
Although the DHHS recommendation is not binding on the DEA, its recommendations “as to such scientific and medical matters” are, in accordance with 21 US Code § 811 (b).
This means that, though the DEA is not obliged to concur with the DHHS recommendation to move cannabis to schedule III, the FDA’s underlying medical and scientific analysis that led to the DHHS recommendation must be accepted and considered by the DEA in its review.
Recent developments could signal a positive outcome
The DEA’s concurrence is far from inevitable. The agency has had a long, hostile history with cannabis. Indeed, as recent as 2016, the DEA rejected an outside petition to reschedule cannabis. When considering that case, though, it is important to note that the DHHS recommended keeping cannabis in schedule I.
The DHHS recommendation is not the only thing that has changed since the 2016 rejection, either. Seven years have passed of state medical cannabis programmes operating and expanding into 14 more states, boosting the case that there are accepted medical uses for cannabis.
What’s more, in 2020 cannabis was moved to a less restrictive schedule under the UN Single Convention, which recognised the medical value of cannabis – a move the US voted for.
These developments make it incredibly difficult for the DEA to claim that cannabis has no accepted medical use – a requisite to keep it in schedule I.
The DHHS recommendation only strengthens CannIntelligence’s belief that cannabis will be moved to schedule III after the full scheduling review is completed. But it’s the DEA that will ultimately decide whether to reschedule cannabis, and if so, when the industry would get that boost it has been waiting for.
– Anthony Traurig CannIntelligence staff
Photo: US DEA
