Cannabis reclassification removes some hurdles for industry

by · UPI

May 4 (UPI) -- The reclassification of cannabis as a Schedule III substance is meant to remove barriers for researchers but its effects could go further.

The final rule from the Office of the Attorney General places all drug products that contain marijuana and are federally approved in Schedule III of the Controlled Substances Act. The move shifts cannabis from Schedule I, alongside substances like heroin and LSD, to Schedule III, with the likes of codeine and ketamine.

Daniele Piomelli, distinguished processor of anatomy and neurology at the University of California, Irvine, told UPI it is an acknowledgement of cannabis' medical uses. Piomelli uses cannabis in animal studies.

Schedule I substances are considered dangerous, with a high potential for abuse and no accepted medical use.

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"Because Schedule I compounds are considered to be highly dangerous, they have to be kept in a locked safe, in a locked building and very accurate records must be kept for the use, even if you only use a few micrograms or a few milligrams in a study," Piomelli said. "All these are costs. Although with Schedule III you will still need to have approval, the hurdles would be substantially reduced."

Clinical studies will still need to go through the approval process of the U.S. Food and Drug Administration and be approved by an institutional review board, Piomelli said.

The order does not address recreational use, nor does it apply to synthetic cannabis. States can still prohibit cannabis.

Cannabis is legal in 24 states for recreational use and 40 states for medical use.

"The question is if this would be implemented in a way that actually makes it easier for us researchers to obtain and use the drug, there will be of course an advantage," he said. "It will speed up research, which is highly needed. But how the [U.S. Drug Enforcement Administration] and the other institutional bodies will implement this is still unknown."

Reclassification currently only affects FDA-approved and state-licensed cannabis products.

The DEA will hold a hearing on June 29 about the broader reclassification of cannabis. The purpose of the hearing is to "receive factual evidence and expert opinion regarding whether marijuana should be transferred to Schedule III of the list of controlled substances."

"These actions will enable more targeted, rigorous research into marijuana's safety and efficacy, expanding patients' access to treatments and empowering doctors to make better-informed healthcare decisions," acting Attorney General Todd Blanche posted on social media last week.

President Joe Biden signed the Medical Marijuana and Cannabidiol Research Expansion Act into law in May 2024 to expedite the reclassification of cannabis. The law required federal agencies, including the Justice Department, to undergo a registration process before taking full effect.

Piomelli said he hopes June's hearing welcomes the expertise of the research community but he does not expect it to be so.

"If the executive order that the White House issued is implemented in a way that is amicable or research friendly so that it allows researchers to actually do what they need to do then it would be a game changer," he said. "Do I expect it? No I don't."

There is no limit to the fields that stand to benefit from rescheduling cannabis, Riana Durrett, executive director of the University of Nevada, Las Vegas Cannabis Policy Institute, told UPI.

"Anything you can research, you have the nexus to cannabis," Durrett said. "Economics, medicine, some people study it in light of substance disorders, public health, public policy research."

Cannabis is already used to manage chronic pain, nausea, seizures, muscle spasms and for patients who experience a loss of appetite during cancer treatments.

Moving cannabis to Schedule III may have future implications for the cannabis industry. Schedule I substances are illegal under federal law. This blocks businesses like cannabis dispensaries from establishing business banking accounts.

Reclassification opens a pathway for cannabis businesses to access the financial services that other businesses enjoy.

"Having a pathway for the medical marijuana, state-licensed operations to be legal means that ultimately whatever is legal for other businesses is legal for them," Durrett said. "This could mean they could get banking. There could be interstate commerce of medical marijuana. There could be international import and export. That's actually addressed in the attorney general's order. All these limits that have been put around this industry, when they're considered actually legal, those limits will go away."

The acting attorney general's final rule says that marijuana, marijuana extracts, delta-9 and other compounds derived from marijuana may be imported and exported with a permit.

Durrett said the cannabis industry could also see its tax burden eased. Businesses like cannabis dispensaries face greater limitations on the tax deductions they can take advantage of under section 280E of IRS code. This means they must pay upwards of 60% of their profits toward federal taxes.

"It makes it very difficult to make a profit in this industry," Durrett said. "At least for medical marijuana licenses, they would no longer be paying this high tax burden."

Durrett and Piomelli told UPI that while reclassification to Schedule III is a welcomed sign, it does not mean federal legalization is coming soon.

"I hope there's a move towards both sides of this issue," Durrett said. "If you're a huge legalization advocate, you need to recognize that it's not for everyone all the time. If you're a policymaker or you're against legalization, you need to recognize that it does have medical benefits and that adults are allowed to use intoxicating substances in this country."

Piomelli said cannabis remains on a slow crawl toward legalization, a crawl it has been on for decades.

"I do not see a momentum but I do see this moving as lava," he said. "It moves slowly. It moves in one direction only and is inevitable in a sense. I see it's very slow but I see it happening."