What the DEA is proposing isn't strictly Schedule 3. It's Schedule 3 with additional limits, or as the Nebraska AG colloquially calls it, "Schedule 2.5." But this approach to rescheduling may not necessarily ease access for patients or make cannabis more affordable. Here's why.
There Will Be Nationwide Tracking and Production Limits
This is not speculation. The federal government directly stated this intent due to the perceived need to comply with international treaties, including the Single Convention on Narcotic Drugs.
This quote is directly from the notice for the rescheduling hearing:
The NPRM [the original rescheduling proposal] stated that if the transfer to schedule III is finalized, the regulatory controls applicable to schedule III controlled substances would apply, as appropriate, along with existing marijuana-specific requirements and any additional controls that might be implemented, including those that might be implemented to meet U.S. treaty obligations. If marijuana is transferred into schedule III, the manufacture, distribution, dispensing, and possession of marijuana would remain subject to the applicable criminal prohibitions of the CSA. Any drugs containing a substance within the CSA's definition of “marijuana” would also remain subject to the applicable prohibition in the Federal Food, Drug, and Cosmetic Act (FDCA).
The DEA is saying that they will control and restrict Schedule 3 cannabis beyond the normal requirements of Schedule 3, and that state-legal cannabis will still be illegal under federal law.
With this approach, Schedule 3 cannabis only adds additional federal controls; it doesn't loosen current prohibitions. This makes it more likely that rescheduling will increase the cost of production and compliance, making the final product more expensive for patients.
What Additional Controls Will Be Required?
Nebraska AG Mike Hilgers did a good job summing up international treaty requirements in his rescheduling opposition complaint. To put it succinctly, they will:
- limit production, distribution, and possession of [marijuana] to authorized medical and scientific purposes
- license and control all persons engaged in [its] manufacture or distribution
- require full track and trace in order to "prepare detailed estimates of national drug requirements," and "collect certain statistics"
- initiate controls to prevent "possession of the drugs ‘except under legal authority'"
- and to enforce this, "impose certain penal sanctions” for the cultivation, manufacture, possession, or distribution of marijuana"
DEA is recommending this because they still intend to comply with international treaties that require participants to "take the required legislative and administrative measures to limit exclusively to medical and scientific purposes the possession of [controlled] drugs.” Participants are also required to ensure that the “total quantit[y] of [marijuana] manufactured . . . shall not exceed . . . the quantity consumed . . . for medical and scientific purposes.”
Nebraska AG Hilgers calls this rescheduling proposal a "Schedule 2.5" instead of Schedule 3 because Schedule 3 doesn't require these types of controls. Hilgers argues that this essentially creates a new drug schedule, which can't be done without Congress.
It's Unlikely the Feds Will Leave State Markets Alone
Some rescheduling proponents believe the feds will take a laissez faire approach to cannabis regulation. They believe the track and trace, production limits, and DEA registration requirements will only apply to FDA approved cannabis products and that the feds will leave state markets alone, but this could be wishful thinking.
In the original rescheduling notice, DEA clearly stated that they would make regulations to implement these additional controls:
Concurrent with this rulemaking, DEA will consider the marijuana-specific controls that would be necessary to comply with relevant treaty obligations in the event that, after the hearing, a final order reschedules marijuana, and, to the extent such controls are needed if marijuana is rescheduled, will seek to finalize any such regulations as soon as possible.
Will Schedule 3 Still Benefit the Industry In Light of These Additional Restrictions?
As always, the cannabis industry is faced with Sophie's choice. The industry needs relief, but it's always trading the whole barn to get the horse.
In this case, the carrot they're dangling is relief from Schedule 280e of the tax code. Schedule 280e forbids cannabis businesses from writing off business expenses related to the production and distribution of Schedule 1 drugs. This results in nearly a 70% effective tax rate for some cannabis businesses – unsustainable to say the least.
But the potential relief from Schedule 280e comes at a serious cost according to current plans, and if some members of Congress get their way, it may not come at all. Congressional bill H.R. 1447 would continue to subject cannabis products to Schedule 280e even if cannabis is rescheduled, and it already has ten cosponsors.
So, Rescheduling May Not Be a Net Positive
Eliminating Schedule 280e penalties doesn't necessarily provide a net positive if businesses are required to comply with federally mandated production controls and DEA registration. Furthermore, many state-legal cannabis operators are equity applicants who have state or federal cannabis convictions. These applicants wouldn't qualify for DEA registration without specific exemptions.
In other words, the industry could be set up for a rug pull.
Can they do this? Sure!
That's not to say Schedule 3 will definitely be destructive to state markets. It could still be a good idea if done well. For instance, if the Feds choose to leave state-legal markets intact and agree to a hands-off approach, this would be a major win for the industry and for patients' wallets.
Can they be convinced to take this approach? It would take a lot of work, and major advocacy efforts from cannabis supporters.
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The information in this article and any included images or charts are for educational purposes only. This information is neither a substitute for, nor does it replace, professional legal advice or medical advice, diagnosis, or treatment. If you have any concerns or questions about laws, regulations, or your health, you should always consult with an attorney, physician or other licensed professional.
