In this episode of the "Eyes on Washington" podcast series by Holland & Knight's Public Policy & Regulation Group, Healthcare and Life Sciences attorneys Michael Werner and Sara Klock discuss recent developments in marijuana, particularly federal legislation and the regulation of cannabis products in the United States. This conversation focuses on the possible rescheduling of marijuana from a Schedule I drug to a Schedule III drug, as recommended by the U.S. Department of Health and Human Services (HHS), and the impact that change could have on the industry at large, especially in states where marijuana use is already legal. While the timeline isn't explicit, Mr. Werner and Ms. Klock emphasize that the regulatory environment is likely to undergo a number of changes in the next couple of years and beyond. They also explain how the rescheduling process works and which regulatory bodies and federal agencies play a major role. The discussion concludes with insightful recommendations for industry stakeholders, including growers, distributors, state governments and researchers.
Podcast Transcript
Michael Werner: I'm Michael Werner. I'm a partner at Holland & Knight. I'm based in Washington, D.C. I head up our FDA group, and I'm one of the leaders of our national Health & Life Sciences Practice. I'm joined by my colleague.
Sara Klock: Hi everyone, I am Sarah Klock. I am an attorney in D.C. I work with Michael. I'm an FDA regulatory attorney also in the Health & Life Science Industry Group.
HHS Recommendation to Reschedule Marijuana
Michael Werner: So we wanted to talk today about developments in cannabis, particularly focused on federal legislation and regulation of cannabis products. And there have been a couple of big developments over the last several weeks that we want to talk about today. One is that recently it became public that the U.S. Department of Health and Human Services (HHS) made a recommendation for the rescheduling of marijuana. And Sara, I wondered if you could explain to everybody the significance of that and what it means going forward.
Sara Klock: Yes, of course. So currently cannabis, marijuana, any other name you'd like to refer to it as, is a Schedule I drug. That is how DEA regulates it, which means there is no medical purpose, it is highly abusive and therefore it cannot be used in any way legally, federally, unless it's for research use only, which is also regulated by DEA. There are no medicinal properties, according to DEA, under a Schedule I drug, and that means that cannabis, marijuana can't really be used for anything today.
Impact on States Where Marijuana Use is Legal
Michael Werner: So how does that jive with all of the states that have specifically authorized the legal use of marijuana, maybe for medicinal purposes or even for recreational use?
Sara Klock: Yeah, that's a great question. I think there's either 20 or 24 or 27 states that have legalized marijuana in their states, either for medicinal, recreational or both uses, and that just is not being enforced by the federal government. So the DEA is not saying you are federally preempted to do this. It's likely due to lack of resources. The federal government could very much be enforcing this and say all of these state laws are invalid under federal law. They're just not.
Next Steps for DEA
Michael Werner: Yeah, so what's interesting about, so we already have this kind of somewhat confusing regulatory environment, if you will, and now we have HHS coming forward and saying that they recommend rescheduling. But the DEA is ultimately the federal agency that's going to make the final call on this and enforce whatever rules come out. So what would be the next step, do you think, that people can expect now that we know that at least one federal agency is trying to perhaps make cannabis a little bit more available, albeit still under controlled circumstances? What do you think is going to, what do you think is the next step? What would DEA do next?
Sara Klock: Great question. So I just want to backtrack slightly to say that Holland & Knight, and Michael and I, have not seen this letter that HHS sent to DEA saying that marijuana should be rescheduled from a Class I drug to a Class III drug. But there's not a lot of precedent here. I just want to start by saying that, and there's only been a handful of times that we are aware of that a drug has been changed from a Schedule I drug or a higher schedule drug to a lower scheduled drug. But the precedent shows that the likely next step would be for DEA to issue a proposed rule, which would set forth that the agency is going to reschedule cannabis from Schedule I to Schedule III, thereby opening up a public comment period, at least for 60 days. The DEA is going to get flooded with comments, and so it will likely be longer than that. But DEA would then open up the door for industry, for companies, for lawyers, for the government, for anyone to comment on the proposed rescheduling. At that point, all of the comments would have to be read and addressed by DEA before a final rule would be issued by DEA, thereby rescheduling cannabis from a Schedule I to III. However, that process is likely not going to be fast just because of how many parties are at play here.
Other Stakeholders on this Issue, Including Congress
Michael Werner: I think that's a great point. I think people have to understand that we're still very early in this process. So even if DEA issued a proposed change in scheduling based on HHS' recommendation — and of course, they don't have to, but even if they did, there's a whole rulemaking process, which by definition is at least 60 days for people to comment. But as you said, by the time DEA reads, addresses, synthesizes all of those comments and all of those positions and then formulates a new policy, could take several weeks or months by the time we get we get a formal policy. The other thing that I think is important about what you pointed out is that, this is in fact a public process, which means that stakeholders, whether you're a company, whether you are clinician, whether you are kind of anyone in the supply chain, you are going to have the opportunity to weigh in with the DEA on their proposal. You will have the opportunity to do so in writing. There will be the opportunity for that as you said, DEA has to address it, has to address all comments by law. So the bottom line here is that we can be watching for what DEA proposes. And then, number one, people have the opportunity to comment on it or perhaps influence it. And number two, just because they propose it doesn't mean that's what the final rule is going to look like. So I think there's really an opportunity. The other thing that's interesting is that I would anticipate that Congress weighs in here. We've already seen earlier this year, I believe, that several senators wrote to the DEA and said they wanted marijuana, cannabis to stay as a Schedule I drug. There are certainly others in Congress who would disagree, who believe there needs to be rescheduling. And a public comment period means just that, which means that members of Congress can weigh in with the DEA through the rulemaking process, or I would anticipate that Congress starts holding hearings or perhaps even tries to legislate on this issue because the politics are pretty charged and they're pretty controversial. What do you think?
Sara Klock: I think it is, the time is right to have this discussion. I think the public views cannabis more favorably today than ever. But there is a lot at stake here for those states that have legalized marijuana. What does this do to them, to their farmers, to their medicinal markets, right? There's a lot of players here. And this is, it is very unlikely this is going to move quickly. The water is going to get murky very, very quickly. And I don't expect this to move fast. However, I think the state of play of marijuana today is not what it will be in five years from now. And how we get there likely is a rescheduling. It likely will happen, but it may take a year or two to reschedule marijuana from a Schedule I to a Schedule III.
Regulation of Cannabidiol (CBD)
Michael Werner: Yeah, I agree. And I think part of the reason why things will be different is because stakeholders will have the opportunity to speak up. I think there will be a lot of interest, both from the DEA, and for that matter FDA and Congress, to hear from the public about people's experiences so far in terms of manufacturer or growing or supply chain or what have you. And of course, there's a research agenda here that has just, you know, the NIH has probably spent about a billion dollars over 10 years or so. But clearly, I think there's interest in an even bigger research agenda and research opportunity. So there is going to be a lot of activity that's coming over the next several weeks and months and as you said, probably even lasting a year. One interesting thing is, of course, last time, several years ago when Congress wrote the farm bill, that's when they created this category of so-called industrial hemp, right, with low percentages of THC, which became legal. There were lots of folks who thought that when Congress reauthorized the farm bill, supposedly this year, that they might take up any of these issues. They haven't so far. But of course, now we get into some of these rescheduling questions. So it's possible that once again, we see Congress using a variety of legislative vehicles to try to address these issues. And speaking of Congress, I wanted to raise one other point, which is the regulation of cannabinoids, particularly CBD, in food and supplements. So, Sarah, we've seen, of course, many, many companies, many, many products on the market that are supplements or perhaps food that contains CBD. And yet FDA has maintained that that's not lawful. What do you think is going on there?
Sara Klock: So I think the cannabis plant is in a situation that is unprecedented in FDA, DEA, USDA world, because the plant has so many different properties and it is currently in the form of CBD on the market as a drug through Epidiolex. There's been political studies that say that it can help children with seizures. And FDA has a law through the Food, Drug and Cosmetic Act that says if there is a drug on the market that has substantial clinical investigations, it can't then be on the market as a food. And that is what the FDA is saying and using to prohibit CBD to be on the market as a food or dietary supplement. But in reality, the market is flooded with food and dietary supplements that contain CBD and potentially other cannabinoids from the cannabis plant. And while they might not contain THC, while they might not get you high, they're technically in the Wild Wild West, if not unregulated, by the FDA, whether because they're prohibited under statute or because these companies aren't operating within the realms of a dietary supplement or a food company. And FDA came to the realization that because CBD and cannabis are in such a unique position that it doesn't have the current framework to regulate a product like this, because there's no way the agency could take appropriate action to rid and clean the market up of how oversaturated it is with CBD, it has turned to Congress to ask for additional help, how to get through the drug exclusionary rule. It's possible that Congress could change the CFR and allow CBD to be a food, that, that is probably a likely path forward. But currently the agency doesn't have the framework to handle this.
Michael Werner: Yeah, it's really interesting because it's a situation where all these products are on the market, you know, in violation of federal law, and FDA's only tool is enforcement. And as we've seen, they'll use that tool. But typically they use it in rare circumstances. When there's a company that's behaving, in their mind, particularly egregiously, such as by suggesting that this supplement with CBD in it is a treatment or a cure for a disease or something like that. So we have all these products on the market. FDA has said that they're worried about the long-term effects of CBD. They're not totally convinced that it's a long-term safe product for people to eat or consume, and yet they feel like they don't have the resources or the ability to regulate the product effectively. And frankly, the companies in the space, I think, probably need some more guidance and clarity about what the regulatory rules are and what the environment looks like in a way that allows their businesses to go forward but still protects the public. So as you mentioned, FDA basically asked Congress for help and said, we need you to change the Food, Drug and Cosmetic Act to create this new pathway. And so what Congress did, the leaders of the committees of jurisdiction, the Energy and Commerce Committee in the House and the so-called HELP Committee in the Senate, in a bipartisan way, issued a request for information. So, they did the equivalent of creating a notice and comment period. They published a document which asked a whole series of questions about CBD, how it's used, how it's manufactured, what the source material is, how it's distributed, how it's packaged, how it's labeled, all those kinds of questions of the stakeholder community. And they are now sifting through the answers to that and undoubtedly working with FDA to try to figure out what that new pathway looks like. And I don't think they have any predisposition to what it looks like, other than there's tremendous support in Congress in a bipartisan way to allow for products to be on the market, albeit in a way that FDA feels comfortable regulating. But I think, Sarah, as you talked about the drug exclusionary rule and the idea that it's prohibited but yet not enforced, but that prohibition not enforced, I think is something that both Congress and FDA find a little bit troubling and they want to clean up.
Regulatory Landscape If Marijuana Becomes a Schedule III Drug
Sara Klock: Yeah, and I think it's a good time to transition to talk about what the world would look like with a Schedule III drug, because you made a comment that it's like how can the FDA feel comfortable regulating this product? So CBD is in a dietary supplement form that FDA isn't taking enforcement over because there's no THC. So there's no property that's going to make somebody high. It should be from the hemp plant itself. But if there is a rescheduling by DEA from Schedule I to Schedule III, that means there's potentially other opportunities for other agencies, AKA the FDA, to then regulate a Schedule III drug. FDA regulates lots of Schedule III drugs. They are the primary regulator once DEA has scheduled. So, for example, ketamine is a Schedule III drug. FDA approved that product, and DEA regulates how it is dispensed and how it is prescribed. And there are consequences that I think we should discuss as to what happens when a product can't be researched, can't be dispensed, can't be manufactured unless under very limited circumstances, of a Schedule I drug to a Schedule III drug that industry should be made aware of, one. And two, there is a very open question of what happens to state laws because a Schedule III drug essentially means that FDA has approved the product as a pharmaceutical drug. It has gone through clinical trials, it has an NDA, it can it can legally be on the market through a new drug application. And I am unaware of a situation where FDA or the federal government has allowed states to regulate prescription drug approval processes. It opens the question of what happens to all of these state laws that are currently allowing cannabis through recreation or medicinal uses.
Michael Werner: Yeah, I totally agree. I think in some ways rescheduling might make the community feel a little more comfortable that the source material, for example, might be easier to get. So might be easier to do research and the federal government might support more research and all of those things, which, which is certainly good and advances the field. But I completely agree with your point. It's just really the beginning, because it in and of itself raises a whole host of questions about how the products will be regulated. What about the products that are already out there? What is the role of the state government vis-à-vis the federal government and the FDA? So it's only going to — in some ways it might be a necessary change, but like all changes in law, this will be a big change in law. And I don't think we quite understand or quite know yet all of the unintended consequences that will come from it. And all of the questions, the legal questions and the regulatory questions that will follow. But I think it's going to be a fascinating debate to be a part of and to watch.
Closing Thoughts
Sara Klock: Yeah, and I just want to stress, right, industry, companies, states, everyone at play here, every stakeholder has a voice that should be used to effectuate their end goal. And I think it's a really good time for all of these stakeholders to start to identify how they want this to play out and what shape they want it to look like, to be ready and prepared to submit comments and engage in the public conversation that is going to come.
Michael Werner: Yes, 100 percent agree this is the time for manufacturers and other stakeholders to be thinking very seriously about if they had the opportunity to change the environment in some way, what that would look like. And because I think, as you said, there are going to be opportunities to do that. And as we've said multiple times here on this podcast, what the law is and what the regulatory environment is in September of 2023 is highly unlikely to be the same in 2024 and beyond. So it's a really good time to start this conversation. I think with that, I'll ask Sarah if you have any closing words.
Sara Klock: I would just say to everyone involved, from a grower to a researcher to a manufacturer, to a distributor, to a company who's buying secondary to a company who's importing, you know we are educated on this. We can help. We currently help clients and we look forward, I think, to the to the changes that are coming.
Michael Werner: Well said. We stand ready to help anyone. If you have any questions about what's happening now or as things go forward, we are 100 percent available and would love to help you as you plod through these ever changing times. And with that, we'll close the podcast. For Sara Klock, I'm Michael Werner. Thanks for joining us today.
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