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By Tariq Naeem, Tucker Ellis LLP
Marijuana advocates and businesses have cheered recent news that the U.S. Department of Health and Human Services (DHHS) recommended to the Drug Enforcement Administration (DEA) that it reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA). While the news hopefully portends a relaxation of the federal government’s restrictive policies toward marijuana, businesses should be aware that the renewed attention that comes with DEA’s reclassification of marijuana as a Schedule III drug could have unexpected consequences to the availability of medical and recreational marijuana under state laws.
I. MARIJUANA UNDER THE CSA
CSA classifies drugs generally based on an assessment of their abuse potential. 21U.S.C. 811(c) states that the U.S. Attorney General (USAG) is to consider the following factors in determining how to classify a drug:
1. Its actual or relative potential for abuse.
2. Scientific evidence of its pharmacological effect, if known.
3. The state of current scientific knowledge regarding the drug or other substance.
4. Its history and current pattern of abuse.
5. The scope, duration, and significance of abuse.
6. What, if any, risk there is to the public health.
7. Its psychic or physiological dependence liability.
8. Whether the substance is an immediate precursor of a substance already controlled under this subchapter.
Using these factors, USAG classifies drugs into one of five schedules, (1) which are described in 21 U.S.C. 812(b) as follows:
| Schedule I | The drug has a high potential for abuse;
The drug has no currently accepted medical use in treatment in the U.S.; There is a lack of accepted safety for use of the drug under medical supervision. |
| Schedule II | The drug has a high potential for abuse;
The drug has a currently accepted medical use in treatment in the U.S. or a currently accepted medical use with severe restrictions; and Abuse of the drug may lead to severe psychological or physical dependence. |
| Schedule III | The drug has a potential for abuse less than the drugs or other substances in schedules I and II; |
| Schedule IV | The drug has a low potential for abuse relative to the drugs or other substances in schedule III; The drug has a currently accepted medical use in treatment in the U.S.; and Abuse of the drug may lead to limited physical dependence or psychological dependence relative to the drugs or other substances in schedule III. |
| Schedule V | The drug has a low potential for abuse relative to the drugs or other substances in schedule IV; The drug has a currently accepted medical use in treatment in the U.S.; and Abuse of the drug may lead to limited physical dependence or psychological dependence relative to the drugs or other substances in schedule IV. |
Currently, CSA classifies marijuana as a Schedule I drug. Other drugs controlled under Schedule I include heroin, LSD, and psilocybin. By way of comparison, Schedule II drugs include cocaine and opiates like fentanyl and methadone, while Schedule III drugs include amphetamines and preparations that contain limited quantities of narcotics like codeine and
morphine.
On August 29, 2023, DHHS sent a recommendation to DEA that it move marijuana to Schedule III of CSA, relying on a Food and Drug Administration (FDA) analysis of the eight CSA factors used to determine the control of a substance. Briefly, DHHS based its recommendation on its findings that (1) marijuana has an abuse potential less than the drugs in Schedules I and II, (2) marijuana has a currently accepted medical use in treatment in the U.S., and (3) marijuana abuse may lead to moderate or low physical dependence or high psychological dependence. While USAG will be responsible ultimately for deciding whether to reschedule marijuana, the recommendations by DHHS on the various scientific and medical matters in its evaluation are binding on USAG. 21 U.S.C. 811(b). Given DHHS’s finding that marijuana can cause physical or psychological dependence, it is unlikely USAG could reschedule marijuana to Schedule IV or V, or remove it from scheduling altogether.
II. IMPACT OF MARIJUANA BEING A SCHEDULE III DRUG
Despite the fact that marijuana has been classified as a Schedule I drug since Congress first enacted CSA in 1970, the federal government has taken a restrained policy since at least 2009 towards enforcement of CSA in states that have legalized medical marijuana. Citing “limited investigative and prosecutorial resources,” DOJ has encouraged its attorneys to exercise their discretion and avoid prosecuting individuals who acted in compliance with state medical marijuana laws. (October 19, 2009 Memorandum from Deputy Attorney General David Ogden to Selected United States Attorneys.) Instead, DOJ advised its attorneys to focus marijuana prosecutions on those whose conduct was indicative of illegal drug trafficking activity. (Id.) (2) Additionally, since 2015, Congress has (3) included riders in its annual appropriations bills prohibiting use of federal funds to prevent states “from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”
It is too soon to predict how DOJ will respond to the recommendation by DHHS to reschedule marijuana. While DOJ may continue its policy of discretionary enforcement following the decision on whether to reschedule marijuana, reclassifying marijuana as a Schedule III drug could cause the federal government to reevaluate how it applies CSA to marijuana businesses. One possibility is that DOJ requires medical marijuana businesses to comply with CSA provisions that apply to other Schedule III drugs. If that happens, and absent DEA granting exemptions from CSA registration or regulations,(3) marijuana businesses should understand and be ready to comply with their CSA obligations. Pertinent provisions include:(4)
- 21 U.S.C. 822(a)(1) requires manufacturers and distributors of controlled substances to register annually with DEA. Application fees can run into the thousands of dollars (21 C.F.R. 1301.13(e)(1)), and applicants must disclose information regarding prior controlled substance crimes (DEA Form 225).
- DEA regulations require registrants to operate with effective security controls against diversion (21 C.F.R. 1301.71) and to conduct screening of employees for drug use and prior criminal activity (21 C.F.R. 1301.90).
- 21 U.S.C. 825 requires manufacturers and distributors of controlled substances to label their products with specific information. They must also affix tamper-proof seals on the products’ containers (21 C.F.R. 1302.06).
- 21 U.S.C. 827 requires registrants to maintain inventory records and provide periodic reports to DEA of every sale, delivery, or other disposal of controlled substances. 21 U.S.C. 880(b) permits USAG to enter onto controlled premises to inspect, copy, or verify the records registrants are required to maintain.
- 21 U.S.C. 829(b) requires a prescription for dispensing Schedule III drugs if they are prescription drugs pursuant to the Federal Food, Drug, and Cosmetic Act (FDCA). While medical marijuana products are not (with a few exceptions) considered prescription drugs under FDCA, a decision by USAG to reclassify marijuana to Schedule III could lead the
Food and Drug Administration to enforce FDCA requirements for approval of medical marijuana as a drug that is “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man.” (21 U.S.C. 321(g)). - 21 U.S.C. 832 requires registrants to design and operate a system to identify suspicious orders, and to notify DEA upon discovery of suspicious orders.
Importantly, neither DOJ nor Congress have ever expressed any intent to include recreational marijuana in their policy of discretionary enforcement of CSA against medical marijuana. Absent CSA exemptions being granted or further action by Congress – for example, enacting legislation removing marijuana from control under CSA – recreational marijuana
businesses will remain at the whim of prosecutorial discretion being exercised by politically-appointed U.S. Attorneys.
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(1) There is one notable exception to USAG’s ability to classify a drug based on an assessment of the eight factors, which is where control is required by United States obligations under an international treaty, convention, or protocol. (21 U.S.C. 812(b)).
(2) DOJ reaffirmed this policy in 2011 and 2013, encouraging its attorneys to focus their efforts on “enforcement priorities that are particularly important to the federal government.” (August 29, 2013 Memorandum from Deputy Attorney General James Cole to All United States Attorneys.) Among those priorities were preventing distribution of marijuana to minors; preventing revenue from the sale of marijuana from going to criminal enterprises; preventing diversion of marijuana to states where it remained illegal; preventing violence and the use of firearms; preventing drugged driving; and preventing marijuana growing, possession, or use on public lands and federal property. (Id.) In 2018, however, the Trump Administration rescinded this policy. (January 4, 2018 Memorandum from Attorney General Jefferson Sessions, III to All United States Attorneys.)
(3) 21 U.S.C. 822(d) permits USAG to waive the registration requirement for manufacturers, distributors, or dispensers of controlled substances if consistent with public health and safety. 21 C.F.R. 1307.03 permits any person to apply for an exemption to the application of any DEA regulations.
(4) Failure to comply with a number of these requirements can be punishable by up to $25,000, and if the statute was
violated knowingly, a prison sentence of up to 1 year can be imposed (up to 2 years for repeat offenders).
(21 U.S.C. 842.)
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