Rescheduling Marijuana and its Impact on Healthcare and the Economy

May 6, 2024Legal Alerts

The United States is on the verge of one of the biggest, if not the biggest, transformations to marijuana policy in the last 50 years. According to an Associated Press report, the Drug Enforcement Administration (DEA) is expected to reschedule marijuana from a Schedule I drug to a Schedule III drug under the Controlled Substances Act (CSA). This decision comes after the United States Department of Health and Human Services (HHS) recommended to the DEA in August of 2023 that marijuana be rescheduled. The move is set to happen imminently, but it still must be approved by the White House Office of Management and Budget. Once approved, the DEA will conduct a 30 to 60-day public comment period on the proposal before issuing a final rule, meaning the full transition is still likely months away.[i] While rescheduling marijuana will not completely legalize it on the federal level, it does demonstrate the growing acceptance of marijuana, and the potential of having it fully legalized on the federal level in the future.

Even though it is not legalized nationwide, this expected DEA decision should have a profound impact. The expected rescheduling will affect the healthcare industry and the economy in general. The following are some impacts we should expect in the near future.

Medical Research and Healthcare

One of the most significant impacts of rescheduling marijuana to a Schedule III drug under the CSA is the potential of more medical research involving marijuana. Previously, marijuana was classified alongside drugs such as heroin and LSD, which are considered to have no accepted medical use and a high potential for abuse. In light of the proliferation of state medical marijuana programs around the country, it has long been understood that this classification was no longer suitable for marijuana, and there has been a push for it to be rescheduled. The present classification severely restricted research opportunities due to federal regulations on Schedule I drugs. With the expected rescheduling to a Schedule III drug, marijuana is now acknowledged to have accepted medical use, which will lead to less stringent regulations. Consequently, it will only be logical to expect an expanded use of marijuana for research into the potential medical benefits, especially for the treatment of certain conditions such as chronic pain, various forms of cancer and epilepsy.

Other implications on the expected rescheduling will allow for marijuana to be prescribed by appropriately licensed healthcare practitioners as a Schedule III drug. This was originally not allowed at the federal level when it was considered a Schedule I drug, which is why most state medical marijuana programs call for qualified providers to “recommend” the drug, not “prescribe” it. Further, the expected rescheduling will ostensibly open the door to cannabis-derived drugs and other products to be approved by the Food and Drug Administration (FDA), and become reimbursable by Medicare and Medicaid, as well as state worker’s compensation programs and the US Department of Veterans Affairs. This is encouraging news to patients and practitioners alike, as it removes many of the barriers to receiving treatment for medical conditions using marijuana.

Economic Impact

With the growing number of states legalizing marijuana for recreational or medical use, the expected rescheduling of marijuana is welcome news for those already in, and those seeking to enter, the marijuana industry. For one, while there will still be regulations on marijuana businesses, rescheduling marijuana will open up the door to cross-state transportation of marijuana, advertising and for marijuana businesses to do business with federally insured banks, which was almost impossible while it was a Schedule I drug. Additionally, marijuana businesses will no longer be restricted by Section 280E of the Internal Revenue Code (IRC). Section 280E prevents businesses that are engaged in the sale of Schedule I or II drugs from deducting business expenses on federal tax filings. This has long been an impediment to marijuana businesses, but this is now expected to be rectified.

We will not fully understand the gravity of rescheduling until after it happens, but we do know the landscape is changing for all those involved. Should you have questions about the expected DEA decision or other matters pertaining to the cannabis industry, please contact your Dinsmore attorney.