Biden's Greenlight: What To Know About Fed-Regulated Marijuana, Markets, Legal Circuits And Compliance

In an exclusive interview with Benzinga Cannabis, Aaron Bloom, an attorney and CEO of DocMJ, a multistate cannabis clinic, delved into the legal steps for rescheduling cannabis to Schedule III in the Controlled Substances Act, the possibility of categorizing cannabis under different regulatory frameworks, and how these changes may bring both challenges and opportunities for informed investors.

"Many practices that are common in the cannabis industry today, will become illegal under a federally regulated cannabis framework," Bloom explained. 

Bureaucratic Road Map For Rescheduling Cannabis

The DEA's decision to reschedule cannabis from Schedule I to Schedule III marks a significant federal policy shift. Analysts predict tax changes, including the removal of IRS code 280e, which would allow cannabis companies to deduct their expenses like normal companies and potentially save them millions of dollars. Companies like Trulieve TCNNF could see a 500% increase in its cash flow.

Additionally, DEA-authorized studies on cannabis benefits will legally spearhead research and development. New federal regulations will detail how practitioners can interact with cannabis, including prescribing and dispensing protocols.

Once rescheduled, the DEA will release regulations outlining what practitioners can and cannot do. "Right now, there are no regulations," Bloom noted. These new rules will likely mirror those for other Schedule III drugs, requiring written prescriptions and controlled distribution by licensed pharmacists.

Public Comment And Legal Challenges

The process will include public comment periods and hearings. "Regulations will be posted for comment, followed by hearings," Bloom said. This phase may also provoke lawsuits challenging the new regulations. If regulations are not completed before a potential change in administration, their future will likely be uncertain.

Simultaneous Rescheduling And Regulation

The rescheduling and new regulations are expected to occur simultaneously. "It will be rescheduled with the regulations," Bloom confirmed. This synchronized approach aims to ensure that once cannabis is a Schedule III drug, all necessary rules are in place to govern its use and distribution.

How Far Are We From Seeing Cannabis Sold At Walgreens?

Bloom believes that state medical and recreational programs can coexist with a federal medical program, including pharmacy involvement. "We have an illegal federal drug alongside a recreational market, so anything's possible," he said. However, FDA approval and insurance coverage are needed before pharmacies can dispense cannabis. "We're far from FDA approval," he added.

Bloom noted that doctors currently recommend rather than prescribe cannabis, which lacks specific dosage guidelines. "This would need to change with FDA approval." 

Moreover, for pharmacies like Walgreens WBA to dispense cannabis, it must be mass-produced and standardized, which is a significant hurdle without FDA guidelines.

"If rescheduling to Schedule III allows interstate commerce, it would be a game changer for the economy and accessibility, enabling national brands to operate efficiently," Bloom said.

Insurance Coverage And Patient Affordability

The rescheduling could lead to insurance coverage for cannabis treatments, improving patient affordability and accessibility. Bloom acknowledged potential challenges, including the impact on insurance costs and the need for regulatory adjustments to accommodate cannabis treatments.

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Branding And Regulation Of Medical Marijuana

With rescheduling, Bloom sees potential for new branding and presentation of cannabis as a federally studied medicine. "If it becomes a medicine, the FDA will require uniform packaging and labeling so that physicians, pharmacies, and dispensaries understand what it is." 

This federal regulation will ensure that cannabis products have consistent labeling and claims.

The move towards standardized packaging could significantly change the current branding landscape of cannabis. "There is an opportunity for someone to create a medical brand of cannabis that complies with federal requirements and is presented as a medicine," he noted.

This shift would involve packaging similar to other medications, with clear instructions and dosage information, rather than the current market's visually appealing designs.

"The FDA ensures names and labels are not misleading, which we would see with federal regulation," Bloom said. "The Agency might create a new class just for cannabis due to its unique nature."  

How Would Cannabis Become FDA Approved?

The FDA approval process for any substance is well-defined, challenging, lengthy and expensive. "When the FDA approves a drug, patients can use it, and doctors can prescribe it with confidence," Bloom explained. Cannabis is currently far from meeting these standards.

"FDA approval requires clinical trials, which are long and costly," he said. Typically, pharmaceutical companies fund trials to sell a drug and make medical claims. However, "companies already profiting from recreational cannabis might lack the incentive to fund expensive trials." Thus, pharmaceutical companies might need to step in.

Isolates And Tinctures: The New Mainstream Under Federally Regulated Cannabis

The possibility of positioning cannabis under different regulatory categories, such as nutraceuticals, could open new business opportunities. This would require specific rules on what can be sold and how to potentially make the regulatory process more manageable.

In this context, isolates and tinctures could become significant niches under federally regulated cannabis. "If you could develop an FDA-approved tincture for neuropathy or chronic pain, there's a market for that."

These products can be precisely dosed. "Tinctures could be the next big thing in pharmaceutical cannabis, especially because they can be microdosed and remain stable over time," he noted.  

Industry Practices And Legal Compliance

"Many practices that are common in the cannabis industry today, such as fee splitting and offering kickbacks for patient referrals, will become illegal under a federally regulated cannabis framework," Bloom explained.

He detailed practices that will become illegal: "Fee splitting, anti-kickback violations, and the corporate practice of medicine."

Many states don't allow corporations to own medical practices, yet this happens in medical marijuana. Bloom noted that current under-regulated states allow practices that are not tolerated in other healthcare sectors.

This increased scrutiny could lead to significant changes in how businesses operate. 

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