Janet Jackim (photo courtesy)
(This is a contributed guest column. It will be considered MJBizDaily Guest columnist, please submit your request here.)
President Donald Trump’s December 18 executive order ordered US Attorney General Pam Bondi to take “all necessary steps” to move marijuana to Schedule 3 of the Controlled Substances Act. It also encouraged medical marijuana research, testing and use.
For health care providers and legal marijuana businesses, federal marijuana reform marks a major change in how medical marijuana can be researched, regulated, prescribed, and sold at the federal level.
But medical is the key word here. The near-term federal policy changes are expected to apply only to cannabis used for legal medical purposes, not adult use.
President Trump’s kind words about medical marijuana – and warnings against use by adults
The president’s order cites many examples of medical conditions that cannabis is said to alleviate.
Citing 40 states and the District of Columbia with regulated medical marijuana programs, the order criticizes the federal government for insulting the American people by not fully examining and scientifically researching the benefits and risks of cannabis.
That is what should have been done following the fact that in 2023 the Department of Health and Human Services (DHHS) found that marijuana has a “currently accepted medical use” in the US and should be relisted.
Trump’s order also addressed the use of unregulated CBD and THC hemp-derived cannabinoid products.
These products, currently unregulated by the federal government, introduce additional treatments that may be subject to rigorous research, study, testing and regulation.
The order calls on Congress and federal agencies to bring clarity — and safety — to Americans’ use of CBD and hemp-derived cannabinoid products.
That’s what Trump’s marijuana redistricting order didn’t address
It appears that medical marijuana was on the mind of the president, who was joined in the Oval Office by a friend who used the drug to recover during chemotherapy.
But most notably, nothing is said about reclassifying marijuana in the context of adult or recreational use. On the contrary – Trump specifically warned against using marijuana as a recreational drug.
This leaves room for regulation of adult use or recreational marijuana in the states, while a medical marijuana program is established.
Caution: The final outcome of the executive order is unpredictable, as the Department of Justice and Drug Administration must resume an administrative review of the pending DHHS recommendation.
They are likely to schedule public hearings, deliberate stakeholder positions, survive appeals, issue preliminary rules for another round of hearings, and finally publish administrative rules to initiate reorganization.
For manufacturers, retailers, and healthcare providers, this can mean stricter compliance standards.
It can also mean clear organizational direction that applies to how products can be marketed, sold, or sold.
What can a medical marijuana program do for patients?
It could lead to more research that discovers potential applications, new strains of marijuana, standardized testing and labeling requirements.
It could encourage more medical professionals to prescribe marijuana treatment – expanding programs like Texas’ – more alternative treatment courses for patients and medical professionals, and expanded access and availability for needy patients across the country.
More cannabis available across the country may mean lower prices.
What can a medical marijuana program accomplish for marijuana businesses?
Depending on what industry your cannabis business is in, the answer will seem to be a mix of good and bad news.
First, the good news.
The reorganization is effective for plant-related businesses that are currently considered illegal under Internal Revenue Service Code 280E. Moving cannabis to Schedule 3 should allow them to deduct general and administrative expenses from their taxable income on their federal returns.
National and regional banks, credit unions, and other financial institutions may be more receptive to providing general account, treasury, and lending services to marijuana businesses as customers. Standardization of banking facilities goes a long way in strengthening stability in the industry.
Restructuring may require insurance and benefit plan changes to cover the cost of prescription marijuana treatment. Larger insurance groups and different insurance plans may emerge, with opportunities for new or better coverage.
Large pharmaceutical, tobacco, and alcohol companies will likely be encouraged to develop new consumer products, invest in small businesses that provide new products and services, and merge existing marijuana companies into well-positioned conglomerates.
It could also encourage several states without legal marijuana access, including Idaho, Indiana and Wisconsin, to eventually legalize medical marijuana.
Marijuana reform is bad news for marijuana businesses
Schedule 3 appears to add a complex and expensive pharmacy program to the full agenda of the US Food and Drug Administration. Expect all cannabis products to be subject to lengthy and comprehensive animal and human testing regulations, agency delays and high costs currently out of the budget of cannabis users.
Reorganization may also change the relationship of the marijuana dealer with his patients.
Before the product reaches the consuming patient, a doctor’s visit (in person or virtual) is required along with an MD prescription, and the patient must be filled by a DEA registered pharmacist.
After the reorganization, budtenders may become obsolete, replacing the doctor and/or pharmacist. Consider going to Costco to get your weed rather than engaging in an informative conversation with a sympathetic budtender.
This can dramatically change the patient experience, shifting distribution from dispensary-based models to traditional pharmacy-driven systems.
Does the restructuring mean the end of the cannabis industry as we know it?
Reorganization and subsequent federal agency policymaking may clarify appropriate use for consumers and medical professionals. But that specification would legally authorize the sale of those products by convenience stores, gas stations, vape shops, CBD stores and beverage retailers.
Current efforts at the government level to curb or end the sale of these products have shut down some of these marijuana dealers or required the removal of those products. Reformulating and/or redefining hemp and CBD products may mean your favorite Circle K store can sell these products, but more retailers mean more competition and less revenue for state-licensed cannabis operators.
Reordering will be messy and uncertain.
So, what should medical cannabis dispensaries do now?
- Monitor the work of federal agencies, starting with the FDA and DEA.
- Assess how restructuring may impact tax planning, banking relationships, insurance coverage, and compliance obligations.
- Consider that existing business models or product lines may need to be changed over time as compliance requirements change.
- If your medical patient population has decreased, rethink your marketing strategies to focus on elderly patients, nursing home patients, and patients undergoing physical or mental therapy programs.
- They partner with medical clinics, specialized cancer treatment centers, and physical therapists to offer marijuana as an alternative to conventional medicine.
Janet Jackim, chair of the Cannabis Business Industry Group at Fennemore, is a seasoned cannabis and corporate attorney whose practice focuses on sales, litigation, real estate, mergers and acquisitions. He can be reached at jjackim@fennemorelaw.com.
