Janet Jackim (Courtesy photo)
(This is a contributed guest column. To be considered as an MJBizDaily guest columnist, please submit your request here.)
President Donald Trump’s Dec. 18 executive order directed U.S. 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 healthcare providers and legal marijuana businesses, federal marijuana rescheduling marks a potentially significant shift in how medical cannabis may be researched, regulated, prescribed, and commercialized at the federal level.
But medical is the key word here. Near-term federal policy changes are expected to apply only to cannabis used for legitimate medical purposes, not adult use.
President Trump’s kind words for medical cannabis – and warnings against adult-use
The president’s order cites numerous examples of medical conditions cannabis allegedly allays.
Citing the 40 states and District of Columbia with regulated medical marijuana programs, the order also criticizes the federal government for failing the American people by not fully assessing and scientifically researching cannabis’ benefits and risks.
That’s what should have been done following the 2023 Department of Health and Human Services’ (DHHS) finding that cannabis has a “currently accepted medical use” in the U.S. and ought be reclassified.
Trump’s order also addressed the use of unregulated CBD and hemp-derived THC cannabinoid products.
These products, not currently regulated by the federal government, present additional possible medical treatments that should be subjected to rigorous study, research, testing and regulation.
The order asks Congress and federal agencies to bring clarity – and safety – to Americans’ use of CBD and hemp-derived cannabinoid products.
What Trump’s marijuana rescheduling order did not mention
Medical cannabis seems to have been 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 very notably, there is no mention of rescheduling marijuana in the context of adult or recreational use. Quite the opposite – Trump specifically warned against using cannabis as a recreational drug.
This leaves room for the regulation of adult or recreational use of marijuana to the states, while establishing a federal medical marijuana program.
A word of caution: What will eventually emerge from the executive order is unpredictable, given that the Justice Department and Drug Enforcement Administration must resume administrative review of the still-paused DHHS recommendation.
It’s likely that they will schedule public hearings, deliberate stakeholder positions, survive appeals, issue preliminary regulations for another round of hearings, and finally publish administrative regulations to implement rescheduling.
For manufacturers, retailers, and healthcare providers, this could mean tighter compliance standards.
It could also mean clearer federal guidance applicable to how products can be marketed, prescribed, or sold.
What could a federal medical marijuana program achieve for patients?
It could result in more research that discovers potential applications, new cannabis strains, standardized testing and labeling requirements.
It could encourage more medical professionals to prescribe marijuana treatments – expanding programs like Texas’ – more alternative treatment courses for patients and medical professionals, and expanded access and availability to needy patients across the country.
More cannabis available across the country also likely means lower prices.
What could a federal medical marijuana program accomplish for marijuana businesses?
Depending upon where your marijuana business is in the industry, the answer would seem to be a mix of good and bad news.
First, the good news.
Rescheduling is good for the plant-touching businesses currently considered illegal under Internal Revenue Service Code 280E. Moving cannabis to Schedule 3 should permit 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 could become more receptive to providing typical account, treasury, and lending services to marijuana businesses as customers. Normalization of banking services goes a long way to bolster industry stability.
Rescheduling could require insurance and benefit plan changes to cover the cost of prescribed medical marijuana treatments. A much larger insurer group and varying insurance plans could emerge, with opportunities for new or better coverage.
Big pharma, tobacco and alcohol companies will likely be encouraged to develop new products for consumption, make investments in smaller entrepreneurial businesses offering new products and services, and consolidate existing marijuana companies into better-positioned conglomerates.
It may also encourage the few states without legal cannabis access, including Idaho, Indiana and Wisconsin, to finally legalize medical cannabis.
Marijuana rescheduling’s bad news for cannabis businesses
Schedule 3 appears to add a complex and expensive pharma-centric program to the U.S. Food and Drug Administration’s full agenda. Expect every marijuana product to be subjected to lengthy and comprehensive animal and human testing protocols, agency delays and high costs not currently in cannabis operators’ budgets.
Rescheduling could also change the marijuana retailer’s relationship with its patients.
Before the product reaches a consuming patient, a medical doctor’s visit (in person or virtual) and the MD’s prescription are required, and the patient must have the prescription filled by a DEA-registered pharmacist.
Post-rescheduling, budtenders may become obsolete, having been replaced by the doctor and/or the pharmacist. Think going to Costco for your weed rather than engaging in an educational conversation with a compassionate budtender.
This could fundamentally change the patient experience, shifting distribution from dispensary-based models to more traditional pharmacy-driven systems.
Does rescheduling mean the end of the cannabis industry as we know it?
Rescheduling and subsequent federal agencies’ policymaking could clarify appropriate uses for consumers and medical professionals. But that clarity could also federally legalize the sales of those products by convenience stores, gas stations, vape shops, CBD stores and beverage retailers.
Current efforts at the state level to curb or eliminate sales of these products have closed some of these convenience marijuana retailers or required the removal of those products. Rescheduling and/or redefining hemp-derived and CBD products could mean your favorite Circle K store can sell these products, but more retailers means more competition and less revenue to state-licensed cannabis operators.
Rescheduling will be messy and uncertain.
So, what should medical cannabis dispensaries do now?
- Monitor federal agency activity, starting with the FDA and DEA.
- Evaluate how rescheduling could affect tax planning, banking relationships, insurance coverage, and compliance obligations.
- Consider whether existing business models or product lines may need to be adapted over time as compliance requirements evolve.
- If your medical patient population has declined, reconsider your marketing strategies to focus on aged patients, nursing home patients, and patients undergoing physical or mental health treatment programs.
- Partner with medical clinics, specialized cancer treatment facilities, and physical therapists to offer marijuana as an alternative to conventional treatments.
Janet Jackim, chair of the Cannabis Business Industry Group at Fennemore, is a seasoned cannabis and business attorney whose practice focuses on transactions, litigation, commercial real estate, mergers and acquisitions. She can be reached at jjackim@fennemorelaw.com.
