A recent report from the Congressional Research Service suggests that the Drug Enforcement Agency (DEA) is likely to approve a US Department of Health and Human Services recommendation to reschedule marijuana, which is currently a Schedule I drug. On the latest episode of Policy Outsider, Director of Operations and Fellow Heather Trela explains what such a change would mean for the marijuana industry and federal enforcement of the drug. The episode provides an overview of the drug scheduling system and its history, the challenges and limitations of rescheduling, and what comes next in the ever-changing marijuana policy landscape.
Guest:
Heather Trela, director of operations & fellow, Rockefeller Institute of Government
Learn More:
The High Court: How the Judiciary is Influencing Marijuana Policy
Transcript was generated using AI software and may contain errors.
Alexander Morse 00:04
Hey there, and welcome to Policy Outsider presented by the Rockefeller Institute of Government. I’m Alex Morse. In October of 2022, President Biden announced an administrative initiative to review the scheduling classification for marijuana under federal law. Scheduling is a system the federal government uses to classify drugs such as marijuana, LSD, cocaine, fentanyl, and other related controlled substances. Marijuana is currently classified as a Schedule 1 drug, which is the same class as heroin and LSD and is more restrictive than cocaine and fentanyl. What impact would rescheduling marijuana have on related industries such as medicinal and adult use recreation businesses? Will it have any impact on enforcement practices? And why is this happening now? Heather Trela, director of operations and fellow at the Rockefeller Institute of Government joins the podcast to dive into the weeds to explain why the Biden administration is making this request to reschedule marijuana and what changes in enforcement and business practices we can expect if marijuana is in fact rescheduled. We’ll also review the administrative process including which federal agencies are involved in the decision making and identify what other hurdles decision makers must consider during the administrative review. Coming up next. Today, I’m joined by Rockefeller Institute’s own federalism and marijuana expert, Heather Trela. Heather, thank you for joining today.
Heather Trela 01:49
Thanks, Alex.
Alexander Morse 01:50
Marijuana, or cannabis, is currently a Schedule 1 drug, the most restrictive classification for a drug. But there’s recent news that the US Department of Health and Human Services is proposing to reschedule marijuana to a less restrictive classification. Before we get into the process of rescheduling and its impacts. Let’s first cover what Schedule 1 means. What are drug schedules? And how are they classified?
Heather Trela 02:14
Sure. So to understand the modern scheduling of drugs, we have to go back to 1970 with the passage of the Controlled Substances Act of 1970. That created the five tier scheduling system that we still use today. Placement was based on substances medical use, potential for abuse, and the safety potential safety or dependents liability. Marijuana has always been a Schedule 1 drugs since the beginning, meaning that it was deemed to have no currently accepted medical use and a high potential for abuse. So other Schedule 1 drugs include heroin, LSD, and MDMA. For comparison, cocaine, fentanyl are Schedule 2 drugs. So that’s what we’re the kind of the state of play has been since 1970. So in October 2022, President Biden, as a package of other proclamations directed the Secretary of Health and Human Services, to initiate the administrative process to review how marijuana is scheduled. Ultimately, the Drug Enforcement Administration has the final say they take the recommendations from Health and Human Services and determine whether or not to change the scheduling.
Alexander Morse 03:18
Well, thanks for that overview, Heather. I’m curious as to why was cannabis or marijuana put into this Schedule 1 classification? And what impact does that have on conducting research on marijuana or maybe enforcement practices?
Heather Trela 03:32
Sure. So it’s political in why marijuana was initially put as a Schedule 1 drug, at least partially. President Nixon, who was president when this was implemented, he was looking for a tool to punish people who are protesting against him involving the war and other matters. So he was looking more at who uses marijuana than what marijuana actually does. And so once a drug becomes a Schedule 1 drug, it’s kind of a catch 22 for the drug, because you can only prove that the drug has medical benefits if you can do research on it. But as a Schedule 1 drug research is restricted on the particular drug. So you can’t really find the benefits if you can’t do research on the drug and see how it affects people what the long term medical impacts are.
Alexander Morse 04:14
So let’s talk about that. With the Biden administration’s directive to reschedule we may presume that it’s going to be a lower restriction level, right. And so how will this affect marijuana researchers?
Heather Trela 04:26
So, yeah, Health and Human Services, their recommendation was to make this a Schedule 3 drug. And what this would do was this would open up the ability to do research on marijuana and its impacts. Right now, because of the Schedule 1 designation, it is hard to get access to marijuana has to be from a certain federally approved grower. You can’t do tests on human subjects. So you can’t see the actual impact on people when they use marijuana. That would all open up with Schedule 3, there’d be more opportunities for research. There might be even some federal funding for research which currently is prohibited.
Alexander Morse 04:59
So If it were to be scheduled as a are classified as a Schedule 3 drug, a SUNY researcher can then maybe go down to a licensed store in New York State and purchase marijuana from that store?
Heather Trela 05:11
That would still have to be determined, but it would at least open up the possibility to have a wider supply and a wider variety of studies that could be done.
Alexander Morse 05:20
What are some other impacts that rescheduling marijuana will have on the marijuana business industry, whether that’s medicinal or adult use recreational?
Heather Trela 05:28
Sure, so the biggest takeaway of rescheduling is actually on the business side and impacts taxes, what everyone has to worry about. So currently as a Schedule 1 drug, marijuana businesses cannot take routine business deductions on their taxes that other businesses can because of a clause in the tax code that was shortcut called 280E. That means they can’t deduct payroll, they can’t deduct rent on their businesses. It makes it very cost prohibitive to get into the marijuana industry. That 280E restriction only applies to Schedule 1 and Schedule 2 drugs. So if marijuana was to become a Schedule 3 drug that would open up the ability for business owners to take these deductions, potentially reinvest more money in their businesses and hire more people.
Alexander Morse 06:12
That’s a huge benefit. I had no idea that by reclassifying it would open up to all these types of deductions to help reinvestment in their own businesses.
Heather Trela 06:20
Yeah, I mean, it’s a huge hurdle for people who want to get into the marijuana industry, because you know, it requires a lot of cash upfront, and then you don’t get the same business deductions that a candy store or a liquor store can even take.
Alexander Morse 06:33
Now, is there a separate classification currently or under this new proposal between medicinal marijuana and adult use recreational?
Heather Trela 06:41
So it doesn’t make a clear distinction on that. The idea for this would be I think more medical, doesn’t mean it wouldn’t impact recreational but the drugs that are scheduled, for example, Schedule 3 could be accessed with a prescription. So that would benefit that
Alexander Morse 06:56
Like opioids?
Heather Trela 06:57
Yes.
Alexander Morse 06:58
So how there does this make marijuana legal at the federal level or at state levels?
Heather Trela 07:03
Now, unfortunately, it does nothing to change that status, marijuana would remain federally illegal, it would not have any real change in the state markets that currently exist, doesn’t mean that there couldn’t be further changes after the scheduling. There could be some additional legislation that could change this. But the short term not a ton changes.
Alexander Morse 07:23
How might enforcement practices change with a possible rescheduling. For example, with this effect, marijuana related citations and arrests moving forward?
Heather Trela 07:32
So yeah, that’s where critics think this doesn’t go far enough. Because there are limits to what the rescheduling would do. This would potentially maybe changed the federal restrictions on possession, it would still be federally illegal. The federal government already is kind of laissez faire with state medical and recreational things. But this would really further move this down the priority list for enforcement.
Alexander Morse 07:56
And judging by your answer, I suspect that there’s not going to be much change for people who are already incarcerated for marijuana related arrests?
Heather Trela 08:02
Yeah, no, unfortunately, no, this does not do anything to help them.
Alexander Morse 08:06
Well, that’s interesting to know that rescheduling doesn’t have a retroactive impact. So moving on, we’re going to talk about the legal process for rescheduling. You mentioned that we began with the Biden administration making a request to the Department of Health and Human Services to initiate a review process, which they then followed up with a proposal and is now up to the Drug Enforcement Administration to make a final decision. Can you elaborate on that process and maybe talk about a timeline on how this happened?
Heather Trela 08:36
Sure. So President Biden issued this directive and the Health and Human Services they delegated to the FDA to do some of this medical research, they came up with their recommendations, they have a seven prong test as to what they look for, for rescheduling. Now, this is not as easy a change as some agencies can make. So when this goes to the DEA, they can’t just propagate regulations, put it in the federal register, have a hearing period and then pass it, there’s an extra step in there. So not only do the DEA have to present the changes and regulations, allow federal open comment, they also have to hold a public hearing and go on record explaining and presenting evidence. It’s almost like a trial, where they have to explain why they’re doing the rescheduling. An administrative judge who works at the agency will make the final decision on whether or not to adopt the regulation. And then that is also subject to legal challenge. So there’s the extra step with the hearing that most other agencies don’t have to do.
Alexander Morse 09:35
Now, is there any legislative role in this process?
Heather Trela 09:39
Not as currently written. It’s really left up to the Drug Enforcement Administration under the guidance of the Attorney General to make these recommendations.
Alexander Morse 09:47
Now, Heather, are you surprised that the Biden administration is moving forward with this?
Heather Trela 09:52
Not really, this is not the first attempt to try to reschedule marijuana. This is the first one that’s gotten as far as it has. But there’s definitely been a change in public opinion. You know, we have, I think close to 35 states have either medical, recreational or both marijuana available. So you’re seeing a sea change in how people look at this. There’s been a lot of federal activity as well, to try to do the other is a law in Congress that would federally legalized marijuana, as well as some banking regulations and other things. So as this industry has grown, and has shown a track record, you’re seeing people changing their mind and beginning to think it needs some of the other protections that other businesses have.
Alexander Morse 10:31
So on a final note, are there any other barriers to changing the classification? Or maybe court challenges that you alluded to earlier?
Heather Trela 10:39
Yeah, there’s a couple things that need to be taken into consideration. One is that, as I said, this is not the first challenge to try to reschedule marijuana. There was a petition that was raised and ruled on in 2016 by two state governors to try to reschedule marijuana from Schedule 1 to Schedule 2. And the ruling was it needed to remain a Schedule 1 drug because it didn’t have any medical value. So that’s not that long ago. So they need to kind of really prove the case as to why what evidence has changed their mind from 2016 to 2023-2024, to make that recommendation, and change the regulations,. There’s also some international treaties that have to be taken into consideration that may or may not bind our ability to reschedule. There have been some changes in those treaties. So that’s potentially a legal challenge. And there’s just going to be, this as a contentious issue. As I’ve written in my High Court series. There’s a lot of legal challenges to the marijuana industry in general. So any large change like this, that is done administratively and not done legislatively, even though it doesn’t have to, I’m sure is going to trigger some additional legal challenges.
Alexander Morse 11:48
Well, this is all fascinating stuff, Heather. Thank you for joining today. I’m glad that you mentioned your high court series. We will absolutely link that in our episode description. Heather Trela thank you so much for joining us today.
Heather Trela 12:00
Thanks, Alex.
Alexander Morse 12:04
Thanks again to Heather Trela, director of operations and fellow for the Rockefeller Institute for sharing their insight into the marijuana rescheduling initiative. To learn more check out Heather’s most recent series, The High Courts, which highlights how federal and state programs policies and court decisions are shaping the marijuana industry. You can also check out our entire collection of marijuana related research and how states are legalizing the drug in the shadow of federal prohibition by visiting our website. All links are available in the episode description. If you liked this episode, please rate subscribe and share. It will help others find the podcast and help us deliver the latest in public policy research. All of our episodes are available for free wherever you stream your podcasts and transcripts are available on our website. Special thanks to Rockefeller Institute’s staff Joel tirado, for their contributions to this episode. Thanks for listening. I’m Alex Morse. Until next time. Policy oOutsider is presented by the Rockefeller Institute of Government, the public policy research arm of the State University of New York. The Institute conducts cutting edge nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York state and the nation. Learn more at Rock institute.org or by following at Rockefeller inst. That’s Rockefeller i n s t on social media. Have a question comment or idea? Email us at [email protected]
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