US Health Officials Urge Moving Pot to Lower-Risk Tier (Correct)

US health officials are recommending easing restrictions on marijuana, a move that sets the stage for potentially expanding the cannabis market across the country.

A top official at the Department of Health and Human Services wrote Drug Enforcement Administration head Anne Milgram calling for marijuana to be reclassified as a Schedule III drug under the Controlled Substances Act, according to a letter dated Aug. 29 that was seen by Bloomberg News.

A DEA spokesperson confirmed the department had received the letter with HHS’s recommendation. With final authority to reschedule a drug, DEA will now initiate its own review, the spokesperson said.

Reclassification is a step short of legalizing the drug entirely, but it would mark a critical shift away from marijuana’s status as a Schedule I substance, which includes drugs with high risk of abuse, like heroin, LSD and ecstasy. Schedule III substances, such as ketamine, are seen as less dangerous and can be obtained legally with a prescription.

It could also give President Joe Biden an accomplishment to point to ahead of next year’s election, while reducing the taxes that cannabis businesses pay. Cannabis advocates say that re-scheduling would be an acknowledgment by the federal government that marijuana has legitimate uses, and would be one step on a path toward greater acceptance and availability.

Marijuana stocks, which are held more by individual than institutional investors, jumped on the news. The MJ PurePlay 100 Index, which tracks cannabis stocks, rose 13% on Wednesday, paring its year-to-date decline to 21%. Columbia Care Inc. gained 39% and Ayr Wellness Inc. climbed 29%.

Biden rolled out new initiatives focused on easing penalties associated with marijuana use in October, pardoning all prior federal offenses of simple possession and urging governors to do the same with state offenses. He also asked the HHS secretary and the US Attorney General to review how marijuana is scheduled based on its medical use, potential for abuse, safety and potential for dependence.

On Wednesday, White House Press Secretary Karine Jean-Pierre said in a briefing that HHS and the Department of Justice, which oversees the DEA, were engaged in an “independent process” that’s “guided by evidence.”

“We’re going to let that process move forward,” she said, declining to comment further.

Potential for Abuse

Marijuana is the most commonly used drug in the US that is illegal at the federal level, according to the Centers for Disease Control and Prevention. About 1 in 5 Americans used it at least once in 2019, according to the agency.

Its current status as a Schedule I substance indicates a high potential for abuse with no accepted medical use, along with a lack of accepted safety for use under medical supervision. Yet that conflicts with many states’ rules that allow the drug to be used recreationally and prescribed for treatment of everything from glaucoma to anxiety.

Moving the drug to Schedule III would be the most significant federal cannabis reform in modern history, said Edward Conklin, executive director of the US Cannabis Council.

“Cannabis should have never been scheduled alongside heroin and placed at the center of our nation’s destructive drug war,” Conklin said. “Thankfully that era is coming to a close and is being replaced by a modern and scientific approach to regulating this plant.”

Rescheduling wouldn’t give the industry a comprehensive regulatory framework. The biggest impact would be to give beleaguered cannabis companies a tax break and make research on the drug easier. Prior restrictions meant that cannabis companies couldn’t take the same kind of tax deductions as most companies, and its Schedule I designation meant it was hard even for academics to study the drug.

Extensive Review

HHS’s recommendation was based on an extensive Food and Drug Administration review of marijuana’s classification, Assistant Secretary for Health Rachel Levine said in the letter to DEA. The FDA considered eight factors that determine the control status of a substance and recommended that marijuana be placed in the Schedule III category. The National Institute on Drug Abuse agreed with the FDA’s recommendation, Levine said.

An HHS spokesperson said the department’s “comprehensive scientific evaluation” was completed in less than 11 months in an effort to respond quickly to the president’s directive.

“It’s a huge day for the cannabis industry,” said Bryan Barash, co-chair of the Coalition for Cannabis Scheduling Reform, an advocacy group, and deputy general counsel of Dutchie, a platform for cannabis commerce. “We would just hope that the federal government follows through on their recommendation.”

Some cannabis industry advocates said the recommended re-scheduling doesn’t go far enough, and it won’t fix the clash between federal law and the 38 states that allow it for medical use and 23 states that allow it for recreational use.

The move would do “nothing to align federal law” with the states, which each have their own laws to regulate it, said National Cannabis Industry Association CEO Aaron Smith in an emailed statement. “The only way to fully resolve the myriad of issues stemming from the federal conflict with state law is to remove cannabis from the Controlled Substances Act and regulate the product in a manner similar to alcohol,” he said.

(Corrects name of Drug Enforcement Administration in second paragraph of story originally published Aug. 30.)

--With assistance from Akayla Gardner and Tiffany Kary.

To contact the reporters on this story:
Riley Griffin in Washington at rgriffin42@bloomberg.net;
Ike Swetlitz in Boston at iswetlitz@bloomberg.net;
Tiffany Kary in New York at tkary@bloomberg.net

To contact the editors responsible for this story:
Cynthia Koons at ckoons@bloomberg.net

John Lauerman, Jonathan Roeder

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