Bipartisan Subcommittee Promotes Inclusion of Hemp Regulations in 2023 Farm Bill

On July 28, the House of Representatives’ Subcommittee on Biotechnology, Horticulture, and Research held a hearing to discuss ways in which the upcoming 2023 Farm Bill could improve the regulatory landscape for hemp and CBD producers.  Congress passes a Farm Bill every five years – the 2014 Farm Bill lifted federal restrictions on the cultivation and production of hemp, and the 2018 Farm Bill authorized commercial production of hemp, subject to oversight by the U.S. Department of Agriculture.  However, as discussed at length during the July 28 hearing, the Food and Drug Administration (FDA) has not approved CBD as a food or beverage additive or as a dietary supplement – though it has approved one CBD-derived prescription drug for treating seizures.  Despite a surge in hemp cultivation and production following the 2018 Farm Bill and a large market for CBD-based products, demand for hemp has not kept pace with production, as many companies are reluctant to enter the CBD market without clear regulatory guidance from the FDA.

Participants in the July 28 hearing discussed ways to address this regulatory uncertainty and other barriers to entry into the hemp and CBD marketplace.  Both the House and Senate have introduced bills to permit the sale and marketing of CBD as a food additive and dietary supplement.  Another bill introduced in February, the Hemp Advancement Act, was a key focus of the hearing.  This bill includes among its key provisions increasing the THC threshold for hemp from .3% to 1%; eliminating the federal requirement that hemp sold in the U.S. be tested for potency by labs registered with the FDA, which do not exist in all states; and eliminating a ten-year waiting period for people with drug-related felony convictions seeking hemp production licenses.  Other proposed inclusions in the 2023 Farm Bill discussed at the hearing are measures to lower fees for hemp sampling/testing and removing background check requirements for production licenses.  Rural areas – where many hemp producers seek to operate – often lack facilities that process fingerprints, posing another barrier to market entry.

The Subcommittee hearing was led by a bipartisan collection of representatives, mainly from hemp-producing states, who share the goals of achieving greater regulatory certainty and market stability for the growing hemp industry.  The proposals discussed could support rural agricultural economies and facilitate greater equity within the industry, and many lawmakers and market participants see the 2023 Farm Bill as a necessary next step in the development of the fast-growing hemp industry.

New York Cannabis Control Board Meeting, July 14, 2022

On July 14, 2022 the New York Cannabis Control Board (the “Board”) met to consider a variety of topics.  Most importantly, the Board approved the Conditional Adult-Use Retail Dispensary Regulations and the online application for a retail dispensary license. 

The initial focus of the meeting was on the approval of proposed Conditional Adult-Use Retail Dispensary Regulations.  (Generally referred to in the meeting as the “CAURD Regulations”.)  The Senior Policy Director of the New York Office of Cannabis Management noted that the CAURD Regulations were designed to provide retail dispensary licenses to applicants who met two eligibility requirements.  First, the applicant (or family member) must have had a cannabis related legal offense that occurred prior to the passage of the Marihuana Regulation and Taxation Act on March 31, 2021.  Second, the applicant must have experience owning and operating a qualifying business.  The Board unanimously approved the CAURD Regulations.  The Senior Policy Director also provided a form of online application for a retail dispensary license.  This sample form fleshes out the CAURD Regulations.  The Board unanimously approved the sample form of application.  The Board also ordered that a new application period for adult-use retail dispensaries licenses open and close on dates established by the Office of Cannabis Management. The Board did not indicate when the actual application would be made available for filing but notice of the application window must be posted on the Office of Cannabis Management’s website no less than 14 days before the application window opens and the application window must last at least 30 days. Continue reading “New York Cannabis Control Board Meeting, July 14, 2022”

Long-Awaited Marijuana Legalization Bill Introduced in the U.S. Senate

More than a year after introducing a first draft, U.S. Senators Chuck Schumer (D-N.Y.), Cory Booker (D-N.J.) and Ron Wyden (D-OR) finally introduced their proposed marijuana legislation, the Cannabis Administration and Opportunity Act (CAOA) on Thursday, July 21.

The CAOA is a comprehensive bill that would not only permit cannabis companies to access the banking system but would legalize and decriminalize recreational cannabis with an eye toward supporting communities that have been most impacted by the war on drugs. The CAOA also provides for cannabis industry workers’ rights, a federal responsibility to set an impaired driving standard, expungements of criminal records and penalties for possessing or distributing large quantities of marijuana without a federal permit. It would also create a new federal definition for hemp that would increase the permissible THC by dry weight to 0.7 percent from the current 0.3 percent, and the definition would include all THC isomers, not just delta-9 THC. Other features of the bill include grant programs for small business owners hoping to enter the industry who come from communities that were disproportionately affected by the war on drugs, increased funding for law enforcement for illegal cultivation, and cannabis marketing restrictions.

Under the proposal, the Drug Enforcement Administration would no longer have jurisdiction over cannabis and would be regulated by the U.S. Food and Drug Administration and the Alcohol and Tobacco Tax and Trade Bureau (TTB) within the Treasury Department. The bill proposes a 5% to 12.5% excise tax for small and mid-sized cannabis producers. It would charge an initial tax of 10% on larger cannabis businesses and gradually increase it to 25%.

The Senate Judiciary Subcommittee on Crime and Terrorism chaired by Booker scheduled a hearing for Tuesday, July 26 titled, “Decriminalizing Cannabis at the Federal Level: Necessary Steps to Address Past Harms.”

While the bill is unlikely to garner the required 60 votes to pass in the Senate, many see it as a first step toward opening the cannabis debate on Capitol Hill and passing incremental reform that could finally end the federal prohibition on cannabis.

As we have previously reported, the U.S. House of Representatives has passed legislation multiple times in the past few years that would decriminalize cannabis and allow cannabis businesses to access the federal banking system. However, none of those measures have yet made it to the Senate floor.

 

Partner Seth Goldberg Quoted in Washington Post Article

Seth Goldberg was quoted in an article in The Washington Post, “Can I Fly with Edibles?

It is illegal to fly with edibles even if you’re in a state where cannabis is legal and the edibles were manufactured and sold in accordance with state law, says Seth A. Goldberg, a partner at Duane Morris and a team lead of its cannabis industry group. […]

However, that is not their primary concern when you’re going through security. TSA screening procedures are focused on threats to aviation safety, trying to spot things in your bag that could be a potential threat to flights, not finding your edibles. The agency website even says “ … TSA security officers do not search for marijuana or other illegal drugs.”

“THC gummies are not really a threat that the TSA is concerned with,” Goldberg says.

To read the full text of the article, please visit The Washington Post.

Cannabis-Related Reimbursement Claims Hit Healthcare Insurers

Healthcare insurers are used to dealing with claims for reimbursement by hospitals, providers, and patients. Medical marijuana treatment provides another vehicle for such claims.

New Mexico passed the Behavioral Health Services Equity Act (BHSEA) last April, effective January of 2022, which mandates that health insurance must cover in full the cost of services or medication used to treat behavioral health services. In February, New Mexico Top Organics – Ultra Health sent a letter to several insurers and the Office of the Superintendent of Insurance seeking affirmation that the insurers will provide coverage as prescribed by the act for the 74,000+ patients currently enrolled in the medical marijuana program as a result of PTSD. The request was denied. Now, several New Mexico health insurance companies are defending against a class action lawsuit filed by New Mexico Top Organics – Ultra Health, and six medical marijuana patients, seeking “recovery for themselves, and for every other similarly situated behavioral or mental health patient unlawfully subjected to paying for the entire cost of medically necessary cannabis in violation of state law” for failing to pay for the cost of medical marijuana as provided under the act.

Other legislatures are discussing similar laws that provide for insurance coverage of medical marijuana programs. For example, New York has pending legislation that if passed, would define medical marijuana as a “prescription drug,” “covered drug,” or “health care service” that would qualify for coverage under public programs. The United States Supreme Court recently denied certiorari for a pair of cases concerning workers’ compensation for medical marijuana, an issue that has not been decided uniformly amongst the states. For example, Minnesota and Maine have determined that the Federal Controlled Substance Act preempts the state law requiring reimbursement for medical marijuana due to a work-related injury, while New Hampshire and New Jersey have ruled in favor of reimbursement regardless of federal preemption.

The passage of New Mexico’s Act mandating behavioral health coverage in full and subsequent lawsuit brings a new wrinkle into cannabis litigation, with broad implications across the healthcare industry. Indeed, early clinical reports and case studies have shown positive results from the use of medical marijuana to treat PTSD, a disorder that effects an estimated 12 million Americans, and with medical marijuana available in 37 states, the class action lawsuit seeking reimbursement under the BHSEA may serve as a preview of a type of cannabis-related litigation that may be brought against healthcare insurers.

U.S. Supreme Court Rejects Cases Seeking Workers’ Comp for Medical Marijuana

The U.S. Supreme Court declined to hear two cases challenging Minnesota’s denial of workers’ compensation for medical marijuana used to treat work-related injuries.

Two Minnesota employees, Susan Musta, who suffered a neck injury while working as a dental hygienist and Daniel Bierbach, who was injured at his job working for an all-terrain vehicle company, were certified as eligible to participate in Minnesota’s medical cannabis program and began using medical cannabis to treat their pain. They requested reimbursement for the cost of that treatment from their employers pursuant to Minn. Stat. § 176.135, subd. 1 (2020), a Minnesota state law that requires employers to furnish medical treatment as may reasonably be required to treat a work-related injury.

Their respective employers opposed the requests for reimbursement, arguing that paying for someone to possess cannabis is prohibited by federal law, specifically the federal Controlled Substances Act, 21 U.S.C. §§ 801–971 (“CSA”). Musta and Bierbach argued that, because employers are not required to possess, manufacture or distribute cannabis in contravention of federal law, merely providing workers’ compensation for marijuana is not preempted by the CSA.

Their cases made their way to the Minnesota Supreme Court and presented the following question: Does the CSA preempt an order under a state workers’ compensation law requiring an employer to reimburse an injured employee for the cost of medical marijuana? In both instances, the Minnesota Supreme Court said yes, deciding that employers were not obligated to pay for medical marijuana treatment. Musta and Bierbach appealed the decision to the U.S. Supreme Court.

The U.S. Supreme Court invited the U.S. Department of Justice (“DOJ”) to file a brief before making a decision. The DOJ agreed with the Minnesota Supreme Court that the CSA preempts state law and recommended that the court not take up the pair of cases. It wrote, “the Legislative and Executive Branches of the federal government are best situated to consider any potential tailored measures to address specific instances of interaction between federal and state marijuana laws.”

The U.S. Supreme Court denied Musta and Bierbach’s writs of certiorari, indicating that fewer than four justices believed the legal challenges warranted the court’s consideration. By rejecting their cases, the U.S. Supreme Court has chosen not to weigh in on the viability of a workers’ compensation claim for medical marijuana coverage, nor has it taken the opportunity to close the gap between state and federal marijuana policy.

New York State Cannabis Advisory Board’s Inaugural Meeting

On June 30, 2022, the New York State Cannabis Advisory Board (the “Advisory Board”) held its inaugural meeting. Axel Bernabe, the Chief of Staff and Senior Policy Officer at the New York State Office of Cannabis Management, provided some opening remarks noting that the Advisory Board has been in the making for nearly four (4) years. The Advisory Board is comprised of twenty members from the entire State of New York. Advisory Board members were each introduced and include a wide variety of background and experience, including careers such as farmers, public servants, doctors, attorneys and community leaders.

One of the primary purposes of the Advisory Board is to oversee the disbursement of the New York State Community Grants Reinvestment Fund (“Reinvestment Fund”). The Reinvestment Fund will be comprised of thirteen (13) voting members, and also ex-officio members to represent other state agencies. All Reinvestment Fund members will serve three (3) year terms. The Reinvestment Fund is meant to stimulate and rejuvenate small businesses in communities that were negatively affected by cannabis prohibition.

The Advisory Board will also be actively involved with the Cannabis Control Board, and strives to become actively engaged with drafting regulations and advising the Cannabis Control Board’s decisions. Further, with the Advisory Board members’ wide breadth of experience and background in the cannabis industry, the Advisory Board hopes to provide a distinct opinions and insight for the regulations that the Cannabis Control Board considers.

Nearly all Advisory Board members expressed excitement about the opportunity to create an equitable and inclusive cannabis industry. Advisory Board Member, Peter Schaffer, owner at Nanticoke Gardens, expressed his excitement at bolstering New York’s cannabis industry and potential collaboration with cannabis and beverages. Further, Junella Chin, an Integrative Medical Cannabis Physician, spoke of the healing properties of cannabis and making cannabis treatment more available to patients who could benefit from such treatment. Advisory Board member, Gary Johnson is Chair of the National Association for the Advancement of Colored People New York State Economic Development, and expressed interest in the Advisory Board’s future in imparting equity to groups that have been traditionally treated negatively by past cannabis based legislation.

Boston Beer Company Joins the Growing Cannabis Beverage Market

As interest in cannabis beverages continues to increase, Boston Beer Company (the maker of Sam Adams) recently announced plans to introduce a line of non-alcoholic, THC-infused teas, joining a number of other beverage companies in this growing market. The new product line, called TeaPot, will not be available in the United States – yet. Boston Beer is beginning its launch of TeaPot in Canada, in July, and plans to expand into the US and globally as the regulatory landscape develops. Boston Beer’s entrance into the cannabis beverage space is tailored strategically, through its creation of a subsidiary to operate in partnership with entities based in Canada that will provide the cannabis for TeaPot and manufacture and distribute the product. This approach leads to a more nimble operation than would Boston Beer’s attempting to control the entire supply chain. Continue reading “Boston Beer Company Joins the Growing Cannabis Beverage Market”

Reflections of a Former Regulator: Three Thoughts on a Budding Industry

By Matthew J. McCarthy

Beginning in 2019, I served as the lead prosecutor in regulatory enforcement actions at the Maryland Medical Cannabis Commission, where I worked closely with the Commission’s investigators and compliance professionals to develop enforcement procedures to help guarantee a safe and reliable medical cannabis marketplace. During my time as a cannabis regulator, I had an invaluable opportunity to help shape the local regulatory landscape, foster productive relationships between government and industry, and observe emergent cannabis regulatory systems across the Northeastern and Midwestern U.S. I hope that the three notes below can provide some insight as to how licensees can orient themselves for a productive present and profitable future. These observations are mine alone.

Continue reading “Reflections of a Former Regulator: Three Thoughts on a Budding Industry”

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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