Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA) today introduced the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act. While we have not seen the text yet, Sen. Warren has published a summary. The bill would amend the Controlled Substances Act (CSA) saying it no longer applies to anyone acting in compliance with state (or tribal) laws relating to the manufacture, production, possession, distribution, dispensation, administration or delivery of cannabis. It also legalizes industrial hemp and removes it from the CSA. In addition to other provisions, the bill prohibits the distribution or sale of cannabis to anyone under 21 other than for medical purposes.
There are a number of pending bills promising various levels of cannabis legalization or decriminalization. This bill is important because it is the result of conversations between Sen. Gardner and the President. When Attorney General Jeff Sessions rescinded the 2014 Cole Memo which de-emphasized cannabis enforcement against legal state actors, Sen. Gardner angrily stopped approving new judicial nominations. That led to Trump’s commitment to Gardner to support “states rights” legislation if brought to him. Advocates hope this bill has a chance to move quickly as a result.
While not listed in the summary, according to MJBizDaily, the bill also would repeal tax code Section 280E which prohibits cannabis companies from deducting their ordinary business expenses, and also would allow federally insured banks greater ease in accepting cannabis customers. Stay tuned!
Authored by Robert Prince, Ph.D, https://www.duanemorris.com/attorneys/robertwprince.html
On Thursday April 18, 2018, at 8:00AM-12:30PM EST, an FDA advisory panel will consider whether to recommend or not recommend approval of GW Pharmaceutical’s cannabis-based drug Epidiolex ® for use in treating two rare types of epilepsy in children- Dravet syndrome and Lennox-Gastaut syndrome. Epidiolex is an oral formulation of a purified form of cannabidiol (CBD) a component found in cannabis. CBD does not have any psychoactive effects as compared to another component of cannabis tetrahydocannabinol (THC). Epidiolex has less than 0.1 percent of THC.
If approved, Epidiolex would be the first botanical cannabis product approved in the U.S. for any indication. The FDA has approved Marinol® and Syndros® for uses in the U.S. for the treatment of anorexia associated with weight loss in AIDS patients. Both products contain dronabinol, a synthetic delta-9-tetrahydrocannabinol. Another FDA approved drug Cesamet® contains nabilone, which is a synthetic drug with a structure similar to THC that is used to treat nausea and vomiting.
The FDA released briefing documents on April 17, 2018, which did not seem to raise any major issues with Epidiolex, resulting in the share price of GW Pharmaceuticals to rise sharply- up 2.27%. The Center for Drug for Drug Evaluation and Research (CDER) indicates that it plans to provide a free of charge, live webcast of the April 19, 2018 meeting of the Peripheral and Central Nervous System Drugs Advisory Committee. Information regarding the webcast, including the web address for the webcast, will be made available at the following website: http://www.fda.gov/AdvisoryCommittees/Calendar/default.htm. At the time of writing this note, the FDA has not provided any login information for the webcast.
Although, in making the above comments, Sessions was clear that marijuana was still illegal in the U.S., he appears to have drawn a box around those types of marijuana-related criminal activities on which federal prosecutors are focused. The above comments are not inconsistent with the Sessions memo of January 4, 2018, and may help clarify what prosecutorial discretion looks like under that memo. Based on the above comments, it would seem that activities conducted pursuant to state marijuana programs are not the types of activities on which federal prosecutors are focused.
Another breakthrough for the cannabis space occurred on Tuesday, February 27, 2018, when Toronto-based Cronos Group Inc. began trading on the Nasdaq Stock Market. (MJN:CN). This marks the first listing of a company focused purely on cannabis on a major U.S. stock exchange. The listing of Cronos comes within two months of the memorandum issued by Attorney General Sessions that rescinded the federal government’s previous guidance regarding enforcement of state-lawful cannabis activities under the Cole Memorandum. That earlier guidance is credited with providing the cannabis space with a window of opportunity for the warp-speed growth the space has seen in recent years. The Sessions memo was intended to slow the growth of the cannabis space, especially with respect to the capital markets. The Nasdaq listing of Cronos suggests that 2018 could be another strong year for cannabis-related investments; 2017 was believed to have resulted in approximately $2 billion in cannabis-related investments in the U.S.
A potentially groundbreaking federal lawsuit brought last summer was dismissed by New York judge Alvin Hellerstein today. The case, brought by five plaintiffs including two children, two veterans and former NFL player Marvin Washington, all of whom use state legal medical cannabis, claimed that the Controlled Substances Act is unconstitutional as it relates to the plant.
The judge ruled that the plaintiffs should have first complied with administrative processes by filing a petition with the Drug Enforcement Administration, and that the case was not appropriate to bring to court. He was sympathetic to the plaintiffs, however, noting that “this decision should not be understood as a factual finding that marijuana lacks any medical use in the United States, for the authority to make that determination is vested in the administrative process.”
He did, however, rule that it was “not irrational” that the Government deemed cannabis dangerous enough to be listed as a Schedule I drug, as it did for heroin and LSD. Statements by former Nixon Administration officials in the 1990s that they knew they were lying about the drugs at the time of the CSA were not considered dispositive, since Congress passed the law.
News reports indicate that the plaintiffs’ attorneys, Mike Hiller, Joe Bondy and Lauren Rudick, may appeal the decision or ask the judge to reconsider. They claim that the petition process would be futile and that there is substantial evidence that the US government has taken actions supporting the notion that there is medical benefit to cannabis.
There may be no greater thorn in the side of a cannabis producer, processor or retailer than section 280E of the Internal Revenue Code. Section 280E prohibits businesses engaged in trafficking substances prohibited under the Controlled Substances Act (CSA) from claiming certain deductions and credits on their federal income-tax returns.
In October 2017, a Colorado cannabis retailer, the Green Solution Retail, Inc. petitioned the U.S. Supreme Court to review a decision which held that federal laws, specifically the Anti-Injunction Act and the Declaratory Judgment Act, preclude challenges to the IRS assessments of taxes, as such challenges to disputed sums must be determined in a suit for a refund or deficiency. Green Solution argues in its petition that its claims against the IRS are not challenging the IRS’s assessment or seeking to restrain it, but rather its claims are challenging the IRS’ administrative authority to make determinations as to whether Green Solution is criminally culpable under the CSA. Green Solution pleads that it is concerned about the IRS sharing information it gains as part of the assessment with the Department of Justice (DOJ) potentially triggering criminal repercussions for the dispensary under the CSA. Last week, the Government filed its response to Green Solution’s petition, urging the Supreme Court to deny the request for review. The Government takes the position that any investigation by the IRS of Green Solution’s activities is part and parcel of its assessment of the retailer’s allowable deductions and tax liability. Consequently, the Government argues that such a challenge to the IRS’s assessment activities is barred by the Acts.
This is not the only case against government entities involving cannabis issues before the courts. A case commenced by Marvin Washington and other plaintiffs seeking to hold the Controlled Substances Act unconstitutional is scheduled to be heard next week (in connection with the Government’s request that the court dismiss that case). Could these two cases be the pressure at the judiciary level that result in a reevaluation of the social and political positions on federal drug laws criminalizing cannabis? While Justice Neil Gorsuch, during his tenure on the Tenth Circuit, ruled against owners of another dispensary that were fearful of the IRS sharing information with the DOJ in connection with an IRS audit, Justice Gorsuch also stated in that decision that the federal government was sending mixed messages about distribution of cannabis and he was skeptical about the IRS not divulging information with the DOJ.
The Food and Drug Administration (FDA) is accepting comments to help formulate the United States’ position on the World Health Organization’s recommendations on certain drug substances, including cannabis extracts and cannabidiol (CBD), in preparation of a meeting of the United Nations Commission on Narcotic Drugs (Commission) to be held on March 2018.
In November 2017, after the WHO Expert Committee for Drug Dependence (Expert Committee) met, the Expert Committee issued its recommendations for scheduling various substances under international control, pursuant to international treaties such as the 1971 Convention on Psychotropic Substances (1971 Convention) and the 1961 Single Convention on Narcotic Drugs (1961 Convention). The Expert Committee did not include CBD among those substances, stating instead that “there is no evidence that CBD as a substance is liable to similar abuse and similar ill-effects as substances in 1961 or 1971 Conventions.” The Expert Committee concluded that the current information does not justify scheduling of CBD.
The Expert Committee went on, however, to note that CBD is produced for pharmaceutical purposes as an extract of cannabis, and cannabis extracts and tinctures are included in the 1961 Convention. In that regard, cannabis extracts are listed in Schedule I of the 1961 Convention which contains drugs subject to the least stringent controls, unlike Schedule I of the US Controlled Substances Act (CSA) which contains substances subject to the most stringent controls. The requirements for substances identified on Schedule I of the 1961 Convention, such as cannabis extracts, include import and export authorization, licensing of manufacturers/ distributors, recordkeeping requirements, medical use prescriptions, annual estimates of needs, quotas and statistical reporting, and limitations on use for medical and scientific purposes. As part of its recommendations report, the Expert Committee advised that it will conduct a pre-review of cannabis extracts and tinctures at its next meeting in May 2018, and it recommend that it also carry out at that meeting a critical review of cannabis extracts and preparations that contain almost exclusively CBD. Continue reading FDA Accepting Comments on CBD for UN Commission Meeting→
Articles appearing this week in the LA Times and the Philadelphia Inquirer, among other recent articles, highlight the horrors of the opioid crisis and the need for research into cannabis as a possible solution. While the federal government warns about the spiraling toll of the opioid epidemic, it refuses to grant the applications of world-renowned scientists at major universities and research centers seeking to explore the ways in which the well-documented therapeutic properties of cannabis can alleviate the pain and suffering – physical, emotional and financial – being caused by opioid abuse. There is no shortage of deep pockets willing to fund the research, and US-based scientists are ready, willing and able to get to work, yet the federal government refuses to depart from its antiquated “reefer madness” established in the early 20th Century. 2018 should be the year the federal government stops blocking cannabis research so that scientists can determine if and how cannabis can stem the opioid crisis. Fingers crossed!
Although a member of the family of cannabis sativa that includes marijuana, hemp does not contain levels of THC that produce psychoactive effects, so it is regulated differently than marijuana. Whereas growing, processing, distributing and consuming marijuana are still federally prohibited under the Controlled Substances Act, industrial hemp has seen a revival around the U.S. because its growth, processing and distribution for research purposes is permitted under the 2014 Federal Farm Bill.
Importantly, the expansion of Pennsylvania’s industrial hemp program, and the industrial hemp programs in other states that traditionally raised large tobacco crops, may be helpful to local economies that have been impacted by declines in tobacco growth.
There are more than 25,000 products and/or uses derived from industrial hemp. Research under the PA program includes, among other things, planting methods, such as seed variety trials, fiber or seed yields, optimum fertility levels, pest management; harvesting techniques or product marketing options; or conservation, remediation or biofuel.
Former NFL star Marvin Washington and others yesterday filed a lawsuit in New York against the US Government and Attorney General Jeff Sessions. The suit is seeking to declare the Controlled Substances Act (CSA), which makes cannabis illegal under federal law, unconstitutional as to its classification of cannabis as a Schedule I drug, deeming it as dangerous as heroin. If successful, the suit could result in the immediate national federal legalization of cannabis. Many don’t realize that the CSA replaced another law, the Marihuana Tax Act of 1937, which also was declared unconstitutional in the late 1960s after activist Timothy Leary was arrested for marijuana possession and successfully challenged the law’s validity.
The lawyers behind the suit are well-known in NY cannabis circles and believe they have a legitimate case. Quoted in MJBizDaily, Michael Hiller says bluntly that the CSA “doesn’t make any rational sense, and the federal government knows it.” In addition to Washington, the plaintiffs include two young children, a US veteran and a cannabis industry association all claiming harm by the CSA.
The suit argues that the CSA, or how it was adopted, violated the Due Process Clause, the First Amendment and the Commerce Clause of the Constitution. They claim, among other things, that the main purpose the Nixon Administration pushed for marijuana as a Schedule I drug was to incarcerate African Americans and war protesters, believing they were heavy users of cannabis. In the past the US Supreme Court has upheld the right of the federal government to criminalize cannabis, so there is no way to determine whether their efforts will pay off. Interesting stuff.