Speaking at a cannabis industry event on Thursday, a former Food and Drug Administration (FDA) official said he’d be “shocked” if the Drug Enforcement Administration doesn’t reschedule marijuana by next year’s presidential election.
“I would be really shocked if it took the DEA longer than the second quarter of next year to come up with its final rule,” said Howard Sklamberg, former FDA deputy commissioner for global regulatory operations and compliance. “Even when I was at FDA, we knew that important regulations that you wanted to get done in an election year, you want to get done by the summer before.”
Sklamberg also said he expects DEA will ultimately accept the FDA’s recommendation to put cannabis in Schedule III of the Controlled Substances Act (CSA) instead of reaching a contradictory scheduling decision.
“I personally would be surprised if DEA did not agree ultimately with FDA and [the Department of Health and Human Services]’s decision,” Sklamberg, who served as chair of FDA’s Marijuana Working Group from 2014 to 2017, said. “It certainly would be strange, in an issue that is such an important priority for the administration, for one part of the administration to reverse what another one has said.”
Sklamberg, now a lawyer at the firm Arnold and Porter, was one of a handful of panelists who spoke during a Thursday webinar hosted by the American Trade Association for Cannabis and Hemp’s (ATACH) Capital Markets Council. Others included Andrew Kline, a former policy advisor to then-Vice President Joe Biden (D) who’s now at the law firm Perkins Coie, and Adam Goers, a senior vice president at the multi-state marijuana operator The Cannabist Company (formerly Columbia Care).
The group’s mood toward August’s rescheduling recommendation was decidedly upbeat. “I’m really looking forward to this conversation,” Kline said at the start of the event, “and getting people to the place where they understand that this is a really good thing.”
Sklamberg called the possible move “a giant step in the right direction and one that, probably, you know, four years ago, most people would not have foreseen.”
In perhaps the most meaningful change for existing marijuana businesses and would-be operators, the panel said, rescheduling cannabis to Schedule III would free companies from an Internal Revenue Service (IRS) tax code rule known as 280E, which currently prohibits cannabis companies and other federally illegal businesses from taking standard business deductions.
“Schedule III fixes 280E. I think we should put that on a bumper sticker somewhere,” Klein said. “Schedule II does not.”
That change alone could have a sweeping impact on business, he noted. “Instead of paying an effective 80 percent tax rate, companies are going to be paying an ordinary 21 percent tax rate,” he said. “You don’t need to be a mathematician to see that this is going to create profitability overnight.”
And while some have worried that rescheduling could threaten state-legal marijuana systems, Goers at The Cannabist Company said he’s confident business would continue more or less as usual.
“One of the things I would say, for people who have fear of what the unknown ahead would be in Schedule III, is that companies will break Schedule III law in state-regulated markets just like they do Schedule I today, except much more enthusiastically without 280E over our heads,” he said. “That’s going to be impactful for companies big and small, social equity and otherwise, and particularly for companies that are not vertically integrated.”
Goers’s confidence is at odds with worries by some in the legal industry that a move to Schedule III could actually lead to a host of obstacles as FDA and DEA rebalance their enforcement priorities.
In an op-ed for Marijuana Moment, for example, Khurshid Khoja, founder of the business law firm Greenbridge Corporate Counsel and chair emeritus for the National Cannabis Industry Association, warned that large cannabis companies were getting ahead of themselves by celebrating rescheduling as a win.
“In their rush to declare victory before fully assessing and addressing all downstream legal effects of rescheduling,” Khoja wrote, “large multi-state cannabis operators could risk permanently enshrining an ill-suited federal regulatory framework.”
But at Thursday’s webinar, former FDA official Sklamberg downplayed those worries.
“I do not think that people should be worried at all about any kind of increased FDA enforcement role with respect to state cannabis programs based on the change in schedule to Schedule III,” he said. “And I can’t be more emphatic about that.”
In response to a question from Marijuana Moment, Sklamberg also weighed in on recent comments that a senior State Department lawyer made to a United Nations (UN) body asserting that international drug treaties should grant member states considerable leeway on domestic policy—remarks that some observers read as the Biden administration posturing against any argument that global agreements would prevent a move to Schedule III for cannabis.
“You can interpret what the State Department official said as saying, ‘Well, we’re looking to interpret the treaty as really only affecting scheduling decisions insofar as they would affect the international posture of the U.S., as opposed to the internal workings of our state markets,’” he said. “That would be the most logical reading of it, and that of course would be helpful.”
While he said it was possible the official was speaking off the cuff, Sklamberg acknowledged the comments highlighted a possible path DEA could take if they choose to address the country’s drug treaty obligations.
“I think if a DEA official wanted to get to Schedule III and it couldn’t,” he said, “it could use the logic that that State Department official used.”
In 2016, DEA rejected a separate rescheduling petition on the grounds that “in view of United States obligations under international drug control treaties, marijuana cannot be placed in a schedule less restrictive than schedule II.”
Prior to the HHS recommendation in August, Sklamberg participated in an event that month at which he predicted that a move to Schedule III would be the most likely outcome of the marijuana review directed by Biden.
Previously, Sklamberg contributed to a report on scheduling considerations that was released in June by the Coalition for Cannabis Scheduling Reform. And in February, he discussed the issue in a memorandum he authored on behalf of Columbia Care.
Since HHS issued its rescheduling recommendation to DEA in August, many in the industry have clamored to explain the implications of the possible move. Others have warned that businesses are basing their enthusiasm on very little public evidence.
Months after news of the rescheduling memo leaked, the government released the correspondence—as the result of a Freedom of Information Act (FOIA) request—in highly redacted form. The redactions obscure virtually the entire substance of the message, such as the scheduling recommendation itself and a scientific review portion that was attached to the letter.
The document, sent to DEA Administrator Anne Milgram, says that the HHS recommendation was based on “the eight factors determinative of control of a substance under 21 U.S.C. 81 1 (c).”
While the Congressional Research Service (CRS) recently concluded that it was “likely” that DEA would follow the HHS recommendation based on past precedent, DEA reserves the right to disregard the health agency’s advice because it has final jurisdiction over the CSA.
Meanwhile, six former DEA heads and five former White House drug czars sent a letter to the attorney general and current DEA administrator last month voicing opposition to the top federal health agency’s recommendation to reschedule marijuana. They also made a questionable claim about the relationship between drug schedules and criminal penalties in a way that could exaggerate the potential impact of the incremental reform.
Signatories include DEA and Office of National Drug Control Policy heads under multiple administrations led by presidents of both major parties.
Advocates and lawmakers who support cannabis reform separately marked the one-year anniversary of Biden’s mass marijuana pardon and scheduling directive this month by calling on him to do more—including by expanding the scope of relief that his pardon had and by expressly supporting federal legalization.
Two GOP senators, including the lead Republican sponsor of a marijuana banking bill that cleared a key committee last month, recently filed new legislation to prevent federal agencies from rescheduling cannabis without tacit approval from Congress.
A coalition of 14 Republican congressional lawmakers is also urging DEA to “reject” the top federal health agency’s recommendation to reschedule marijuana and instead keep it in the most restrictive category under the CSA. (Full Story)