Epstein Becker Green: Federal Update on Cannabis Scheduling: Are State Legalized Cannabis Dispensaries to Become Pharmacies?

Epstein Becker & Green

A major update in cannabis law was announced by the Drug Enforcement Administration (DEA) and Attorney General (AG) this past Tuesday, April 30, 2024 regarding their intent to ease restrictions on cannabis. The DEA plans to recommend that cannabis be rescheduled as a Schedule III substance under the Controlled Substances Act (CSA). This announcement follows mounting federal support over the course of the last few years to reschedule cannabis, which has been listed as a Schedule I substance since 1970.

Although it is possible to change the schedule status of a substance per the CSA via the legislative and executive branches, 21 U.S.C. § 811 allows the AG to also effectuate a transfer of substances between the CSA Schedules. The Code allows for an interested party to petition the AG to amend substance classification. The substance may only be transferred or added to a schedule if the AG: (a) finds that such drug or such substance has a potential for abuse; and (b) undergoes a review process to determine whether the drug would fall under a different Schedule per the requirements of 21 U.S.C. § 812(b). Additional factors for cannabis rescheduling include the following: (1) its actual or relative potential for abuse; (2) scientific evidence of its pharmacological effect, if known; (3) the state of current scientific knowledge regarding the drug or other substance; (4) its history and current pattern of abuse; (5) the scope, duration, and significance of abuse; 6) what, if any, risk there is to the public health; (7) its psychic or physiological dependence liability; and (8) whether the substance is an immediate precursor of a substance already controlled. 21 U.S.C. § 811(c).

Once the DEA and AG determine that rescheduling is in line with the substance classification requirements, they must publish the proposed rule in the Federal Register in order to begin the comment period. Although the amount of time is typically 30-60 days, agencies may allow for longer comment periods for more complex rulemaking. Regardless, the length of the comment period must be disclosed to the public in the Federal Register. Upon the conclusion of the comment period and any related hearings, the AG and DEA may issue their final rule.

On August 29, 2023, we first heard about an actionable recommendation regarding cannabis from a federal agency, the U.S. Department of Health and Human Safety (HHS), which called upon the DEA to review the scheduling of cannabis, citing previous studies conducted by the Food and Drug Administration (FDA) wherein they noted that cannabis or its derivatives may have clinical uses. This recommendation from the HHS is considered a petition from an interested party that the DEA must consider. After eight months of review, the DEA has now announced that they will propose their own recommendation. However, they cannot do so until they receive approval and sign off from the Office of Management and Budget (OMB). Once that approval has been obtained, the DEA will submit a Notice of Proposed Rulemaking which will outline the details for cannabis rescheduling. Only after the public has been allotted time to review and comment can the DEA move forward with their final rule.

Please note that as we discussed in our last post on this subject, the re-classification of cannabis in Schedule III would not make cannabis legal for every use at the federal or state level. Instead, rescheduling to Schedule III will mean that cannabis is recognized by the DEA as having “a currently accepted medical use in treatment in the United States.” This is a stark shift from what it means to be classified as a Schedule I substance, which are deemed to have no currently accepted medical use in treatment in the United States. Additionally, when and if re-classified to a Schedule III controlled substance, all transactions with Schedule III controlled substances must take place within a “closed system” of distribution established by Congress. Under the framework of the CSA, and within the “closed system” created by the CSA, all legitimate handlers of controlled substances—manufacturers, distributors, physicians, pharmacies, and others—must be registered with the DEA (unless exempt) and maintain strict accounting for all controlled substance transactions. A controlled substance transaction under the framework of the CSA traditionally means that a controlled substance is manufactured by a DEA licensed manufacturer and distributed to a DEA registered and state-licensed pharmacy, which license and registration authorize the pharmacy to obtain and dispense controlled substances. In order to dispense a controlled substance within this closed and controlled system, amongst other requirements, the following must be adhered to:

  • a pharmacy that dispenses a controlled substance (whether a Schedule II – V controlled substance) must be registered with the DEA (21 U.S.C.823(f) and 21 CFR 1301.11(a)) and must obtain a state pharmacy license (21 U.S.C. 823(f));
  • a pharmacy that dispenses a controlled substance (whether a Schedule II – V controlled substance) must register as a new pharmacy and the DEA Form 224 must be completed (21 CFR 1301.13(e)(1)(iv));
  • a pharmacy that dispenses a controlled substance (whether a Schedule II – V controlled substance) can only dispense a controlled substance that has been prescribed for a legitimate medical purpose by a practitioner acting in the usual course of professional practice. An order purporting to be a prescription that is not issued for a legitimate medical purpose in the usual course of professional treatment or in legitimate and authorized research is not a prescription within the meaning and intent of 21 U.S.C. 829. The person knowingly filling such a purported prescription, as well as the person issuing it, shall be subject to the penalties provided for violations of the provisions of law relating to controlled substances. 21 U.S.C. 841(a)(1) and 21 CFR 1306.04(a); and
  • every practitioner who dispenses, which includes by definition administering and prescribing, controlled substances in Schedules II through V, must be registered with the DEA (21 U.S.C. 802(10), 21 U.S.C. 822(a)(2), and 21 CFR 1301.11(a)) and must hold a controlled dangerous substance state license (21 U.S.C. 823(f)). The term practitioner means a physician, dentist, veterinarian, scientific investigator, pharmacy, hospital, or other person licensed, registered, or otherwise permitted, by the United States or the jurisdiction in which he practices or does research to distribute, dispense, conduct research with respect to, administer, or use in teaching or chemical analysis, a controlled substance in the course of professional practice or research.

Given the DEA’s recommendation of rescheduling cannabis to Schedule III, does the DEA intend to require medicinal cannabis dispensaries (or even adult-use cannabis dispensaries) to obtain pharmacy licenses from the States in which they operate and federal DEA registrations as is required under the CSA or will the DEA create an exemption from such licensure and registration? How state-legalized cannabis dispensaries (whether medicinal or adult-use dispensaries) will fit into the “closed and controlled system” under the current CSA framework is unclear at this point, but is certainly something for existing state-legalized cannabis businesses to consider as they exalt the DEA’s recommendation to reclassify cannabis.

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