HSS Releases Full Recommendation Report for Rescheduling Cannabis: What Will This Mean for Med & Rec Markets?

The U.S. Department of Health and Human Services (HHS) recommended that the Drug Enforcement Agency (DEA) reshedule cannabis as a Schedule III substance in August of 2023. The recommendation for rescheduling cannabis marked the first time a government agency officially recognized cannabis’ medical benefits. Though the recommendation was announced over 6 months ago — the HSS’ report outlining their reasoning for the recommendation only recently became publicly available. 

Here’s a summary of the HSS’ arguments for rescheduling cannabis:

1.  Although there are high levels of cannabis abuse, abuse of the substance has far less harmful consequences than the abuse of Schedule II and I substances like cocaine, heroin, and OxyContin.
2.  The HSS found strong scientific support regarding cannabis’ medically beneficial effects for conditions like anorexia, nausea, and chronic pain. The HSS also pointed out studies with weaker evidence suggesting cannabis can potentially help with conditions like PTSD, epilepsy, and anxiety.
3.  Cannabis use has a low potential to cause physical or psychological dependence. 

The ball is now in the DEA’s court regarding when rescheduling will actually happen. Unfortunately, there is no indication that this change will materialize anytime soon. 

So, while we wait for the snail-paced wheels of the federal government to churn out this long-awaited change, let’s take a look at the possible impact that rescheduling could have on the cannabis industry when this decision finally comes to fruition.

From One to Three: What Does This Change Actually Mean?

Let’s make one thing clear, rescheduling cannabis does not mean that it is suddenly federally legal. That means that the cannabis industry’s built-in conflict between federal and state-level regulations is likely to continue. That said, rescheduling will definitely remedy one major headache for cannabis business owners — taxes!

Going from selling and manufacturing a Schedule I substance to a Schedule III substance means that cannabis businesses no longer have to contend with Internal Revenue Code 280E. The code essentially blocks businesses selling or trading schedule I or II substances from claiming deductions or credits. This means massive tax savings for cannabis businesses!

The other big change that comes with rescheduling is an increase in cannabis research opportunities. As it currently stands, the Controlled Substance Act makes it incredibly difficult for the DEA and outside research groups to grow cannabis products for the purpose of research. A schedule III classification means scientists will have an easier time sourcing the plant — though cannabis growing for research purposes will still be subject to significant regulation.

The Longterm Implications of Rescheduling Cannabis

Though the improvements facilitated by cannabis’ forthcoming rescheduling may seem small — in the long run — they have the potential to bring the budding industry into a new era. 

Clearing the monetary burden caused by Code 280E will free cannabis businesses to thrive, not just survive. As Oregon-based research firm Whitney Economics highlighted, in 2022 state-legal cannabis businesses paid more than $1.8 billion in excess taxes when compared to non-cannabis businesses. With these tax savings in hand, cannabis businesses can increase research and development spending, improving product quality in the process. Improved product offerings will give the cannabis industry another advantage in it’s fight against the ever-lurking illicit market — hopefully — leading to industry growth. 

Speaking about research and development, think about all the new cannabis studies that can happen when you allow researchers to more easily access the plant. Despite all the new cannabis research we cover right here at Veriheal, much of it is held back from reaching real conclusions because of cannabis’ current scheduling status. Increasing researcher access to cannabis increases the potential to not only learn more about the plant’s medical properties but to turn those findings into science-backed recommendations and medicine. 

Cannabis research goes beyond expanding medical options available to humans; it also allows us to take better care of our furry friends. Dr. Joseph Wakshlag from Cornell University’s College of Veterinary Medicine says rescheduling cannabis will “open the door” to veterinary cannabis research. This opens a new world of opportunities for a cannabis industry eager to diversify.

Though it may not be full-on legalization, it is clear that the start of the cannabis industry’s next era starts with rescheduling cannabis.