Week in Review: California is official, GW’s epilepsy drug & Illinois resignation

By Omar Sacirbey and John Schroyer

California’s recreational marijuana campaign makes the November ballot, GW Pharmaceuticals’ MJ-based epilepsy drug could play a role in DEA rescheduling, and a possible new dawn in Illinois’ medical cannabis program.

Here’s a closer look at some notable developments in the marijuana industry over the past week.

California taxin’

Recreational marijuana may be poised for one of its biggest victories, now that the Adult Use of Marijuana Act has officially been placed on the 2016 general election ballot in California. All current signs suggest victory – but some legalization advocates aren’t ready to celebrate.

First, a little perspective: California is the world’s eighth-largest economy in the world. The state would more than double the current nationwide recreational market, given its population of nearly 40 million. According to Chris Walsh, editorial director of Marijuana Business Daily, sales for the California recreational market alone would exceed the existing level of nationwide sales for both medical and recreational cannabis.

But Sean Donahoe, a California cannabis political consultant, worries that local elections could impose steep taxes on adult-use cannabis products – a move that could breathe further life into the black market.

Local governments, he noted, “can’t make profits off this unless you ask your voters.”

He predicts most municipalities offering a legal market will probably ask voters to impose marijuana-related taxes.

“And if the cannabis industry isn’t organized at the local level, then it can wind up being something very painful,” Donahoe warned.

He pointed to Santa Barbara, where the city council this week finalized a November ballot question asking voters to approve a 20% tax on both medical and recreational marijuana. The proposed tax hike will appear on the same ballot as the AUMA.

“There will be a wave of these that will be appearing in the next month or so,” Donahoe predicted.

Under state law, he said, the only taxes local governments can impose unilaterally are those that recoup administrative costs – as opposed to taxes that could dedicate funds to other causes, such as public infrastructure.

So any local government that wants to make money from legalization may well ask voters to approve a new tax. And depending on what local officials decide is appropriate, taxation levels could be sky-high – like the Santa Barbara proposal – or more modest.

GW Pharma trials swaying rescheduling?

After the latest successful clinical trials involving its cannabis-based epilepsy medicine Epidiolex, GW Pharmaceuticals could have the product on the market by the “beginning” of 2018, said an investment analyst who follows the publicly traded company.

In fact, the British company is expected to file a new drug application with the Food and Drug Administration early next year.

But the impact of those clinical trials could be felt sooner than that: namely, when the Drug Enforcement Administration announces whether it will remove marijuana from its list of most dangerous drugs. That’s expected soon.

Currently, the DEA has marijuana on its Schedule I list of controlled substances. Schedule I drugs – think heroin and LSD – can’t be sold legally. By contrast, Schedule II-V substances can be sold with prescriptions.

Epidiolex is not on the DEA’s schedule lists. But because Epidiolex is a marijuana-derived product, it technically falls under Schedule I status. So before Epidiolex can go on the market, the DEA must classify it in one of the schedules that permits drugs to be sold legally.

The decision isn’t entirely up to the DEA. If the FDA approves a drug, the DEA must put it on a schedule that permits legal sales. That means that if the FDA approves Epidiolex, the DEA would have to put a cannabis-derived medicine on a schedule other than Schedule I.

“If it gets approved by the FDA, I’m sure it will be rescheduled,” Maxim Jacobs, North American director of healthcare research for Edison Investment Research, said of Epidiolex.

GW CEO Justin Gover recently told analysts “our objective is to be in a relatively low restricted schedule.” GW executives will likely meet with FDA officials this year about their upcoming drug application.

Could Epidiolex’s positive news persuade the DEA to reschedule cannabis now?

“Sure,” Jacobs speculated. He reckons the DEA has been watching the Epidiolex trials.

“If the DEA or government is of the mindset a substance is only bad, they will of course give it a worse scheduling then a substance that does have some benefits,” said Jacobs. “This shows a cannabis-derived medicine is effective.”

In IL, new director brings fresh hopes

This week’s resignation of Joseph Wright as chief of Illinois’ medical marijuana program has given at least one cannabis executive in the state hope that the new director can reorganize what he says is a disjointed program.

In Illinois, the MMJ regulatory system is bifurcated. The state agriculture department regulates the cultivation centers and the Illinois Department of Financial & Professional Regulation oversees dispensaries.

“Anything they can do to streamline communication between the two is only going to help the industry,” said Jeremy Unruh, general counsel and chief compliance officer at Pharmacann, which has two cultivation centers and four dispensaries in Illinois.

Luckily, Unruh said, the man stepping into Wright’s shoes, Jack Campbell, is coming from the agriculture department’s Bureau of Medicinal Plants, which manages the cannabis sector’s cultivation side.

“There are a lot of industry hiccups in the commerce from the cultivation centers to the dispensaries. And I think he will now have vision into both silos and will be in a unique position to help smooth out the industry bumps between those two halves of our industry.”

The agriculture department’s responsibility for a cannabis batch ends once a dispensary receives and signs off on a shipment. That’s when the licensing department’s responsibilities begin.

“If there are any hiccups prior to that transition, the dispensaries don’t have a lot of insight into what happened upstream, nor do the cultivators have a lot of insight into what happens downstream,” Unruh said.

So if a mislabeled cannabis shipment arrives at a dispensary, the cultivator may not know about it.

Unruh reckons Campbell is a quick learner.

“I think his ramp up time will be fairly swift,” Unruh said.

Omar Sacirbey can be reached at [email protected]

John Schroyer can be reached at [email protected]

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