By John Schroyer
Overjoyed. Infuriated. Apathetic.
That’s the marijuana industry’s response to the U.S. Drug Enforcement Administration’s decision to say “no” to cannabis rescheduling and “yes” to medical cannabis research. Here’s a closer look at the business and political implications of this week’s DEA verdict.
1. New industry niche
That was at the top of an email from Dr. Sue Sisley, who’s been striving for years to put together a study on the medical efficacy of cannabis for patients with post-traumatic stress disorder.
In April, the DEA approved Sisley’s scientific study involving military veterans and MMJ, and she’s happy the agency now appears ready to sign off on other clinical trials.
“This new policy permits commercial growing operations to be approved with the purpose of producing a product that can be used in research and also for potential commercial sales,” Sisley wrote. “The federal monopoly on the production of marijuana for federally-regulated research, in existence since 1968, is now over.”
Sisley pointed out the DEA’s new policy doesn’t limit new applicants to universities, as initially reported on Wednesday by the New York Times. Instead, Sisley interpreted the DEA’s decision – which refers to “entities” – to mean private companies could now seek permission to grow research-grade marijuana.
That could spawn a new MMJ industry segment.
2. Business & research impact
Many in the cannabis trade disagreed on whether or not the DEA’s new position on research will ultimately produce actionable medical information that could unleash new and improved MMJ products and opportunities.
“It’s just the same runaround that we’ve been hearing for years,” said Steve DeAngelo, the founder and CEO of Harborside Health Center in Oakland, California. “I don’t see a silver lining to this cloud. I’m just profoundly disgusted with the DEA. Their promise of opening up more research is just another lie.”
DeAngelo, for instance, is dubious the DEA and the U.S. Food and Drug Administration will approve a “whole plant study,” as he argues the agencies should.
Pharmacist Joseph Friedman, the chief operating officer of Illinois dispensary PDI Medical, also was doubtful that any potential research could lead to solid benefits for the MMJ industry – because it’s still a Schedule 1 narcotic.
“It’s going to hamper the entire research effort that’s going to show that cannabis can be a very life-saving, life changing-drug,” Friedman said, adding that it will likely be years before the DEA or FDA approve any MMJ-related study.
The message to the industry on Thursday, Friedman said, was: “Stay the course.”
“We’re continuing to fight an uphill battle; but as more states come on board, it’s going to be harder for the federal government to refuse what’s clearly in front of them, and that’s that cannabis is clearly not as dangerous as cocaine and methamphetamine,” he added. Both of the latter are Schedule 2 drugs.
3. Investing impact
From an outsider’s point of view, the DEA’s move could be spun as at least slightly positive.
“We kind of knew that (rescheduling) was not going to happen, and that this was just a lot of headlines and press releases and stories,” said Avis Bulbulyan, the CEO of California-based Bulbulyan Consulting Group.
But here’s what it did do over the past couple of months: “It got a lot of investors interested,” said Bulbulyan. “It’s going to encourage a lot more money to come into the industry.”
Matt Karnes, the founder of New York-based GreenWave Advisors, analogized the DEA’s announcement to the stock market, and said it probably wouldn’t have much impact on cannabis company valuations. That means the cannabis industry remains ripe for good investments, he said.
“It’s the status quo, from a valuation standpoint,” Karnes said. “Had the DEA rescheduled, or there were some progress, perhaps it could have raised valuations in the sector. So it’s still a good entry point.”
In fact, Wall Street’s initial reaction to the DEA’s announcement was muted.
An index of publicly traded U.S. stocks developed by MarijuanaIndex.com showed the market remained unchanged Thursday from where it started the day. GW Pharmaceuticals – the largest company in the index with perhaps the most to gain from rescheduling – was up 1.1%.
4. Political impact
The political ramifications of the DEA’s decision are a mixed bag.
Conceivably, Democrat Hillary Clinton – the current front-runner to become the next president of the United States – could renege on her campaign pledge to move cannabis from Schedule 1 to Schedule 2, despite reiterating that promise on Thursday.
“I’m 90% sure she will (not reschedule),” Bulbulyan said. “I definitely think she’s going to use this as an opportunity to say, ‘The DEA has had an opportunity to look at it … and it would be premature for me as president to reschedule.'”
There’s also the chance that the momentum from the DEA’s move Thursday could spur action in Congress on further cannabis reform, either on banking or taxes or other MMJ-related issues, Karnes said.
“It’ll put the pressure on Congress” to enact further reforms, Karnes said.
The DEA’s rejection of rescheduling will no doubt give fresh ammo to opponents of marijuana legalization. The agency, for example, said cannabis “does not meet the criteria for currently accepted medical use in treatment in the United States.”
But DeAngelo predicted the DEA’s decision will inflame pro-marijuana voters across the country and likely give even more of a boost to the eight or more cannabis legalization state ballot measures. Those campaigns could wind up having a much bigger impact on the national marijuana policy debate than Thursday’s decision by the DEA.
“Every single cannabis person that I’ve talked to so far is just more energized, more fired up, and more enraged by this,” DeAngelo said. “We will take that anger, and we will turn it into campaign donations and votes.”
5. Hemp impact
A less publicized segment of the DEA’s announcement concerned industrial hemp. The agency spelled out a “statement of principles” governing the legalized growing and cultivation of of industrial hemp for research purposes.
“There are two positives from the DEA announcement,” said Eric Steenstra, executive director of the Hemp Industry Association. “One is that it confirms that private parties can conduct pilot programs under the authority of the U.S. Department of Agriculture. That had been previously disputed by the DEA.”
The other positive: Hemp grown under the 2014 Farm Bill can qualify for USDA research funding. “It makes hemp eligible for the same kinds of research funding that other crops have had available to them,” Steenstra said.
John Schroyer can be reached at [email protected]