North America is enjoying the benefits of its budding marijuana industry. According to ArcView, a pot research company collaborating with BDS Analytics, legal cannabis sales grew 33 percent to reach $9.7 billion just last year in North America alone. Over the next decade, forecasters predict that legal weed sales will exceed $47 billion. Pot stocks are positively soaring.
This type of fast growth, combined with increasing public support for marijuana, is the biggest catalyst for investors. They would be foolish to overlook this market. All across North America, emerging marijuana businesses have been growing in numbers over the last 20 years. Back in 2001, our northerly neighbor, Canada, legalized weed for medical use.
Now, Canada looks about ready to become the world’s first developed country to legalize it recreationally too, which it plans next month. Meanwhile, our southerly neighbor, Mexico, approved medical cannabis in June last year. Within the United States, only 29 states have made marijuana legal in some or other capacity since California legalized medical use back in 1996.
Cannabis Rescheduling Gaining Momentum
However, unlike our neighbors north and south, the United States has yet to legalize marijuana at the federal level. Classified by the U.S. Drug Enforcement Administration as a Schedule I drug, cannabis is still illegal, with the federal government claiming it highly prone to abuse and devoid of any recognized medicinal benefits. This lie continues to secure its classification alongside drugs such as heroin and LSD.
Despite this, earnest calls to reclassify marijuana continue to gain momentum. According to a Gallup poll, in just the United States, support for full legalization grew from just 25 percent back in 1995, just before California approved cannabis for compassionate-use patients, to 64 percent by October last year. It appears that the vast majority of participants in the survey want marijuana legalized.
Should the federal government heed this public pressure, it would, at the same time, provide it with a new stream of tax revenue, as well as empower the pot industry to create many, many jobs that would employ people both directly and indirectly. Additionally, evidence is mounting that marijuana, and all cannabinoid-derived drugs, have huge medicinal value.
GW Pharmaceuticals (NASDAQ: GWPH,) a cannabinoid drug developer based in the United Kingdom, proved conclusively how its lead drug, Epidiolex, reduces both frequency and severity of seizures in Lennox-Gastaut syndrome and Dravet syndrome, two rare types of childhood-onset epilepsy. In several phase 3 clinical trials, Epidiolex performed outstandingly.
Epidiolex, the company’s most famous drug, easily achieved statistical significance in decreasing the frequency of seizures relative to baseline, and it did the same when compared to a placebo. In a month’s time, Epidiolex may well become the very first cannabinoid-derived medication ever to receive approval from the U.S. Food and Drug Administration, or the FDA.
Rescheduling Cannabis Risks Severe Repercussions
Just last month, Senate Minority Leader Chuck Schumer, a Democrat from New York, announced his plans to introduce a new bill that would decriminalize cannabis completely at the federal level, which would finally remove it from the decrepit controlled substances list. Perhaps obviously, removing it from the strictest classification possible and putting it on the other side of the spectrum seems very unlikely.
Rather, several lawmakers on Capitol Hill are proposing to reschedule marijuana instead. Doing so would immediately legalize cannabis for medical use, but it would still be a substance requiring regulation. Of all scenarios possible, removing it from Schedule I and adding it to Schedule II, a category for drugs with recognized medical uses and a high probability of abuse, would have the highest chance of success.
Sadly, rescheduling marijuana could end up backfiring on the very people fighting hardest for its legalization, which are legitimate medical patients. If the government moves cannabis from Schedule I to Schedule II, the whole world will herald it as a victory for both patients and the cannabis movement in general. However, it would also give the FDA total control over the entire industry.
FDA Regulations a Potential Nightmare for the Industry
Try to imagine the cannabis industry with the FDA controlling it. For starters, the FDA would have complete authority over all marketing and packaging of products. Since substances listed as Schedule II drugs are only for medical use, this may not be a huge problem. It would mean childproof, tamper-resistant packaging, but nothing over the top or too out of the ordinary.
However, the FDA would also govern all cultivation, manufacturing and distribution of medical marijuana. Of particular import, it would have full autonomy overseeing the consistency of tetrahydrocannabinol, or THC, content in every crop. THC is the marijuana component that gets you “high.” It gets worse, though, as we can be sure that the FDA will not stop there.
It may also decide it wants to monitor the consistency of cannabidiol, or CBD, which is non-psychoactive and does not make you “high.” CBD, as it just so happens, is also the primary ingredient in GW Pharmaceutical’s Epidiolex. Perhaps most scary of all, the FDA may also force companies working with medical marijuana to run FDA-approved clinical studies to prove that weed helps specific illnesses.
Not only would such an endeavor be insanely expensive and time consuming, it would also be impractical in many ways and borderline criminal in others. Mandating FDA-approved studies would remove medical marijuana from a variety of indications that many patients currently benefit from, at least for the time being, until the completion of clinical trials and eventual approval by the FDA.
If that is not worrisome enough, Section 280E of the U.S. tax code still applies to Schedule II substances. Companies selling them would be subject to this law, which is more than three decades outdated and exempts businesses, those selling Schedule I and Schedule II substances specifically, from taking normal deductions on their corporate income tax.
Change Will Not Come Soon
Changing marijuana from its current classification into a Schedule II drug could be much worse for the industry than leaving it as is. Maybe that is why two congressional representatives from Florida, Republican Matt Gaetz and Democrat Darren Soto, are introducing at federal level a bill to move weed to Schedule III. Doing so would give states regulatory control and limit FDA overreach in the industry.
However, regardless of how many times lawmakers draft new bills for the federal government to consider, change seems a very long way away, especially meaningful change. Jeff Sessions, Attorney General of the United States, remains ardently opposed to a legal marijuana industry. It appears he will do everything he can to thwart all efforts to decriminalize or reschedule the plant.
Meanwhile, despite showing support for the right of states to regulate marijuana within their own borders, President Donald Trump has issues that are more worrisome on his plate. Cannabis reform forms no part of his agenda, so expect little direction from him. It seems likely that marijuana will stay a Schedule I drug for some time yet, and if this changes, patients, investors and users should stay wary.