On April 30, the U.S. Drug Enforcement Administration (DEA) moved to reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA) – a major shift in policy with significant implications for health centers funded under Section 330 of the Public Health Service Act and other federal grantees. The White House Office of Management and Budget still must review the decision and receive public comment, but the DEA’s announcement represents a clear sign that the change is likely to occur in the coming months.

“Today, the attorney general circulated a proposal to reclassify marijuana from Schedule I to Schedule III,” the U.S. Department of Justice’s director of public affairs, Xochitl Hinojosa, said in a statement on April 30. “Once published by the Federal Register, it will initiate a formal rulemaking process as prescribed by Congress in the Controlled Substances Act.”

The DEA’s decision to reclassify marijuana has been highly anticipated. Although 38 states and territories have legalized medical marijuana in recent years, medical providers at health centers receiving federal funding were not permitted to prescribe medical marijuana to patients outright, due to the fact that marijuana remained illegal at the federal level—and prescribing an illegal drug could put health centers’ federal funding at risk.

While reclassifying marijuana as a Schedule III drug under the CSA will lead to more flexibility in some instances (especially for scientific researchers using marijuana as part of their experiments), health centers still would be barred from prescribing marijuana until further approvals are achieved. Undoubtedly, the rescheduling better aligns federal law with state legalization efforts and offers a clearer roadmap for decision-making by medical providers as it pertains to patients’ marijuana use—but the shift to Schedule III is not a panacea that legalizes marijuana for all uses.

Rescheduling Review Background

Marijuana has been classified as a Schedule I drug since 1970, when the CSA list was first created. Any drug listed as a Schedule I classification has a high potential for abuse, no currently-accepted medical use treatment in the United States, and lacks accepted safety for use under medical supervision. Drugs such as heroin, ecstasy and LSD also are included in Schedule I.

In October 2022, following a growing number of marijuana legalization efforts at the state level, the Biden Administration directed the U.S. Department of Health and Human Services (HHS) to undertake a review of marijuana’s classification. After it performed its medical and scientific evaluation, HHS recommended to the DEA in August 2023 that marijuana be reclassified as a Schedule III drug under the CSA. A substance can be placed as a Schedule III drug under the CSA when (i) it has a potential for abuse less than Schedule I or III drugs; (ii) it has a currently accepted medical use in treatment in the United States; and (iii) its abuse may lead to moderate or low physical dependence or high psychological dependence.

The CSA provides that the DEA can “transfer between [] schedules” any drug that meets the criteria to be included in the “schedule in which such drug is to be placed” or to “remove any drug…from the schedules” if it no longer “meet[s] the requirements for inclusion in any schedule.” See 21 U.S.C. § 811.

As the DEA continued its own review in January 2024, the HHS’ scientific findings in support of its rescheduling recommendation were released to, and published by, news outlets, placing heightened pressure on the DEA to come to a decision. The agency acknowledged in late January that it was engaged in conducting its review.

Biden and Harris Favored a Quick Decision

As Biden administration officials awaited the DEA’s decision in early 2024, the president and vice president made notable comments indicating the administration’s desire for a groundbreaking decision that they could point to as a victory for reform efforts during the 2024 campaign season:

• In his State of the Union address in early March 2024, President Biden touted the mass pardons he has issued for marijuana use and noted that he has “direct[ed] his Cabinet to review the federal classification of marijuana.”
• In a marijuana reform roundtable on March 15, Vice President Harris commented that it is “absurd, not to mention patently unfair” that marijuana is considered as dangerous as heroin and more dangerous than fentanyl.

These high-level remarks ignited a buying spree in the stock market. During the week of March 18, cannabis stocks experienced substantial growth, with commenters noting that the positive statements by Biden administration officials on reclassifying marijuana to a Schedule III substance under federal law led to the gains.

Takeaways for Health Centers and Other Federal Grantees

Although rescheduling marijuana as a Schedule III drug represents a clear indication, at the federal level, of marijuana’s medical uses, the move from Schedule I to Schedule III, without any other changes, likely would not allow marijuana to be prescribed as a medicine right away. Although substances listed as part of Schedule III may be lawfully dispensed by prescription because they have an accepted medical use, all prescription drugs need FDA approval—and marijuana itself is not yet an FDA-approved drug.

According to a Congressional Research Service report published in January: “Moving marijuana from Schedule I to Schedule III, without other legal changes, would not bring the state-legal medical or recreational marijuana industry into compliance with federal controlled substances law.”

For other federal grantees, such as research institutions, the reclassification of marijuana as a Schedule III substance means far fewer restrictions on research. Although scientists have long wanted to conduct more research on marijuana to better understand its benefits and risks, researchers have faced an arduous process of needing to first register with the DEA in order to study marijuana as a Schedule I substance. Researchers also have had to follow strict requirements relating to drug storage in electronic safes and vaults. Even in states where marijuana is legal both medically and recreationally, researchers conducting experiments would risk losing federal funding for their universities if such protocols were not followed. Although hurdles would still exist if marijuana were to be reclassified as a Schedule III substance, the decision would pave the way toward increasing scientific research of marijuana’s medical uses.

Please join Feldesman Leifer attorneys Molly S. Evans and Mindy B. Pava for “Navigating the Haze: Marijuana and Changes to Federal Law”—a webinar addressing the DEA’s decision to reclassify marijuana as a Schedule III drug and what that decision means for federally-funded health centers, research institutions, and other entities and their drug-related policies—on May 29 at 1 p.m. For more information, please click here.

For more information on this topic, please contact Molly S. Evans at mevans@feldesman.com or Mindy B. Pava at mpava@feldesman.com.