The Federal Government and its Mixed Messages regarding CBD

The U.S. Patent Office issued patent #6630507 to the U.S. Department of Health and Human Services (HHS) on February 2, 2001, listing the use of cannabinoids found in the cannabis sativa plant (marijuana) as useful in treating certain neurodegenerative diseases. Scientists with the National Institute of Health (NIH) were searching for antioxidant qualities to help treat degenerative brain diseases when they applied for the patent in 1999. The patent does not cover the entire marijuana plant, only certain non-psychoactive compounds of it, including Cannabidiol (CBD).

Under the Controlled Substances Act, the federal government places drugs into classifications, known as schedules, based on two criteria: their medical value and their potential for abuse. To initiate the process of placement on a schedule, the Drug Enforcement Agency (DEA) first asks whether a drug can be abused. If the answer is yes, then the drug's medicinal value and relative potential for abuse are assessed in order to determine where it should be placed on the scale. In order to be determined as medically valuable, a drug must have large-scale clinical trials to back it up, similar to what the Food and Drug Administration (FDA) requires for all drugs entering the market. The Controlled Substances Act does not clearly define the term “abuse,” but federal agencies responsible for classifying drugs have determined that abuse occurs if people take the substance recreationally and develop personal health hazards or pose risks to society as a whole. Possibly the most medicinally important compound of the cannabis sativa plant, CBD is specifically mentioned numerous times in the patent. Furthermore, the patent states, “No signs of toxicity or serious side effects have been observed following chronic administration of cannabidiol to healthy volunteers, even in large acute doses. . ..”

Relying only on the verbiage of the patent, it is not a stretch to realize that the federal government recognizes certain compounds in the cannabis sativa plant have medicinal properties, and that they are not harmful to humans. In the abstract, government scientists expressed that non-psychoactive cannabinoids like CBD act as antioxidants that appear to aid in the treatment of certain neurodegenerative diseases. By stating that CBD is an antioxidant, they mean it inhibits human brains from oxidizing, better known as aging. They go on to state that cannabinoids could potentially be preventative in limiting damage caused by stroke and other trauma. The patent speculates about the benefits these compounds could offer in treating a variety of other medical conditions, and it validates the potential for these compounds to aid in treating certain degenerative diseases. The issuance of patent #6630507 is a direct contradiction of the government’s own definition for classification of a schedule 1 drug.

Since cannabis sativa contains compounds that are recognized and endorsed by a federal agency, why does marijuana remain on the schedule 1 list of drugs? The big distinction between schedule 1 and schedule 2 substances is whether the federal government thinks a drug has medical value. The DEA has determined that schedule 2 substances have medical value while schedule 1 substances do not. Not only do schedule 1 drugs supposedly have no medical value, they also have high potential for abuse. Substances classified on schedules 2 through 5 have been determined to have medical value, but they differ in rank depending on their potential for abuse. Schedule 1 and schedule 2 drugs have the most regulatory restrictions, schedule 5 drugs have the least. In essence, schedule 1 drugs are effectively illegal for anything outside of research; schedule 2 drugs can be used for limited medical purposes – but only with the DEA's approval. Although limitations vary from drug to drug, the DEA sets strict limits on production of schedule 1 and schedule 2 drugs.

Under federal regulation, there is only one location within the U.S. -- a farm owned and operated by the University of Mississippi -- that is currently allowed to grow marijuana, and it is limited to research purposes. The government claims that it needs more research to realize and interpret long-term outcomes, proper dosage, and individual effects on specific diseases before CBD can be made available to the public. This certainly seems contradictory to the assignment of schedule I status, which is designated for substances that have no medical benefit. By comparison, several private companies produce oxycodone, a schedule 2 substance, for prescription painkillers.

When marijuana's classification has come up for review, its schedule 1 status has been consistently maintained due to insufficient scientific evidence of its medical value. Interestingly, the reason there isn't enough scientific evidence to change marijuana's schedule 1 status is its schedule 1 status. There have certainly been studies confirming marijuana has medical benefits, but these studies haven’t been large enough to meet the threshold required by the DEA to prove its medical value in controlled, large-scale clinical trials. Attempting to change marijuana's schedule is truly a catch-22; there needs to be a certain level of scientific research that proves marijuana has medical value, but the federal government's restrictions make it essentially impossible to conduct the research.   

There are several potential economic benefits to adjusting the schedule 1 status, including tax revenue for states and the federal government, as well as job creation. According to an analysis by New Frontier Data, an estimated 1.1 million jobs could be created by 2025 if marijuana was legalized. But there's actually an economic benefit to the federal government in maintaining the status quo. U.S. tax code 280E, a tax rule dating back more than three decades, prevents businesses that sell federally illegal substances, as defined by the Controlled Substances Act, from taking corporate income tax deductions. Assuming marijuana-based businesses are profitable, they will have to pay federal income taxes, and without deductions they could be on the line for an effective tax rate of up to 70%. Because of the discrepancy between state and federal laws, legal marijuana businesses are often stuck paying twice as much as other businesses in federal taxes. Such a huge effective tax rate is a benefit that the federal government isn’t likely to give up easily. Exactly how much extra tax money makes its way to the feds because of marijuana’s illegal status isn’t clear, but last year the Congressional Joint Committee on Taxation responded to a request from Colorado Senator Cory Gardner with the projected additional amount of tax dollars to be collected from legal cannabis businesses between 2018 and 2027 if the drug remains federally illegal: $5 billion! Ignoring the fact that the federal government has a financial incentive to keep cannabis listed as schedule 1 on the Controlled Substances Act is becoming increasingly difficult.

The federal government’s cannabis windfall can be traced back to tax code provision 280E, which was written clear back in the 1980s to prevent drug lords from writing off the costs of packaging methamphetamine. A majority of states have now legalized the sale of medical and/or recreational marijuana, so the 280E tax provision has become a source of major friction between the federal government and state-legal businesses. Furthermore, one of the main provisions of patent #6630507 is that the NIH can make deals with other companies to continue research – with very strict stipulations. For instance, a business by the name of Kannalife is the sole licensee of the patent. They’ve contracted to conduct specific research limited to the possible effects of treatment for cirrhosis. Conveniently, the contract provides the NIH with royalties once Kannalife begins seeing a profit from the research.

While shifting cannabis to schedule 2 may seem like a good idea on the surface, doing so would expose the industry to strict federal oversight by the FDA. The drug regulatory agency would have final say on packaging and marketing, and would likely oversee THC content. Most importantly, the FDA would require marijuana companies to prove medical benefits through approved clinical trials before making it available to the public, which would be a very costly endeavor. Yet maintaining the schedule 1 status leaves the cannabis industry trapped in the federal government's restrictions that make it essentially impossible to conduct the research necessary for a schedule revision. Hmmmm. . ..