Analysis and Comments
on the D.E.A. Interim Final Rule
as published in the Federal Register on August 21st, 2020
Disclaimer and Opinion
This analysis and commentary is based on the research and opinions of Telic Labs, LLC and should not in any way be interpreted or taken as legal advice. This is offered solely as public commentary on this new interim ruling.
On August 21st the Drug Enforcement Agency, (DEA) issued interim final rules that are meant to codify their regulations in order to confirm with the statutory amendments to the Controlled Substances Act (CSA) as outlined in the Agricultural Improvement Act of 2018 (AIA-2018, AKA the 2018 Farm Bill). It is stated that these rules do not add any regulations or requirements, instead this is an update to the definition and conformity to other laws and not additional rules or regulations. On the surface, this seems to be the case, as most of the language used indicates exemptions from DEA regulation and reiteration of definitions. However, it's not what is stated in these rules, but rather what is NOT stated in these rules that will be problematic and harmful to the industry.
Let it also be known that the DEA is a law enforcement agency operating under the umbrella of the Department of Justice (DOJ), which has stepped up efforts to slow the hemp industry with expanded lobbying efforts, increased seizures, previous declaration of CBD as a controlled substance, and ignoring comments from their own judges, scientists and the FDA. Ultimately, the DEA has final regulatory control over the schedulization of marijuana and hemp and they may not follow any recommendations received despite opening a comment period for these rules. They have enacted these rules as being effective immediately, giving the industry no time to adjust. It was a calculated move in a chaotic time.
Proposed Rules and Analysis
1. The DEA, in reference to the AIA and the FDA is stating that “hemp” is defined as any part of the cannabis plant (excluding stalk, fiber, and sterilized seeds) or derivative thereof that contains 0.3% or less of delta-9 THC. This clarifies that hemp and hemp products would be exempt from CSA regulation, if they contain 0.3% or less delta-9 THC. This also clarifies and directly states that any part of the cannabis plant or substance derived from hemp that contains more than 0.3% of delta-9 THC is considered “marijuana” and, as such, is a controlled substance, regardless if it came from “hemp” cannabis or “marijuana” cannabis. As a partial justification, this ruling cites recent studies from the FDA finding that many CBD brands do not contain the advertised percentage of THC or CBD. This rule also states that simply labeling a product as “CBD” or “hemp” does not in and of itself exempt the product from the CSA. The product must contain less than 0.3% delta-9 THC, otherwise it will be considered “marijuana” and a schedule 1 controlled substance.
Analysis: At first glance this rule seems to exempt a lot of products from DEA control. After a more thorough analysis though, it presents two significant problems for the industry that could halt CBD production and eliminate the industry entirely as it currently exists.
a) The first is that, in the course of processing hemp into CBD products, there are intermediary compounds and products that will inevitably contain more than 0.3% delta-9 THC. Even if those extracts are only intermediary compounds (WIPHE – Work In Progress Hemp Extracts) that will later be diluted or remediated before final production, under these rules these WIPHE will fall under the definition of “marijuana”. There is no mention of, or distinction between “final products for sale” or “finished products” in the DEA document, only mention of “cannabis or cannabis derived material”. So, the interpretation of this new ruling does not allow for any middle steps in the processing of hemp into CBD, even if these WIPHEs never leave the processing facility. This eliminates the ability to produce any kind of CBD product at scale with currently available technology. Essentially, this is in conflict with the wording and intent of the 2018 Farm Bill (AIA-2018).
b) The second is that there is NO way with currently available technology to remediate or remove delta-9 THC without running afoul of this ruling. This eliminates the ability for anyone to produce isolate grade cannabinoids that are not a pharmaceutical production facility, which will already have a schedule 1 manufacturing permit, so that producers and manufacturers will still be able to operate. This will either, create a new monopolized revenue source for pharmaceutical companies to sell isolate compounds to producers and manufacturers, or cut out the “middle-man” and monopolize the selling of CBD and other non-d9-THC cannabinoids only through pharmaceutical manufacturing companies
2. There is further definition of the term “tetrahydrocannabinols” that basically excludes naturally occurring tetrahydrocannabinols in the plant and those derived from “hemp” cannabis, as long as the substance, again, contains less than 0.3% delta-9 THC. The DEA reiterates that any substance with delta-9 THC in excess of 0.3% is a schedule 1 controlled substance. This rule also indicates that any synthetically produced “tetrahydrocannabinols” are still a schedule 1 controlled substance and would make it almost impossible for anyone other than pharmaceutical companies to manufacture cannabinoid products that lab synthesized and purified.
Analysis: This is redundant, but necessary wording on their part to continue to assert regulatory authority over any CBD or cannabis product that contains more than 0.3% delta-9 THC.
3. FDA approved CBD medications and drugs that have a residual delta-9 THC concentration of less than 0.1% are removed from schedule V as a controlled substance. Because those FDA approved medications with less than 0.1% delta-9 THC are essentially removed from scheduled control by the DEA, the import/export permits for those substances will no longer be required. They again note that any compound with a concentration of more than 0.3% delta-9 THC will be considered “marijuana” and as such, will be a schedule 1 substance.
Analysis: This is more redundancy to further define the DEA’s role with regulation and assertion of their continuing effort to keep anything above 0.3% THC listed as a schedule 1 controlled substance. It does allow for pharmaceutical products that meet FDA approval to be more freely imported and exported, but there is currently only 1 product (Epidiolex, Greenwich BioSciences) that meets these standards. This gives more than the appearance of a blatant handout to the pharmaceutical industry and another slap in the face to the smaller, mainstream producers that have built and are the driving force of this industry.
4. Additionally, the DEA is expanding the definition of “marijuana extract” to include any extract derived from any part of the cannabis plant that contains 0.3% or more of delta-9 THC. This eliminates any distinction between “hemp” cannabis derived and “marijuana” cannabis derived extracts, in opposition to the intent and letter of AIA-2018.
Analysis: This definition is in-line with previous expanded definitions that includes any materials derived from any cannabis plant which contain more delta-9 THC than the 0.3% threshold defined in the AIA-2018 and CSA. Again, this definition solidifies that even intermediary compounds (WIPHE) produced in the course of processing hemp into CBD would be considered “marijuana” by the DEA. Again, this is in conflict with the letter and intent of AIA-2018.
1. The DEA should further define the classification of “cannabis or cannabis derived materials” to include the following wording, “intended for commercial sale” or “fit for commerce” to delineate between products and compounds that are intermediary in the processing of hemp. This allows some flexibility for remediation of delta-9 THC from these compounds before they are released for sale.
Regardless of the specific wording, any classification must contain terminology that allows for temporary increases in delta-9 THC levels during intermediary processing and manufacturing. Anything else will decimate the CBD and hemp cannabis markets, create more job losses in an already precarious economic state, decrease tax revenue, and handover all CBD (and other cannabinoid) manufacturing and production to pharmaceutical manufacturing companies.
2. The DEA, having complete oversight and authority for the schedulization of substances, could de-schedule all cannabis plants and their subsequent derivatives and compounds, however, this is extremely unlikely. As such, we would recommend that the DEA bring “marijuana” as defined here, by the AIA, and CSA to a more appropriate schedule such as III, IV, or V, as there is scientific data widely available to support such movement for “marijuana” and derived substances. Furthermore, this movement is supported by many agencies and organizations.
Alternately, we would recommend de-scheduling cannabis with a Total THC content (defined by the USDA as d9-THC + (THCA*0.877)) or equivalent on a dry weight basis) of 1.0% or below.
3. This ruling should be updated to conform with the USDA IFR from October 2019 by setting provisions in line with what is considered “good faith efforts” or “negligence” in the cultivation of hemp. These USDA rules allow for growers to be considered acting in “good faith” and would be exempt from prosecution for hemp crops that exceed 0.3% but are below 0.5% delta-9 THC. Those rules also state that the USDA would determine growers who cultivate crops grown above 0.5% delta-9 THC as “negligent” and as such, the USDA would have the authority to enact corrective measures. Only repeated negligence or acting in a “culpable mental state” in the cultivation of hemp would result in DEA notification and involvement.
Confusingly, this DEA IFR ignores these allowances in the previously established USDA rules. By leaving out such provisions, or not even referencing them, this tacitly asserts enforcement authority by the DEA and cuts out the USDA in these circumstances. The lack of attention and compliance with this matter is in conflict with the USDA IFR and possibly the AIA-2018. It also creates major points of confusion on chains of authority and penalties for non-compliance.
We interpret these rules to be in line with other agency rules that are clearly in favor of large corporations and will ultimately hurt the backbone of the CBD and cannabinoid industries and ultimately this country, by placing an undue burden on small businesses and family farms. These rules are either intentionally detrimental to the processes and business practices already in place for these industries or are blatantly myopic regarding the scope and effect these rules will have, let alone the technological advancements, uses, and research currently in development. At a time of extraordinary economic distress, when the nation as a whole, and almost every state is counting on any stable revenue stream and job creation sources available, rules such as these would cut off a major source of tax revenue and employment, while placing additional burdens on already overburdened government support agencies.
In addition, as of today there are many recognized and significant potential therapeutic uses for CBD and other cannabinoids such as chronic pain, epilepsy, anxiety, depression, insomnia, inflammation, ADHD, and autism. There is even documented clinical research showing great potential towards treatment and prevention of Covid-19 infections and its symptoms. Much more research is required to investigate the mounting pile of anecdotal evidence of the clinical effectiveness of these products, but this ruling is another door slammed shut on these promising avenues of research. If anything, the responsibility of the DEA should be to pave a pathway for this research, not hindering it. This is especially true when many of the medications currently used to treat the above conditions carry significant side-effects when compared with cannabinoid products and is of extra importance with the country’s current and unprecedented opioid addiction epidemic.
We urge legislators and the DEA to adopt changes that truly reflect the therapeutic nature of this plant and its derivatives, and to recognize the catastrophic effect this will have on the growing CBD (and cannabinoid) industry, particularly the effect on the livelihood and security of the thousands of people in this industry and not just the surface costs saved through less paperwork for the DEA and large pharmaceutical manufacturers that want to import or export the only FDA approved medicine related to this plant.