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To Facilitate Cannabis Research, DEA Proposes New Role as Marijuana Distributor

Agency Aims to Expand Number of Entities Authorized to Grow Marijuana
On March 23, 2020, the US Drug Enforcement Administration (DEA) issued a proposed rule that, if finalized, would establish processes by which individuals and entities could apply to DEA to lawfully grow marijuana. The proposed rule would then allow the agency to buy and sell the marijuana grown by those individuals and entities.

A link to the proposed rule can be found here. As we noted previously, on August 12, 2016—the same day that DEA denied a petition to remove marijuana from Schedule I of the Controlled Substances Act (CSA) for the fifth time—DEA issued a policy statement announcing the agency’s plan to expand the number of “manufacturers” (i.e., growers) registered to produce marijuana in order to facilitate additional cannabis research. In response to this 2016 policy statement, DEA reportedly received  37 applications from individuals and entities seeking DEA registration. However, three and a half years later, DEA has yet to approve any of these applications. It seems like we finally understand the reason for the delay.

In the preamble to DEA’s new proposed rule, the agency explains that after issuing its 2016 policy statement, the US Department of Justice (DOJ) “undertook a review of the CSA, including the provisions requiring consistency with obligations under international treaties such as the Single Convention [on Narcotic Drugs, 1961 (the Single Convention)]. Following this review, DEA determined that certain changes to its 2016 policy were needed.”

By way of background, the Single Convention requires signatory countries that permit cannabis cultivation (like the United States) to comply with certain controls, one of which  “require[s]  all cultivators of the cannabis plant to deliver their total crops of cannabis … to the [responsible] agency and ensure that the agency purchases and takes physical possession of such crops as soon as possible, but not later than four months after the end of the harvest.”

It appears that DEA and DOJ believe that the new rule, if finalized, would ensure that the US complies with its international treaty obligations and also increase the supply of marijuana available for, among other things, research that could lead to more marijuana-derived medicines approved by the Food and Drug Administration.

The rule aims to achieve the expansion of DEA-registered manufacturers through direct participation—that is, DEA proposes that, in compliance with the Single Convention, the agency would control the distribution of marijuana by purchasing marijuana from the “manufacturers” and then acting as the distributor to the researchers. The price at which DEA would purchase and sell the marijuana would be based on the terms of a supply agreement between the grower and the end user (e.g., a DEA-registered Schedule I researcher). Additionally, the end user would be required to pay DEA an administrative fee. This fee would be set annually and be used to cover DEA’s costs to administer the program. Based on DEA’s current calculations, the agency estimates that the end user would be required to pay an administrative fee of $304 per kilogram of marijuana purchased.

If the rule is finalized, this would signify a notable change in the cannabis research space. At present, the University of Mississippi (UM) is the sole DEA-registered entity in the US authorized to cultivate marijuana for research purposes. However, this rule would allow DEA to begin registering additional manufacturers. With DEA sitting on 37 pending manufacturer applications, UM may have company at last.

While the expansion of the number of DEA-registered marijuana manufacturers has been long anticipated, DEA’s proposed scope of involvement is somewhat surprising. If finalized, the rule would put DEA in uncharted territory, making the regulator an active participant in the marijuana industry by importing, exporting, and warehousing cannabis.

For those invested in the outcome of this rulemaking, the comment period is open until May 22, 2020.

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