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Don't Blame the DEA for Not Reclassifying Marijuana


Protocol shifts onus to the FDA

I haven't written long-form content in some time but I've had the itch of late and today's news provides fresh fodder.  I'm not talking about 'that' news-I think we've all had enough of 'that' news-I'm referring to the DEA ruling related to marijuana and industrial hemp.  As I've written about this space over the years, I wanted to share my interpretation of the latest developments.

The  decision *not* to reclassify cannabis from a Schedule 1 drug-considered to have no medicinal value and is as harmful as drugs such as heroin and meth-to a schedule 2 drug (which would allow it to be prescribed by doctors) was at first, mind-blowing.   "Big pharma lobbyists," I thought to myself, "just follow the money." 

Upon further consideration, however, the decision made perfect sense.  The DEA acted in a manner consistent with the letter of the law.  In their own words (emphasis mine):

"The Controlled Substances Act (CSA) mandates that scheduling decisions be based on medical and scientific data and other data bearing on the relative abuse potential of the drug.  Under the CAS, the Food and Drug Administration (FDA), in consultation with the National Institute of Drug Abuse (NIDA), reviews, analyzes, and assesses that data and its medical and scientific conclusions legally bind the Drug Enforcement Administration (DEA).

A substance is placed in Schedule 1 if it has no currently accepted medical use in treatment in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse.  These criteria are set by statute."

The Agency also took great lengths to communicate its stance on marijuana research:

"Research is the bedrock of science, and we will-as we have for many years-support and promote legitimate research regarding marijuana and its constituent parts.  For instance, the DEA has never denied an application from a researcher to use lawfully produced marijuana in a study determined by the Department of Health and Human Services (HHS) to be scientifically meritorious.

Further, in December 2015, we waived certain regulatory requirements for researchers conducting FDA-authorized clinical trials on cannabidiol (CBD), a constituent part of marijuana.  

If, for instance, CBD proves to be safe and effective for the treatment of a specific medical condition, such as childhood epilepsy (some trials have shown promise), that would be a wonderful and welcome development.  But we insist that CBD research-or any research-be sound, scientific, and rigorous before a product can be authorized for medical use.  That is specifically and properly the province of the FDA.

If the scientific understanding about marijuana changes-and it could change-then the decision could change.  But we will remain tethered to science, as we must, and as the statute demands....furthermore, we believe that the drug approval process is the proper way to assess whether a product derived from marijuana or its constituent parts is safe and effective for medical use."

Even the most ardent fans of legalization must tip their hat to the legal cover taken by the DEA.  They're right-as it stands, there are no federally approved uses for cannabis or its constituent parts so why take the political risk, social risk, and business risk-yes, big pharma lobbyists, I'm talking to you-when you don't have to?

If you pay attention to what the DEA is saying, however-what they seemingly went out of their way to outline-is that the landscape is fluid and subject to change; and when it does, they will follow the proper procedural mandates to address reclassification.  In fact, and this is the beauty of it all, once the FDA approves any medical usage related to the cannabis plant, the DEA will have no choice but to reclassify.  That, in Washington, is called, "covering your ass."

This is probably the part of the article when I should disclose that I own GW Pharmaceuticals (NASDAQ: GWPH) and I trade around a core position (buy dips, sell rips).  While my cost basis was $38, I have bought and sold it so many times that my blended average (and P&L) is higher than it once was.   And I understand the risks-valuation (or lack thereof), execution and of course, overall sector / tape risk-so  please don't take this as a recommendation, as much as an observation.

But that's sort of my point-the DEA did not put the kibosh on cannabis today; they simply passed the torch to the FDA, who will base their decision on medical research.

And according to pipeline on the company's website, that day may come sooner than most people think.

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 Long GWPH
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