How Schedule III Could Impact Utah and Shape the Next Era of Medical Cannabis
Recent announcements about a proposal to reclassify cannabis under Schedule III have been made over the past several months, trickling in from multiple departments of the U.S. government. This marks the first time in decades that lawmakers have proposed reclassifying cannabis at the federal level.
The imminent changes to the classification of cannabis at the federal level, while monumental, are also disconcerting, and the move leads to more questions than answers: How will medical cannabis be dispensed in the future, now that its medical value will soon be recognized by the government? How will this impact Utah’s medical cannabis system?
Whispers and rumors of a pharmaceutical takeover of state medical cannabis systems have emerged — that the sky is falling, removing the systems we once knew. But at this point, no one knows how the proposed reclassification will fully impact statewide medical cannabis systems, which have taken over the country, state by state, since 1996.
For nearly 50 years, cannabis has been classified at the federal level as a Schedule I substance, a category reserved for the most dangerous of all substances — those with “no currently accepted medical use” and a “high potential for abuse.” It’s lumped together with heroin, lysergic acid diethylamide (LSD), and other drugs that are powerful and not used in conventional medicine.
State medical cannabis programs have operated in defiance of federal law — from day one — and that discord between state and federal law has been interpreted very differently, depending on the time and the current administration in power. They’ve always operated in the gray area. The reasoning behind the illogical classification of cannabis at the federal level was always murky, since its inception.
How Cannabis Ended Up a Schedule I Substance
Nationwide laws fully prohibiting cannabis have been in place for 87 years, since 1937 with the Marihuana Tax Act. Also, cannabis has remained classified under Schedule I for 54 years, since 1970. The Supreme Court overturned the Marihuana Tax Act in 1969 under Leary v. United States. Almost immediately, within months, Congress replaced it with something equally problematic, if not worse: The Controlled Substances Act. The 91st U.S. Congress implemented Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970, and it was signed into law by then-President Richard Nixon. The Controlled Substances Act (CSA), Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970, is the foundation of how drugs are controlled in America, including medications that have high potential for abuse.
In 1970, Congress placed cannabis into Schedule I of the Controlled Substances Act, based on the advice of Assistant Secretary of Health Roger O. Egeberg. Documents including Egeberg’s own letters, however, indicate that the classification was intended to be provisional as its potential medical benefits were already known.
It was largely due to the work of Nixon and his administration to outlaw drugs and create the war on drugs that shaped American law for decades. The implications of the law also went beyond America — leading to 1972 amendments of the United Nations Single Convention of Drugs, which shaped drug laws globally.
People fought back almost immediately, and they’ve been lobbying to legalize or decriminalize cannabis at the federal level. These efforts, for the most part, failed. That is, until now, given that federal agencies finally did the right thing, no matter how small of a baby step it is.
Reclassification of Cannabis Under Schedule III
In 2024, everything changed. On April 30, the Associated Press first reported that the U.S. Drug Enforcement Administration (DEA) will move to reclassify cannabis under Schedule III. It was based on a recommendation by the U.S. Department of Health and Human Services (HHS) dating back to August 2023.
Then, on May 16, President Joe Biden announced that the U.S. Department of Justice will officially reschedule cannabis, moving it from Schedule I to Schedule III. What exactly is Schedule III? It’s a slightly less restrictive category of drugs, which includes drugs such as hormone replacement therapy or ketamine, anabolic steroids, or Tylenol 3’s (codeine-infused Tylenol).
Federal lawmakers have been pushing for reform, whether it be full decriminalization or at the very least — reclassification from Schedule I, which never made any sense. Rep. Earl Blumenauer is the only currently active original member of The Congressional Cannabis Caucus, a bipartisan caucus he co-founded in 2017 with former Reps. Dana Rohrabacher and Don Young, as well as now-Colorado Gov. Jared Polis. The entire purpose of the caucus is to form a bipartisan coalition, filled equally by Democrat and Republican leaders, to end the prohibition of cannabis in America.
Currently, the caucus is made up of Reps. Barbara Lee (D‑CA), David Joyce (R‑OH), and Brian Mast (R‑FL), keeping its core identity as a rare, bipartisan coalition. In the 118th Congress, Blumenauer leads and supports many cannabis bills, including the SAFE Banking Act (H.R. 2891), Veterans Equal Access Act (H.R. 2431), Small Business Tax Equity Act (H.R. 2643), VA Medicinal Cannabis Research Act (H.R. 1003), HOPE Act (H.R. 2677), and the Free to Grow Act (H.R. 1428).
On October 30, 2023, Blumenauer announced he would not run for re-election in 2024, which means his latest term will expire in January 2025. He slammed the glacial pace of change and cannabis reform taking place in America, for a plant that’s always had medical value. Eleven days before Biden’s Schedule III announcement, Blumenauer held his final 4/20 media huddle on April 20 eve.
“There are almost half a million people who are working in state-legal cannabis companies. It’s the best opportunity economically, politically, and socially,” Blumenauer told Salt Baked City, speaking of imminent cannabis reform at the federal level. “And most importantly, it’s a chance to get right with the people who were damaged by Richard Nixon’s deliberate efforts to politicize this issue, rejecting his own Blue Ribbon Committee. It should be decriminalized. And launching this failed war on drugs — it hasn’t done anything to stop drug use. Drug use continues and there are more and more potent drugs. There is no indication that we’re going to turn back the clock.”
Blumenauer explained how there is essentially no downside for politicians to support legalizing cannabis. He thinks publicly supporting cannabis even played a role in a series of runoff elections in recent years. For any type of politician, there’s no downside to publicly supporting it, he says. With the 2024 general election quickly approaching, Blumenauer hopes that politicians are smart enough to embrace cannabis reform, continuing to decriminalize the plant even after its likely reclassification to Schedule III.
“The votes continue to mount and support continues to grow as evidence continues to accumulate in support of it,” Blumenauer said. “And I don’t think it’s going to be stopped. I don’t think there’s any presidential candidate that’s going to be able to torpedo it.”
How Utah’s Medical Cannabis System Might Be Impacted
On November 6, 2018, voters in Utah approved Proposition 2, legalizing the use of medical cannabis for qualified patients. The law took effect on December 1, 2018, but a special legislative session was quickly convened. Lawmakers replaced Prop. 2 with a “compromise” bill replacing the legislation with tighter restrictions on patient access and a greater level of state oversight. Critical provisions like home growing were scrapped. In 2019, Gov. Gary Herbert (R) signed Senate Bill 161 to make a number of modifications to the state’s medical cannabis program. On February 28, 2020, Gov. Herbert (R) signed Senate Bill 121, which implemented more changes.
The Utah Patients Coalition (UPC) was instrumental in legalizing medical cannabis in Utah. The UPC filed the Utah Medical Cannabis Act initiative in June 2017. With the proposal to move cannabis to Schedule III, the UPC is doing what it can to gear up for changes surrounding taxes, insurance, and payment systems.
“The Utah medical cannabis landscape is ready for a change in scheduling, as our dispensing practices mirror those of pharmacies and already align with potential DEA expectations,” says Utah Patients Coalition Executive Director Desiree Hennessy. “While it won’t instantly bring Utah’s system in line with federal law, it could pave the way for better banking solutions and reduce tax burdens. This historic move is a testament to the medical potential of cannabis and will enable us to study and truly understand its benefits for specific medical conditions. We hope it will allow patients and providers to use insurance to cover medical cannabis costs, making it more affordable and eliminating the burden of cash payments for patients.”
The UPC also drafted and is backing bills like Senate Bill 200, a bill to create a therapeutic psilocybin pilot program in Utah.
The Utah Medical Cannabis Act allows patients with a health care provider’s certification to purchase cannabis from medical cannabis pharmacies. But Utah’s medical cannabis pharmacies are nothing like drug pharmacies in America, which are highly regulated by the Federal Drug Administration (FDA). The FDA has oversight over distribution (pharmacies), while state and local governments have some authority within their jurisdictions. Congress has legislative control over drug pharmacies, but the FDA also can create and modify regulations. But since pharmacies dispense Schedule III drugs, it’s unclear how that will eventually be impacted by the reclassification of cannabis. Cannabis in flower form is simply a different beast than most other pharmaceutical drugs.
Utah’s medical cannabis system differs from older, less restrictive medical cannabis systems like California’s. Utah, for instance, requires that a Pharmacy Medical Provider (PMP) be on-site and available to consult with cardholders during business hours, unlike California. There are more checks and balances in Utah’s medical cannabis program than most others. In addition, the process of buying medical cannabis in Utah resembles an FDA-regulated drug pharmacy more than any other medical cannabis system I’ve seen.
“In our program here in Utah, we have tried from the beginning to treat cannabis as close as possible to the way that we treat other controlled substance medications,” said Utah State Rep. Ray Ward, who represents Utah House District 19. “So I think this is a good step by the federal government in that same direction,” he said, speaking about the move to Schedule III.
Schedule III does not mean state dispensaries will suddenly be compliant with federal law, or that whole-plant marijuana products will be dispensed at your neighborhood pharmacy. The sale of marijuana products within state programs, which are not FDA-approved drugs distributed by DEA registrants, was federally illegal under Schedule I and will remain federally illegal under Schedule III. For these same reasons, the reclassification to Schedule III does not mean that marijuana grown pursuant to state programs can be sold in interstate commerce. Marijuana products, even under Schedule III, are only federally legal if they are federally approved, and there are only three FDA-approved cannabis-based drugs developed to date (Marinol, Epidiolex, and Syndros).
Most of the legal teams Salt Baked City chatted with believe the most likely change under the reclassification of cannabis will be the unrealistic burdens that medical cannabis businesses face, which are imposed under tax code Section 280E of the Internal Revenue Service.
Section 280E generally prevents cannabis businesses from claiming tax credits and deductions for expenses from their operations. It increases the effective tax rates of cannabis businesses to rates far above those of businesses in other industries.
“The change in scheduling won’t affect our medical program a great deal, at least at this point, but it could benefit the license holders by removing the large tax burden they face on the federal level,” Utah State Sen. Evan Vickers told Salt Baked City.
It will take years for the changes to roll out from the proposal to remove cannabis from Schedule I and reclassify it under Schedule III, and it will have few but significant changes to the way medical cannabis is handled in all states that allow it.
