Published September 30th, 2018
The past week has seen developments on the federal level pertaining to industrial hemp and it’s control under the Controlled Substances Act (CSA). First, the Drug Enforcement Agency (DEA) announced a scheduling action for FDA approved drug Epidiolex, marketed by GW Pharmaceuticals. Second, Congress failed to agree on the 2018 Agricultural Act (known as the Farm Bill) before expiration of the 2014 Farm Bill on today, September 30th. Both events have serious implications for the United States hemp industry and hemp farmers. We monitor any such developments diligently and are issuing the following analysis for public release.
In June, the Food and Drug Administration approved Epidiolex, a drug containing Canabidiol (CBD) to treat Lennox-Gastaut and Dravet syndom, two rare and severe forms of epilepsy. The company who markets Epidiolex, GW Pharmacuticals, is based in London and imports the ingredients and/or final drug into the United States. The DEA was then required to re-evaluate Epidiolex as a controlled substance under the CSA because it is imported and is legally recognized as having medical use in treatment. Currently, non-exempt cannabis products are considered schedule 1 and by definition have no medical use. Since the FDA found medical uses for Epidiolex and the Department of Health and Human Services (HHS) found a very low potential for abuse, the DEA decided to place Epdiolex (and only Epdiolex) in schedule V, the least controlled schedule. This does not apply to any other CBD products.
This action is significant to the broad hemp and CBD industry because; 1) The HHS has recognized a cannabis-based drug including CBD to have low abuse potential. 2) The DEA has continued their stance that they are required under treaty obligations (Single Convention on Narcotic Drugs) to control the importation, sale, and production of all cannabis. 3) Using this reasoning, the DEA will be confronted with a dilemma when controlling non-approved CBD products if a new Farm Bill includes the Industrial Hemp Farming Act. 4) The DEA is not considering recent findings from the World Health Organization on CBD nor are they considering any studies to more broadly re-schedule CBD products.
2018 Farm Bill Failure
This week we also learned that the 2018 Farm Bill would not pass before the expiring of the 2014 Farm Bill on Sunday, September 30th. Partisan bickering and politics have now delayed the single most consequential hemp legislation since the 1937 Marihuana Tax Act. This is shameful and all elected officials will now need to face their constituents and explain why they were unable to advance not only hemp farming but our massive agricultural industries. In 2014, the hemp industry received a gift in the form of research. Section 7606 of the 2014 Farm Bill authorized states to establish a program to study the cultivation, processing, and marketing of industrial hemp. 40 states have established such programs and have begun production. The hemp industry and specifically the CBD market has flourished under these research programs.
This year, Senator Mitch McConnell introduced a provision into the 2018 Farm Bill that would remove the guise of research and authorize commercial production and marketing of industrial hemp along with removing hemp (defined as cannabis with less than 0.3% THC) from schedule 1 of the CSA. As discussed above, the DEA uses the Single Convention on Narcotics as reasoning to continue controlling all cannabis. We do not believe the hemp provision would completely remove hemp from being controlled under the CSA, instead resulting in a similar rescheduling action.
Nonetheless, the passage of a Farm Bill with the Industrial Hemp Farming Act provision would provide for a tremendous boost of confidence for consumers, businesses, financial institutions, and farmers to engage in the hemp industry. It will allow farmers access to crop insurance and open more markets for the sale of industrial hemp. Businesses that work with hemp will have easier access to funding and merchant services. Overall, we expect an explosion in all aspects of the global hemp market.
The failure of congress, and specifically the House of Representatives to negotiate a Farm Bill before the September 30th deadline is a kick in the gut for farmers who have already experienced a sharp drop in commodity prices. It will now be until November before the 2018 Farm Bill can possibly be voted on and some representatives are indicating a desire to pass the bill after elections. While the hemp research programs do not expire nor have a sunset clause and the industry will be continually protected by Section 7606, farmers and businesses are making plans for 2019 and require confidence in regulations and markets.
What congress has done in their failure is inexcusable. The Senate was able to pass bi-partisan Farm Bill and their counterparts in the House of Representatives would not accept this nor could they work towards a compromised bill. We do understand the nuances and complicated nature of such large legislation and the fierce battles over SNAP, crop payments, and the Conservation Stewardship Program. We also understand that these issues had four years to be sorted out.
There are no excuses good enough to cover for this utter failure on the part of our elected representatives. We are hopeful for a November passage but extremely disappointed. Please reach out to your congressional representatives and ask for a swift passing of the 2018 Farm Bill.