On Friday, the American Bar Association hosted a panel called “Cannabis and COVID-19: How a Federally Illegal Drug Continues to Exist as an ‘Essential Business’ at the State Level.” Panelists explored how cannabis businesses have been declared “essential” in most states, how relief funds are unavailable because of federal cannabis prohibition, federal responses to cannabis businesses, and how COVID-19 has “upended” cannabis law reform efforts at both the state and federal levels.
Early discussion focused on the state-by-state responses to cannabis businesses during the COVID-19 pandemic. While the specifics differ, for example, when it comes to curbside pickup or social distancing rules, overall, the cannabis industry has been declared “essential.”. (Cannabis Wire has been tracking how cannabis regulators respond to the pandemic.)
“Make no mistake, every state is offering cannabis to consumers in one way or another, and that’s a big win for the industry,” said Andrew Kline, the National Cannabis Industry Association’s director of public policy.
Noelle Sheehan, a lawyer with Florida-based Wilson Elser, asked the group: given that cannabis is illegal at the federal level, how can cannabis be essential at the state level?
“I have no idea. It is fundamentally irreconcilable with reality,” Kline said, of the federal approach to cannabis.
Sheehan also asked about how COVID-19 has affected cannabis lobbying, and Kline responded that, in some ways, it’s business as usual.
“We’re still super busy, notwithstanding the shutdown. And that same activity has happened on Capitol Hill, notwithstanding the fact that members of Congress are not at the capitol, nor are lobbyists,” Kline said. “The industry has been very hard at work, lobbying for both loans and [the SAFE Banking Act]. There appears to be more momentum right now on the [Small Business Administration] loan front than Safe Banking, but Safe Banking is really critically important right now.” (Read Cannabis Wire’s coverage of the SAFE Banking Act.)
Kline pointed out that there will be at least one more COVID-19 related stimulus package, and that the lack of access to relief applies to both cannabis companies, and ancillary ones.
“If you’re an ancillary company serving the cannabis industry, you’re not eligible for any of those small business loans or grants,” Kline said. This week, Representatives Earl Blumenauer and Ed Perlmutter filed a bill that would give cannabis businesses access to Small Business Administration funds, as Cannabis Wire reported.
The conversation then turned to the legislative slowdown due to COVID-19, which Cannabis Wire has been covering.
Campaigns to legalize cannabis for medical or adult use “may face challenges in collecting signatures now that we’re all working from home,” Kline said, while those measures that already qualified for the ballot “seem to still be on track to pass” in November. Kline compared New York, where Governor Andrew Cuomo has indicated that there’s just too much going on right now to debate legalization, as Cannabis Wire reported, to New Jersey, where voters appear ready to legalize cannabis for adult use by ballot this fall. A new Monmouth University poll, including 704 New Jersey adults, found that 61% of respondents said they will vote in favor of the ballot measure.
Still, could the “pot for potholes” talking point move the needle this year? Panelists discussed how major state budget shortfalls could be bridged by revenue generated by cannabis programs.
“That could potentially expedite bipartisan support. It’s yet to be seen,” Kline said.
Panelists also discussed the Food and Drug Administration’s extension of public comment on CBD product rulemaking. The FDA opened public comment a year ago, and in March, as Cannabis Wire reported, reopened public comment “indefinitely.”
“They’re moving like molasses, and it’s not clear to me why,” Kline said.
Kelly Fair, director of legal affairs for Canopy Growth in the United States, described the tea leaves that the cannabis industry needs to read when it comes to federal regulators. Through 2019, Fair said, the FDA’s position was, “‘We are not necessarily closing the swim lanes for hemp-derived CBD in dietary supplements and foods, but we need to evaluate the safety of those products and the safety of humans ingesting CBD in various formats and doses.’” What followed was a public hearing, which Cannabis Wire covered, and a public comment period.
“Companies like Canopy started submitting their studies, GRAS studies, to show that ingesting CBD is not causing the liver toxicity issues, the reproductive toxicity issues, that the FDA is concerned about. And that was already evaluated,” Fair said.
This year, the industry paid close attention to new FDA Commissioner Steven Hahn’s first public address on CBD, which was at NASDA’s winter conference, which Cannabis Wire covered.
“Prior to this public address, we didn’t know where he was on CBD, generally,” Fair said. Hahn, who was sworn in as FDA commissioner in December, asked the attendees how many people went through Reagan National Airport, and came upon a store that has a “huge stand for CBD products.”
“So, we know one thing from the American people: they’re using CBD products,” Hahn said. Hahn went on to tell a story about a patient who texted him to say that they were using CBD oil as part of a broader cancer treatment.
“We’re not going to be able to say ‘you can’t use these products,’” Hahn said. “Even if we did, it’s a fool’s game to even try to approach that. But what do we need to do? We need to fill the information gaps. We need to understand what it helps with, because we have some evidence on the drug side that it may be beneficial.”
During the ABA panel, Fair asked the question of whether COVID-19 might be contributing to a stall with FDA rules for CBD.
“I’m not seeing that. In fact, quite the opposite,” Fair said. “From a lobbying perspective, it presents an opportunity to really drive forward as the federal government is going to look for industries that can give, you know, a shot in the arm for the economy.”
Salmeron Barnes, director of growth and strategy at MPG Consulting (formerly Marijuana Policy Group), pointed out an area that COVID-19 could hit particularly hard: places like California, where the illicit market persists.
“Not only do you have overburdensome regulations, but you’re competing with the black market. Wherever people are seeing competition from the illicit, black market, COVID is going to make it worse on them,” Barnes said. “We all know California is having a hard time controlling the black market. Then you have legal operators that are paying higher tax rates, having to do things to stay in sync with what regulation is, and black market operators aren’t. They’re enjoying higher profits. COVID will affect the states where enforcement is not carried out as effectively as it could be and there’s already an illicit,black market presence.”
Barnes said, “We are essential. But essential is not invincible,” referencing how economic woes people are facing might mean fewer trips to the local cannabis shop.
“We have to be very, very careful that the industry operates in lockstep with what’s happening with the general society and make sure we’re pricing things correct. We need favorable legislation because this event, this COVID-19 event, has a very, very high probability that if the result of it is that a lot of cannabis companies go bankrupt, go under, face financial strains, then the demand that they supply legally will shift to the black market and that will be hard to get back, right? So we just need to make sure that we fight off the black market as much as we can.”
Barnes also said that state and federal regulators “have a lot to deal with” in terms of their response to COVID.
“I think one of the biggest hits that we felt as the industry is that New York took the adult use conversation off the table,” Barnes said. “That was the first major impact.”
Barnes said that, still, the cannabis industry will have a sunny future, eventually. “Overall, I think the industry will survive. We’ll come out stronger. We just need a little help from the federal regulators and state legislators to make it a more competitive industry financially.”
Willner responded, “It kind of sounds like you’re saying if the thunder don’t get you, the lightning will. It’s one thing or another for the cannabis industry. Hopefully the industry can learn from other industries that are, for lack of a better term, destroyed by COVID-19, like the restaurant industry.”
The conversation then turned toward lessons learned, and what’s next. In lieu of federal guidance, Kline suggested going above and beyond.
“The biggest lesson is to be prepared,” Kline said. “Because of cannabis’ illegality at the federal level, we’re not subject to regulations the way the food and drug and cosmetic industry are. So we need, as an industry, to establish voluntary best practices to make sure that no one gets sick, and that includes employees and customers, make sure that no product gets compromised, and that means leveraging good manufacturing practices, which are voluntary at this time. So the cannabis industry will need to step up and go above and beyond what they’re required to do, and a little bit more.”
