Ease on Down the Road: DEA Still Not Ready to Evaluate Marijuana Manufacturer Registrations

August 29, 2019By John A. Gilbert & Larry K. Houck

In a September 2018 post, we observed that the Drug Enforcement Administration (“DEA”) had come to a fork in the road with respect to DEA’s August 12, 2016 policy statement that it would be accepting applications and would in fact issue additional marijuana manufacturer registrations for research.  Given Congressional pressure to act and DEA’s doubling of the 2019 aggregate production quota for marijuana, it appeared that DEA had finally reached the point of needing to act on the significant number of pending applications for manufacturer registrations it had received to meet legitimate medical need.

There was bit of a buzz when DEA announced yesterday that it “is moving forward to facilitate and expand scientific and medical research for marijuana in the United States…and is providing notice of the pending applications from entities applying to be registered to manufacture marijuana for researchers.”  DEA, Press Release, DEA Announces Steps Necessary to Improve Access to Marijuana Research (Aug. 26, 2019).  However, DEA’s recent notice indicates that DEA is still not ready to evaluate these applications and will need to propose additional regulations to address the process.  So, having come to the fork in the road, it appears that Agency intends to proceed way below the speed limit.

DEA’s press release stated that the number of individuals registered to conduct research with marijuana, marijuana extracts, or THC increased more than forty percent, from 384 researchers in January 2017 to 542 in January 2019.  Id.  The DEA published notice earlier this week that it has received thirty-three applications to manufacture marijuana, marijuana extract and/or THC for research, having received the first application in July 2014.  Bulk Manufacturer of Controlled Substances Applications: Bulk Manufacturers of Marihuana, 84 Fed. Reg. 44,920 (Aug. 27, 2019).  The notice lists the thirty-three applicants, and invites registered bulk manufacturers of marijuana (there is only one, the University of Mississippi) and other applicants to file written comments on, or objections to, issuing registrations to those listed on or before October 28, 2019.  Id. at 44,921.

However, DEA states that before it can complete the application evaluation and registration process, it “intends to propose regulations in the near future” governing applicants growing marijuana for medical and scientific research.  Id.  In addition, DOJ has reviewed its own policies since August 2016 “to ensure that the marihuana growers program is consistent with applicable law and treaties.”  Id.  What does DEA mean by “near future?”  We have not seen anything on the OMB regulatory agenda that indicates regulations are in the works.

DEA’s notice statements rekindle questions initially raised by DEA’s August 2016 policy statement as to how DEA will evaluate and consider whether an application is consistent with the public interest.  DEA indicated in its 2016 policy statement that in evaluating applications, it intended to place specific emphasis on whether the applicant “has previous experience handling controlled substances in a lawful manner and whether the applicant engaged in illegal activity involving controlled substances.”  Applications to Become Registered Under the Controlled Substances Act to Manufacture Marijuana to Supply Researchers, 81 Fed. Reg. 53,846, 53,847 (Aug. 12, 2019).  DEA quickly pointed out that relevant illegal activity “includes any activity in violation of the CSA (regardless of whether such activity is permissible under State law) as well as activity in violation of State or local law.”  Id.  But DEA further stated that “[w]hile past illegal conduct involving controlled substances does not automatically disqualify an applicant, it may weigh heavily against granting the registration.”  Id.

DEA stated that under 21 U.S.C. § 823(a)(1) it “is obligated to register only the number of bulk manufacturers of a given schedule I or II controlled substance that is necessary to ‘produce an adequate and uninterrupted supply of these substances under adequately competitive conditions for legitimate medical, scientific, research, and industrial purposes.’”  Id.  Therefore, DEA will evaluate the applications, and of the applications it finds are compliant with “relevant laws, regulations and treaties,” will register the number of applicants it determines is necessary to ensure an adequate and uninterrupted supply under adequate competitive conditions.  Bulk Manufacturer of Controlled Substances Applications, at 44,921.

It is worth noting that the DEA notice cites to the Agency’s decision in Lyle E. Craker, Denial of Application, 74 Fed. Reg. 2101 (Jan. 14, 2009) (denying an application for a bulk manufacturer of marijuana).  That opinion provided an exhaustive discussion of the standard related to adequate supply under adequate competition.  Thus, the question is how will DEA apply this standard to limit issuing marijuana manufacturer registrations to the number of applicants that can provide an adequate and uninterrupted supply of marijuana to researchers?  How will DEA choose between registering applicants who conducted state-authorized, though federally-illegal, marijuana activities versus those that have not, with all else being equal?  Will DEA choose to register the latter over the former?  And will there be some intermediate ground for those applicants who conducted state-authorized activities and did not violate the Cole memorandum?  Undoubtedly, these application evaluation questions will form the basis of DEA’s proposed marijuana growing regulations.

Lastly, the notice expressly confirms that as a result of the Farm Bill, the definition of marijuana under the CSA no longer includes “hemp.”  Id.  “Hemp” is defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9-tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”  Id.  Thus, cannabis plant material containing 0.3 percent or less THC on a dry weight basis is not federally-controlled and therefore does not require a DEA registration to cultivate.  Id.  Because hemp is not controlled, handlers of that material are not subject to DEA controlled substance recordkeeping, reporting and security requirements.

Given that DEA has still not registered any additional manufacturers, we wonder whether the researchers have been able to obtain the necessary material to conduct their research.  So, as DEA inches forward on the road towards acting on these registrations, the notice may disappoint those who had hoped DEA would finally evaluate their applications or to conduct research with marijuana from those new registrants.