Cannabis Businesses Move To Defend Federal Rescheduling Effort Against Legal Challenges

Two state-licensed medical cannabis companies filed a motion Monday asking to join ongoing federal lawsuits over marijuana rescheduling on the side of the government, arguing they would be directly harmed if opponents succeed in blocking the policy. The filing, submitted by attorney Shane Pennington of Blank Rome LLP on behalf of MedPharm Iowa, LLC (doing business as Bud & Mary's) and Pennsylvania-based Tri-Mountain Pure, LLC, says both firms have already applied for federal registration through a Drug Enforcement Administration form created for cannabis businesses seeking rescheduling-related protections. The companies cite five categories of potential harm: loss of relief from the 280E tax penalty now that marijuana sits in Schedule III rather than Schedule I; forfeiture of pending DEA registrations and related business planning; renewed restrictions on clinical research, university partnerships, and insurance reimbursement; damage to banking, insurance, vendor, and investor relationships; and difficulty recruiting scientists, pharmacists, physicians and executives wary of Schedule I status. "The companies would be forced to postpone or abandon planned initiatives, absorb sunk compliance costs, and continue operating under the significant legal and commercial burdens associated with schedule I status," the motion states. It also argues the Department of Justice cannot adequately protect the companies' interests: "Although Intervenors seek to intervene in support of DOJ, as a government agency, DOJ will necessarily focus its defenses on its own institutional interests and duties. DOJ therefore cannot adequately represent Intervenors' private commercial interests." Three consolidated lawsuits before the U.S. Court of Appeals for the D.C. Circuit challenge the rescheduling move: one from Smart Approaches to Marijuana (SAM) and the National Drug and Alcohol Screening Association; another from a coalition of anti-marijuana activists, substance-use professionals, doctors and a cannabis biopharmaceutical firm; and a third originally filed by the attorneys general of Indiana, Nebraska and Louisiana, though Louisiana later withdrew. The SAM/NDASA suit was signed by lawyers at Torridon Law PLLC, where former Attorney General William Barr is a partner; SAM announced hiring the firm in January after Trump ordered officials to expedite rescheduling. Acting Attorney General Todd Blanche announced in April that marijuana products under state medical licenses, and any FDA-approved cannabis products, moved immediately from Schedule I to Schedule III. DEA this week opened an administrative hearing on broader rescheduling, including recreational products, with government witnesses emphasizing cannabis's medical value and relative safety compared to alcohol and opioids while opponents challenge the process behind the recommendation. The House Appropriations Committee voted to block further rescheduling steps, though bipartisan lawmakers said they doubt that effort will succeed. Separately, a SAM-led lawsuit challenging Medicare coverage of hemp-derived products was dismissed in May and is now under appeal.