From Rescheduling to Medical Interstate Commerce: What it means for patients, and what MPP is doing about it

The DOJ’s recent “Final Order” on rescheduling, assuming it stands, makes cannabis federally legal in the hands of state medical licensees (though perhaps only those who register with the DEA). Interstate commerce between licensed businesses would thus also be presumably federally legal, leaving only state laws — which might be ruled unconstitutional under the Dormant Commerce Clause (DCC) in states with existing markets — standing in the way. 

There will be three important things to watch for with respect to interstate commerce in medical cannabis:

1. New and expanding state medical programs might specifically permit interstate commerce. The nine states without medical programs will be under some pressure to adopt one under rescheduling. South Carolina, in fact, is statutorily required to do so. But there’s little political appetite in those states for legalizing commercial cannabis production. A medical program that specifically envisions legal product from out of state would lessen the state’s regulatory burden (they could regulate retail alone if they chose, or even limit sales to pharmacies), sidestep political resistance to commercial production, and get legal, tested, high-quality cannabis into patients’ hands sooner and less expensively than a state-gated program.

1a. It is possible that we’ll see a push to open commerce in some “established” medical states with inadequate patient access.

Note: MPP will work over the coming year to identify and help lead efforts in currently non-medical or quasi-medical states to adopt and approve patient-centered programs specifically anticipating commerce, allowing patients to access the best and most affordable medical cannabis available as soon as possible.

2. Expect one or more states with mature production industries to pass legislation allowing their medical licensees who meet federal criteria to ship products to licensees out of state. California, Oregon, and Washington all previously passed laws to allow their businesses to participate in commerce when Congress legalizes cannabis or the DOJ indicates tolerance. And while the language of those laws may need some clean-up to fit neatly with this version of rescheduling, we are likely to see that happen.

Note: MPP stands ready to work with allies in those and other states seeking to pass legislation allowing their medical licensees — operating in compliance with federal requirements — to ship products to states whose medical programs allow it.   

3. Expect to see a successful federal lawsuit. Rescheduling changes the judicial calculus under the Constitution’s Dormant Commerce Clause. Federal circuits have split on whether state-legal cannabis industries are protected under the DCC. DCC protection would bar states with legal markets from discriminating against legal products from other states. The federal decisions finding no DCC protection have leaned on cannabis’ federal illegality. The Final Order almost certainly changes that for licensed medical operators. 

We expect stakeholders to sue states in multiple federal circuits (hoping to consolidate those into one suit), seeking to force open state markets on constitutional grounds. Interstate commerce in Schedule III drugs between DEA-approved entities is clearly covered by the DCC. A federal case will take time, but assuming rescheduling stands, we expect federal litigation to be ultimately successful.

Note: MPP has no plans to be involved in federal lawsuits seeking to open existing medical markets to commerce.