After years of delay under the Trump administration, the federal government is preparing to award the first new licenses for cultivating cannabis for scientific research, giving U.S. marijuana operators a crack at entering a business that has been dominated by the University of Mississippi for more than 50 years.
The U.S. Drug Enforcement Administration late last week signaled it would award the licenses soon by issuing a “Memorandum of Agreement” (MOA) to “a number” of organizations that applied for the opportunity, according to an agency news release.
The move will allow greater research into marijuana and its potential medicinal properties. That, in turn, could spur more doctors to recommend medical cannabis, which likely would boost sales.
“We expect to receive our registration number this afternoon,” said Dr. Steven Groff, founder of Groff North America in Red Lion, Pennsylvania, one of three entities that on Friday received an MOA from the DEA.
The recipients are supposed to review the MOAs and return them to the DEA with comments or suggestions. Groff already returned its MOA, and two other recipients told they’d return their paperwork in the coming days or weeks.
Besides Groff, at least two other organizations confirmed they’d received an MOA:
- Scottsdale Research Institute in Arizona.
- Biopharmaceutical Research Co. (BRC) in Castroville, California.
A DEA spokesperson declined to answer if any other MOAs were issued. It’s also unclear when, or if, the DEA intends to issue more MOAs.
“This has the potential to create a renaissance of cannabis research for decades,” Dr. Sue Sisley, president of the Scottsdale Research Institute, said in a phone interview. Sisley, a longtime cannabis advocate, has been studying marijuana’s potential therapeutic benefits.
George Hodgin, the CEO of BRC, echoed Sisley, saying in a phone interview: “This is a massive regulatory step.”
Currently, the University of Mississippi, or Ole Miss, is the only institution in the United States with DEA permission to cultivate cannabis for federally approved research, having been awarded its license in 1968.
Critics complain that the cannabis grown there doesn’t reflect what’s being sold in the marketplace today.
To expand the number of entities with federal licenses for cultivating marijuana for research, the Obama administration announced an application process in its final year. Nearly 30 businesses, research institutes, universities and other entities applied.
At that time, several state-legal cannabis businesses were among those to submit applications to the DEA to grow cannabis for researchers, including:
- Columbia Care, based in New York.
- GB Sciences, based in Nevada.
- Green Leaf, based in Alaska.
- NuVue Pharma, based in Colorado.
The process, however, stalled under President Donald Trump but has been restarted by the Biden administration, which has expressed far greater interest in cannabis research than its predecessor.
According to a DEA news release, the MOAs outline “the means by which the applicant and DEA will work together to facilitate the production, storage, packaging, and distribution of marijuana under the new regulations as well as other applicable legal standards and relevant laws.”
Research crop by ‘end of year’?
Groff North America CEO Joe Grzyb said his company’s facility is ready to go, but it would still need to obtain seeds or seedlings to start growing.
Company officials are now debating whether they want to start with seeds, seedlings or something else, so it would be a few weeks before they are growing federally approved cannabis for research.
“We hope to have our first material out before the end of the year,” Grzyb said.
Sisley and Hodgin said their organizations would review the MOAs and suggest changes.
Hodgin said Biopharmaceutical Research Co. would return its paperwork to the DEA with suggested changes before the end of this week, while Sisley said her group could take up to a month.
“They (DEA officials) really want to have an open dialogue with us. I think they’re eager to learn from us,” Sisley said.
“This is the first time they’ve underwent this process in 52 years. They admit that they don’t know everything.”
Hodgin said his cultivation facility is ready to go minus minor adjustments demanded by the DEA.
Once BRC gets its license, the company needs only to acquire plants.
Sisley’s institute uses cannabis products imported from a large publicly traded licensed producer in Canada.
‘Sense of urgency’
Applicants also believe the DEA will no longer drag its feet on the issue.
Shayne Pennington, a New York-based lawyer with Vicente Sederberg who is advising Sisley, said he felt “a sense of urgency” from the DEA to award the cultivation licenses.
While MOA recipients were in celebratory moods, applicants that did not receive MOAs hoped their names would be announced soon, too.
“We’re nearing our final step for approval,” said Richard Shain, CEO of Maridose, which has a cultivation facility in Maine.
He said he believed the DEA wanted to review his cultivation site’s security system because its primary concern is preventing diversion into the illicit market.
He added that he believed the DEA would continue to award MOAs on a “rolling” basis.
Sisley doubts that more licenses would be awarded in the near term because there currently is not enough demand for research cannabis.
Also, the DEA sets a quota for how much cannabis federally approved cultivators can grow. Sisley added that the University of Mississippi destroys hundreds of pounds of unused cannabis it grows every year.
“The DEA functions on quotas,” she said. “They look at demand for previous years, and they estimate based on that. And I think it’s going to be very unlikely that any more get approved. There’s no justification.”
For 2020, the DEA set the cannabis cultivation quota at 3,200 kilograms (7,055 pounds).
The DEA published its final rule to expand the number of federally approved cultivators of marijuana for research on Dec. 18.
“DEA believes a range of three to 15 growers is a reasonable estimate for purposes of this economic analyses, with the understanding that the actual number could vary considerably,” the final published rule noted.
Omar Sacirbey can be reached at omars@mjbizdaily.com.
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