By Lindsey Stroud

Taxpayers Protection Alliance

 

The U.S. House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act on April Fool’s Day. This non-foolish comprehensive cannabis-reform bill would remove cannabis from scheduled drug classification under the Controlled Substance Act, expunge previous cannabis-related convictions, and establish a federal tax rate on all cannabis products in the states.

Federal decriminalization and even legalization of cannabis is no joke, but there are some in Congress who think that the federal government needs more regulatory authority.

The bill, as currently written, charges that “the Secretary of Health and Human Services, acting through the Commissioner of Food and Drugs, shall hold not less than one public meeting to address the regulation, safety, manufacturing, product quality, marketing, labeling, and sale of product containing cannabis or cannabis-derived compounds.”

Essentially, under the MORE Act, all cannabis products could (if not, would) be regulated by the U.S. Food and Drug Administration (FDA). And unfortunately, as proven time and time again, consumer products and innovation languishes once under FDA regulations.

The history of the FDA dates to the 1906 Food and Drug Act and essentially morphed into the 1938 Food, Drug and Cosmetic (FD&C) Act, which the agency still operates under today. As of March 15, 2022, the FD&C Act is 871 pages of bloated bureaucratic privileges afforded to an agency that has long suppressed innovation across many sectors of consumer products. Currently, there is no mention of cannabis at all in FDA regulations.

One doesn’t need to look too far in FDA regulations to understand that the agency is more of a barrier to, rather than a supporter of innovation, and has applied disastrous rules that harm small businesses.

For example, under the FDA’s Center for Tobacco Products, all new tobacco products that enter the market after 2007 must undergo an extensive approval process to even market their products. This has significantly lessened adult access to tobacco harm reduction products, despite these products being promoted by public health agencies in other countries. Moreover, in September 2021, the agency actually issued denial orders to nearly 1 million vapor products that had been manufactured by small e-cigarette firms since 2016.

The FDA’s Center for Drug Evaluation and Research (CDER) oversees drug approval. Bringing a new drug to market is expensive and takes time. In fact, some studies have shown that bringing a new drug to market can cost more than $1 billion and take more than a decade.

The Center for Food Safety and Applied Nutrition is the FDA branch that oversees about 78 percent of the food consumed by Americans. With the 2011 Food Safety and Modernization Act of 2011, Congress gave the FDA “expanded authority to regulate fresh-produce production at the farm level.” Unfortunately, as noted in a 2018 study by the U.S. Department of Agriculture, the fixed costs in the certain requirements of the 2011 Act meant that “compliance costs to be higher as a share of revenue for smaller firms.”

These are just a few snippets of the massive authority FDA already has over consumer products and the costs associated with FDA-created regulations. Should the FDA oversee the regulation of cannabis products, many small firms could be shut out of what is already a legal market in their respective state.

While the language of the MORE Act does not have specific regulations in place, small businesses in America have already faced regulations imposed by the FDA on existing and legal consumer products.

In 2009, the FDA tried to block shipments of e-cigarettes to the U.S, using their CDER regulatory authority, and was promptly sued by e-cigarette manufacturers. Also in 2019, Congress gave the FDA authority to regulate tobacco products, effectively creating the CTP. In 2012, the original 2009 litigation would be finalized with the U.S. Court of Appeals for the D.C. Circuit determining that FDA could regulate e-cigarettes, as a tobacco product.

In 2016, the FDA established the long-awaited deeming regulations, codifying federal regulations for novel tobacco products, including any that had entered the market after February 15, 2007 – or two years prior to FDA regulatory authority over tobacco products. As of March, 2022, only two companies had received marketing orders from the agency for their e-cigarette products, while many more have been issued denials.

The absence of FDA regulation has permitted other adult consumer goods to flourish. For example, the craft beer market has blossomed across America.

In 2012, two companies controlled 90 percent of the American beer market, but between 2008 and 2016, breweries “expanded by a factor of six, and the number of brewery workers grew by 120 percent.” Further, between 2007 and 2016, “shipments from five major brewers … fell by 14 percent.” In 2021, even amid the COVID-19 pandemic, craft beer sales grew by eight percent, “raising small and independent brewers’ share of the U.S. beer market by volume to 13.1%.”

As noted, the FDA has not been the best federal agency in empowering small businesses. In fact, its regulations tend to favor large corporations at the expense of the small businesses who created the market.

Some in the cannabis space are paying attention to the actions by the FDA. Due to a lack of federal regulations, “only bold, small players have entered the hemp and hemp CBD space” and as of October, 2021, no “Fortune-500 type corporations have entered [the market] because a fear of regulatory uncertainty.” In fact, the MORE Act could “herald a major shakeup as well-funded and well-positioned corporations with comprehensive distribution networks would replace smaller hemp companies.”

Thankfully, the MORE Act isn’t the only comprehensive cannabis reform bill before Congress. Representative Nancy Mace (R-S.C.) has introduced the States Reform Act, which decriminalizes marijuana, sets a lower tax rate than the MORE Act, and more importantly, establishes a federal regulatory scheme that is similar to alcohol.