Rescheduling Cannabis: Big Pharma’s Gain, Small Businesses’ Pain—Can the Industry Adapt?

As the federal government moves closer to potentially rescheduling cannabis to Schedule III, the industry stands on the brink of a seismic transformation. While the shift could usher cannabis into the pharmaceutical mainstream—potentially landing products on the shelves of CVS and Walgreens—it also poses existential challenges for businesses struggling to adapt to heightened regulations and pharmaceutical-grade standards. Can the cannabis industry survive this dramatic shift?

One of the most profound changes under rescheduling would be compliance with FDA oversight. The cannabis industry, historically focused on safety and avoiding contaminants, has operated with relatively minimal requirements compared to the pharmaceutical sector. Now, businesses will need to meet stringent production standards, conduct rigorous testing, and achieve pharmaceutical-grade quality.

"This isn’t just a tweak to the system," says Denise Pollicella, cannabis attorney and head of Omnus Law's cannabis practice. "It's a complete overhaul of how the industry operates."

These changes could drive up costs significantly, putting pressure on smaller businesses with limited resources. As Pollicella points out, scaling production to meet pharmaceutical-grade standards will require not only capital investment but also expertise many companies currently lack.

A shift to Schedule III could pave the way for major pharmaceutical retailers like CVS and Walgreens to carry cannabis products. Such distribution channels would open new revenue streams and expand access, but they also favor larger operators with the infrastructure to meet federal standards.

States with robust cannabis markets, such as Michigan, Pennsylvania, and Florida, are already positioning themselves for this new era. "Michigan, for example, has worked to align its standards with FDA expectations," Pollicella explains. Companies like TerrAscend, Curaleaf, and Green Thumb Industries have invested heavily in their production capabilities, anticipating the stricter requirements that federal oversight will demand.

Rescheduling could also unlock interstate commerce, fundamentally reshaping cannabis supply chains. Producers in states like Michigan and Florida, which have mature markets and pharmaceutical-grade facilities, could dominate the national wholesale market. However, this opportunity comes with regulatory challenges, including state permissions, excise taxes, and the need to track cannabis products as they cross state lines.

This shift would likely accelerate consolidation as smaller players struggle to navigate the complexities of a multi-state supply chain. "It’s Darwinian," says Pollicella. "Companies that grew thoughtfully will thrive; those that didn’t may not survive."

Rescheduling cannabis isn’t a done deal. A potential Trump presidency or lack of political will could derail progress, leaving the industry in limbo. Advocates are pushing for federal alignment, citing economic benefits, but Pollicella cautions against premature optimism. "Anybody counting on rescheduling in the next administration is taking a gamble," she warns.

Despite these challenges, Pollicella remains optimistic about the future for businesses that can adapt. Those with scalable production capabilities, forward-thinking strategies, and the ability to meet pharmaceutical-grade requirements are well-positioned to thrive. However, the industry must prepare for significant consolidation as smaller operators bow out under the weight of compliance costs and operational overhauls.

"The cannabis industry is at a crossroads," Pollicella says. "For some, this shift will be a death knell; for others, it’s the opportunity of a lifetime."

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