What this means for seniors, research, actions

President Donald Trump is expected to sign an executive order this week that would widely expand access to cannabis. Industry advocates, executives and researchers who spoke to CNBC said the changes would have big implications for both consumers and the health care industry.

Trump said Monday he was “strongly” considering an executive order that would reclassify pot as a Drug Enforcement Administration Schedule III drug, which would place cannabis alongside Tylenol with codeine, rather than Schedule I with drugs like heroin and LSD, as is currently the case. The order would also authorize a pilot program for Medicare to cover cannabis products for seniors.

The proposal should apply specifically to cannabidiol products, better known as CBD, intended to treat chronic pain, lack of sleep and other age-related conditions, said Shawn Hauser, a partner at the cannabis law firm Vicente LLP.

CBD has gained popularity in recent years, expanding to the general public via canned cocktails and body lotions, but has yet to gain full support from federal drug regulators.

“I expect the executive order to clarify what types of cannabinoids are covered, that they must come from a federally legal source,” Hauser told CNBC.

While many in the cannabis industry view the move to Schedule III as a done deal, the inclusion of a controversial Medicare provision adds an additional problem that could bring cannabis-derived products into the U.S. healthcare system, despite limited clinical evidence of their effectiveness, some experts told CNBC.

Insiders like Hauser expect the final order to define legal cannabinoids, administrative methods and a Food and Drug Administration oversight framework.

“A lot of people want to see this reclassification, because it leads to enormous amounts of research that cannot be done without a reclassification,” Trump told reporters Monday. “So we’re paying attention to that.”

Rescheduling and Medicare coverage are likely to trigger new investments from institutional capital and investors who typically follow big pharma’s federal insurance coverage, said Timothy Seymour, founder and chief investment officer of Seymour Asset Management and a CNBC contributor.

“The valuation of the sector will be worth a lot more because institutional investors will be allowed in, will have access and will have liquidity, and the exchanges will trade it,” Seymour told CNBC. “This could immediately double or triple the sector.”

The push for reclassification comes as a 2024 report found that more Americans reported using marijuana daily, or almost daily, than drinking alcohol with the same frequency. It was the first time the share of daily use shifted in favor of marijuana, according to Carnegie Mellon University’s analysis of 40 years of data.

The Medicare initiative is championed by billionaire Howard Kessler, a financier and longtime Trump ally who founded the Commonwealth Project in 2019. The organization says it advocates for elderly care, including through the use of cannabis.

Kessler and advocates like Hauser have urged the administration to bypass typical FDA hurdles — like multi-year clinical trials — and use a pilot program to gather real-world data on the safety and outcomes of cannabinoids in the elderly population.

Kessler did not respond to a request for comment. The White House also did not respond to a request for comment.

In September, stocks of cannabis companies rebounded on optimism that Trump would act soon after he shared a video from the Commonwealth Project on Truth Social that called coverage of CBD “the most important senior health initiative of the century.”

However, the Medicare proposal has attracted attention, even from other Trump allies.

House Speaker Mike Johnson, R-La., has expressed concerns about the cost and liability of such a program, The Washington Post first reported, while FDA officials say reimbursing Americans for treatments not approved by the agency would be unprecedented.

Beyond the political aspects, the scientific arguments in favor of medical cannabis remain controversial.

So far, the FDA has only approved the CBD drug Epidiolex to treat rare forms of epilepsy. This limited approval reflects both regulators’ caution and the fact that high-quality clinical trials are still limited for most other conditions for which cannabis is promoted.

Critics warn that a Medicare pilot program could put seniors, a demographic who often take multiple medications daily, at risk. A recent FDA-funded study suggested that prolonged use of CBD could cause liver toxicity and interfere with other life-saving medications.

“This is not based on science at all. This is all based on money, and it’s blatant. This is not how we make medical decisions,” said Meg Haney, director of the Cannabis Research Laboratory at Columbia University. “[Kessler]who is a friend of the president… can make a lot of money selling something that has no proof behind it.”

Other research has cast doubt on the effectiveness of cannabis entirely, suggesting it may not be effective for many of the conditions targeted by the proposed pilot, Haney said.

For example, a 2023 review of 134 studies involving adults aged 50 and older found that medical cannabis had inconsistent results in improving conditions such as terminal cancer and dementia. The review also found more common links to harm, including depression, anxiety, cognitive impairment and injury.

Rescheduling cannabis, however, would ease barriers to conducting clinical trials that experts say have historically stifled scientific research.

“Medical research has effectively remained under lock and key,” said Ryan Vandrey, a professor at Johns Hopkins University who helps run its cannabis science lab. “Schedule I makes large-scale placebo-controlled trials incredibly difficult. Without this data, policymakers are asked to make decisions in the dark.”

For investors, the specific conditions of the rescheduling are essential.

The rescheduling would improve producers’ access to banking and financial services because it would lift certain IRS tax restrictions that prohibit cannabis businesses from deducting their standard expenses.

The economic context is already changing: the annual value of American cannabis production jumped 40% last year compared to the previous year, according to the Department of Agriculture. The global market for cannabis-derived products is expected to reach $160 billion by 2032, according to Grand View Research.

Rumors of a rescheduling and possible pilot program helped shares of weed growers Tilray Brands and Canopy Growth jump 44% and 52%, respectively, on Friday.

As Seymour described it, Medicare coverage and federal insurance participation constitute the “holy grail” that could unlock institutional capital.

A Schedule III classification could also help legitimize the sector among institutional investors who have been hesitant to jump in, paving the way for more shares to list on the New York Stock Exchange and Nasdaq and shifting valuations from retail sentiment to fundamental cash flows.

“The Schedule I classification is what has held back many institutional investors,” Seymour said. “Having to tell their shareholders … that they own a company that sells something that is comparable to heroin, LSD or cocaine … is a difficult thing to swallow.”

If cannabis moves toward a reimbursable prescription drug model or toward federal legality, the category could attract interest from big pharma and distribution could eventually migrate from state-licensed dispensaries to national pharmacy chains like CVS And Walgreens.

This could cause problems for small weed businesses.

Big pharma already has the financial wherewithal to fund the multi-year, double-blind clinical trials required for FDA-approved drugs – a barrier to entry that few current cannabis operators can overcome.

However, Seymour views Medicare coverage as a catalyst for merger and acquisition activity rather than an immediate death knell.

“You’re going to see more consolidation in the industry,” Seymour said. “Small businesses that have good business and are profitable… will likely be seen as targets.”

Meanwhile, Ben Kovler, CEO of Green Thumb Industries, predicts increased competition between pharmaceutical companies and cannabis companies to achieve medical breakthroughs.

“The pharmaceutical sector, in the past, has been a major lobbyist against [cannabis] because it’s a threat,” Seymour said. “Therefore, yes, it’s a huge opportunity for the pharmaceutical industry.”

— CNBC’s Brandon Gomez contributed to this report.