Editor’s Note: California’s legalization of cannabis has created opportunity in Orange County as serious investors have told the Business Journal they are looking to invest in the industry, from real estate to research to starting companies.
OC is already home to prominent cannabis companies generating millions of dollars, from Weedmaps to Terra Tech to KushCo; the latter two are among the new industry’s first publicly traded companies, Terra Tech recently said it will combine with enterprises headed by an industry pioneer entrepreneur, who will lead the new firm as well. Meanwhile, Santa Ana is becoming a hub for dispensaries and delivery companies are sprouting up through the county.
While claims abound about the wonders of cannabis, the industry lacks in-depth research on its effects—and many legal questions haven’t been resolved.
Daniele Piomelli, a professor of anatomy and neurobiology at University of California-Irvine, has a $9.5 million grant from the National Institutes of Health to study the effects of cannabis on adolescents’ brains. Piomelli is also editor in chief of Cannabis and Cannabinoid Research, which launched in 2016 and is the only academic, peer-reviewed research journal on the subject.
Piomelli and Bob Solomon, clinical professor of law, are co-chairs of UCI’s Center for the Study of Cannabis, which was established last year. They recently spoke with Business Journal Executive Editor Peter J. Brennan.
OCBJ: What do we know about the current state of the industry and its research?
PIOMELLI: I’m seeing two poles. One pole is folks who are genuinely trying to find medically and scientifically sound uses for cannabis and make a profit. Folks on the other pole are trying to market their way to success by taking advantage of the hype.
SOLOMON: On the legal side, we’ve created a tremendous incentive to get a license to sell and the same disincentive to get a license to grow. The growers are producing three times as much product as is being sold legally. The grower who gets a license will have to cut his price because he’s paying a 30% tax and will have greater expenses because he’ll have to track from seed to sale. There are obviously flaws there.
The whole question of local control is up in the air as to whether municipalities have the right to limit sales in their communities.
There are enormous tax questions because you still have to pay federal taxes, but you’re not allowed to deduct certain expenses like other businesses do.
A San Francisco AIDS group won an IRS tax case by arguing it wasn’t selling cannabis’ but giving it as part of its compassionate care package that is sold to patients.
Big firms are getting into dirt deals—real estate. There are all kinds of issues there.
OCBJ: Is cannabis the same as it was in the 1970s and 1980s or far stronger?
PIOMELLI: You can find anything you want—high levels or low levels of THC.
The fastest-growing segment of the population using cannabis is above 55 years old. Very few young people go to dispensaries because they use the black market.
There’s been a tripling of people 55 or older nationally who have said they’ve used cannabis in the past month.
It’s a sea change. I get invited to talk to senior homes quite frequently with audiences of more than 200 people. Everyone’s 70 years or older.
The evidence is very strong that cannabis alleviates chronic pains in adults. People in retirement homes use cannabis for lower back pains, joint pains and lack of sleep. In terms of actual danger, it has been overstated, provided that folks exercise caution.
OCBJ: What are you finding in your $9.5 million study on the effect of cannabis on teenagers?
PIOMELLI: There are a lot of studies based on human usages, which are based on associations. They all suffer from the problem of no clear cause.
There are no causation studies between cannabis and anything. We cannot give cannabis to people, wait 10 years and see what happens. We don’t have those studies right now.
There have been a few animal studies, but they’re not relevant. People wanted to show THC is bad for you so they would do high levels of THC and leap to that conclusion. All medicines in high doses are bad for you.
We are doing causative studies in mice, so we have a broad understanding of the biology.
We’re seeing what happens to their brains. In mice, it’s only a few months up to a year. That’s the equivalent of 70 years for humans.
We are now in our second year and have exciting data. It looks THC at very low doses, if given to adolescents, can substantially change not just the brain but a lot of other parameters in the body.
Individuals exposed to cannabis early in life tend to have lower body weight, lower levels of diabetes.
We are finding issues with memory.
It’s likely that teenagers and older people respond to cannabis in completely different ways.
OCBJ: Is there a connection between schizophrenia and teenage use of cannabis?
PIOMELLI: The evidence is overwhelming that there is an increased risk of schizophrenia among heavy users in adolescents. Any more than one cannabis cigarette a day is heavy.
One of the early symptoms of schizophrenia is anxiety. Cannabis initially helps reduce anxiety and users may try to self-medicate. However, a user can end up aggravating other aspects of the disease. It’s like if you’re on a raft in the middle of the ocean and you drink saltwater. It may feel fresh, but you’re not fixing the dehydration that you are suffering from.
OCBJ: What medications would consumers be using if not cannabis?
PIOMELLI: There are strong statistics showing that in states where cannabis is legal, the number of any prescriptions, including painkillers, opiates, is lower.
If you’re a cancer patient, the first thing chemotherapy cuts is your appetite and it makes you nauseous. Cannabis helps manage the side effects like pain, nausea and helps you sleep. It’s not curing cancer at all, but it helps you go through the cancer so that your organs can fight back with the help of chemotherapy.
There are a whole host of benefits claimed online and they are mostly unsubstantiated. It doesn’t mean they are wrong. We really need studies.
OCBJ: Are pharmaceutical companies talking to you about developing cannabis?
PIOMELLI: No. Their business model is completely different. They are building an intellectual property portfolio and have 25 years of leeway. They need a billion-dollar blockbuster that can be protected.
You cannot do it with cannabis because intellectual property protection is extremely hard. The companies I see are coming from the agricultural or nutraceutical space. They bring in their expertise like growing or marketing. They are already selling other products.
Cannabis is closer to nutraceuticals space in that they’re trying to protect IP based on a subtlety.
There are 140 cannabinoids produced by the cannabis plant. We only know two cannabinoids that are effective in humans—THC and CBD. There are 138 that could be useful.
The cannabis plant is a factory in making a particular compound that will be effective in treating a particular condition. They need the research to prove that. This is the pull of the companies that are doing the right things.
It is rapidly becoming crowded with researchers.
What I often find is these companies come to me and say they want to do this type of research. I tell them that’s fantastic. But I’ve learned that the first thing to tell them that the research at minimum costs $100,000 a month. They often don’t come back.
OCBJ: Is the federal government increasing its research?
SOLOMON: The federal government has restricted research by classifying cannabis as a Schedule 1 drug, which means you need a Schedule 1 license and you can only use cannabis grown at the University of Mississippi.
Universities are risk averse to taking money from the industry. They are afraid of what the government will do. We have hundreds of millions of dollars in the medical field at risk.
OCBJ: While the pharmaceutical industry is often sued, the cannabis industry is far less regulated and with a lot of unverified claims. What’s the liability for investors in cannabis companies?
PIOMELLI: I think it’s pretty big. The smart money should go to the companies that do the research and do it on the right side of the law because these lawsuits are eventually going to happen.
OCBJ: Smoking cigarettes causes cancer. Any danger that cannabis causes cancer or hereditary problems?
PIOMELLI: This area surprised scientists because we expected cannabis smoke to be a worse carcinogenic than cigarettes. The conclusion is that there is no link between cannabis smoke and cancers of the throat, lung or stomach. Why? Heavy smokers smoke two to three packs a day. Chain smoking of cannabis is rare.
The only cancer linked to cannabis is testicular cancer, which is often in young men in their 20s who are users.
As for hereditary, scientists are only now beginning to investigate it. There is some evidence that THC can cause some changes.
OCBJ: Is cannabis like alcohol?
PIOMELLI: They are not equivalent. Cannabis is a real medicine. You cannot make any medications from wine or tobacco.
OCBJ: What about driving under the influence of cannabis?
SOLOMON: No one wants that. The problem is that police use the field sobriety tests for cannabis. It’s so outmoded. The police we talk to in Orange County are quite sophisticated and totally on top of this.
OCBJ: How can employers tell if their employees are stoned?
PIOMELLI: Measuring THC in a urine test is meaningless and unfair. Let’s say an employee uses cannabis on a Friday night and it is his or her right because it’s legal. But on Monday, the employer can look at the THC levels in the employer’s urine, but they have no meaning because you can urinate THC for weeks afterwards.
The eyes are the best way to determine if someone is stoned. The pupils undergo constant vibrations that are controlled by cannabinoids. That wave is characteristic of abusing pot within the last five or six hours.
There isn’t anything available yet. A testing device could look like an Oculus mask to measure your vibrations and it will automatically tell whether you are on THC or not because your eyes cannot lie.
We have a bright physician in our center working on this but we’re having trouble funding it from the government. Maybe we should look for funding from the private sector.
OCBJ: You started full time studying cannabis in 1992. How has the industry changed?
PIOMELLI: When I started researching this industry, there were about 25 papers a year. Now there are about 2,500 a year. Probably 90% are not worth the paper they’re written on.
We’ve published more than 100 articles in our quarterly journal, the only peer reviewed academic journal. The publisher wants to make it monthly. The field has exploded in recent years.
OCBJ: Why did you start researching cannabis?
PIOMELLI: I was always against its use when I was young. I didn’t like any drugs. I had friends who used it and the effects were so peculiar that as a neuroscientist, I felt we had to understand it. I’m more liberal now because I don’t see it as dangerous or as useful as people say. I think there is something in the middle.
To me as a scientist, how can you have such amazing effects? How can you have a drug that at the same time stimulates your appetite and makes you laugh you head off for no reason?
A neuroscientist looks at this differently. How does it work in the brain?