The ABC's of CBD Regulation

“Isn’t hemp the same thing as cannabis (marijuana)?”

The difference between cannabis and hemp stem from their most widely studied and commonly known chemical compounds: tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”). Cannabis contains the higher levels of THC (the compound responsible for causing the psychoactive effects of “getting high”), whereas hemp contains only trace levels of THC and can be rich in CBD. CBD, as a compound, is said to be helpful treating a range of symptoms and ailments. But research on CBD is still at its relative infancy.

“If hemp is related to cannabis, how can it be legal?”

The passage of the Hemp Farming Act of 2018, which was incorporated into the 2018 U.S. Farm Bill (the “Farm Bill”), effectively decriminalized the production or use of hemp and cannabis derivatives with lower than .3% THC concentration on a dry weight basis. As a result, CBD is not only receiving a lot of attention from hemp growers and distributors but also regulators.

Despite hemp and its derivatives (including CBD) being removed from the definition of cannabis under the Controlled Substances Act (“CSA”), it is subject to oversight and regulation by the United States Department of Agriculture (the “Department of Agriculture”), the Food and Drug Administration’s (the “FDA”), as well as the United States Department of Health and Human Services. Thus, while the Farm Bill decriminalized CBD, what the government giveth, the government may also taketh; and along with regulatory oversight comes the specter and reality of regulatory enforcement.

In a recent statement, outgoing FDA Commissioner, Scott Gottlieb, noted that “the FDA requires a cannabis product . . . marketed with a claim of therapeutic benefit to be approved by the FDA for its intended use before it may be introduced into interstate commerce.”

Considering the increasingly widespread use of CBD products for therapeutic purposes, the FDA is acutely concerned that patients might substitute these commercially available products in place of medicines that have been approved to prevent, treat, or cure certain diseases and conditions. The essence of this concern is that approved medication provide a level of confidence as to appropriate dosing required to treat patients with complex and serious medical conditions such as cancer, Alzheimer’s, and substance abuse, while there is not enough clinical research to substantiate many of the health and medical claims associated with CBD.

“It still sounds like CBD is illegal even though I see CBD products being sold everywhere.”

Again, the short answer is that CBD is not illegal. But there is a difference between a substance that is not violative of criminal laws yet nevertheless potentially violative of government regulations. Think alcohol. Alcohol is not illegal under federal law though it is subject to varying levels of regulatory oversight; at the federal level by the Bureau of Alcohol Tobacco and Firearms, and at the state level – in NJ, for instance – by the Alcohol and Beverage Commission.

The Farm Bill envisions a relatively similar structure: the Department of Agriculture will set baseline rules for the implementation of federal regulation of hemp and its derivatives, such as CBD, while states are permitted to create their own rules, albeit subject to the review and approval of the Department of Agriculture.

Indeed, as recently May 28, 2019, the Department of Agriculture made public the legal opinion of its General Counsel as to the effect of this patchwork of federal and state regulations on hemp. In this opinion, the Department of Agriculture reiterated that although States may make more restrictive rules than those approved by the Department of Agriculture, such states may not prohibit the interstate shipment of hemp that is lawfully produced in another state.

“What regulations should those in the CBD industry be concerned about?”

First, CBD is derived from hemp and there is nothing at the federal level prohibiting the continued sale of hemp until the Department of Agriculture creates their regulations. And, there is no indication – absent a legislative fix – that such rules will be implemented any time soon (though the Department of Agriculture indicated its hope that such rules will be implemented this year).

But many states’ rules apply. The Farm Bill was preceded by a 2014 Farm Bill that permitted states to implement their own hemp pilot programs. In short, this allowed states to establish their own regulatory structure for the sale and distribution of hemp. There were differences in interpretation as to whether the 2014 Farm Bill permitted interstate sales of hemp. In any event, many companies began to sell CBD products interstate in spite of the legal ambiguity. Irrespective of any perceived legal ambiguity, it is legal to grow and sell hemp intra-state, provided you are operating under your own state’s lawful hemp statutory and/or regulatory structure. The FDA has also declared that CBD is illegal in dietary supplements because it violates the federal Food Drug and Cosmetic Act, putting the health and safety of consumers at risk.

“Speaking of the FDA, if I were to sell CBD, could the FDA come after me - and for what exactly?”

When dealing with issues at the federal level, the question continuously loops back to enforcement priorities: There are only so many federal agencies and agents to enforce administrative rules. As a result, agencies like the FDA have to pick and choose their battles as to what is most important from an enforcement perspective. Luckily, we need not guess what the FDA’s priorities are with respect to CBD.

Immediately following the Farm Bill, the FDA identified the following three areas of potential liability through regulatory enforcement actions associated with the sale and distribution of CBD:

CBD products marketing claims of therapeutic benefits, or with any other disease claim;

• selling or marketing CBD products as food or dietary supplements; and/or
• selling or marketing CBD for human consumption without having sought pre-approval through the generally recognized as safe pathway.

The FDA keeps records associated with companies running afoul of these areas, identifying, with particularity, the types of offensive statements made. Those who violate these prohibitions or make therapeutic claims about the effectiveness of their products without sufficient evidence and the legally required FDA approval, are subject to the “enforcement discretion” of the administration.

Notably, there is currently no clearly defined regulatory framework setting forth when it is appropriate for the FDA to begin an enforcement action against a company for improperly marketing CBD products. The FDA has so far typically first sent warning letters to companies regarding various marketing aspects of their CBD products. These letters have generally required the offending companies to correct the alleged violations within fifteen days, along with threatening that a failure to do so will constrain the FDA to commence “legal action without further notice, including, without limitation, seizure and injunction.”

“Can you give me some examples of CBD marketing practices that previously ticked off the FDA and how to navigate this all? And please don’t tell me I just need to speak with a lawyer.”

Well, you really should contact a lawyer (more on that below), but here are some examples of therapeutic claims offensive to the FDA:

• “CBD successfully stopped cancer cells in multiple different cervical cancer varieties;”
• “Cannabidiol may be effective for treating substance use disorders;” and
• “For Alzheimer’s patients, CBD is one treatment option that is slowing the progression of that disease.”

Likewise, the FDA has flagged companies for various online marketing practices. Some examples include tweeting hashtags of diseases on a company’s twitter account, retweeting other people/entity’s health claims, and even simply responding to a person’s inquiry about seeking a CBD product to treat a certain disease (despite the fact that the offending company’s response did not specifically reference that it would treat such disease).

Given the state of uncertainty that exists in the regulatory framework of CBD marketing, best practices suggest that certain disclaimers be utilized. For example, we always recommend that our CBD clients utilize the following statement on the principal display panel of their products: “[t]hese statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease.”

“Tell me about the FDA hearing in May.”

To address the above issues and others, the FDA will hold a public hearing on May 31, 2019 to begin a notice-and-comment period assessing the medical consequences for patients who might choose to treat certain diseases by taking CBD. It is particularly interested and is seeking public comment, data and information about issues such as the level(s) of cannabis and cannabis-derived compounds that may implicate safety concerns. This includes what modes of delivery may affect the safety and exposure to these compounds and how they interact with other substances.

In conjunction with this, the FDA is also forming an internal agency working group to explore how companies might lawfully market and advertise dietary supplements and more conventional foods containing CBD. This does not mean, however, that the FDA has pulled back from enforcing the prohibitions contained in existing regulations. Gottlieb’s recent statements make clear that it remains “unlawful to introduce food containing added CBD, or the psychoactive compound THC, into interstate commerce, or to market CBD or THC products as dietary supplements.”

“Okay, cat’s out of the bag. I am going to either invest or partner with my friend that is about to launch a CBD company. Why Genova Burns?”

Whether it is Genova Burns or another firm that has a well established and experienced Cannabis law practice, spending money on compliance on the front end will save you money and help your growth on the back end. Ensure that you build your legal team with those that understand not only what the rules say but also creative solutions for fostering compliance. This space is ever evolving. It is important to not only consult with those that are plugged in on the latest and most innovative aspects of the marketplace but also practitioners who have been getting their hands dirty in the weeds for some time.

For more information on what your organization can do to ensure compliance, please contact Partner Charles J. Messina, Esq., co-Chair of the Cannabis Law Practice Group.