Legal: CBD and the FDA

Federal regulations remain incredibly vague, making it difficult to predict the future of the market

After the passage of the 2018 Farm Bill, the only thing that is clear is that the future of CBD is murky. Despite this confusion, the market continues to grow, and projections from BDS Analytics put the 2024 market value for CBD at over $20 billion, proving there is plenty of space available in the CBD market.

That’s what makes the Food and Drug Administration’s lack of clear guidance or draft regulations on hemp and CBD products all the more troubling.

Almost immediately after the passage of the 2014 Farm Bill, GW Pharmaceuticals was awarded “orphan drug” status for its anti-seizure medication, Epidiolex. This may not have raised many eyebrows outside of the industry, but the orphan drug designation carries with it certain privileges. First, the orphan drug status carries with it the FDA designation of a drug. Second, orphan drug status grants that application the exclusive seven-year right to use the drug to treat the condition that was applied for.

Since that time, the FDA has taken a hard-line stance that CBD is a drug. Any drug requires pre-market approval from the FDA, effectively cutting off the ability to have a legal product for CBD isolate outside of the pharmaceutical industry.

Interestingly, though the CBD market has mostly been hemp-derived CBD, the orphan drug status (for GW Pharmaceuticals and others) has largely evolved around marijuana-derived CBD. The side-effect of this has been the reclassification of CBD to a Schedule V drug under the Controlled Substance Act. Although the FDA initially planned to deschedule the drug entirely, the agency ultimately compromised and agreed to the DEA’s reclassification, as reported by Marijuana Moment.

The orphan drug status of CBD has created a problem for the industry as a whole. For starters, it led to a ludicrous proposition. In warning letters touting the orphan drug status of CBD, the FDA notes the limited exception for a dietary supplement or food product having been marketed prior to the granting of orphan drug status. Before Epidiolex received orphan drug status, the CBD market was already well-established, according to a BDS Analytics white paper that states, “Since 2012, the Cannabinoid market has experienced a gradual commercial rise with products becoming available in dispensaries and mainstream markets.”

Despite this, the FDA continued to insist no such market existed prior to Epidiolex.

The orphan drug hurdle is not the only hurdle faced by CBD products. The regulation by the FDA means that products must meet certain criteria under the Food, Drug and Cosmetics Act. Under the act, a new substance may not be added to a food unless it has been approved as GRAS (generally recognized as safe). Likewise, a substance may not be added or classified as a dietary supplement unless the substance has been approved as a “new dietary ingredient.”

The FDA has also been clear that neither CBD, nor hemp extract, have been approved as either GRAS as a food additive, or approved as a new dietary ingredient.

Even with the negative outlook created in warning letters, CBD is not without its benefactors in high places. In April 2019, then-FDA Commissioner Scott Gottlieb outlined what appeared to be enforcement priorities for CBD products, laying in its sights those companies making egregious claims. This, of course, was seen as a good sign by those in the industry who were operating above board. Then, in September 2019, Senate Majority Leader Mitch McConnell wanted to insert language into a congressional spending report calling on the FDA to create a path to lawful marketing of CBD products. Things were looking up, and it looked like CBD and hemp extract may be permitted.

Despite this, the FDA’s current stance continues to be anti-CBD, and the agency’s warning letters have taken on a darker tone. Even after McConnell’s plea to the FDA, in November 2019, the FDA issued a batch of 15 warning letters, which were accompanied by a rather dire press release warning of “potential harm,” “safety concerns” and questions about the “impacts on vulnerable populations.”

In late-2019, the CBD rumor mill was abuzz with news that the former drafter of the FDA’s supplement regulations under the Dietary Supplement Health and Education Act (DSHEA) was tapped to draft the regulations for hemp and CBD. This created hope that the FDA had regained its senses and was going to regulate CBD and hemp extract as a supplement, as opposed to the more onerous categories of drug or over-the-counter monograph, which would effectively be industry-killers, as it would effectively place the market in the hands of conglomerates and drug companies. The hope vanished when draft language creating supplement status was removed during one onerous, late-night editing session. According to my contact in Washington, D.C., the language was in place when he went to bed and was gone in the morning. This has fueled speculation that the drug company lobbyists ruled the day.

Hope arose again in January 2020, with the introduction of House Resolution 5587. The resolution would force the FDA to classify CBD as a supplement and was introduced in the House of Representatives, with broad bipartisan co-sponsorship. As of this writing, the bill has not made it far, having only been referred to a subcommittee of the Committee on Agriculture.

In late February, the FDA’s current commissioner, Dr. Stephen Hahn, acknowledged the need for a pathway for CBD, calling it a “fool’s errand” to tell people they can’t use these products.

Like I said, the issue is murky at best. However, I take solace that the recent news has lent itself toward creating a viable market for CBD and hemp extract.

One thing is for certain, the industry needs to speak up. The stakes are far too high to stay silent while those with little industry experience make the decisions for the industry and for consumers. If the CBD industry ends up in the hands of pharmaceutical companies, consumers will be subject to higher prices, less choice and less innovation. And those who worked tirelessly to create the hemp and CBD market will be out of work.

It is a tense time in the industry while we try to read the tea leaves, and while those in power are giving us conflicting messages. In the meantime, we will continue to innovate and continue to make our voices heard.

Justin P. Walsh is a partner at Gleam Law, PLLC, spearheading the firm’s hemp and CBD work, as well as heading the litigation department. He graduated cum laude from Seattle University School of Law, where he was published in the Seattle Journal for Social Justice. He also served as a judicial extern to the Honorable Chief Justice Mary Fairhurst (retired) on the Washington State Supreme Court. He has been rated AV-Preeminent by Martindale.com, the highest rating available. He can be reached at Justin@GleamLaw.com.

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