In a significant step toward the legalization of cannabis in the United States, the Farm Bill became law in December 2018. Among other things, this new law removed hemp from Schedule I of the Controlled Substances Act, effectively eliminating the federal ban on cultivars of cannabis that have less than 0.3% THC and are generally used for items such as paper, textiles, clothing, rope and other commercial uses. While the passage of this new law was a very welcome change and warmly received by the cannabis industry, it also brought the hemp/CBD markets more squarely than ever within the view of various regulatory agencies, including the U.S. Food and Drug Administration (FDA).
The market for CBD-based products using legal hemp is now wide open from coast to coast, without fear of violating federal law. This is nearly certain to expand the research efforts of the potential of CBD to treat various medical issues, from pain relief to seizures and many, many other ailments. The potential for companies to grow and profit in this rapidly expanding industry will drive investment into new uses for CBD. The flip side to this situation, however, is that given the ability of companies to use federally legal hemp in CBD products, the FDA has made clear that the use of hemp will be regulated just like any other substances used in consumer products.
On the same day that the president signed the bill that decriminalized hemp, FDA Commissioner Scott Gottlieb issued a statement on behalf of the agency, stating that its commitment to protect and promote the public health will apply equally to the use of hemp as it does with any other product that falls under the authority of the FDA. He also pointed out that the new law explicitly preserved the authority of the FDA to regulate products containing cannabis or cannabis-derived compounds. Commissioner Gottlieb further noted that by decriminalizing hemp, while keeping the use of these newly legal compounds under the watch of the FDA, companies utilizing these cannabis compounds would now have a clearer pathway to operate legally within the FDA framework.
While it is unclear at this point exactly how the FDA will regulate the CBD market, particularly given the resignation of Commissioner Gottlieb, it is likely to look similar to what was done prior to the 2018 Farm Bill, but with a more developed process for introduction and regulation of CBD-based products. Prior to the passage of the Farm Bill, the FDA had become increasingly aggressive toward the claims of companies selling products with CBD or other cannabis-derived compounds. In order to claim that a product has a therapeutic use or can be used to treat a disease, the product must be approved by the FDA for its intended use. This applies to all products, not just those using a cannabis-derived compound. The removal of hemp from the Controlled Substances Act does not change how the FDA will view CBD or other cannabis-derived compounds; as examples, if the relevant product is a food, or includes a claim of therapeutic value, or the ability to treat a disease, the FDA will require its approval before permitting the product to go to market.
Given that cannabis companies have operated largely in the shadows for many years, the steps necessary to operate within the regulatory framework of the FDA and other government agencies designed to protect the public may seem daunting. However, to date, the FDA has not revealed an intention to “single out” or “pick on” the cannabis market. In other words, it looks like products using a cannabis-derived compound will largely be regulated just like any other product under the watch of the FDA.
In general, there are three relevant categories of FDA approval:
1. Generally Recognized as Safe, or “GRAS”
This category of regulatory approval would apply to food products, whether or not any claim of any benefit to the user is made. So food products containing CBD will likely come under increasing scrutiny of the FDA. A “food” is pretty much anything that is ingested, like a cookie, beverage or a tincture. For new subject matter, like CBD, the process can take from a few months to more than a year and can cost in the low six figures.
2. New Dietary Ingredient Approval, or “NDI”
This category applies to dietary supplements and for which structure/function claims are made, for example, that it “promotes restful sleep.” Like the GRAS process, for new subject matter, the NDI approval process can take from a few months to more than a year, and can cost in the low six figures.
3. New Drug Application or “NDA”
This category applies to drugs. The process here can potentially take a decade or longer, and can cost a billion dollars or more. GW Pharmaceuticals recently received approval for its CBD-based drug Epidiolex for the treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome. By approving Epidiolex, the FDA made clear that it is willing to consider CBD-based drugs for approval.
The United States, like many other countries, seems to be taking an increasingly friendly position on cannabis and the use of cannabis-derived compounds. It is clear that we have only begun to scratch the surface of the medicinal value of cannabis. With the removal of hemp from Schedule I, the approval of Epidiolex by the FDA for the treatment of seizures, and many other steps taken every day to transition cannabis from the shadows to the mainstream, the commercial uses for cannabis will continue to grow. As cannabis moves from the illegal market to the legal market, those involved in the cannabis industry will similarly need to change their mindset from operating outside of the laws and regulations that other products are subject to, to operating within that regulatory environment. The companies that can make this transition and properly navigate within this environment will be poised to reap the rewards of this rapidly expanding industry.
Epidiolex may be the first cannabis-based drug to receive FDA approval, but others will surely follow.
Tom Zuber is the managing partner of Zuber Lawler, which handles corporate, finance, M&A, IPO, intellectual property, FDA and litigation matters from offices in Los Angeles, Silicon Valley, Chicago and New York. He holds a law degree from Columbia Law School, a master’s degree in public policy from Harvard University and a biomedical engineering degree from Rutgers University, where he graduated with highest honors. He can be reached at firstname.lastname@example.org.