What does the legalization of CBD mean for marketers?

Regulatory questions linger for hemp-derived products

Cannabidiol, or CBD, is all the rage these days. It’s being marketed to alleviate a wide variety of conditions, ranging from acne and anxiety to seizures and vertigo. Like medical marijuana, CBD is sold in several forms, including vapes, tinctures and edibles. Creative marketers, however, are incorporating CBD into myriad products, including pet foods, cosmetics, cookies and protein shakes, to name a few.

It is anticipated that the CBD industry will grow to $16 billion by 2025, according to analysis by Cowen & Co. But what exactly is CBD and how is it regulated?

CBD is a non-psychoactive chemical compound that can be derived from either the hemp plant (with less than 0.3% THC) or the marijuana plant. Generally, CBD products on the market tend to be derived from hemp, though until recently, hemp was listed as an illegal substance under the Controlled Substances Act.

On Dec. 20, 2018, President Trump signed into law the Agriculture Improvement Act of 2018, commonly known as the Farm Bill, which removed hemp from the Controlled Substances Act. Hemp is defined in the Farm Bill as the “plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts and salts of isomers … with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3% on a dry weight basis.”

Under the Farm Bill, production of hemp will be regulated on the state and federal levels. On the state level, department of agriculture officials are to consult with the state’s governor and chief law enforcement officer to devise a plan for the regulation and monitoring of hemp production. The plan must be submitted to the U.S. agriculture secretary for approval. State plans to license and regulate hemp cannot commence until they’ve been approved by the U.S. agriculture secretary. For states that opt out of devising a hemp regulatory program, according to an article published by the Brookings Institute, “USDA will construct a regulatory program under which hemp cultivators in those states must apply for licenses and comply with a federally-run program.”

In addition to ensuring their CBD suppliers are appropriately licensed, where possible, marketers of CBD-based products should insist that their suppliers contractually agree to comply with applicable good manufacturing practices and standards, carry sufficient insurance in the event of product liability claims and agree to indemnify the marketer should litigation or loss ensue. Also, to avoid the specter of consumer fraud litigation, marketers should ensure that the CBD they receive is as represented. To that end, they should insist that their suppliers provide certificates of analysis regarding the purity, quality and strength of the CBD supplied and consider doing their own testing to confirm the representations made by their suppliers.

Unfortunately, many CBD products are currently being marketed without regard to applicable governmental regulations. In the Farm Bill, Congress explicitly preserved the Food and Drug Administration’s authority to regulate products containing cannabis or cannabis-derived compounds under the federal Food, Drug and Cosmetic Act and Section 351 of the Public Health Service Act. In fact, on the same day as the passage of the Farm Bill, FDA Commissioner Scott Gottlieb, M.D. issued a statement reinforcing the FDA’s authority over hemp products, including CBD. Gottlieb made clear that products containing cannabis or cannabis-derived compounds will be treated as any other FDA-regulated products and subject to the same authorities and requirements. Furthermore, any products, hemp-derived or otherwise, “marketed with a claim of therapeutic benefit, or with any other disease claim” must be approved by the FDA for its intended use before it may be introduced into the market.

Despite the passage of the Farm Bill, it remains unlawful under the Food, Drug and Cosmetic Act to introduce food containing CBD or THC into interstate commerce, or to market CBD or THC products as dietary supplements, regardless of whether the substances are hemp-derived. CBD and THC are active ingredients in FDA-approved drugs, including Epidolex, Marinol capsules and Syndros oral solution. These restrictions, however, do not apply to hemp seeds, hemp seed protein or hemp seed oil, which the FDA considers to be generally recognized as safe (GRAS). These hemp seed-derived ingredients contain only trace amount of THC and CBD, “which the seeds may pick up during harvesting and processing when they are not in contact with other parts of the plant,” the FDA says. Products containing these ingredients may be marketed, provided they comply with all other relevant FDA labeling regulations.

Gottlieb recently announced that he will be resigning from his position at the FDA. Prior to his announcement, he told lawmakers that he was putting together a group of senior officials to write regulations regarding the use of hemp-derived CBD, and that the FDA would hold a public hearing on this matter in April.

Gottlieb’s successor will be tasked with guiding regulatory policy for the burgeoning CBD industry, including steps that will be taken to legalize its use in food, beverages and nutritional supplements.

Richard Fama is a shareholder and Kristin Keehan is an associate of Cozen O’Connor. Both are based in the firm’s New York office and focus their practices on food, beverage and cannabis

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