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The Growth of Hemp in the US—an Ever-Changing Regulatory Environment

December 31, 2019Articles The Legal Intelligencer

The emergence of the hemp crop in U.S. markets has been slowed by a confusing and inconsistent regulatory environment at both the state and federal levels. However, the United States Department of Agriculture somewhat clarified this regulatory environment when it released interim final rules early in the fourth quarter of 2019. The highly anticipated rules address a wide spectrum of issues, including licensing, interstate transportation, and THC testing and sampling. But the most important impact of the federal program rollout is the beginning of the process where states—the primary regulators of hemp cultivation—can submit and obtain USDA approval of individual state plans. Just recently, the USDA approved the state plans of New Jersey, Ohio and Louisiana, as well as certain tribal plans. Many other state plans have been submitted and are under USDA consideration, including Pennsylvania. And as state plans are approved, existing and future hemp businesses will have a higher level of predictability when it comes to business operations.

While the USDA rules are a good start, those rules were generally intended to govern the plant itself, and not consumer products containing CBD, a derivative of the plant. So, for those in the CBD space, the elephant in the room remains: the Food and Drug Administration. As we know, the 2018 Farm Bill does not affect the Federal Food, Drug and Cosmetic Act, or the authority of the Commissioner of Food and Drugs to promulgate regulations and guidelines under the FD&C Act. In other words, Congress explicitly preserved the FDA’s current authority to regulate products containing cannabis or cannabis-derived compounds, including hemp-derived CBD.

Since passing the 2018 Farm Bill, the FDA has generally taken the position that “cannabis and cannabis-derived products claiming in their marketing and promotion materials that they are intended for use in the diagnosis, cure, mitigation, treatment, or prevention of diseases (such as cancer, Alzheimer’s disease, psychiatric disorders and diabetes) are considered new drugs or new animal drugs and must go through the FDA drug approval process for human or animal use before they are marketed in the United States.” Similarly, the FDA has stated that “it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements … because both CBD and THC are active ingredients in FDA-approved drugs (Epidiolex) and were the subject of substantial clinical investigations before they were marketed as foods or dietary supplements.”

That said, the FDA has recognized the “growing public interest in cannabis and cannabis-derived products, including CBD,” as well as the “potential opportunities of cannabis or cannabis-derived products.” It has also promised to “continue to take steps to make the pathways for the marketing of these products more efficient.”

Although a relatively rare occurrence, the FDA has enforced its position through the issuance of warning letters to companies that are allegedly operating unlawfully. Most recently, the FDA warned 15 companies for purportedly “illegally selling” various products containing CBD. These 15 warnings represent a significant uptick in the FDA’s enforcement actions against CBD-selling businesses. In comparison, the FDA issued a total of only 18 warning letters between 2015 and 2018. And, as a result of this more recent round of warnings, industry players have expressed concern about how the FDA will treat CBD products in the future as it continues to learn about the substance.

While this concern may be legitimate, the recent wave of FDA enforcement action should not be the reason. It is true that the issuance of these warnings represent a numerical increase in enforcement actions. But a close reading of the letters reveals that the FDA has not changed its position, despite the appearance of being more aggressive in its enforcement.

The FDA news release detailing the warning letters provides that the particular companies “are using product web pages, online stores and social media to market CBD products in interstate commerce in ways that violate the FD&C Act, including marketing CBD products to treat diseases or for other therapeutic uses for humans or animals.” For example, some companies were making egregious health claims, such as CBD curing Alzheimer’s. The FDA also took issue with companies adding CBD to food and drink, and marketing CBD products as dietary supplements. These are the same concerns that the FDA has focused on in previous warnings to CBD companies. In other words, same old.

That said, the warning letters did include new concerns related to products being marketing to infants and children—“a vulnerable population that may be at greater risk for adverse reactions due to differences in the ability to absurd, metabolize, distribute or excrete a substance such as CBD.” But it should come as no surprise that the FDA flagged this type of conduct as worthy of enforcement. After all, that is the FDA’s job, particularly since the effects of CBD on a developing brain are simply unknown at this time.

At bottom, the FDA’s highest priority is consumer safety, and that has not changed despite the issuance of these new warnings. For businesses, the FDA’s enforcement actions can be boiled down into a single principle: selling CBD responsibly. Making unsubstantiated health claims about curing a serious disease is not responsible selling. Marketing CBD products to infants and children when the effects of CBD on children are unknown is not responsible selling. And in these situations, the FDA has rightfully stepped in to ensure consumers are properly informed and to protect the public health. Put differently, businesses that continue to conduct themselves in this manner should not be permitted to operate in the space—we are talking about ingestibles that may have real health effects on human beings.

Indeed, this is the message that the FDA conveyed when it simultaneously updated its consumer update on CBD. There, the FDA highlighted several health concerns related to CBD consumption, including liver injury, male reproductive toxicity and interactions with other drugs. These are real concerns. And as the FDA works through its process to determine a regulatory framework, one thing is for certain: the forthcoming FDA rules and regulations governing CBD (if any), will be focused on consumer health and protection. And only those businesses that have the resources and experience to ensure such protections should be permitted to sell CBD products. The recent warning letters simply solidify this position.

Reprinted with permission from the December 31, 2019 issue of The Legal Intelligencer. (c) 2019 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.