It has been more than three years since the California Department of Public Health (CDPH) announced in July 2018 that California would not permit ingestible hemp-derived CBD products to be sold in the state, following guidelines from the U.S. Food and Drug Administration (FDA). The state legislature now has overwhelmingly passed Assembly Bill 45, which is expected to be signed by Governor Gavin Newsom shortly.
Assembly Bill 45 allows for hemp-derived cannabinoids, extracts and derivatives in food and dietary supplements with various restrictions. Though expected to be a game-changer for hemp products sold in the world's fifth largest economy, this legislation comes just weeks after the FDA denied two New Dietary Ingredient applications filed by well-known CBD brands, and it perpetuates the 50-state patchwork model for hemp products that the FDA was expected to remedy after passage of the 2018 Farm Bill. Here, we offer our analysis of the key provisions of the new legislation and highlight areas of lingering uncertainty and risk.
Key Provisions of AB45
Hemp Does Not Adulterate Food or Dietary Supplements
under State Law
Under AB45, a dietary supplement, food, beverage, cosmetic or
pet food is not adulterated by the inclusion of industrial hemp or
cannabinoids, extracts or derivatives from industrial hemp if those
substances meet specified requirements. A manufacturer of dietary
supplements and food that includes industrial hemp is required to
register with the CDPH, must demonstrate proper sourcing of the
industrial hemp and must comply with good manufacturing practices.
Industrial hemp may not be included in products that contain
alcohol, tobacco or nicotine.
Hemp Defined
"Industrial hemp" or "hemp" is defined
under the bill as "an agricultural product, whether growing or
not, that is limited to types of the plant Cannabis sativa L. and
any part of that plant, including the seeds of the plant and all
derivatives, extracts, the resin extracted from any part of the
plant, cannabinoids, isomers, acids, salts, and salts of isomers,
with a delta-9 tetrahydrocannabinol concentration of no more than
0.3 percent on a dry weight basis."
Prohibition on Intoxicating Hemp-Derived Products
To curtail the growth of new unregulated intoxicating
hemp-derived products such as Delta-8 THC, the bill creates a new
definition for "THC or comparable cannabinoid" as applied
to industrial hemp products. This includes "Any
tetrahydrocannabinol, including, but not limited to,
Delta-8-tetrahydrocannabinol, Delta-9-tetrahydrocannabinol, and
Delta-10-tetrahydrocannabinol, however derived." The CDPH is
granted discretion to include or exclude within this definition
"any other cannabinoid, except cannabidiol, that the
department determines . to cause intoxication."
Rejection of DEA's Rule on Noncompliant Hemp
Extract
AB45 does not acknowledge the controversial Interim Final Rule
of the Drug Enforcement Administration (DEA) that seeks to classify
hemp extract that exceeds 0.3% THC concentration at any point
during the extraction process (which is practically unavoidable) as
a Schedule 1 controlled substance. The bill instead focuses on the
final extract, which cannot exceed 0.3% THC concentration.
Labeling and Advertising
An industrial hemp product that is a dietary supplement, food
or beverage must have packaging and labeling that includes
all of the following information:
- A label, scannable barcode, internet website or QR code linked to the certificate of analysis that provides the product name, contact information for the product's manufacturer or distributor, the product batch number, the concentration of cannabinoids present in the product batch and the contaminant levels within the product batch.
- The product expiration or "best by" date, if applicable.
- A statement indicating that children or those who are pregnant or breastfeeding should avoid using the product prior to consulting with a health care professional about its safety.
- A statement that products containing cannabinoids should be kept out of reach of children.
- The following statement, that "THE FDA HAS NOT EVALUATED THIS PRODUCT FOR SAFETY OR EFFICACY."
The bill prohibits labeling, advertising or marketing an industrial hemp product with a "health-related statement" that is untrue as to the effects on health of consuming products containing industrial hemp or hemp-derived cannabinoids, extracts or derivatives. A "health-related statement" includes "a statement of a curative or therapeutic nature that, expressly or impliedly, suggests a relationship between the consumption of industrial hemp or industrial hemp products and health benefits or effects on health." An exemption exists, however, for structure-function claims that are allowed for dietary supplements made in accordance with the Federal Food, Drug, and Cosmetic Act.
It also is impermissible to directly target advertising or marketing to children or to persons who are pregnant or breastfeeding. Advertising or marketing placed in broadcast, cable, radio, print or digital communications shall only be displayed where at least 70 percent of the audience is reasonably expected to be 18 years of age or older, as determined by current and reliable audience composition data.
Serving Size Remains a Tricky Problem
A significant topic left open by AB45 is how the CDPH will
regulate maximum serving sizes, active cannabinoid concentration
per serving size, the number of servings per container and similar
questions. The bill provides CDPH with this authority but provides
no guidance. Some industry leaders have warned against
"percentage" thresholds of cannabinoids as an appropriate
measure for foods and beverages. Due to the potentially large
amounts that may be consumed, food and beverages that contain less
than 0.3% THC concentration may nevertheless contain a substantial
quantity of THC. A typical energy bar of 60 grams, for example,
would be allowed to have up to 180 mg THC if limited to 0.3% THC
concentration by weight. Regulated cannabis edible products by
comparison may only be sold in a serving size of no more than 10
mg, with a limit of up to 100 mg per package. CDPH will need to
grapple with this issue.
Testing
A hemp manufacturer must meet rigorous testing requirements,
including that the hemp is tested by an independent testing
laboratory in raw extract final form prior to being incorporated
into a product, and that the total THC concentration does not
exceed 0.3%. The CDPH "may regulate and restrict the cap on
extract and may cap the amount of total THC concentration at the
product level based on the product form, volume, number of
servings, ratio of cannabinoids to THC in the product, or other
factors, as needed." The scope of testing must include any
hemp derivatives identified on the product label or in associated
advertising.
A raw hemp product also must demonstrate that the tested sample of the batch did not contain contaminants that are unsafe for human or animal consumption. Testing requirements for contaminant levels are the same as those for cannabis.
Temporary Prohibition on Inhalable Products
A new tax on inhalable products is authorized by AB45. Until
that tax is enacted, however, the manufacture and sale of inhalable
products are prohibited except for sale outside California.
Groundwork for Incorporating Hemp Products into the Cannabis
Supply Chain
AB45 instructs the Department of Cannabis Control (California
has merged the three state cannabis authorities into this single,
new Department) to prepare a report on the necessary steps for
incorporating hemp products into the cannabis supply chain. This
includes the incorporation of hemp cannabinoids into manufactured
cannabis products and the sale of hemp products at cannabis
retailers.
Enforcement and Interagency Cooperation
The bill also facilitates communications between state
agencies and local law enforcement for better compliance by and
enforcement against unlicensed manufacturers. CDPH is specifically
granted seizure/embargo powers for noncompliant hemp products, as
well as the ability to initiate recalls.
Comment
AB45 is expected to provide sorely needed vitality to
California's lagging hemp industry, and lays the groundwork for
future synergy with the state's regulated cannabis market. The
legislation will certainly be a boon to hemp- and CBD-infused
consumer product manufacturers and retailers even though some
questions remain, such as how the state may ultimately regulate
inhalable hemp products and the serving size for hemp-infused food
and beverages.
Industry participants should nevertheless proceed with caution due to the specter of the FDA, which has not completed its rulemaking process around CBD. Although it is widely assumed that the FDA will allow CBD in dietary supplements in some form, the same is not true for CBD as a food additive. Final rules by the FDA that are inconsistent with California's rules will likely result in a showdown between Washington and Sacramento, and may breathe new life into class actions and other litigation brought by the plaintiffs' bar against hemp and CBD companies in the state. In the meantime, California hemp and CBD manufacturers, distributors and retailers should follow closely and comply with the new regulations that will be coming from the CDPH and other state agencies.
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