As the market for hemp-based products booms, many investors are grappling with (and consumers unaware of) the grey area within which hemp products are being commercialized across the country. Increasing demand for cannabidiol (the cannabinoid more commonly known as CBD), in particular, has resulted in the proliferation of a wide range of products available over the counter at many retailers. Eager to operationalize under a legal framework that can support the growth in CBD and other hemp-based products in the United States, industry stakeholders, state and federal legislators, and courts across the nation are pressuring the Food and Drug Administration (FDA) —which has primary but shared, regulatory oversight of CBD—to hand down regulations governing the approval process and marketing and sale of CBD products added to foods, drugs, or cosmetics.
The FDA, in turn, is moving slowly in developing regulations; although, it has indicated that it supports a legal structure governing the marketing and sale of CBD to consumers. In the meantime, the FDA is using its authority to enforce the Food, Drug, and Cosmetic Act (FD&C Act) against makers of CBD products, and it appears to be ramping up its efforts as CBD products continue to gain popularity in the United States.
Retail sales of CBD products have soared since the passage of the 2018 Agricultural Improvement Act (better known as the 2018 Farm Bill), which pulled hemp out from under the Controlled Substances Act, clearing a path toward the legal manufacture, commercialization, and use of products created with hemp and its derivatives (except for those derivatives containing more than .3% delta-9-tetrahydrocannabinol (THC)).
The 2018 Farm Bill also confirmed the FDA's authority to regulate CBD as a substance within the scope of the FD&C Act when added to foods, drugs, or cosmetics. To date, the FDA has approved only one CBD pharmaceutical product (Epidiolex) used to treat rare seizure disorders. It has not, however, approved CBD as an ingredient or additive that is “generally recognized as safe” under the FD&C Act in dietary supplements and other food products. With developments in hemp and cannabis law taking a national spotlight, the FDA has begun paying closer attention to the proliferation of CBD products.
Indeed, since 2015, the FDA has issued more than 50 warning letters targeting CBD companies for impermissible marketing and labeling practices. The FDA's current position is that companies selling CBD products that claim to have medical uses or therapeutic benefits are marketing and selling unapproved new drugs. This applies, for example, to many CBD products on the market advertised as treatments for ailments—such as arthritis, anxiety, cancers, and even COVID-19—that come in a variety of ingestible and topical products such as oils, capsules, and lotions. The FDA also takes issue with CBD product labels containing claims of medical use or therapeutic benefit when such labeling lacks complete or accurate instructions to the consumer on how to safely use the CBD product and/or encourages the consumer to forego the advice of a healthcare provider.
The FDA notes further that some of these CBD products are marketed as health foods and dietary supplements having medical uses or therapeutic benefits despite not meeting the relevant definitions under the FD&C Act to be so classified. In sum, regardless of whether the CBD product is a food, drug, or cosmetic, the FDA is more likely to scrutinize its marketing and labeling when the CBD product carries some type of health- or wellness-related claim.
The volume of CBD-specific warning letters sent during 2019 and 2020 showed a marked increase in FDA scrutiny of CBD products from years past. On December 22, 2020, the FDA announced that its latest round of warning letters was sent to companies marketing nasal products (e.g., nose spray), inhalant products (e.g., vapor sticks), and ophthalmic products (e.g., eye drops) containing CBD with claims of medical uses or therapeutic benefits. The FDA stated that these products are especially troubling due to the route of administration and present a great public health risk (one of the standards by which the FDA has stated it will prioritize enforcement activity).
Practical Guidance for CBD Companies
Despite its enforcement efforts, the FDA continues to emphasize its support of CBD-product development and has acknowledged its opinion that legal CBD products have great potential for medical applications, in particular. Until the FDA hands down guiding regulations, however, its recent enforcement trends will be the metric by which CBD companies must govern their conduct. As a final note, while the FDA has oversight regarding the way that CBD products sold as foods, drugs, and cosmetics are marketed and labeled, other agencies are targeting CBD companies for similar marketing practices under their authority.
On December 17, 2020, the Federal Trade Commission (FTC) announced that it had launched Operation CBDeceit, its first major crackdown on CBD companies for marketing CBD products that deceptively claim to treat serious medical conditions such as cancer despite not being scientifically supported. Unlike warning letters issued by the FDA, the FTC sanctions have some teeth—five of the six CBD companies sanctioned must pay fines ranging from $20,000 to $85,000.
To avoid regulatory scrutiny, CBD companies should place particular focus on accurate marketing and labeling of their products. Moreover, CBD companies should carefully monitor regulatory developments and frequently assess how such developments align with their business activities.
Originally Published by Bass, Berry & Sims, January 2021
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