FDA Oversight of Booming CBD Market: What Can Businesses Expect?
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FDA Oversight of Booming CBD Market: What Can Businesses Expect?

The agency will hold a public hearing May 31, and its subsequent guidance will be critical for businesses to understand what can be legally sold and how it can be marketed.

The Agriculture Improvement Act of 2018, Pub. L. 115-334 (2018 Farm Bill) removed industrial hemp from the Controlled Substances Act (CSA) and thereby legalized hemp nationwide. The 2018 Farm Bill was a major victory for hemp farmers throughout the United States, but they are not out of the weeds just yet.

Hemp is a variety of the cannabis sativa plant that historically offered many industrial purposes including paper, oils, clothing and building material. Cannabidiol (CBD) derived from hemp is now one of hemp farmers’ best-selling products. Products that contain CBD are popping up everywhere, as CBD becomes increasingly popular for both recreational and therapeutic use.  Manufacturers infuse CBD into oils, creams, beverages, and even pet food. Restaurants are selling meals prepared with CBD. 

However, concerns, arise as vendors make increasingly ambitious claims about the seemingly miracle-like effects of CBD. Some CBD marketers, for example, have made claims that CBD can cure cancer and other ailments, even when research to support those claims is unsubstantiated or nonexistent. Unresolved questions remain concerning the cumulative exposure to CBD if people consume it across a broad range of products.

The Food and Drug Administration (FDA) can help close the gap between hard science and snake oil by deciding what claims companies lawfully can make about CBD. Under current statutory authority, FDA-regulated products (with the exception of some cosmetics) that contain CBD require premarket approval from the FDA. The agency requires premarket approval for drug products containing CBD that are marketed with a therapeutic claim to diagnose, prevent or treat a disease.

Because CBD is an active ingredient in an FDA-approved drug that was the subject of substantial clinical investigations, manufacturers cannot lawfully market food and dietary supplements containing CBD. With the proliferation of interest in the manufacturing and marketing of products containing CBD for therapeutic use, the FDA has scheduled a public hearing for May 31, 2019, to “obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds.”

In the wake of the 2018 Farm Bill, the agency created a webpage to establish goal posts for how it intends to regulate cannabis and cannabis-derived products, including products containing CBD. On April 2, 2019, just days before Scott Gottlieb, M.D. concluded his tenure as the commissioner of the FDA, he released a statement concerning new steps to advance the FDA’s continued evaluation of potential regulatory pathways for cannabis-containing and cannabis-derived products. Those steps include the formation of “a high-level internal agency working group to explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed; including a consideration of what statutory or regulatory changes might be needed and what the impact of such marketing would be on the public health.”

The agency also committed to identifying and taking action against companies that are illegally selling unapproved CBD products that include claims to prevent, diagnose, treat or cure serious diseases and target vulnerable populations. The agency has sent warning letters to certain companies across the country, informing the companies that it has reviewed their websites and concluded that the companies have made unsubstantiated advertising claims and offered products that are unapproved and misbranded new drugs sold in violation of the Federal Food, Drug, and Cosmetic Act.

The FDA already has approved one drug that contains cannabis-derived CBD. The FDA will ask Congress to pass further legislation addressing CBD regulations, according to Gottlieb. One possible pathway forward would be to allow lower concentrations of CBD as a food additive and higher concentrations as an approved drug.

The FDA’s guidance will be critical because investors want to understand what can be legally sold, and how it can be marketed. Indeed, retailers and producers need to know which way the compass is pointing so they can communicate with investors. Meanwhile, the national market could be worth $16 billion by 2025, according to one recent report. That same report found that almost seven percent of Americans already use CBD.

With such a burgeoning market, the industry needs product standards, and marketers cannot make unsubstantiated therapeutic claims. The FDA is attuned to stakeholders’ interest in the CBD market, and their need for regulatory guidance. In light of the rapidly evolving landscape for CBD producers, retailers and marketers, industry participants should consult experienced legal counsel to ensure that they are complying with federal law.

Robert M. Kline is a partner at McDermott Will & Emery. He focuses his practice on complex litigation and sensitive internal investigations, with an emphasis on health care law, class action defense in state and federal courts and labor and employment disputes. He also is a member of McDermott’s multidisciplinary team of lawyers that provides clients with regulatory, litigation, intellectual property, trade and tax services with respect to their investments and participation in the cannabis industry.

Khelin N. Aiken is counsel at McDermott Will & Emery. She focuses her practice on counseling and advising life sciences companies develop the strategic regulatory approaches necessary to bring drug products to market, navigate citizen petitions and execute Rx to OTC switches, all while maintaining a competitive advantage. She also is a member of McDermott’s multidisciplinary team of lawyers that provides clients with regulatory, litigation, intellectual property, trade and tax services with respect to their investments and participation in the cannabis industry.