Husch Blackwell: Operation CBDeceit Marks Beginning of FTC Crackdown on Deceptive CBD Medical Claims While FDA Continues to Issue Warning Letters

Husch Blackwell:  Operation CBDeceit Marks Beginning of FTC Crackdown on Deceptive CBD Medical Claims While FDA Continues to Issue Warning Letters
On Thursday, December 17th, the Federal Trade Commission (FTC) announced that it was taking action against six companies selling CBD-based products.  These companies faced administrative actions by the FTC for “making a wide range of scientifically unsupported claims about their ability to treat serious health conditions,” such as cancer, Alzheimer’s disease, and pain relief.  The six actions have been resolved by consent orders, each of which call for the companies to immediately stop making unsubstantiated health claims about their products, as well as notify their customers of the FTC’s order by a form letter.  Five out of the six companies also had to pay a fine to the FTC, ranging from $20,000 to $85,000—the first monetary sanctions issued by the FTC against CBD product manufacturers and sellers.
Operation CBDeceit Marks Beginning of FTC Crackdown on Deceptive CBD Medical Claims While FDA Continues to Issue Warning Letters

Tonya M. Esposito

 

Renée B. Appel

 

In quick succession, the Food & Drug Administration (FDA) announced yesterday, December 22nd, that it issued five warning letters to companies for selling products containing CBD in ways that violate the Federal Food, Drug, and Cosmetic Act (FD&C Act). The warning letters address the illegal marketing of unapproved CBD products claiming to treat medical conditions. The warning letters include CBD products that are “especially concerning from a public health perspective due to the route of administration, including nasal, ophthalmic and inhalation.”  In addition, they address violations relating to the addition of CBD to food, and the impermissible marketing of CBD products as dietary supplements. Two of the letters also concern CBD products illegally marketed for pets, including a product for use in the eye.

In its announcement of the warning letters, FDA Principal Deputy Commissioner Amy Abernethy, M.D., Ph.D assured, “The FDA’s first priority is to protect the health and safety of Americans. Many questions remain regarding the science, safety, effectiveness and quality of products containing CBD,” and further stated, “We remain focused on exploring potential pathways for CBD products to be lawfully marketed while also educating the public about these outstanding questions of CBD’s safety. Meanwhile, we will continue to monitor and take action, as needed, against companies that unlawfully market their products — prioritizing those that pose the greatest risk of harm to the public.” In its announcement, the FDA further reminded the public that it has not approved any CBD products other than one prescription drug for the treatment of seizures associated with tuberous sclerosis complex (TSC), Lennox-Gastaut syndrome (LGS) and Dravet syndrome (DS) in human patients. CBD has not been approved as a food additive and does not meet the statutory definition of a dietary supplement.

In an industry that has been described as “the Wild West,” the FTC and FDA are trying to establish some structure and lessons through enforcement measures, with the FTC having “upped the ante”:

  • Need for Substantiation. All six FTC consent orders contain similar language in regards to the standards of evidence required to make certain health-based claims about products: there must be “human clinical testing” to support the claims made regarding prevention, treatment, and safety claims, and “competent and reliable scientific evidence for other health-related product claims.” “The six settlements announced today send a clear message to the burgeoning CBD industry: Don’t make spurious health claims that are unsupported by medical science,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection.  Commissioner Wilson also commented: “Although I support these cases, I hope that the Commission’s actions here, which challenge wholly unsubstantiated disease claims, do not discourage research into the potential legitimate benefits of CBD and a wide array of other products. In addition, going forward, I urge the Commission to focus our scarce resources on marketers that make strong, express claims about diseases and serious health issues with little to no scientific support and engage in deceptive practices that cause substantial consumer injury.”

Importantly, the FDA, has not approved a marketing application for cannabis for the treatment of any disease or condition and thus has not determined that cannabis is safe and effective for any particular disease or condition.  While both the FTC and FDA are aware that several states have either passed laws that remove state restrictions on the medical use of cannabis and its derivatives, including CBD, it maintains that manufacturers are responsible for conducting medical research into the safety and effectiveness of cannabis products through adequate and well-controlled clinical trials.

  • Actions Speak Louder Than Words. The FTC’s activity demonstrates that the agency is prepared to move beyond warning letters and assess fines against violating companies, as well as require notices be issued to customers. This goes beyond a “slap on the wrist,” as companies face serious consequences that can be debilitating to operations.  This summer, the FTC filed its first action against a CBD marketer and its owner, but it did not result in any financial fine.  Consistent with that action, however, the FTC has once again demonstrated that it will pursue individuals under the appropriate circumstances so owners and operators cannot evade liability.
  • More to Come. Prior to this month, the FTC and the FDA had sent warning letters to CBD companies regarding their use of unsubstantiated health-based claims in the same vein as those made by the six companies being sanctioned. By taking the next step beyond warning letters and imposing financial sanctions, the FTC has demonstrated that it will hold CBD-based products to the same standard of any other product claiming to prevent, treat, or cure medical conditions, regardless of its recent entry into commercial markets. As Director Smith warned other CBD manufacturers and retailers, absent medical support, “don’t be surprised if you hear from the FTC.”

Once again the FDA and FTC have made a mark that COVID-19 is not enough to distract them from continuing to monitor the CBD market and take action when necessary to protect consumers.  FTC Commissioner Rohit Chopra addressed the overlap between CBD and COVID-19 in his concurring statement with the FTC’s actions: “…COVID-19 and the resulting economic and social distress are fueling new concerns about substance use disorders. In particular, there are signs that the pandemic is leading to greater dependence on opioids. It is critical that the FTC take steps to prevent exploitation of patients seeking treatment for substance use disorders.”  Accordingly, where CBD products raise health concerns, the FTC and FDA will be watching.

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Cannabis Law Journal – Editorial Board Members

Editor – Sean Hocking

Author Bios

Canada
Matt Maurer – Minden Gross
Jeff Hergot – Wildboer Dellelce LLP

Costa Rica
Tim Morales – The Cannabis Industry Association Costa Rica

Nicaragua
Elvin Rodríguez Fabilena

USA

General
Julie Godard
Carl L Rowley -Thompson Coburn LLP

Arizona
Jerry Chesler – Chesler Consulting

California
Ian Stewart – Wilson Elser Moskowitz Edelman & Dicker LLP
Otis Felder – Wilson Elser Moskowitz Edelman & Dicker LLP
Lance Rogers – Greenspoon Marder – San Diego
Jessica McElfresh -McElfresh Law – San Diego
Tracy Gallegos – Partner – Fox Rothschild

Colorado
Adam Detsky – Knight Nicastro
Dave Rodman – Dave Rodman Law Group
Peter Fendel – CMR Real Estate Network
Nate Reed – CMR Real Estate Network

Florida
Matthew Ginder – Greenspoon Marder
David C. Kotler – Cohen Kotler

Illinois
William Bogot – Fox Rothschild

Massachusetts
Valerio Romano, Attorney – VGR Law Firm, PC

Nevada
Neal Gidvani – Snr Assoc: Greenspoon Marder
Phillip Silvestri – Snr Assoc: Greenspoon Marder

Tracy Gallegos – Associate Fox Rothschild

New Jersey

Matthew G. Miller – MG Miller Intellectual Property Law LLC
Daniel T. McKillop – Scarinci Hollenbeck, LLC

New York
Gregory J. Ryan, Esq. Tesser, Ryan & Rochman, LLP
Tim Nolen Tesser, Ryan & Rochman, LLP
Cadwalader, Wickersham & Taft LLP

Oregon
Paul Loney & Kristie Cromwell – Loney Law Group
William Stewart – Half Baked Labs

Pennsylvania
Andrew B. Sacks – Managing Partner Sacks Weston Diamond
William Roark – Principal Hamburg, Rubin, Mullin, Maxwell & Lupin
Joshua Horn – Partner Fox Rothschild

Washington DC
Teddy Eynon – Partner Fox Rothschild