Stinson: CBD Industry Sees Significant Uptick in Regulatory Activity: Could Robust Federal Regulation Be on the Horizon?

Stinson: CBD Industry Sees Significant Uptick in Regulatory Activity: Could Robust Federal Regulation Be on the Horizon?

The cannabis industry is rapidly expanding around the world. Much of this expansion is due to innovation related to, and interest in, products containing cannabidiol (CBD). Despite widespread interest, the industry has largely been operating without any real federal regulation and guidance specific to CBD, and with only a patchwork of inconsistent and incomplete state regulations. That may be changing soon. Over the last month, the CBD industry has been the subject of a lot of regulatory activity, specifically from the Food and Drug Administration (FDA), which may be signaling forthcoming federal CBD regulations.

Zane Gilmer – Stinson: CBD Industry Sees Significant Uptick in Regulatory Activity: Could Robust Federal Regulation Be on the Horizon?

Zane Gilmer  

Authored By: Zane Gilmer

Zane Gilmer is a partner with the national law firm of Stinson LLP. Zane practices out of the firm’s Denver, Colorado office. He represents individuals and companies in high-stakes litigation involving business and investment disputes. He handles class actions and cases involving fraud, mismanagement and regulatory compliance. He is also the chair of the firm’s cannabis practice group.

FDA Provided Report to Congress on the State of the CBD Marketplace

On July 8, 2020, the FDA submitted a report titled “Sampling Study of the Current Cannabidiol Marketplace to Determine the Extent that Products are Mislabeled or Adulterated” to the U.S. House and U.S. Senate Committees on Appropriations. This report identified two separate studies the FDA conducted related to products containing cannabis or CBD. The first study was conducted prior to the enactment of the 2018 Farm Bill. In this report, the FDA tested the CBD content of 74 CBD-related products sold for human consumption and 4 products sold for consumption by pets. In determining which products to select for testing, the FDA considered the following factors:

 

  • Products that made serious disease or medical claims;
  • Products that were sold in multiple states (i.e., interstate commerce);
  • Products that were readily accessible to consumers and available for online purchase; and
  • Products that were the subject of previous consumer complaints or an adverse event report.

 

The FDA determined that of the 74 products tested, only 67 contained CBD, and only 8 contained labels identifying the accurate amount of CBD in those products. The FDA’s tests also revealed that two of the products contained levels of THC, prompting their referral to the Drug Enforcement Agency (DEA).

 

According to the report, the second FDA study occurred in 2019. The FDA identified 34 products to test, all of which were analyzed for various elements. However, none of the test results revealed levels of elements that would cause public health concerns. The FDA also tested 31 of the 34 products to determine if, and how much, CBD each product contained. The test results revealed that 21 of the products contained the amount of CBD listed on the product label, and another 7 products contained within 20% of the amount of CBD listed on their labels. However, four of the products tested did not contain CBD. Nearly half of the products tested, 15 of the 31, contained THC, which was not identified on the product’s label.

 

These studies indicate the FDA is interested in determining: (1) what is in CBD-related products; (2) do the levels or concentration of the contents of the products create a public health concern; and (3) do the product labels accurately reflect what is in the products. None of these interests are surprising, given these are the very issues the FDA is concerned with regarding other products consumed by humans. However, it does underscore to the industry that although there may not be clear guidance and regulations specific to CBD, it is not a free for all. Identifying what is (or is not) in a particular product and ensuring the product’s label accurately reflects that information is a must and will continue to be a focal point for the FDA—with or without additional regulations.

 

FDA Released Guidance Related to Conducting Research into Cannabis for Drug Development

On July 21, 2020, the FDA issued its “Cannabis and Cannabis-Derived Compounds: Quality Considerations for Clinical Research, Draft Guidance for Industry,” which sets forth the FDA’s positions concerning topics related to clinical research and development of drugs containing cannabis or cannabis-derived compounds. The draft guidance seeks comments and suggestions from interested parties, which must be submitted within 60 days. The guidance addresses the following issues:

 

  • Sources of Cannabis. Cannabis testing for purposes of clinical drug testing must meet all FDA requirements. The National Institute on Drug Abuse (NIDA) Drug Supply Program (DSP) is the only domestic federally legal source for cannabis containing over 0.3 percent THC to be used for clinical research. In light of the 2018 Farm Bill, however, cannabis containing less than 0.3 percent THC can be used for clinical research.
  • Quality Considerations. New drug sponsors must be able to demonstrate they can consistently manufacture a quality product. At each research stage, sponsors must “submit sufficient information to ensure the identify, quality, purity, and potency or strength of the investigational drug.” The guidance further addresses some of the specific information sponsors should submit to demonstrate the quality of the products. In addition, the guidance sets forth a list of documents and principles sponsors should consider to ensure product integrity.
  • Percent THC Calculation. The guidance states sponsors should first consult with the DEA to ensure compliance with the Controlled Substance Act and DEA requirements related to THC content levels of cannabis materials. The guidance further states sponsors should work with reliable laboratories to test THC levels.

 

This proposed guidance, while perhaps not perfect or complete, is a significant step forward for cannabis testing and trials and ultimately for getting new drugs approved that contain cannabis or extracts. In that vein, this is another step in the direction of regulation and ultimately legitimacy for the industry.

 

FDA Submitted Draft CBD Enforcement Guidance to White House

On July 22, 2020, the FDA submitted its “Cannabidiol Enforcement Policy; Draft Guidance for Industry” to the White House Office of Management and Budget (OMB) for review. The contents of the document were not released to the public and remain unknown. However, as the title implies, it is presumed that the document sets forth the FDA’s position concerning enforcement priorities related to the CBD industry and products as well as guidance related to the same for the industry.

 

To some extent, the FDA’s enforcement priorities are well known and guided by the Federal Food, Drug, and Cosmetic Act (FD&C Act). In 2019, for instance, the FDA issued at least 22 warning letters to CBD companies that were accused of violating the FD&C Act. The FDA also has issued a handful of similar letters in 2020. While the allegations in these letters often vary slightly, there are a number of common themes: (1) the company has made improper/unapproved drug claims concerning the alleged benefits the product may have on certain health conditions or diseases; (2) the products contain misbranded drug labeling because the products constitute drugs and do not contain proper directions for use; (3) the products are improperly marketed as dietary supplements; and (4) the products constitute improper adulterated human or animal foods.

 

It is likely the enforcement guidance the FDA submitted to OMB emphasizes a policy toward continuing to enforce the FD&C Act against CBD companies that allegedly violate one or more of the categories set forth above. In addition, while it is speculation, it is possible that the enforcement guidance sets forth a more refined policy concerning which specific companies and product lines the FDA may be more likely to target with warning letters or other enforcement actions. Given the FDA’s limited resources and the ubiquity of CBD companies and products, the FDA cannot target every company or product it believes is in violation of the FD&C Act. However, it can formulate enforcement guidelines that help dictate how those limited resources will be used. For instance, the FDA will likely focus on companies with a larger market control, companies that sell products online (i.e., interstate commerce), products that are intended for human consumption (or intended for agricultural animal consumption that will ultimately enter the human food supply chain), products that make unfounded medical/health claims, or products that otherwise may present a large scale public health concern.

 

FDA Approves New Use for CBD-Containing Drug Epidiolex

On July 31, 2020, the FDA announced it had approved GW Pharmaceuticals’ drug Epidiolex, which contains CBD, for oral treatment of seizures associated with tuberous sclerosis complex in patients one year of age or older. The FDA previously approved Epidiolex for the treatment of seizures arising from rare forms of epilepsy. While this is certainly good news for GW Pharmaceuticals, it is also a win for the broader industry as it is a move further in the direction of regulation and legitimacy of CBD, specifically, and CBD products, more generally.

 

The flurry of CBD-related activity by the FDA in recent weeks may be an indication that the FDA is getting closer to releasing wide sweeping CBD regulations. Only time will tell whether that is true. However, at worst, the FDA’s recent activity provides a sneak peek into the FDA’s current thought process regarding some issues facing the industry and helps predict (or at least hypothesize) what regulations may look like if, and when, the FDA formally acts to implement them.

 

[1] Zane Gilmer is a partner with the national law firm of Stinson LLP. Zane practices out of the firm’s Denver, Colorado office. He represents individuals and companies in high-stakes litigation involving business and investment disputes. He handles class actions and cases involving fraud, mismanagement and regulatory compliance. He is also the chair of the firm’s cannabis practice group.

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