CBD OilSeven months ago, Congress enacted the Agriculture Improvement Act of 2018 (the 2018 Farm Bill). Although referred to as a farm bill, the implications for America beyond the farming community are significant. Most notably, as a consequence of the 2018 Farm Bill, hemp is no longer a controlled substance. But the fact that hemp is no longer a controlled substance does not take products that contain it out of federal regulation. The Food and Drug Administration (FDA) has regulated, and for the foreseeable future will continue to regulate, how these products can be marketed.

The FDA does not currently have an established policy for products that contain hemp beyond its standard policies for addressing foods and drugs that are marketed to consumers. Mindful that there has been a recent proliferation of these type of products and states have been encouraging companies to bring these products to market, the FDA is now soliciting comments on how to treat products that contain hemp. However, the enactment of the 2018 Farm Bill did not halt the FDA's practice of issuing warning letters to companies that it believes are improperly marketing their products in contravention of the Food, Drug, and Cosmetic Act (FD&C Act).

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CBD Products

Cannabis sativa is a plant that is the source of two types of products that are increasingly being discussed and used in America: hemp and marijuana. It contains a number of active chemical compounds, the two most important of which are tetrahydrocannabinol (THC) and cannabidiol (CBD). The difference between hemp and marijuana is the amount of THC. THC is significant because it is what gives marijuana (also spelled "marihuana") its psychoactive properties. CBD is structurally related to, but is distinct from THC, and it is the most important ingredient in hemp. Products that contain hemp or are derived from it may be referred to as "CBD products."

Advocates of CBD products claim that they have many health benefits, e.g., in the area of pain management. However, all CBD products that are being marketed to the lay public are being done so without FDA approval. As would be expected, with this type of marketing have come lawsuits that include allegations of false advertising. See, e.g., Horn v. Medical Marijuana, __ F. Supp. 3d __, 2019 WL 1673710 (W.D.N.Y. 2019).

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The 2018 Farm Bill

The 2018 Farm Bill amended prior law in three significant ways for producers of CBD products. First, it amended the Agricultural Marketing Act of 1946 by adding the following definition of "hemp":

The term 'hemp' means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.

7 U.S.C. §1639o. The key to this definition is that it defines hemp to cover products from the cannabis plant with a THC concentration of not more than 0.3 percent. This relatively low level of THC is what distinguishes CBD products from marijuana products.

Second, the 2018 Farm Bill amended §102(16) of the Controlled Substances Act by explicitly reciting that marihuana does not include hemp, 21 U.S.C. §802, and amending the definition of tetrahydrocannabinols to exclude THC within hemp, 21 U.S.C. §812. Thus, hemp is no longer a controlled substance under the United States Code.

Third, the 2018 Farm Bill explicitly noted that the FDA retained the right to regulate products that contain hemp. 7 U.S.C. §1639r. At least one court has emphasized that not only can the FDA regulate it, but the FDA has primary regulatory authority over it. In re CWNevada, 2019 WL 2420032, *4 (D. Nev. June 3, 2019). Thus, persons in the CBD industry should pay close attention to the activities of the FDA.

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FDA Activity

In the wake of the 2018 Farm Bill, the FDA has tried to be proactive with respect to its role in regulating CBD products. On April 2, 2019, FDA Commissioner Scott Gottlieb announced four initiatives:

• A public hearing, which took place on May 31, 2019, and in connection with which comments were solicited through July 16, 2019;

• 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;

• Updates to the FDA's webpage regarding FDA Regulation of Cannabis and Cannabis-Derived Products: Questions and Answers; and

• The issuance multiple warning letter to companies that market CBD products with egregious and unfounded claims that are aimed at vulnerable populations.

More recently, on June 14, 2019, the FDA stated that its position that its responsibility with respect to how to regulate CBD products depends on the type of product and how that product is being marketed. Amy Abernethy and Lowell Schiller, "FDA Is Committed to Sound, Science-Based Policy on CBD," fda.gov.

According to current FDA policy, it is illegal to put into interstate commerce a food to which CBD has been added, or to market CBD as or in a dietary supplement. Id.

The FDA has recognized that it has the authority to issue a regulation that create an exception to its general rules that preclude the sale CBD as a dietary supplement or within a food product. Id. However, it is being deliberate in its consideration of the issue. It is concerned that unsubstantiated claims can be harmful to consumers because they might cause consumers to put off obtaining medical care. Id.

Although the FDA is still determining if it should establish a formal rule for how to treat CBD products, it does, as noted above, continue to issue warning letters. The most recent letters, which were issued after the enactment of the 2018 Farm Bill, are helpful in guiding clients on how they may market their products.

On March 28, 2019, the FDA sent warning letters regarding CBD products to:

• Advanced Spine and Pain, LLC (ASP) (FDA Letter Ref. 565256) in connection with the following products: "CBD Salve," "CBD Oil," and "CBD for Dogs."

• PotNetwork Holdings, Inc. (PotNetwork) (FDA Letter Ref. 564030) in connection with the following products "Liquid Gold Gummies (Sweet Mix)," "Liquid Gold Gummies (Sour Mix)," and "blue CBD Crystals Isolate 1500mg."

• Nutra Pure LLC (Nutra Pure) (FDA Letter Ref. 567714) in connection with the following products: "Hemp Oil" and "CBD Softgels."

In these letters, the FDA noted that each of the cited products violated one or more of the provisions of the FD&C Act, 21 U.S.C. §301 et seq. Below are the four most important takeaways.

First, the FDA does not currently treat CBD products as dietary supplements. This finding is significant, because were CBD products to qualify as dietary supplements, then under the Dietary Supplemental Health and Education Act, manufacturers would have more latitude with respect to labeling. 21 U.S.C. §321(ff); Hughes v. Ester C Co., 99 F. Supp. 3d 278, 281-82 (E.D.N.Y. 2015). However, because CBD was previously approved as an active ingredient in a drug product (Epidiolex) it could not qualify as a dietary supplement, and each of PotNetwork Nutra Pure and ASP ran afoul of this issue.

Second, the products need not be labeled "dietary supplements" for the FDA to infer that they were marketed as such. For example, ASP's CBD Oil did not identify itself as a dietary supplement, but its instructions for use recited that it was a hemp supplement, and the FDA inferred that the intent was to market it as a dietary supplement.

Third, the FDA emphasized that it is impermissible to introduce into commerce foods that contain CBD. This was an issue for PotNetwork because for two of its products, the FDA inferred that the inclusion of nutritional information implied that the company intended to market those products as foods.

Fourth, there are a number of indicia that the intended use of CBD products is as a drug. These include: (1) describing the use of CBD products to treat medical conditions; and (2) promoting health benefits from using CBD products. These types of promotion would require prior approval of the FDA. 21 U.S.C. §331(d) and 355(a). Each of the three companies that received warning letters marketed their products with reference to the treatments of disease and/or conditions and with the suggestion of health benefits.

In the letters, the FDA also notified each of the recipients that they may face issues with the Federal Trade Commission for having made unsubstantiated claims that their products could prevent, treat, or cure human disease.

The FDA's position is clear. It believes that depending on how CBD products are labeled and marketed and the intended use, in many circumstances, sale and offering for sale would violate FDA law.

By contrast, the FDA has been clear that that hemp seed-derived food ingredients: hulled hemp seed, hemp seed protein powder, and hemp seed oil, may be sold because they are generally recognized as safe (GRAS). Additionally, cosmetics that contain CBD are not subject to pre-market approval, subject to their complying with the requirements to qualify as cosmetics, e.g., not being intended to affect the structure or function of the body or to diagnose, mitigate, cure, or treat or prevent a disease. "FDA Regulation of Cannabis and Cannabis-Derived Products: Questions and Answers," fda.gov.

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State Regulation

While the FDA deliberates on how to address the sale of CBD products, the states continue to work with CBD product manufacturers to provide a framework under which they can bring these products to market. For example, most recently on May 9, 2019, the governor of Connecticut signed "An Act Concerning a Pilot Program for Hemp Production." C.G.S.A. P.A. 19-3 §1. In that act, Connecticut adopted the definition of "hemp" from the 2018 Farm Bill, and set out a framework for entities to obtain manufacturing licenses to permit them under Connecticut law to make hemp products that are consumables or dietary supplements.

New York, which has been more aggressive in trying to become an attractive site for the hemp industry, amended its Agriculture and Markets Law in 2017 to direct its commissioner to consult and to cooperate with the New York State urban development corporation regarding industrial hemp economic development. NY AGRI & MKTS §512. Signifying the commitment of the state, in 2017-2018, New York authorized $10 million in grants for research and capital investments in 2017-2018. To date New York has issued at least 30 CBD processing licensees, but New York state is not currently accepting CBD processor applications.

Although the states are actively encouraging the CBD industry, being licensed by a state does not absolve manufacturers from complying with FDA law. Therefore, every entity in this industry must pay careful attention to what is happening in not only Albany, Hartford and other state capitols, but also what is happening in Washington, D.C.

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Conclusion

There remains a tension between the desire of states to move forward quickly to reap the economic benefits of a thriving industry for CBD products and the mandate of the FDA to be cautious with respect to sanctioning products that may possess a safety risk or be misleading as to their efficacy. Caught in the middle are producers of CBD products, who must wait for the FDA rule making process to play out. However, if they sit on the sidelines, they may lose a valuable opportunity to grow their market share in the face of somewhat limited competition. For the businesses that wish to push forward on this uncertain landscape, cautious and strategic marketing may be the best—although not risk free—course of action.

Scott D. Locke is a partner at Dorf & Nelson and chairs the intellectual property practice group.