New Farm Bill Opens Up Opportunities for the CBD Oil Market- If Companies Comply with the Legal and Regulatory Requirements

Although CBD oil does not produce psychoactive effects like the THC found in marijuana, the two products are associated closely enough that the production and sales of CBD are currently in a legal grey area. Before starting your CBD oil business, it is important that you make sure to understand both the state and federal laws regarding CBD products.

The legality of CBD products varies depending on many different factors. These factors include:

  • The source of the CBD product. Is the source from hemp or marijuana? What is the related THC content?
  • Is the product imported or is it produced in the United States? If it’s produced in America, in which state?
  • Is the product being used for industrial use or commercial use?
  • What are the relevant state laws governing CBD products – as compared to the applicable federal laws?
  • Is the product being used for medicinal purposes and do the claims state a medicinal or therapeutic purpose?
  • In what form is the product being offered to the public – capsule, oil, drink, lotion, or some other form?

In addition to the legality of selling CBD products, companies should work with an experienced CBD product lawyer to review all related regulatory issues. These include analyzing what the product is likely to be classified as by federal regulatory authorities (principally, FDA).  Is it a dietary supplement, a food, a drug, or some other product? Most CBD products are governed by the Food and Drug Cosmetic Act. This means the FDA can and will inspect the products and the company’s site for compliance issues.

Compliance concerns include reviewing the classification of the product and whether the product can be deemed misbranded. The FDA will also review all related marketing materials – online, in print, and on the labels – to determine if the advertising is truthful and meets the relevant requirements.

CBD products often a range of medical and financial opportunities. Understand your FDA and other legal obligations before beginning any new business.

WHY COMPANIES ARE RUSHING TO MAKE AND SELL PRODUCTS WITH CBD AND THC

Makers and consumers of THC and CBD products need to understand which federal and state laws apply. While there may be health benefits, there are legal risks.

CBD from hemp and marijuana– product differences

The cannabis Sativa plant, also called just cannabis, contains both Tetrahydrocannabinol (THC) and cannabidiol (CBD). The cannabis plant is also known by the more common name – marijuana. Hemp can also be extracted from the cannabis plant.

CBD products derived from marijuana are generally illegal under state law, unless your state has an approved medical marijuana law and the products meet the state’s regulations, often beginning with licensing requirements.

CBD is also available from hemp which is generally tested less than cannabis. Hemp is generally higher in CBD and lower in THC.  By contrast, medical marijuana is higher in THC and lower in CBD.

CBD, hemp and the 2018 Farm Bill

The US Farm bill was passed in 2018. It changed the Controlled Substances Act. Prior to the passage of the Farm bill, the possession, manufacture, and sale of hemp was illegal – because almost all parts of the cannabis plant and any chemical compounds such as hemp that were derived from the plant were considered too dangerous for the public.

The 2018 Farm Bill changed the legality of hemp. The law exempted hemp from the Controlled Substances Act – and any extract form the cannabis plant (or derivative) if the THC concentration of the product is a sufficiently low percentage. THC is the psychoactive ingredient that creates the sensation of being high. This means that the Drug Enforcement Administration will effectively no longer monitor hemp-based products, provided these products are appropriately labeled and comply with other laws

The legality and regulatory consequences of the Farm Bill on hemp and CBD production

Exempting hemp from the Controlled Substance Act means many things from the perspective of legal risk mitigation:

  • Numerous commercial opportunities for CBD oil and product production MAY now be possible. The Farm Bill makes it legal on a federal basis, to grow, produce, and ship industrial hemp. Whether the growth, production, and transportation of hemp and related products is legal on a state level is another question. Generally, the production and other commercial uses must be legal on both the state and federal law in order for a business to legally conduct CBD product operations. Generally, companies must also have a valid state license in order to operate their business.
  • Research opportunities. Instead of being an illegal drug, hemp is now classified as an agricultural product. This opens the door to conducting scientific research of hemp – to help determine medicinal and other benefits and risks.
  • Regulatory requirements. The FDA will regulate hemp, CBD, and legal cannabis products.  Accordingly,CBD product developers of legal hemp products and legal marijuana products must comply with the federal Food, Drug, and Cosmetic Act and the Public Health and Safety Act.
  • State regulations. Both the states and the federal government will have the ability to regulate the production of CBD products.

In many ways though, the science is what drives the legality of CDB products. CDB products based from hemp production can potentially be legal. CBD products based on production from marijuana are still illegal – with growing exceptions such as medical marijuana usage. The scientific and commercial question is – how well CBD products can be developed based on hemp versus development based on marijuana. Currently, it’s easier to make products from marijuana. Hemp is more used as an industrial product than a commercial one – though the legality of hemp may change the focus of many businesses and investors. There is still a lot of legal gray area here, requiring legal interpretation and advice for a given situation.

Pressure is mounting for clarification of the federal and legal issue surrounding CBD products

CBD products made from the cannabis plant are generally considered legal if the percentage of THC is .03% or less. Whether safe and useful products can be developed from this strain of cannabis remains to be seen.

There are also questions about what laws and which agencies will ultimately govern the development and product of CBD products.

  • Will it be the Secretary of Agriculture?
  • Will it be the Secretary of Health and Human Services?
  • Will it be the head of the FDA?

Will the controlling law be just the Food, Drug, and Cosmetic Act or will the Public Health Safety Act dictate compliance issues? It is possible that the public will not know the answers until the issues are litigated through court process.

Two Oregon US Senators have already asked for clarification and a reconsideration of the FDA position that CBD products are only valid as drugs and not food, beverages, or dietary supplements.

The Senators asked the FDA Commissioner to consider that:

“Farmers in Oregon and nationwide are poised to make real economic gains for their communities once these regulations are updated,” they wrote. They said it was Congress’ intent in the bill to ensure producers and consumers have access to hemp-derived products, including those that contain CBD.”

The Senators want the FDA to:

  • Clarify its authority in the production and marketing of hemp and its derivatives,
  • Clarify whether the FDA will consider issuing a regulation to allow hemp derivatives in food, beverages or dietary supplements that cross state lines.

Advocates of CBD oils say it helps relieve pain and anxiety. In addition to helping with epilepsy seizures, advocates claim it may also help with insomnia.

Possible future regulatory considerations for CBD oil and product companies

Growers, developers, makers, distributors, and retailers of CBD products need to understand that the regulatory framework for their products is in a state of flux – at both the federal and local level. An experienced CBD lawyer can help guide your company through this maze.

Some of the regulatory and compliance issues companies will need to develop plans for include:

  • Licensing of CBD companies
  • The proper way to test new products
  • Inspection requirements
  • Current Good Manufacturing Practices
  • Misbranding – are CBD products that claim to be dietary supplements or food and beverages are actually drugs
  • Labeling violations
  • A range of other compliance issues such as the relationship between CBD and cosmetics
  • Deceitful advertising. This includes promises that the products have therapeutic affects when they don’t.
  • State regulations

CBD products – Drugs vs dietary supplements

Currently, the FDA does not authorize CBD products that are foods or dietary supplements if the CBD is derived from hemp. The FDA has ruled that products are not dietary supplements and are considered drugs:

“If a substance (such as THC or CBD) is an active ingredient in a drug product that has been approved under the relevant federal law, or has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public.”

The FDA considers a substance to be authorized for investigation as a new drug if it is the subject of an Investigational New Drug application (IND) that has gone into effect.

The FDA has already approved one CBD-based product called Epidiolox, which helps people (children) with epilepsy control the risks of seizures. This indicates the FDA may approve other pharmaceutical applications of CBD products.

Companies that violate FDA regulations will be subject to FDA warning letters, injunctions, civil and criminal penalties.

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Specific FDA regulatory concerns – labeling requirements

As we wrote earlier,
“labels need to include more than just the ingredients. Companies that make and sell these products, if labels become required, may need to include the ingredients and some of these additional items:

    • The total cannabinoid content – CBD, THC, etc.
    • The ratio of CBD to other cannabinoids
    • Indicate if the product hemp or cannabis based
    • State where the ingredients were produced – in California or elsewhere

There may need to be separate labels for seniors, for medical marijuana users, and for recreational users.”

Experienced FDA and CBD product lawyers will need to review the label requirements and other marketing laws before and CBD oils, tinctures, lotions, or other products are sold – especially if they are being sold online or being shipped to other states. Marketing includes websites, online promotions, brochures, informational materials, and other communications.

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Importing hemp and interstate commerce

While many states do not authorize growing or producing hemp of CBD products for commercial purposes in their state, imports of CBD products potentially may be legal. Many hemp products, including food products and building materials are legally imported from Europe and other locations. It was, in part, due to the legality of importing these foreign products that the Farm Bill advanced legalizing hemp possession in America.

Currently, the FDA states that it is illegal under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived. Selling products online is likely to be considered interstate commerce.

California’s regulation of CBD products

Currently, California has not legalized CBD as a food, beverage, or dietary supplement. Essentially, the state is following the FDA rules and regulations.

CBD hemp-based products can only be sold through licensed California facilities if the products are properly regulated. There are three agencies that control the licensing of CBD products made from hemp or cannabis:

Numerous developers, manufacturers, and sellers are starting to join the explosion of companies nationwide that are taking advantage of the Farm Bill of 2018. That law legalized CBD products that are hemp-based provided certain requirements are met. Businesses and individuals need to understand what types of products (drugs, foods, beverages, and cosmetics) have federal and state approval. They need to understand when the FDA might issue warning letters based on misbranding, false labeling, and claims that promise more than they can deliver.

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California, for the most part, is letting the FDA take the lead on establishing rules and regulations – so it is crucial to know what the FDA’s position is.

Contact the CBD lawyers at Cohen Healthcare Law Group, PC today to learn more about what CBD uses may be possible as a business. Understand the state and federal laws and regulations so your business can take advantage of the new business opportunities created by the signing of the Farm Bill of 2018 and other modifications of the legal landscape for CDB products

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