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CBD Industry Caught Between Regulators & Law Enforcement

By Gregory S. Kaufman
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The consumer-facing CBD industry operates in a regulatory gray zone even as it grows in prominence. Illegal to market as an unapproved drug, dietary supplement or food additive under the Food, Drug & Cosmetic Act, nevertheless, the CBD industry has flourished with ingestible products widely available. With the increased consumer interest in CBD, headwinds in the form of mislabeled or contaminated products and unsubstantiated therapeutic claims, combined with regulatory uncertainty, continue to be a drag on legitimate market participants and consumer perception of CBD products. The regulation of hemp-derived CBD falls under the purview of the Food and Drug Administration (FDA) and its charge to protect the public health. Despite having jurisdiction to regulate CBD products, the FDA has done little to bring regulatory certainty to the CBD marketplace. However, the FDA, with the assistance of the National Institute of Standards and Technology (NIST), recently took important steps that can be described as “getting their ducks in a row” for the eventual regulation of hemp-derived CBD in consumer products. Always looming is the threat of criminal enforcement of the Controlled Substances Act (CSA) by the Department of Justice’s Drug Enforcement Administration (DEA) for plants and products not meeting the definition of hemp.

Prior to July 2020, the FDA’s regulation of the CBD industry was limited to a public hearing, data collection, an update report to Congress on evaluating the use of CBD in consumer products, and issuing warning letters to those marketing products for treatment of serious diseases and conditions. The FDA recognizes that regulatory uncertainty does not benefit the Agency, the industry or consumers and, therefore, is evaluating a potential lawful pathway for the marketing of CBD products. In furtherance of this effort, the FDA took several recent actions, including:

  • Producing a CBD Testing Report to Congress1
  • Providing draft guidance on Quality Considerations for Clinical Research2
  • Sending a CBD Enforcement Policy to the Office of Management and Budget for pre-release review and guidance3

FDAlogoNot to be overlooked, the NIST announced a program to help testing laboratories accurately measure compounds, including delta-9 tetrahydrocannabinol (THC) and CBD, in marijuana, hemp and cannabis products, the goal being to increase accuracy in product labeling and to assist labs in identifying THC concentrations in order to differentiate between legal hemp and federally illegal marijuana. These actions appear to be important and necessary steps towards a still be to determined federal regulatory framework for CBD products. Unfortunately, a seemingly innocent interim final rule issued by the DEA on August 21, 2020 (Interim Final Rule), may prove to be devastating to hemp processors and the CBD industry as a whole.4 While the DEA describes its actions as merely conforming DEA regulations with changes to the CSA resulting from the 2018 Farm Bill, those actions may make it exceedingly difficult for hemp to be processed for cannabinoid extraction without violating the CSA in the process.

  1. FDA Report to Congress “Sampling Study of the Current Cannabidiol Marketplace to Determine the Extent That Products are Mislabeled or Adulterated

On July 8, 2020, the FDA produced a report to the House and Senate Committees on Appropriations detailing the results of a sampling study to determine the extent to which CBD products in the marketplace are mislabeled or adulterated. The study confirmed what the FDA, Congress and the marketplace already knew – that in this regulatory vacuum, there are legitimate concerns about the characteristics of consumer CBD products. These concerns include whether products contain the CBD content as described in the label, whether products contain other cannabinoids (including THC) and whether products were contaminated with heavy metals or pesticides. With these concerns in mind, the FDA tested 147 CBD and hemp products purchased online for the presence of eleven cannabinoids, including determinations of total CBD and total THC, and certain heavy metals. The key tests results included the following:

  • 94% contained CBD
  • 2 products that listed CBD on the label did not contain CBD
  • 18% contained less than 80% of the amount of CBD indicated
  • 45% contained within 20% of the amount listed
  • 37% contained more than 20% of the amount of CBD indicated
  • 49% contained THC or THCA at levels above the lowest concentration that can be detected
  • Heavy metals were virtually nonexistent in the samples
The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

Due to the limited sample size, the FDA indicated its intention to conduct a long-term study of randomly selected products across brands, product categories and distribution channels with an emphasis on more commercially popular products. In furtherance of this effort, on August 13, 2020, the FDA published a notice soliciting submissions for a contract to help study CBD by “collecting samples and assessing the quantities of CBD and related cannabinoids, as well as potential associated contaminants such as toxic elements, pesticides, industrial chemicals, processing solvents and microbial contaminants, in foods and cosmetics through surveys of these commodities.”5

Even though this report was not voluntarily produced by the FDA, rather it was required by Congress’ Consolidated Appropriations Act of 2020, it importantly solidified a basis for the need for regulation. With less than half of the products tested falling within the 20% labeling margin of error, this suggests rampant and intentionally inaccurate labeling and/or significant variability in the laboratory testing for cannabinoids.

  1. NIST Program to Help Laboratories Accurately Measure Compounds in Hemp, Marijuana and Cannabis Products

 Proper labeling of cannabinoid content requires reliable and accurate measurement of the compounds found in hemp, marijuana and cannabis products. As part of NIST’s Cannabis Quality Assurance Program, NIST intends to help labs produce consistent measurement results for product testing and to allow forensic labs to distinguish between hemp and marijuana.6 As succinctly stated by a NIST research chemist, “When you walk into a store or dispensary and see a label that says 10% CBD, you want to know that you can trust that number.” Recognizing the lack of standards due to cannabis being a Schedule I drug for decades, NIST intends to produce standardized methods and reference materials the help labs achieve high-quality measurements.

NIST’s efforts to provide labs with the tools needed to accurately measure cannabis compounds will serve as an important building block for future regulation of CBD by the FDA. Achieving nationwide consistency in measurements will make future FDA regulations addressing CBD content in products achievable and meaningful.

  1. FDA Industry Guidance on Quality Considerations for Clinical Research on Cannabis and Cannabis-Derived Compounds

On July 21, the FDA released draft guidance to the industry addressing quality considerations for clinical research of cannabis and cannabis-derived compounds related to the development of drugs. These recommendations are limited to the development of human drugs and do not apply to other FDA-regulated products, including food additives and dietary supplements. However, by indicating that cannabis with .3% or less of THC can be used for clinical research and discussing testing methodologies for cannabis botanical raw material, intermediaries and finished drug products, the FDA is potentially signaling to the consumer-facing CBD industry how the industry should be calculating percentage THC throughout the product formulation process.

While testing of botanical raw material is guided by the USDA Interim Final Rule on Hemp Production,7 the FDA warns that manufacturing processes may generate intermediaries or accumulated by-products that exceed the .3% THC threshold and may be considered by the DEA to be Schedule I controlled substances. This could be the case even if the raw material and finished product do not exceed .3% THC. The FDA’s guidance may eventually become the standard applied to regulated CBD products in a form other than as a drug. However, through its guidance, the FDA is warning the CBD industry that the DEA may also have a significant and potentially destructive role to play in the manufacturing process for CBD products.

  1. FDA Submits CBD Enforcement Policy Guidance to the White House

On July 22, 2020, the FDA submitted to the White House Office of Management and Budget a “Cannabidiol Enforcement Policy – Draft Guidance for Industry” for its review. The contents of the document are not known outside of the Executive Branch and there is no guarantee as to when, or even if, it will be released. Nevertheless, given the FDA’s interest in a legal pathway forward for CBD products, the submission is looked upon as a positive step forward. With this guidance, it is important to remember that the FDA’s primary concern is the safety of the consuming public and it continues to collect data on the effects of ingestible CBD on the human body.

It is doubtful that this guidance will place CBD products in the dietary supplement category given the legal constraints on the FDA and the lack of safety data available to the FDA. The guidance likely does not draw distinctions among products using CBD isolate (as found in Epidiolex), full or broad spectrum hemp extract, despite the FDA’s expressed interest in the differences between these compositions.8 Instead, the FDA is more likely to establish guardrails for CBD ingestible products without authorizing their marketing. These could include encouragement of Good Manufacturing Practices, accuracy in labeling, elimination of heavy metal and pesticide contamination, and more vigorous enforcement against marketing involving the making of disease claims. The FDA is not expected to prescribe dosage standards, but may suggest a maximum daily intake of CBD for individuals along the lines of the U.K.’s Food Standards Agency guideline of a maximum of 70 mg of CBD per day.9

Identifying concerns in the current marketplace; promoting accuracy in testing; highlighting the line between FDA regulation and DEA enforcement; and proposing guidance to the industry all appear to be signs of substantial progress on forging a regulatory path for ingestible CBD products.

  1. The DEA’s Interim Final Rule Addressing Derivatives and Extracts Could Have a Devastating Impact on the Cannabinoid Industry

The seemingly benign Interim Final Rule published by the DEA in August with the stated intent of aligning DEA regulations with the changes to the CSA caused by the 2018 Farm Bill’s definition of hemp could cut the legs out from under the hemp-derived CBD industry.10 Claiming it has “no discretion with respect to these amendments,” the DEA rule states that “a cannabis derivative, extract, or product that exceeds the 0.3% delta-9 THC limit is a schedule I controlled substance, even if the plant from which it was derived contained 0.3% or less delta-9 THC on a dry weight basis.”11 Under this interpretation of the 2018 Farm Bill language and the CSA, it is unclear whether processors of hemp for cannabinoid extraction would be in possession of a controlled substance if, at any time, a derivative or extract contains more than 0.3% delta-9 THC even though the derivative or extract may be in that state temporarily and/or eventually falls below the 0.3% threshold when included in the final product. It would not be unusual for extracts created in the extraction process to exceed 0.3% delta-9 THC in the course of processing cannabinoids from hemp.

The implications of the rule may have a chilling effect on those involved in, or providing services to, hemp processors. It is known, as revealed by the Secretary of the USDA to Congress, that the DEA does not look favorably on the legalization of hemp and development of the hemp industry. The DEA’s position is that the rule merely incorporates amendments to the CSA caused by the 2018 Farm Bill’s definition of hemp into DEA’s regulations. In doing so, the DEA made explicit its interpretation of the Farm Bill’s hemp provisions that it presumably has held since the language became operative. What is not known is whether this changes the DEA’s appetite for enforcing the law under its stated interpretation, which to date it has refrained from doing. Nevertheless, the industry is likely to respond in two ways. First, by submitting comments to the Interim Final Rule, which will be accepted for a 60-day period, beginning on August 21, 2020. Anyone concerned about the implications of this rule should submit comments by the deadline. Second, by the filing of a legal challenge to the rulemaking on grounds that the rule does not correctly reflect Congressional intent in legalizing hemp and, consequently, the rulemaking process violated the Administrative Procedure Act. If both fail to mitigate harm caused to the CBD industry, the industry will have to look to Congress for relief. In the meantime, if the hemp processing industry is disrupted by this rule, cannabis processors holding licenses in legal states may be looked upon to meet the supply needs of the CBD product manufacturers.

The Interim Final Rule also addresses synthetically derived tetrahydrocannabinols, finding them to be Schedule I controlled substances regardless of the delta-9 THC content. This part of the rule could impact the growing market for products containing delta-8 THC. While naturally occurring in hemp in small quantities, delta-8 THC is typically produced by chemically converting CBD, thereby likely making the resulting delta-8 THC to be considered synthetically derived.

The hemp-derived cannabinoid industry continues to suffer from a “one step forward, two steps back” syndrome. The USDA’s highly anticipated Interim Final Rule on hemp production (released Oct. 31, 2019) immediately caused consternation in the CBD industry, and continues to, due to certain restrictive provisions in the rule. Disapproval in the rule is evident by the number of states deciding to operate under their pilot programs for the 2020 growing season, rather than under the conditions of the Interim Final Rule.12 With signs of real progress by the FDA on regulating the CBD products industry, yet another interim final rule could undercut the all-important processing portion of the cannabinoid supply chain by injecting the threat of criminality where there is no intent by processors to violate the law. It is not a stretch to suggest that both the USDA and FDA are being significantly influenced by the DEA. The DEA’s Interim Final Rule is just another troubling example of the legal-illegal dichotomy of cannabis that continues to plague the CBD industry.


References

  1.  U.S. Food & Drug Admin., Report to the U.S. House Committee on Appropriations and the U.S. Senate Committee on Appropriations, Sampling Study of the Current Cannabidiol Marketplace to Determine the Extent That Products are Mislabeled or Adulterated (July 2020).
  2. U.S. Food & Drug Admin., Cannabis and Cannabis-Derived Compounds Quality Considerations for Clinical Research: Guidance for Industry(July 2020).
  3. U.S. Food & Drug Admin., Cannabidiol Enforcement Policy: Draft Guidance for Industry (July 2020).
  4. Implementation of the Agriculture Improvement Act of 2018, 85 FR 51639 (Aug. 21, 2020) (to be codified at 21 C.F.R. §§ 1308, 1312).
  5. U.S. Food & Drug Admin., Collection and Analysis of Products Containing CBD and Cannabinoids, Notice ID RFQ_75F40120R00020 (Aug. 13, 2020).
  6. Nat’l Inst. of Standards and Tech., NIST to Help Labs Achieve Accurate THC, CBD Measurements (July 21, 2020).
  7. Agricultural Improvement Act of 2018, Pub. L. 115-334, title X, 10113 (codified at 7 U.S.C. §§ 1639o-1639s).
  8. U.S. Food & Drug Admin., Report to the U.S. House Committee on Appropriations and the U.S. Senate Committee on Appropriations, Cannabidiol (CBD), p. 14 (March 2020).
  9. U.K. Food Standards Agency, Food Standards Agency Sets Deadline for the CBD Industry and Provides Safety Advice to Consumers (Feb. 2020) at https://www.food.gov.uk/news-alerts/news/food-standards-agency-sets-deadline-for-the-cbd-industry-and-provides-safety-advice-to-consumers.
  10. See supra n. 4.
  11. Id.
  12. U.S. Dept. of Agriculture, Status of State and Tribal Hemp Production Plans for USDA Approval (as of Aug. 26, 2020).

Moving Towards Greater Competency in Cannabis Testing

By Ravi Kanipayor
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While legalization of recreational cannabis remains in a fluid state in the United States, the medical application of cannabis is gaining popularity. As such, the  diversification of  pharmaceutical and edible cannabis products will inevitably lead to increased third party testing, in accordance with Food and Drug Administration (FDA) mandates. Laboratories entering into cannabis testing, in addition to knowing the respective state mandates for testing procedures, should be aligned with Federal regulations in the food and pharmaceutical industries.

In 2010, the American Herbal Products Association (AHPA)1 established a cannabis committee with the primary objective of addressing issues related to the practices and safe use of legally-marketed cannabis and cannabis-related products. The committee issued a set of recommendations, outlining best practices for the cultivation, processing, testing and distribution of cannabis and cannabis products. The recommendations for laboratory operations sets some basic principles for those performing analysis of cannabis products. These principles, complementary to existing good laboratory practices and international standards, focus on the personnel, security, sample handling/disposal, data management and test reporting unique to laboratories analyzing cannabis samples.

As local and federal regulations continue to dictate medical and recreational cannabis use, many will venture into the business of laboratory testing to meet the demands of this industry. Thus, it is not surprising that cannabis producers, distributors and dispensaries will need competent testing facilities to provide reliable and accurate results. In addition, our understanding of cannabis from an analytical science perspective will derive from test reports received from these laboratories. Incorrect or falsified results can be costly to their business and can even lead to lawsuits when dealing with consumer products. Examples of fines and/or suspensions related to incorrect/false reporting of results have already gained coverage in news media. This sets up the need for the cannabis industry to establish standardized protocols for laboratory competency.

The international standard, ISO 17025 – ‘General requirements for the competence of testing and calibration laboratories’ – plays an important role in providing standard protocols to distinguish labs with proven quality, reliability and competency. The industry needs to rely not only on the initial accreditation received, but also on the ongoing assessment of the labs to ensure continuous competency.

Receiving accreditation involves an assessment by an International Laboratory Accreditation Cooperation (ILAC) recognized accrediting body, which ensures that laboratories have the competency, resources, personnel and have successfully implemented a sound quality management system that complies with the international standard ISO/IEC 17025:2017. This ISO standard is voluntary, but recognized and adopted globally by many industries for lab services. Cannabis companies can ensure that the test services they receive from accredited laboratories will meet the requirements of the industry, as well as the state and federal regulatory agencies. The International Organization for Standardization (ISO) is an independent, non-governmental organization with over 160 memberships of national standards bodies, and all with a unified focus on developing world-class standards for services, systems, products, testing to ensure quality, safety, efficiency and economic benefits.

ILAC is a non-profit organization made up of accreditation bodies (ABs) from various global economies. The member bodies that are signatories to the ILAC Mutual Recognition Arrangement (ILAC MRA) have been peer evaluated to demonstrate their competence. The ILAC MRA signatories, in turn, assess testing labs against the international standard, ISO/IEC 17025 and award accreditation. Accreditation is the independent evaluation of conformity assessment in accordance with the standard and related government regulations to ensure the lab carry out specific activities (called the ‘Scope’) impartially and competently. Through this process, cannabis industry stakeholders and end users can have confidence in the test results they receive from the labs.

Understanding the principles of accreditation and conformity to ISO standards is the beginning of the ISO 17025 accreditation process. Similar to other areas of testing, accreditation gives cannabis testing labs global recognition such that their practices meet the highest standards in providing continuous consistency, reliability and accuracy.

Many government agencies (state and federal) in the US and around the world are mandating cannabis testing laboratories to seek accreditation to ISO/IEC 17025:2017, in an effort to standardize their practice and provide the industry with needed assurance. Conformance with the standard enables labs to demonstrate their competency in generating reliable results, thereby providing assurance to those who hire their services.

Testing of cannabis can be very demanding and challenging given that state and federal regulations require that the performance and quality of the testing activities must provide consistent, reliable and accurate results. Hence, labs deciding to set up cannabis testing will have to take extra care in setting up a laboratory facility, acquiring all necessary and appropriate testing equipment, hiring qualified and experience staff and developing and implementing test methods to ensure the process, sample throughput, data integrity and generated output are continuously reliable, accurate and meet the need of the clients and requirements of the regulatory bodies. This demands the lab to establish and implement very sound quality assurance program, good laboratory practices and a quality management system (QMS).

Some expected challenges are:

  1. Standardization of test methods and protocols
    1. Since there is no federal guidance in standardization of test methods and protocols for cannabis testing in US, it is challenging for laboratories to research and validate other similar, established methods and gain approval from the local and state authorities.
  2. Facility
    1. Cannabis testing activities must be physically isolated from other testing activities for those labs conducting business in other areas of testing such as environment, food, mining, etc.
    2. Microbiological testing requires additional physical isolation within the testing facility, maintaining sterility of the environment, test area and test equipment.
  3. Equipment
    1. The test equipment such as Chromatographs (GC/LC), Spectrometers (ICP-MS, ICP-OES, UV-Vis), and other essential analytical instruments must meet the specifications required to detect and quantify and statistically justify the test parameters at the stipulated concentration levels. That means the limit of detection and limit of quantitation of each parameter must be well below the regulatory limits and the results are statistically sound.
    2. Calibration, maintenance and operation of analytical equipment must be appropriate to produce results traceable to international standards such as International System of Units and National Institute of Standards and Technology (SI and NIST).
  4. Staff
    1. The qualification and experience of the staff should ensure standard test methods are implemented and verified to meet the specifications.
    2. They should have a sound understanding of the QA/QC protocols and effective implementation of a quality management system which conforms to ISO/IEC 17025:2017 standard.
    3. Staff should be properly trained in all standard operating procedures (SOPs) and receiving schedule re-training as needed. Training should be accurately documented.
  5. QMS
    1. The QMS should not only meet the requirements of ISO 17025, but also be appropriate to the scope of the laboratory activities. Such a system must be planned, implemented, verified and continuously improved to ensure effectiveness.

Finally, stakeholders should seek expert advice in establishing a cannabis testing lab prior to initiating the accreditation. This can be achieved through a cyclic PLAN-DO-CHECK-ACT process. Labs that are properly established can attain the accreditation process in as little as 3-5 months. An initial ‘Gap Analysis’ can be extremely helpful in this matter.

IAS, an ILAC MRA signatory and international accrediting body based in California is one such organization that provides training programs for those interested in attaining accreditation to ISO/IEC 17025:2017. It is a nonprofit, public-benefit corporation that has been providing accreditation services since 1975. IAS accredits a wide range of companies and organizations including governmental entities, commercial businesses, and professional associations worldwide. IAS accreditation programs are based on recognized national and international standards that ensure domestic and/or global acceptance of its accreditations.2


References

  1. American Herbal Products Association , 8630 Fenton Street, Suite 918 , Silver Spring, MD 20910 , ahpa.org.
  2. International Accreditation Services, iasonline.org.

CBD Health Claims Spur FDA Warning & Product Seizure Threats

By Greg Boulos
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The 2018 Farm Bill gave cannabis businesses around the country a legal path to market and sell hemp and hemp-derived products. Despite the groundbreaking law, several regulatory uncertainties remain. The FDA has been a source of many of those uncertainties, but recent action suggests that the agency plans to impose heavy burdens on companies selling CBD products that claim to provide health benefits. Recently, the FDA held a public hearing during which it signaled that health claims associated with cannabis-related products was a primary concern. Congress subsequently pressured the FDA to develop a regulatory framework for the cannabis industry and the agency announced that it was expediting its efforts to do so, promising an update on its progress by this fall.

FDAThen, on July 22, the agency issued a warning letter to Curaleaf regarding its claims that several of its products provide specific health benefits. The agency included a threat to seize Curaleaf’s products if the issues raised in the letter are not resolved. How the FDA ultimately regulates cannabis products going forward will have a significant impact on the industry as a whole. Indeed, the agency has significant powers over product manufacturers, including the ability to seize products through the U.S. Marshalls. This article will delve into the specifics on the FDA’s warning letter and address how manufacturers can limit the risks associated with making health-related claims.  

The FDA’s Warning: Beware of “Unsubstantiated” Health Claims

The FDA’s letter explained that it determined several of Curaleaf’s CBD products “are unapproved new drugs sold in violation of sections 505(a) and 301(d) of the Federal Food, Drug, and Cosmetic Act (FDCA).” The letter goes on to say that one of Curaleaf’s pet CBD products “are unapproved new animal drugs that are unsafe.” Curaleaf has 15 days to respond to the agency’s letter. The agency cited the following health claims as problematic, among others.

  • “CBD has been demonstrated to have properties that counteract the growth of [and/or] spread of cancer.”
  • “CBD was effective in killing human breast cancer cells.”
  • “CBD has also been shown to be effective in treating Parkinson’s disease.”
  • “CBD has been linked to the effective treatment of Alzheimer’s disease ….”
  • “CBD is being adopted more and more as a natural alternative to pharmaceutical-grade treatments for depression and anxiety.”
  • “CBD can also be used in conjunction with opioid medications, and a number of studies have demonstrated that CBD can in fact reduce the severity of opioid-related withdrawal and lessen the buildup of tolerance.”
  • “CBD oil is becoming a popular, all-natural source of relief used to address the symptoms of many common conditions, such as chronic pain, anxiety … ADHD.”
  • “What are the benefits of CBD oil? …. Some of the most researched and well-supported hemp oil uses include …. Anxiety, depression, post-traumatic stress disorders, and even schizophrenia …. Chronic pain from fibromyalgia, slipped spinal discs . . . Eating disorders and addiction . . ..”
  • “[V]ets will prescribe puppy Xanax to pet owners which can help in certain instances but is not necessarily a desirable medication to give your dog continually. Whereas CBD oil is natural and offers similar results without the use of chemicals.”
  • “For dogs experiencing pain, spasms, anxiety, nausea or inflammation often associated with cancer treatments, CBD (aka cannabidiol) may be a source of much-needed relief.”

The letter explicitly warned, “Failure to correct the violations promptly may result in legal action, including product seizure and injunction.” The FDA has a history of seizing products it deems non-compliant with its regulations. Recently, the U.S. Marshals, at the direction of the FDA, seized 300,000 units of a cosmetic company’s product. The impact of such a seizure on a business’ profits and operations is staggering. FDA action also has a direct impact on publicly traded cannabis companies’ stock price. When news of the FDA’s Curaleaf letter circulated, Curaleaf shares plunged 8%.

Balancing Regulatory Risk and Business Objectives

While the FDA’s letter appears to create a new risk for the cannabis industry, the stock market’s reaction is arguably overblown. The fact that the FDA would question a product’s ability to kill cancer cells is not surprising. I am not familiar with Curaleaf’s research efforts and it is not my goal to pass judgment on their claims. Rather, my point is that manufacturers need to make sure legitimate scientific studies underpin all of their health claims, regardless of the industry. Manufacturers will never be able to avoid regulatory scrutiny or even litigation regarding their health claims entirely. Instead, cannabis companies should take steps to ensure that they can credibly respond to regulatory scrutiny or present strong defenses in potential litigation. Establishing a robust research department is a start. But manufacturers must develop institutional knowledge of the most cutting-edge research regarding their products.Developing in-depth institutional knowledge regarding the state-of-the-art scientific research on your product is a must. 

Manufacturers that market products primarily for their health benefits should consider working with clinical researchers to study their products. There should be written policies and guidelines, as well as employee training, for conducting these studies and dealing with researchers in order to protect the quality of the study. For purposes of mitigating regulatory and litigation risks, the perceived quality of these studies can be just as important as their actual quality. Regulators and plaintiff’s attorneys can easily misinterpret (sometimes intentionally) written communications between a manufacturer and researcher in ways that suggests a particular study was outcome-driven and not a legitimate scientific undertaking. Manufacturers should consult with attorneys experienced in defending product liability and mass tort litigation so that their labeling and research practices are based on historical examples of successful (and sometimes, unsuccessful) product manufacturers.

Key Takeaways

Manufacturing consumer products comes with substantial litigation and regulatory risks. There are several historical and current examples of product labels, health claims, and warnings leading to thousands of lawsuits filed simultaneously across the country against a single manufacturer. Fees associated with defending against even meritless claims can force a manufacturer into bankruptcy. The regulatory risks can also have devastating effects on the day-to-day business operations of any manufacturer. Eliminating these risks is impossible, but addressing them upfront before a product launch, regulatory crackdown, or lawsuit is considerably less expensive than dealing with costly litigation or government seizure of entire inventories. Developing in-depth institutional knowledge regarding the state-of-the-art scientific research on your product is a must. Also, consider working with a clinical researcher to support any claimed health benefits or even discover new health benefits associated with your product. Finally, consult a lawyer with experience in product liability and mass tort litigation to strengthen your policies and procedures regarding research, develop credible health claims, and craft strong warnings.

Food Safety Hazards for the Cannabis Industry: ERP Can Help

By Daniel Erickson
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To say that there has been explosive growth in the cannabis edibles market is an understatement. In the next 5 years, edibles are expected to become a $5.3 billion industry according to the Brightfield Group, a cannabis market research firm. Skyrocketing demand for cannabis infusion in food and beverage products, both recreational and medical, has prompted concern for the health and safety of consumers due to the lack of federal legality and regulatory guidelines for these products. Edibles consumers assume the same level of safety and quality present in other food and beverage products in the market. Progressive cannabis operations are opting to follow current food safety guidelines to mitigate hazards despite not being legally required to do so. Utilizing these guidelines, as well as incorporating an industry-specific ERP solution to automate processes, enables cannabis businesses to provide quality, consistent products and establish standards to support the eventuality of federal cannabis legalization.

FDAlogoEdibles consumption has grown not only in a recreational capacity but also for medicinal use to treat chronic pain, relieve epilepsy symptoms, decrease nausea, combat anxiety and other health issues. Cannabidiol (CBD) infused products take many forms including candies, baked goods, chocolate, oils, sprays, beer, soda, tea and coffee. Their popularity is partly due to their more socially acceptable use, creating an appeal to a wider audience. While the Food and Drug Administration (FDA) is responsible for overseeing food and beverage safety for products sold in the United States, their regulations are not enforced in the cannabis-infused marketplace. Without federal regulatory standards, there exist inherent food safety concerns that create risks to consumers. The average cannabis edibles customer is likely unaware of the “consume at your own risk” nature of the products.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

There are many consequences of not addressing food safety hazards, as the possibility of food-borne illnesses resulting from unsafe and unsanitary manufacturing facilities have become increasingly likely in an unregulated market. In addition to these concerns, problems particular to cannabis growing and harvesting practices are also possible. Aflatoxins (mold carcinogens) on the cannabis bud, pesticide residue on plants, pest contamination, improper employee handling and training and inaccurate levels of CBD all contribute to the risk of outbreaks, hefty fines, recalls or business closure. To mitigate the risk of exposure, it is recommended that edible manufacturers employ a proactive approach of observing proper food safety standards that encompass the growing, manufacturing, packaging, handling, storing and selling of products. With a focus on safety, cannabis edible manufacturers utilizing an ERP solution and vendor with experience in food safety management will reap the benefits that food and beverage businesses have experienced for decades.

Following established food safety protocols and guidelines of the food and beverage and dietary supplement industry, allows manufacturers of cannabis-infused edibles to implement a proactive approach by focusing on safety and reducing the risk to their operations. Food and beverage manufacturing best practices include: maintaining supplier list, quality control testing, sanitary handling of consumables, maintaining clean facilities and mitigating cross-contamination. Successful food and beverage manufacturers also incorporate a food safety team, preventative controls, and a food safety plan (FSP) including a detailed recall plan into their safety initiatives.HACCP

Establishing and maintaining a supplier list with approved quality ingredients is an essential building block for reducing food safety hazards and can be easily maintained within an ERP. Documentation of vendor information and recording of stringent testing results ensures that specific quality standards are met. Conducting extensive research regarding the source of the ingredients for use in cannabis edibles allows companies to confirm that raw ingredients were processed in a safe environment. The importance of supply chain visibility cannot be understated, as suppliers are in control of potential hazards. Quality processes and regularly performed testing is automated through the workflow of an ERP solution in the manufacturing facility – enabling noncompliant raw materials to be quarantined and removed from production. The ERP solution allows for management of critical control points to catch non-compliance issues and set-up of alternate suppliers in case of supplier-related issues. Maintaining approved supplier lists is an industry best practice that provides current and accurate information in the event of possible consumer adverse reactions.

GMPFollowing current Good Manufacturing Practices (cGMPs) should underlie efforts to address food safety concerns in the cannabis edibles industry. An ERP solution assists with documenting these quality initiatives to ensure the safe and sanitary manufacturing, storage and packaging of food for human consumption. This includes evaluating equipment status, establishing cleaning and sanitation procedures and eliminating allergen cross-contamination. Employee training is conducted and documentation maintained in the ERP solution to ensure hygienic procedures, allergen awareness, illness reporting and required food or cannabis handling certifications.

Cannabis businesses can benefit from establishing a food safety team tasked with developing a Hazard Analysis Critical Control Points (HACCP) plan to provide effective procedures and protect consumers from the hazards inherent in edible cannabis products – including biological, chemical and physical dangers. Automating processes within an ERP solution prevents and controls hazards before food safety is compromised. Since HACCP plans have historically been used by food and beverage manufacturers to ensure a safe product for the consumer, cannabis edibles manufacturers can apply the lessons from these food safety protocols and procedures in their initiatives.By utilizing food safety best practices partnered with an ERP solution, cannabis businesses can avoid the negative consequences resulting from failure to address food safety hazards in manufacturing, storage and packaging. 

A comprehensive FSP, as required by the FDA’s Food Safety Modernization Act (FSMA), identifies food safety hazards and guides the development of a company-specific, validated plan. This plan documents processes throughout the manufacturing, processing, packaging and storage stages of the operation. ERP software provides real-time, forward and backward lot traceability from seed-to-sale with the ability to track materials, document recipes and accurately label products. This detailed level of traceability provides an automated system that implements and documents food safety policies throughout the manufacturing process. With a trained Preventative Control Qualified Individual (PCQI) implementing the FSP, preventative controls, recall plans and employee training records are maintained in an integrated system.

The cannabis market’s tremendous growth has driven edibles manufacturers to follow the same guidelines as mainstream food and beverage companies to ensure safety is afforded equally to consumers of cannabis edibles. By utilizing food safety best practices partnered with an ERP solution, cannabis businesses can avoid the negative consequences resulting from failure to address food safety hazards in manufacturing, storage and packaging. At the end of the day, it’s up to cannabis manufacturers to be proactive in ensuring cannabis edibles are safe to consume until regulations are mandated.

Product Labeling Law: A Primer and a Warning for California Cannabis Executives

By Jonathan C. Sandler
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What do you get when you combine a Schedule 1 federally controlled substance with a plethora of food, beverage and cosmetic entrepreneurs marketing new products to inexperienced users and then place that combustible combination into California’s plaintiff-friendly legal environment?

A lot of rich plaintiffs’ attorneys.

California continues to be a favored plaintiffs’ lawyers’ venue for filing consumer-related lawsuits against food and cosmetic companies. These lawsuits result in tens of millions in settlements each year and hundreds of millions in judgments. Staying current on statutes and trends is critical to doing business in California and cannabis companies are no exception.

While the Food and Drug Administration (“FDA”) has provided very little guidance on how cannabis products should be labeled, a lack of specific regulations does not mean that there are no applicable labeling requirements for cannabis. This is particularly true in states like California that have a multitude of statutes designed to protect consumers from false or misleading advertising and labeling. Below includes a brief list to help guide companies’ labelling processes:

  1. Look to available guidance for the relevant industries. For example, food labeling of cannabis products still requires compliance with other nutritional labeling statutes. The same goes for supplements and cosmetics. The Fair Packaging and Label Act (“FPLA”) regulates labeling of all “consumer commodities” as to net contents, product identity, and manufacturer’s, packer’s or distributor’s name and location.
  2. Consider the intended use of the product as well as the directions. For example, is the product meant to be consumed all at once or should it be consumed over a period of time? Depending upon the product, this question can affect whether compliance with the FDA dietary supplements guidance is required or whether the Food Drug and Cosmetic Act applies.
  3. Consider your supply chains. This can be one of the most difficult aspects for cannabis companies that are looking to expand, but need more supply. However, keeping track of ingredients is a critical aspect to being able to defend against lawsuits. In the past, cannabis companies have been sued because they have expanded their suppliers without assuring consistency in the products and then combining inconsistent ingredients into one common product that is now mislabeled. While the Bureau of Cannabis Control testing requirements should help with some of the cannabis information, all ingredients need to be tracked and the final products tested.
  4. Cannabis companies must label their products with applicable state laws. For example, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65 (“Prop. 65”)is being used by the plaintiffs’ bar as a basis to sue cannabis companies.
    • Prop. 65 is a statewide initiative that regulates companies that make or sell their products in California in two ways: (1) it requires companies whose products contain certain levels of chemicals to provide clear and reasonable warnings. Prop. 65 does not ban or restrict the sale of chemicals on the list or their inclusion in products, but it requires warnings if the listed chemicals are included; and (2) It prevents companies from discharging these chemicals into the state’s water supply.
    • All companies doing business in California and all products manufactured or sold in California are subject to Prop. 65 with three exceptions: (1) the company has fewer than 10 employees, (2) government agencies, or (3) the products contain less than a threshold amount of the chemicals.
    • Penalties for violations can be staggering. Prop. 65 is enforced both by the California Attorney General and private lawsuits on behalf of the California Attorney General. The potential penalties for violations of Prop. 65 include a fine of up to $2,500 per day. Additionally, one of the largest drivers of litigation is that the private enforcers (plaintiffs’ bar) can recover their attorneys’ fees. The total amount paid in settlements in 2017 was over $25 million and of the more than $18 million in judgments, $13 million was attributed to attorneys’ fees.
  5. The California Consumers Legal Remedies Act (“CLRA”) is another California statute that is intended to protect consumers from false advertising and other unfair business practices. The CLRA allows consumers to bring individual or California class action lawsuits to recover damages and enjoin the prohibited practices. The statute also allows a prevailing consumer to recover attorneys’ fees and costs. Cannabis companies need to be mindful of their representations related to their products. California courts are filled with cases involving terms like “natural” or “healthy” or “high performing.”

Product labeling, mottos and advertisements may seem straightforward, but they form the basis for hundreds of lawsuits filed every year throughout the country, and especially in California. At this stage of trying to get one’s product out the door and to the consumer, it is tempting to move quickly. However, the importance of sound research, strategy and consulting an experienced team to ensure compliance and avoid costly mistakes is critical.

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GW Pharma’s Epidiolex Gets Encouraging FDA Assessment

By Aaron G. Biros
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According to a press release, last week GW Pharmaceuticals’ drug Epidiolex received a positive FDA panel review, which is an encouraging and important step towards getting the drug approved by the U.S. Food and Drug Administration and on the market in the United States. Epidiolex is an anti-epilepsy drug, taken in a syrup form, with the main active ingredient being cannabidiol (CBD), and less than 0.1 % THC.

GW logo-2The drug is targeted to treat Dravet syndrome (DS) and Lennox-Gastaut syndrome (LGS) a rare early-onset type of epilepsy found in children, according to Reuters. FDA staff said the drug “reduces seizure frequency in patients with drug-resistant LGS or DS while maintaining a predictable and manageable safety profile.”

GW Pharmaceuticals, founded in 1998 and based in London, is a biopharmaceutical company that has made headlines previously for developing cannabis-derived drugs. Sativex, one of the first drugs they developed, is derived from cannabis, but was not approved by the FDA. It is however available in other parts of the world, such as the EU, Israel and Canada.

Epidiolex-GWIf Epidiolex actually gets approval by the FDA, it will be the first-ever cannabis-derived drug available via prescription in all of the United States. According to Justin Gover, chief executive officer of GW Pharmaceuticals, this is a momentous breakthrough for the company. “We are pleased by the Advisory Committee’s unanimous recommendation to approve Epidiolex, which would provide an important treatment option for patients with LGS and Dravet syndrome, two of the most severe and treatment-resistant forms of epilepsy,” says Gover “This favorable outcome marks an important milestone in our company’s unwavering commitment to address the significant unmet need for patients with LGS and Dravet syndrome and our resolve to study Epidiolex under the highest research and manufacturing standards. We look forward to our ongoing discussions with the FDA as it continues to review the Epidiolex NDA.”

According to the GW press release, the Peripheral and Central Nervous System Drugs Advisory Committee of the FDA unanimously recommended supporting the approval of the New Drug Application (NDA) for the drug. That advisory committee is sort of like an independent panel; their unanimous vote doesn’t necessarily mean the drug will get approved, but the FDA takes their decision into consideration when approving new drugs. So this panel recommendation is certainly a good sign and shows this drug could potentially be on the path to FDA approval.

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FDA Issues Warning To CBD Companies

By Aaron G. Biros
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On November 1st, the U.S. Food and Drug Administration (FDA) published a press release addressing warning letters issued to four companies. The warning letters, sent to companies marketing cannabidiol (CBD) products with therapeutic claims, cites unsubstantiated claims about their products’ ability to treat or cure cancer and other diseases.

A snippet of the warning letter issued to Greenroads

According to the press release, the four companies that received warning letters are Greenroads Health, Natural Alchemist, That’s Natural! Marketing and Consulting, and Stanley Brothers Social Enterprises LLC. The press release called their marketing campaigns “deceptive” for “unproven treatments.” Here is the letter they sent to Greenroads Health.

“As part of the U.S. Food and Drug Administration’s ongoing efforts to protect consumers from health fraud, the agency today issued warning letters to four companies illegally selling products online that claim to prevent, diagnose, treat, or cure cancer without evidence to support these outcomes,” reads the FDA statement. “Selling these unapproved products with unsubstantiated therapeutic claims is not only a violation of the Federal Food, Drug and Cosmetic Act, but also can put patients at risk as these products have not been proven to be safe or effective.”

According to the press release, the FDA has issued ninety warning letters in the past ten years, with around twelve this year, to companies making fraudulent claims about cancer therapies. Here are some examples of claims made by companies that the FDA took issue with:

  • “Combats tumor and cancer cells;”
  • “CBD makes cancer cells commit ‘suicide’ without killing other cells;”
  • “CBD … [has] anti-proliferative properties that inhibit cell division and growth in certain types of cancer, not allowing the tumor to grow;” and
  • “Non-psychoactive cannabinoids like CBD (cannabidiol) may be effective in treating tumors from cancer – including breast cancer.”

“Substances that contain components of marijuana will be treated like any other products that make unproven claims to shrink cancer tumors,” says FDA Commissioner Scott Gottlieb, M.D. “We don’t let companies market products that deliberately prey on sick people with baseless claims that their substance can shrink or cure cancer and we’re not going to look the other way on enforcing these principles when it comes to marijuana-containing products. There are a growing number of effective therapies for many cancers. When people are allowed to illegally market agents that deliver no established benefit they may steer patients away from products that have proven, anti-tumor effects that could extend lives.”