Just months ago, the hemp industry seemed to be on a clear path to legal certainty when the 2018 Farm Bill was passed on December 20, 2018 (the “2018 Farm Bill”). Though the passage of the 2018 Farm Bill legalized the production of industrial hemp, one of the main sources of cannabidiol (“CBD”), and the transport of hemp-derived CBD products across state lines, the CBD industry now finds itself in a state of disarray. So why all the confusion surrounding the CBD industry, especially at a time when CBD-infused products are flooding the marketplace? What the 2018 Farm Bill did NOT do was change the Food and Drug Administration’s (the “FDA”) authority to regulate any products containing CBD that are sold as food additives, topicals, drugs or dietary supplements in accordance with the Federal Food, Drug, and Cosmetic Act. As a result, the FDA has since made it clear that it is currently unlawful to introduce food or supplements products into interstate commerce that contain CBD, without first going through the FDA’s approval process.
So you must be wondering why the FDA has taken this position, given the intent of Congress with the passing of the 2018 Farm Bill. On June 25, 2018, the FDA approved a highly-purified form of CBD as a solution for the treatment of seizures associated with two rare and severe forms of epilepsy. The CBD drug, Epidolex by GW Research Ltd., was initially cheered by activists and advocates who assumed that all forms of CBD would now be legal. Well, those activists and advocates are now scratching their heads. Because CBD was approved as a drug, it is prohibited from being included in a food or a nutraceutical supplement. Simply put, due to the drug exclusion rule, you can’t add a drug to a food without going through the FDA process. For the foregoing reasons, the FDA currently prohibits companies from selling CBD-infused food, supplements and beverages across state lines, or making any therapeutic claims about such products.
Despite the FDA’s current stance, the now former FDA Commissioner, Dr. Scott Gottlieb, acknowledged that the FDA is aware of the intent of Congress on CBD when the 2018 Farm bill was passed, stating “We heard Congress loud and clear with respect to that legislation.” Gottlieb further stated “I understand Congress wants there to be a pathway for CBD to be available.” Nevertheless, Gottlieb went on to clarify that “the law does allow us to go through a regulatory process and go through a notice and comment rule-making to establish a framework to allow it to be put into the food supply”, indicating what will likely be a lengthy rule-making process. So, until the FDA decides to set a clear path for CBD-infused food or supplement products to be introduced into interstate commerce, the booming CBD food and supplement industry will continue to be in limbo, including individual states, creating a very confused marketplace with companies being placed in the unfortunate position of being forced to choose between compliance and responding to consumer demand. To give you a sense of what’s at stake, analysts at Cowen Investment Management estimated that the CBD market could reach $16 billion in sales in the U.S. alone by 2025. In 2018, retail sales of CBD consumer products were estimated between $600 million and $2 billion. These are staggering numbers.