Cannabidiol—better known as “CBD,” a cannabis-derived compound—is one of the latest crazes in the consumer packaged goods industry. CBD sales are expected to top $5 billion in 2019—a 700% increase from 2018—and reach $24 billion in sales by 2023. Manufacturers have flooded the market with CBD-infused food, dietary supplements, cosmetics, pet food, and other animal health products. CBD is being touted as a miracle chemical compound capable of treating a host of diseases and ailments in both humans and animals, such as anxiety, depression, joint issues, digestive issues, chronic pain, ADHD, Alzheimer’s disease, cancer, and heart disease. CBD products are largely unregulated, but the days of unfettered marketing may be coming to an end: The FDA has recently taken a keen interest in CBD products, and a slew of consumer protection actions may not be far behind.
Before discussing the potential legal hurdles facing manufacturers of CBD products, a brief history of CBD: CBD is the second most prevalent active compound in the Cannabis sativa L. plant species (also known as cannabis). Unlike THC (delta-9-tetrahydrocannabinol)—the main active compound in cannabis, and the compound in marijuana that creates the high—CBD does not have psychoactive effects. For decades, cannabis and its derivatives were identified as Schedule I controlled substances largely due to the habit forming psychoactive effects of THC. Before 2018, some CBD products were sold on the market, but given CBD’s murky legal status, their distribution was limited. The landscape changed dramatically in 2018, however, when Congress removed cannabis and cannabis derivatives with low THC content (0.3 percent or less) from the list of controlled substances, thus paving the way for CBD with only trace amounts of THC to be sold commercially. At the same time, Congress also explicitly preserved the FDA’s authority to regulate the sale and distribution of CBD. Also in 2018, the FDA approved the first prescription drug containing CBD—Epidiolex—to treat rare and severe forms of epilepsy.
With the ensuing explosion of CBD products in the market, the FDA has ramped up its scrutiny of such products and their labeling. Since 2015, the FDA has issued 50 Warning Letters to manufacturers of products containing CBD. Many of the FDA’s older warning letters advised manufacturers against making false claims about the CBD levels in their products. But more recently, FDA has turned its focus to CBD products being marketed as “drugs” or “dietary supplements” without having received FDA approval to be sold as such. For example, FDA has issued warning letters regarding CBD products advertised as cures for cancer, anxiety, depression, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety because they promise to prevent or treat disease or otherwise affect the structure or function of the body—the types of marketing claims that can only legally be made of FDA-approved drugs. The FDA has also warned that CBD products cannot be marketed as dietary supplements because CBD has already been approved as the active ingredient in a prescription drug (Epidiolex). Therefore, CBD products do not qualify as dietary supplements under FDA regulations.
In addition to issuing warning letters, the FDA has begun to roll out more comprehensive regulatory initiatives for cannabis and cannabis-derived compounds, including CBD. With mounting pressure from Congress and the public, the FDA recently announced that it is actively working to create regulations for CBD products, with a focus on identifying pathways through which CBD products may be safely and lawfully marketed. To that end, the Agency has begun obtaining research, data, and other safety and public health information on CBD to lay the groundwork for formal rulemaking concerning CBD’s marketing and non-drug uses.
Given this attention from the FDA, should CBD product manufacturers be concerned about the risk of private litigation? Absolutely. As discussed in our prior post, when the FDA begins issuing warning letters to manufacturers regarding labeling practices, the class action plaintiffs’ bar usually isn’t far behind.
Although to date, the consumer challenges to CBD products have been limited, there are a number of theories that plaintiffs may seek to advance:
- In line with the recent FDA warning letters, plaintiffs could allege that CBD manufacturers have misleadingly marketed a CBD product as a “drug.” To the extent CBD products are advertised as conferring the therapeutic benefits of a drug without having received the necessary approval by FDA to be marketed as such, plaintiffs may claim this is an unlawful practice that violates the Food, Drug & Cosmetic Act and/or state law analogs. Similarly, the FDA has stated in its warning letters that CBD products do not qualify as dietary supplements because CBD has been approved as an active ingredient in a drug product. Thus, marketing claims promoting CBD products as dietary supplements are also suspect.
- Further, plaintiffs could also claim that they were misled into thinking that food-based CBD products are safe when CBD has not been Generally Recognized as Safe (“GRAS”) as a food additive by the FDA.
- Plaintiffs may allege that some of the touted benefits of consuming CBD products—e.g. that CBD can treat anxiety, depression, cancer, etc.—are unsubstantiated or disproven by scientific evidence, and that labeling products as conferring such benefits is therefore false and misleading.
- In the same vein as “slack fill” cases, plaintiffs may also bring claims alleging that they were misled because the amount of CBD and/or THC present in a product is different from what the manufacturer has claimed.
While there are viable defenses to each of these theories, a lack of merit has rarely served as a barrier to the plaintiffs’ bar, and manufacturers’ costs of defending against such litigation could be steep.
Moreover, as they gain market share against non-CBD products, manufacturers of CBD products should also be concerned about suits initiated by competitors, who can pursue claims under the Lanham Act based on similar theories of false and misleading advertising.
Though the CBD industry has good reason to be excited about its sales figures and growth potential, it should also be attuned to the considerable litigation risks associated with marketing such products. To date, growth in this arena has largely outstripped efforts to regulate it—but the pendulum has begun to swing in the other direction. And with the FDA honing its focus on CBD products, manufacturers of CBD products should take pains to develop a sound strategy for thoroughly vetting advertising claims and anticipating the wave of litigation that is likely to follow.