Could the FDA Shut Your Hemp Business Down? Why Hemp Businesses Need to Manage Risk

If Henry Ford ran a car off of hemp fuel, what is holding today’s hemp businesses back from innovation and prosperity?  Simply put, regulation.

In the past couple of weeks, the FDA has been busy releasing new guidance surrounding Cannabis and Cannabis-derived compounds. It seems clear that the FDA is both interested in protecting consumers, but also realistic enough to realize that there is significant commercial demand for CBD, and other Cannabinoid containing products on the shelves, as well as an overall rise in hemp business.

Hemp Business

Quick Refresher

The Cannabis sativa plant has two different names in US law. Under the Controlled Substance Act (“CSA”), it is “marihuana”, and if it contains less than 0.3% THC by dry weight, then it is “hemp” under the Farm Bill of 2018. “Marihuana” and its derivatives are Schedule I substances under the CSA, and therefore is deemed to have no medicinal value. Hemp and its derivatives, however, are not subject to the CSA at all, and rather are crop and crop derivatives.  Being a hemp business or a cannabis business comes with its fair share of regulation.

If I derive something from a legal crop, like hemp, then anything I make with the derivative is also legal. Right? …maybe not.

Since the passage of the Farm Bill of 2018, the FDA has released reminders to the public that this is not suddenly a free-for-all. Food and drugs containing cannabinoids, even when derived from hemp, still have to meet all of the FDA standards and guidelines. Further, no health claims can be made about any consumer product unless those claims either have been approved by the FDA, or are within the dietary supplement guidelines.

Okay – so if I manufacture within the dietary supplement guidelines, I’m okay right? …probably not.

Cannabidiol, aka CBD, a non-psychoactive cannabinoid in the Cannabis sativa plant, is an active ingredient in a drug approved by the FDA called Epidiolex. The FDA rules state that an active ingredient in a drug approved by the FDA may not be introduced into ingestible products without also undergoing the FDA approval process. Further, such products would not be within the scope of the dietary supplement guidelines.

Do I want to create hemp related products or start a hemp business after reading all of that? …maybe, let’s talk about it.

One simple response – it depends on what you are making, and when you are going to start! Being a hemp business owner means not only understanding operations, but really understanding regulations.  There are a couple of new things coming out of the FDA over the last week which seem to point to a change in the FDA’s stance, or at least a clarification on existing standards and guidelines as they relate directly to Cannabis and Cannabis-derived compounds. Below are some key points we would like to point out in what we have read.

FDA GUIDANCE ON CANNABIS-RELATED DRUG DEVELOPMENT:
  • Draws a hard line (which already existed anyway) between the FDA and DEA. The FDA is interested in development of drugs for treatments of ailments, and has no interest or jurisdiction in enforcing the CSA.
  • Proposes, as an interpretation, a means for calculating whether the THC content of a derivative meets the definition of Hemp under the Farm Bill of 2018. Essentially, THC if there were no water in the sample.
  • Tells the reader to go ask the DEA if they are unsure about anything. Sounds fun.

FDA SUBMITTED A DRAFT ENFORCEMENT POLICY FOR CBD TO OMB:

  • As of the posting of this blog entry, the text of the draft enforcement policy is not available
  • Speculation from the Hemp industries on various approaches:
    • “Claims based” enforcement likely – You claimed something that you’re not allowed to claim and now you’re in trouble. For example: “Eating [insert CBD product here] will cure your cancer, guaranteed!” would be an unproven health claim subject to enforcement.
    • “Serving-size” based – a maximum amount of CBD allowed to be sold in one package, or that serving sizes must be disclosed.
    • “Product standards” based – requirement that you follow specific guidelines related to testing, quality, and labeling.
    • Something else entirely…

What does this all mean for Hemp Businesses?

Hemp business is still in its infancy. Such emerging products have always been difficult for large regulatory bodies to keep up with. The key here is to understand where your risks are, and to mitigate them. Some of those risks can be mitigated with good business planning. For example, if you think that the FDA may place new labeling standards on your hemp business, then call your label printer, and graphic designer today to quote out a re-design of your label which would meet new standards if they come your way.

For more ideas and help, give me a call or email me at mhopkins@teamdkb.com