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Hemp-Derived CBD in Food Products, A Legal Rabbit Hole

Wilson Elsner takes a deep dive into the world of CBD legality

When Alice went down the Rabbit Hole and was offered food and drink of questionable source and safety, Wonderland had no versions of the DEA and FDA to stop her. Both agencies have weighed in recently on the source and safety of the burgeoning hemp-derived cannabidiol (CBD) industry – and trying to understand this legal warren feels like joining Alice down that Rabbit Hole. Come along with us now for the journey, and “remember what the dormouse said, feed your head.”

 

Why All the Confusion?

To properly evaluate whether CBD is “legal,” one must look both to whether the source of CBD is legal under federal and state criminal law, as well as whether the use of CBD otherwise violates food and drug laws.  Many commentators have focused on the former at the expense of the latter, or otherwise have conflated the issues. It is important to separate these two areas of inquiry. Below, we address both questions in turn.

 

What Is CBD?

CBD, or cannabidiol, is one of more than 100 cannabinoids in the cannabis plant. Unlike tetrahydrocannabinol (THC), CBD is not psychoactive and won’t get the user “high.” Based on growing demand, the CBD market is predicted to be valued at more than $2 billion by 2020. Fueling this trend is scientific and anecdotal evidence of CBD’s effect on anxiety, pain, inflammation, nausea and seizures, as well as its value in fighting the opioid crisis.

These health benefits have prompted the addition of CBD to many food products, ointments, oils, creams, cosmetics and pet products.  But what is the legality of CBD? Isn’t a cannabinoid extracted from the cannabis plant illegal under federal law? What about state law?  Like many questions involving cannabis and its cousin hemp, the answer is “it depends.” To appreciate the nuance of the answer, it is necessary to first address the relevant legal landscape.

 

Marijuana versus Industrial Hemp

Definition of Marijuana under the Controlled Substances Act

The Controlled Substances Act (CSA) defines marijuana as “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.”

The CSA, however, specifically excludes mature stalks of the plant, seed oil and unviable seeds from the definition of marijuana because they contain only trace amounts of cannabinoids.

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Industrial Hemp under the “Farm Bill”

Hemp is a subspecies of cannabis characterized by fibrous stalks and very low levels of THC. After many years of debate, in 2014 Congress authorized state pilot programs to study the cultivation of and market for industrial hemp as a viable agricultural crop. It did so through the 2014 Farm Bill, which defines industrial hemp as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a [THC] concentration of not more than 0.3 percent on a dry weight basis.” (See, Section 7606 of the Agricultural Act of 2014.) The Farm Bill’s definition of industrial hemp includes any part of the plant, including the flower. Unlike the CSA, which distinguished “industrial hemp” from “marihuana” based on the part of the cannabis plant from which a product is derived, the Farm Bill distinguished the two based on the concentration of THC contained in each species.

Industrial hemp under the Farm Bill is permissible if (1) “the industrial hemp is grown for purposes of research conducted under an agricultural pilot program or other agricultural or academic research and (2) the growing or cultivating of industrial hemp is allowed under the laws of the State in which such institutions of higher education or State department of agriculture is located.” Critically, the Farm Bill differentiates between permissible industrial hemp and impermissible marijuana. It also leaves to each state the determination whether to allow cultivation of industrial hemp by instituting an industrial hemp pilot program. Currently, 35 states have industrial hemp pilot programs.

In late June 2018, the U.S. Senate overwhelmingly passed the Senate’s version of the 2018 Farm Bill, which contained Senate Leader Mitch McConnell’s hemp bill that removes essentially all barriers to hemp cultivation and sale in the United States, and provides other benefits such as access to federal grants and federal crop insurance. The Senate bill must be merged with the version from the House before it can be signed by the president later this year, but expectations are that protections for hemp will remain in the final version.

 

The DEA and CBD

Notwithstanding the language of the 2014 Farm Bill, in December 2016 the Drug Enforcement Administration (DEA) established a new drug code for “Marihuana Extract,” broadly defining the term as “extract containing one or more cannabinoids … derived from any plant of the genus Cannabis, other than the separated resin (whether crude or purified) obtained from the plant.” This broad definition of “Marijuana Extract” appeared to include CBD derived from industrial hemp because it is a cannabinoid derived from a subspecies of the genus Cannabis.

This disparity between the DEA’s definition and the Farm Bill’s language prompted a lawsuit in the Ninth Circuit Court of Appeals brought by the Hemp Industries Association (HIA), which argued that Congress unambiguously excepted all parts of the industrial hemp plant to fall outside the parameters of the CSA.

 

Briefing papers filed in that case explain:

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“Through the Farm Bill and Spending Bill, Congress resolved much of the long-standing tension regarding industrial hemp. Congress passed a law that chose a path of non-interference with industrial hemp legalization in States that wished to explore economic growth opportunities with the crop. Congress made this decision in the face of DEA’s longstanding views. While Congress and DEA disagreed, Congress resolved the disagreement through the plain language of the Farm Bill and Spending Bill. …

“In sum, the Farm Bill clearly established that states could determine on their own whether to allow cultivation of industrial hemp. In addition, it provided a new definition of industrial hemp explicitly based on THC content alone, and ensured that the new definition would take precedence “notwithstanding” the CSA.”

Earlier this year, the Ninth Circuit denied the HIA’s petition on procedural grounds and never reached a decision on the merits. The DEA nevertheless issued a clarifying statement in May 2018, explaining that “the mere presence of cannabinoids [such as CBD] is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.”

It is now widely understood that CBD extracted from properly sourced industrial hemp does not fall within the CSA, whereas CBD extracted from marijuana is controlled by the CSA. This distinction is colloquially known as the “source” rule.

Although the DEA has clarified its position, this does not end the inquiry as to whether CBD can be legally marketed and sold in food products across the country because one also must look to the Food and Drug Administration’s (FDA’s) position on CBD.

 

The FDA and CBD

The FDA is responsible for protecting the public health by ensuring the safety and efficacy of drugs and medical devices, and the safety of the nation’s food supply. Under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act (FD&C Act), any substance that is intentionally added to food is a food additive that is subject to premarket review and approval by the FDA, unless the substance is generally recognized among qualified experts as having been adequately shown to be safe under the conditions of its intended use, or unless the use of the substance is otherwise excluded from the definition of a food additive. The use of a food additive may be “generally recognized as safe” (GRAS) through scientific procedures, or for a substance used in food before 1958, through experience based on common use in food.

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It is the FDA’s position that cannabinoids, including CBD, are impermissible additives that adulterate food for both humans and animals. Unlike the DEA’s “source” rule, the FDA does not differentiate the source of CBD, but rather considers all CBD to be an illegal food ingredient regardless of source. Since 2015, the FDA has sent a number of letters to companies that sell CBD-infused oils and food products, warning against making impermissible health claims. The most recent FDA warning letters were sent in October 2017 to four companies selling CBD products online in interstate commerce. In the letters, the FDA concludes that CBD products are in fact drugs, and not dietary supplements, under the FD&C Act because they are intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease and/or because they are intended to affect the structure or any function of the body. Accordingly, the “drugs” required FDA approval under the FD&C Act.  

The FDA also concluded that CBD products are not dietary supplements under the Dietary Supplement Health and Education Act (DSHEA) because the FDA had previously authorized CBD for investigation as a new drug, for which substantial clinical research already had been conducted and made public. The FDA cited Epidiolex® and Sativex® as examples of clinical investigations regarding CBD that have been made public.

 

The FDA further explained:

“[I]f an article (such as CBD) 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, then products containing that substance are outside the definition of a dietary supplement. There is an exception if the substance was “marketed as” a dietary supplement or as a conventional food before the new drug investigations were authorized; however, based on available evidence, FDA has concluded that this is not the case for CBD.”

In addition, the FDA warns that a drug is misbranded if it fails to bear adequate directions for its intended use, and that “it is impossible to write adequate directions for a layperson to use [CBD products] for their intended purposes.” The FDA therefore concludes that “the introduction or delivery into interstate commerce of these misbranded drugs violates the FD&C Act.”

 

Epidiolex

In June 2018, the FDA approved the first CBD-based drug, Epidiolex, for treatment of seizures associated with two rare forms of epilepsy. Despite its approval of Epidiolex, the FDA has announced that the drug cannot be legally sold in the United States because of the CSA. In its June 25 press release, the FDA states: “CBD is currently a Schedule I substance because it is a chemical component of the cannabis plant.” By definition, a Schedule I substance has no accepted medical use. To resolve this conflict, the DEA must remove CBD from Schedule I, and it has 90 days from the FDA’s approval of Epidiolex to do so.

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Many commentators have rightly argued that the FDA misses the mark by claiming CBD is currently a Schedule I substance under the CSA “because it is a chemical component of the cannabis plant.” As recently made clear by the DEA, CBD is only a controlled substance if it is derived from the marijuana plant, but it is not a controlled substance if it is derived from industrial hemp because Congress specifically excluded industrial hemp from the definition of marijuana in the 2014 Farm Bill.

Unfortunately for those who want to capitalize on booming demand for hemp-derived CBD food products, this is largely a distinction without a difference and underscores the new regulatory hurdles for federal approval of cannabis- and hemp-based products. Regardless of the source of CBD, the FDA has concluded that CBD is a drug with a real health benefit that is used to treat certain epileptic seizures, and is being investigated for other medical uses. Because the FDA has made this determination, CBD cannot be freely added to food products and sold to the public.

Anticipating that its approval of Epidiolex would cause greater public interest in CBD products sourced from industrial hemp, the FDA recently updated its “Questions and Answers” regarding marijuana-based therapy and industrial hemp. The FDA explains that the Farm Bill did not amend the FD&C Act and did not “alter the approval process for new drug applications, the requirements for the conduct of clinical or nonclinical research, the oversight of marketing claims, or any other authorities of the FDA as they are set forth in that Act.”

The FDA also clearly states that products containing cannabinoids cannot be sold as dietary supplements, concluding that THC and CBD products are excluded from the “dietary supplement definition” in DSHEA. Under those provisions, if a cannabinoid is either “(1) an ingredient in an active drug product that has been approved, or (2) has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted, then products containing that substance are outside the definition of a dietary supplement.”

Now that CBD is an active ingredient in the approved drug Epidiolex, it is not a dietary supplement and cannot be sold as such. Unlike the DEA, the FDA does not follow the “source” rule. Its position is that CBD, regardless of its source (industrial hemp or marijuana), is not a dietary supplement and cannot be added to food products for humans or animals.

Recently, a Canadian company, Fresh Hemp Foods, Ltd., through its subsidiary Manitoba Harvest (https://manitobaharvest.com) applied for GRAS designation from the FDA for three separate hemp-based substances to put in food, including hemp seed oil, hemp seed protein and hulled hemp seed. These hemp additives presumably do not contain CBD. The FDA’s response is currently listed as “pending.” The FDA previously rejected a GRAS request for hempseed oil in August 2000 based on common use in food as opposed to scientific procedures. At that time, the FDA concluded the use of hempseed oil in food cited in the application did not show that the use was sufficiently widespread to demonstrate safety.

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A recent search of the FDA’s GRAS database confirms that no applications have been made for “CBD” or “cannabidiol.”

 

CBD and State Regulations

Certain states also have weighed in on the legality of adding CBD or hemp to foods. While states regulate food alongside and in cooperation with the FDA, states are responsible for food safety within state borders while the FDA regulates interstate food and drug safety.

 

California

It is important to note that notwithstanding the recent approval of Epidiolex and the consequential definition of CBD as a drug, the FDA always has considered all cannabinoids to be impermissible adulterants to food. However, because the FDA has taken little enforcement action over the past few years other than sending several warning letters, the response from the hemp industry has until now been a collective shrug and a steady march forward. Then, on July 6, 2018, prompted by the approval of Epidiolex and responding to “numerous inquiries from food processors and retailers who are interested in using industrial hemp-derived CBD products in food,” the California Department of Public Health (CDPH) kicked the hornet’s nest.

On July 6, the CDPH issued a public statement that CBD sourced from industrial hemp cannot be used in food in California. The CDPH relies on the FDA’s position, explaining: “California incorporates federal law regarding food additives, dietary use products, food labeling, and good manufacturing practices for food,” and that the “FDA has concluded that it is a prohibited act to introduce or deliver for introduction into interstate commerce any food (including any animal food or feed) to which THC or CBD has been added … regardless of the source of the CBD – derived from industrial hemp or cannabis.”

The CDPH distinguishes CDB added to medicinal and adult-use “manufactured cannabis products,” including cannabis edibles, which are regulated by the CDPH Manufactured Cannabis Safety Branch (MCSB). It explains that “although California currently allows the manufacturing and sales of cannabis products (including edibles), the use of industrial hemp as the source of CBD to be added to food products is prohibited.” Therefore, California now takes the position that CBD sourced from marijuana is permitted in food products but is considered a cannabis product and must be sold in licensed dispensaries. On the other hand, CBD sourced from industrial hemp is not permitted in any food product under any condition.

 

Texas

Texas also has weighed in on the legality of CBD within the state. In March 2018, the Texas Department of Health State Services released a “proposed inspection protocol” that suggested state officials would seize all products containing hemp-based CBD from store shelves across the state. The proposed seizure targeted all products containing even trace amounts of CBD or THC.

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After receiving nearly a thousand comments, the Department of Health State Services paused its proposal and is currently weighing how best to proceed.

 

Indiana

Similarly, in November 2017, Indiana’s Office of the Attorney General issued an opinion on CBD stating that “products or substances marketed for human consumption or ingestion, and containing [CBD], remain unlawful in Indiana, and under federal law.” The attorney general reasoned – inconsistently with the DEA’s recent clarification – that “[CBD] is a schedule 1 controlled substance because marijuana is a schedule 1 controlled substance.” One week later, Governor Eric Holcomb instructed the state’s Excise Police to begin spot-checking CBD oil products on store shelves for any level of THC, and warned retailers to remove CBD products from their shelves within 60 days.

Despite this tough stance on CBD by Indiana’s top officials, the state passed Senate Bill 52 in March 2018, allowing the distribution and retail sale of “low-THC hemp extract.” Under the new law, CBD derived from industrial hemp is permitted for sale so long it is tested by an accredited, independent laboratory. In addition, CBD producers must follow strict labeling requirements.

 

An Absurd Result

These federal and state positions have created an absurd result. CBD now may be legally distributed, sold, imported or exported without restriction so long as it is from properly sourced industrial hemp, but CBD may be added to food products only if it is derived from marijuana. It is difficult to logically reconcile this “schizophrenic” state of the law. Although the FDA has always prohibited cannabinoids in food, it has to date only taken action when CBD products making health claims were sold online or were otherwise introduced into interstate commerce. The FDA’s recent approval of Epidiolex has been widely viewed as a positive development by those who want to see a change to the federal scheduling of marijuana, but it also has unexpectedly hamstrung the fledgling market for hemp-derived CBD products that are in high demand, including when used to fight the opioid crisis.

 

The Impact on Manufactured Cannabis Products

What is the potential impact on state-regulated manufactured cannabis products that contain CBD and other cannabinoids? Because the regulated cannabis market is currently regulated only under state law, there is no interstate commerce of cannabis products that contain CBD or other cannabinoids. When federal law is changed, however, and interstate commerce for cannabis becomes a reality, the industry should brace for stepped-up FDA enforcement.

 

Evaluating the Risk

Some who sell hemp-derived CBD products may be tempted to keep moving forward and hope for the best. After all, that’s basically what the cannabis industry did vis-à-vis the Department of Justice and DEA in the face of federal illegality, and the FDA has remained largely on the sidelines when it comes to CBD because, until recently, few CBD products have been available in interstate commerce. California’s Department of Public Health has not yet taken any visible enforcement action on non-cannabis CBD. Some may ask what risk there is in simply continuing to sell their products. It is tempting to focus on potential regulatory fines and penalties as the greatest risk, but tort exposure to civil lawsuits is likely the larger problem. Unlike selling federally illegal cannabis products pursuant to a state-regulated market where participants are protected under state laws, no such protection exists for sellers of CBD products that are considered adulterated and misbranded under both federal and state law. Even in states – unlike California – that have not yet announced a formal position on CBD in food products, the FDA’s position is likely sufficient for determination as a matter of law that such products cannot be sold legally.

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Most states have consumer protection laws that provide statutory remedies against companies that sell adulterated, mislabeled, misbranded or contaminated products.* Those statutes may provide the basis for consumer class actions brought against companies that sell allegedly adulterated or misbranded food products containing CBD. It’s also important to note that insurance companies often decline coverage for these claims, leaving the company to fend for itself. Uninsured losses arising out of consumer class actions have proven problematic for the dietary supplement industry over the past decade.

Moreover, in 2015 and 2016, the FDA tested the chemical content of cannabinoid compounds in some of the companies’ products it sent warning letters to, finding that many did not contain the levels of CBD they claimed to contain. Misrepresenting the amount of CBD in a product similarly opens companies up to consumer class action lawsuits.  

 

About the Authors

Neil Willner

Ian A. Stewart

Ian A. Stewart is a partner in the Los Angeles office and Neil Willner is an associate in the New York office of the national law firm Wilson Elser. Through its dedicated Cannabis Law practice, Wilson Elser attorneys assist growers, processors, distributors and vendors within the legalized cannabis industry as well as organizations outside the industry impacted by cannabis legalization.

 

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