- On December 11, 2024, the U.S. Food & Drug Administration (FDA) issued updated guidance for industry on the registration and listing of cosmetic product facilities and products. The guidance provides recommendations and instructions to help individuals and companies comply with the Modernization of Cosmetics Regulations Act of 2022 (MoCRA).
- MoCRA mandates that cosmetic companies report serious adverse events to FDA within 15 business days, register their facilities and list their products, ensure product safety before marketing, and comply with FDA’s authority to access records and order recalls if products are found to be unsafe or misbranded.
- The updated guidance outlines the statutory requirements for submitting cosmetic product facility registrations and product listings. It finalizes the frequently asked questions (FAQs) in Appendix B (Q1-19) and introduces three new FAQs (Q20-22) for public comment.
- Q20 outlines the responsibilities of a U.S agent, which includes assisting FDA with communications, responding to product inquiries, helping schedule inspections, and receiving documents on behalf of the foreign establishment;
- Q21 explains that multiple buildings within three miles can share one FEI number if they are part of the same establishment and management, and can be inspected together; and
- Q22 indicates that a product listing is generally required for all cosmetic products, including free samples or gifts, unless specific exemptions apply.
- The comment period is open until January 13, 2024, and comments can be submitted through the docket.
Category: Drug & Cosmetic Law
Telehealth Update: DEA/HHS Temporary Rule, Medicare Coverage of Telehealth Services, Potential for Increased Oversight, and What to Watch For in 2025
Telehealth companies and other industry stakeholders have had a watchful eye towards the end of 2024 and the impending “telehealth cliff” as COVID-era Drug Enforcement Agency (DEA) flexibilities and Medicare expanded telehealth coverage are set to expire. Although a recent temporary joint rule from the DEA and the Department of Health and Human Services (HHS) along with the 2025 Medicare Physician Fee Schedule final rule has provided some hope, questions regarding telehealth access in 2025 and under a new Administration remain unclear. Further, calls continue for increased oversight of telehealth services. Below, we breakdown recent updates for the telehealth industry.
DEA Telehealth Flexibilities
Providing some good news, late last month the DEA and HHS jointly issued a temporary rule (the Temporary Rule) extending the COVID-era flexibilities for prescribing controlled substances via telehealth through the end of 2025. The flexibilities, which previously were twice extended and set to expire December 31, 2024, temporarily waive the in-person requirements for prescribing under the Controlled Substances Act.
The DEA and HHS issued the Temporary Rule to ensure that providers and patients who have come to rely on telehealth services are able to smoothly transition to the new requirements, which as previously covered, are likely to significantly limit providers’ ability to prescribe controlled substances without an in-person interaction. The Temporary Rule also acknowledges that the DEA and HHS continue to work with relevant stakeholders and will use the additional time to promulgate proposed and final regulations that “effectively expand access to telemedicine” in a manner that is consistent with public health and safety, while mitigating the risk of diversion. The agencies also note that the limited time period of the extension is aimed at avoiding investment in new telemedicine companies that may encourage or enable problematic prescribing practices.
The Temporary Rule effectively allows all DEA-registered providers to prescribe Schedule II-V controlled substances via telehealth through the end of 2025, regardless of when the provider-patient relationship was formed. Consistent with the prior temporary rules, the following requirements continue to apply:
- The prescription must be issued for a legitimate medical purpose by a practitioner acting in the usual course of professional practice.
- The prescription must be issued pursuant to a telehealth interaction using two-way, real-time audio-visual technology, or for prescriptions to treat a mental health disorder, a two-way, real-time audio-only communication if the patient is not capable of, or does not consent to, the use of video technology.
- The practitioner must be authorized under their DEA registration to prescribe the basic class of controlled medication specified on the prescription or be exempt from obtaining a registration to dispense controlled substances.
- The prescription must meet all other requirements of the DEA regulations.
Providers should also be cognizant of applicable state laws that may place additional restrictions on the ability to prescribe certain medications or otherwise provide treatment via telehealth.
Medicare Coverage of Telehealth Services
Unlike the DEA flexibilities, many of the COVID-era flexibilities for traditional Medicare coverage of telehealth services will end on December 31, 2024. Despite bipartisan support, congressional action is required to extend broad coverage for certain telehealth services existing since March 2020. Most notably, unless Congress acts, beginning January 1, 2025 expiring flexibilities include waiving the originating site requirements to allow beneficiaries to receive services in their homes and expanding the list of Medicare-enrolled providers who can furnish telehealth services.
Further, beginning January 1, 2025, Medicare coverage of telehealth services for beneficiaries outside of rural health care settings will be limited to:
- Monthly End-Stage Renal Disease visits for home dialysis;
- Services for diagnosis, evaluation, or treatment of symptoms of an acute stroke;
- Treatment of substance use disorder or a co-occurring mental health disorder, or for the diagnosis, evaluation or treatment of a mental health disorder;
- Behavioral health services;
- Diabetes self-management training; and
- Nutrition therapy.
For its part, the Centers for Medicare & Medicaid Services (CMS) recently issued its 2025 Medicare Physician Fee Schedule Final Rule (the MPFS Final Rule) extending and making permanent certain telehealth flexibilities within its authority. In particular, through December 31, 2025, practitioners may continue to utilize live video to meet certain Medicare direct supervision requirements and reference their currently enrolled practice when providing telehealth services from their home. The MPFS Final Rule continues to remove frequency limitations for certain hospital inpatient/observation care, skilled nursing facility visits, and critical care consultation services furnished via telehealth. Additionally, the MPFS Final Rule makes permanent the utilization of audio-only telehealth for any Medicare-covered telehealth service.
Increased Telehealth Oversight
Recent months also have seen renewed calls for increased oversight of telehealth services. In September, the HHS Office for Inspector General (OIG) issued a report (the OIG Report) recommending increased oversight of Medicare coverage of remote patient monitoring. As a basis for its findings, the OIG Report cites the dramatic increased utilization of and payments for remote patient monitoring from 2019 to 2022, the fact that over 40% of Medicare beneficiaries receiving remote patient monitoring did not receive all three components of the service (i.e., education and setup, device supply, and treatment management), and the observation that Medicare lacks key information regarding the data being collected and the types of monitoring devices utilized. Notably, OIG conducted its review in part because of the potential for significant expansion of remote patient monitoring in the Medicare population.
Given these factors, the OIG Report recommends that CMS:
- Implement additional safeguards to ensure that remote patient monitoring is used and billed appropriately in Medicare.
- Require that remote patient monitoring be ordered and that information about the ordering provider be included on claims and encounter data for remote patient monitoring.
- Develop methods to identify what health data are being monitored.
- Conduct provider education about billing of remote patient monitoring.
- Identify and monitor companies that bill for remote patient monitoring.
Separately, concerns also have been raised regarding the recent emergence of direct-to-consumer telehealth platforms sponsored by pharmaceutical companies. In this model, patients seeking specific medications are linked to a health care provider who can virtually prescribe the requested medication. In October, U.S. Senate Majority Whip Dick Durbin (D-IL), joined by Senators Bernie Sanders (I-VT), Peter Welch (D-VT), and Elizabeth Warren (D-MA) sent letters to several pharmaceutical companies requesting written response to questions regarding these platforms including the cost of direct-to-consumer advertising, the arrangements between the telehealth providers and the pharmaceutical companies, and whether the virtual consultation comply with the standard of care.
Conclusion
Despite attempts to preserve and expand telehealth access and affordability, effective January 1, 2025, many Medicare beneficiaries will be cut off from certain telehealth services unless one of the bills currently pending in Congress is passed. Crucially, bipartisan support for increased access to telehealth services is likely to continue in both chambers of Congress. Although the incoming Administration has not detailed its plans regarding telehealth access on a permanent, or even temporary basis, telehealth will continue to play an important role in the United States health care system through 2025 and beyond. As telehealth continues to play an important role in increasing access to care, increased oversight and enforcement is almost certain, even if future oversight priorities are unclear. As always, we will continue to monitor and report on important telehealth developments.
FDA Affirms Its Decision to Remove 25 Plasticizers From the Food Additive Regulations
In a continuation of the US Food and Drug Administration‘s efforts to conduct post-market reviews evaluating the continued use and safety of chemicals authorized in its regulations, the agency is removing decades-old clearances for food-contact materials based on evolving toxicology concerns. Specialty chemical companies should take note of the development as an example of the way FDA may respond when safety concerns evolve for cleared substances.
Specifically, on October 2024, the Food and Drug Administration (FDA) responded to an objection to its 22 May 2022 final rule amending the food additive regulations (the Final Rule) and affirmed its decision to remove 25 ortho-phthalate plasticizers from 21 C.F.R. Parts 175, 176, 177, and 178. The FDA issued the Final Rule on 20 May 2022 in response to a food additive petition submitted by the Flexible Vinyl Alliance. Several non governmental organizations filed an objection to the FDA’s Final Rule, and in the FDA’s response, the FDA stated that the objection did not provide a basis for modifying the FDA’s Final Rule. While the FDA affirmed its decision, the FDA noted that it is working on an updated safety assessment that will include the remaining authorized uses for phthalates that were not removed from the food additive regulations. The FDA will consider, in part, information it received through its “Ortho-phthalates for Food Contact Use” Request for Information in its evaluation. The FDA’s response explained why the FDA’s action with respect to the Final Rule was reasonable.
The FDA also received objections to the agency’s denial of a separate food additive petition (food additive petition 6B4815) in which the National Resource Defense Council (NRDC) requested that the FDA revoke authorized food contact uses of 28 phthalates due to alleged safety concerns. The FDA concluded that the NRDC did not establish a basis for modifying or revoking the denial order as requested in their objections. According to the FDA, the NRDC failed to establish sufficient support to take the requested action of grouping the 28 phthalates as a class and revoking their authorizations for the 28 phthalates on the basis that they were unsafe as a class. The FDA took issue with reviewing all 28 phthalates together as a class by applying data from one chemical to the entire group as the NRDC suggested. The FDA found that available information did not support grouping the phthalate chemicals into a single-class assessment and noted that 23 of the 28 phthalates were no longer in use and had been revoked in the Final Rule issued at the same time as the denial of the safety-based petition.
The FDA’s forthcoming post-market assessment(s) of the ortho-phthalates whose uses remain the subject of applicable food additive clearances may be an example of the procedures that the FDA will utilize for its post-market assessment of chemicals in food that is currently under development. The proposed post-market assessment process was the subject of a recent public meeting, attended by our Senior Scientific Advisor, Dr. Peter Coneski, at the FDA’s White Oak Campus on 25 September 2024. The public comment period for the FDA’s proposal for an enhanced systematic process for the post-market assessment of chemicals in food remains open until 6 December 2024. We are monitoring these and other developments affecting the regulation of food contact materials in the United States and other jurisdictions.
FTC Releases Controversial Interim Staff Report on PBMs’ Purported Impact on Drug Prices
At an Open Commission Meeting on August 1, 2024, the Federal Trade Commission (FTC) presented a report prepared by its staff entitled Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.
Although characterized as “interim,” the report posits the following observations about pharmacy benefit managers (PBMs):
- “PBMs have gained significant power over prescription drug access and prices through increased concentration and vertical integration.”
- “Increased concentration and vertical integration may have enabled PBMs to lessen competition, disadvantage rivals, and inflate drug costs.”
- “The largest PBMs’ outsized bargaining leverage may operate to the disadvantage of smaller unaffiliated pharmacies.”
- “PBM and brand drug manufacturer rebate contracts may impair or block less expensive competing products, including generic and biosimilar drugs.”
- “PBMs lead to higher prices” (a conclusion based on only two case studies).
Commissioner Melissa Holyoak, in dissenting from the release of the report, stated that “the Report was plagued by process irregularities and concerns over the substance—or lack thereof—of the original order. In fact, the politicized nature of the process appears to have led to the departure of at least one senior leader at the Commission.” Commissioner Holyoak added that “[e]ven if the Report’s assertions of increasing concentration are accurate, increased concentration ‘does not prove that competition in that market has declined.’ Though the Report baldly asserts that PBMs ‘have gained significant power over prescription drug access and prices,’ the Report does not present empirical evidence that demonstrates PBMs have market power—i.e., ‘the ability to raise price profitably by restricting output.”’
Commissioner Andrew N. Ferguson, although concurring in the release of the report, was likewise critical of the process and its findings. In particular, Commissioner Ferguson found the report to be “especially unusual” in that it “relies, throughout, in large part on public information that was not collected from the PBMs or their affiliates during the 6(b) process.” Furthermore, Commissioner Ferguson was critical of the finding, based on only two case-study drugs, that PBMs lead to higher prices and pleaded with the FTC “to determine whether these findings are representative of market dynamics for other drugs.” He added that “[w]e need to understand whether any anticompetitive or unfair or deceptive acts or practices on the part of PBMs or any other market participants are contributing to these prices.”
Ozempic Lawsuit Overview
Makers of Ozempic and other semaglutide drugs are facing hundreds of lawsuits throughout the United States. While intended for diabetes management and weight loss, research has linked the drug to increased risk of gastroparesis, stomach paralysis, pancreatitis and bowel obstruction.
Plaintiffs and their Ozempic lawsuit lawyers are seeking monetary compensation through products liability litigation. Victims are continuing to come forward. As of June 2024, cases are in preliminary stages, with new cases being added to multi-district litigation.
What Is the Ozempic Lawsuit About?
The Ozempic lawsuit is about whether the manufacturers of semaglutide drugs created and sold an unreasonably dangerous drug that hurt people. Plaintiffs say that the drugs created an unreasonable risk of gastrointestinal injury – a risk that the drug manufacturers knew about, and that they hid from the public.
What drugs are involved in the Ozempic weight loss lawsuit?
Ozempic might be the best known of the drugs involved in the weight loss lawsuits, but there are several drugs named in litigation. These drugs include:
● Ozempic
● Wegovy
● Rybelsus
● Trulicity
● Mounjaro
Ozempic, Wegovy and Rybelsus are manufactured by Danish pharmaceutical giant Novo Nordisk. Trulicity and Mounjaro are manufactured by Eli Lilly and Company.
Each individual case names the drug or drugs that the plaintiff took.
What are the issues in the Ozempic lawsuit?
There are three primary issues alleged in the Ozempic lawsuits:
1. Whether the drug companies knew or should have known that their semaglutide drugs could cause gastroparesis and other gastrointestinal issues.
2. Whether the drug companies adequately warned doctors and patients about the dangers of their products.
3. Whether the drug companies made false, misleading, or incomplete statements about safety as they marketed their products.
Overview of the Drug of Ozempic and How It Works
Danish pharmaceutical company Novo Nordisk developed the diabetes drug Ozempic. Its purpose is to treat type 2 diabetes.
How do Ozempic and related weight loss drugs work?
Ozempic is a glucagon-like peptide-1 (GLP-1) receptor agonist. The drug signals the body that it is not hungry and to stop eating. It is meant to act like the GLP-1 hormone.
When we eat, the body releases the GLP-1 hormone in the intestinal tract. The hormone signals the brain that it is full. When the hormone is present, a person may eat less or stop eating. In diabetes patients, the drugs trigger insulin production and reduce a hormone from the pancreas that increases blood sugar. The drug helps keep the person’s blood sugar level lower, managing their diabetes.
Over time, Novo Nordisk made and marketed three different semaglutide GLP-1 receptor agonist drugs:
● Ozempic – Injected with a pen, approved in 2017
● Rybelsus – Taken by pill, approved in 2019
● Wegovy – Targeted for weight loss patients, in a higher concentration than other forms of semaglutides, approved in 2021
With FDA approval, sales of these weight loss drugs soared. Medicare even began to cover the drug Wegovy in 2024, with some restrictions. There was such a demand for the products that there was a shortage in 2023.
Not a miracle drug after all
At first, manufacturers thought that they had created a miracle drug. The New England Journal of Medicine reported that people taking semaglutide drugs lost up to 15% of their body weight. Novo Nordisk aggressively marketed the drugs, including with consumer-direct marketing campaigns. Influencers on social media touted the benefits, and there were stories of celebrities who had found seemingly effortless success.
However, it soon became clear that there may be serious problems with the drugs. Doctors and researchers began learning that the drugs may cause higher rates of gastroparesis and other gastrointestinal issues. Victims say that when these drugs were marketed to them, they were unaware that they were placing themselves in serious danger.
What’s the problem with Ozempic?
Ozempic and other weight loss drugs may cause higher rates of gastroparesis. Gastroparesis is a medical condition of weakened stomach muscles and intestines. The condition can lead to other problems and complications because the person cannot move food through the body in a
timely manner.
What is gastroparesis?
Gastroparesis is delayed gastric emptying of the digestive tract, including the stomach, intestines and bowels. The person has weakened muscles in their stomach and intestines, so they’re not able to digest food at a reasonable pace. The condition can cause several problems
and complications, including:
● Stomach pain
● Vomiting, nausea, diarrhea
● Fatigue
● Vitamin, nutrition deficiencies
● Bloating
● Too many bacteria in the small intestine
● Obstructed intestine or bowel
Gastroparesis can cause discomfort. The condition can be dangerous and life-threatening. Diabetes can mask the symptoms of gastroparesis, making it harder to detect.
Ozempic Lawsuit Case Details
What type of case is the Ozempic lawsuit?
The Ozempic stomach paralysis lawsuit is a tort product liability case, which is not an Ozempic class action lawsuit. The claims have been consolidated into multidistrict litigation. People who were harmed by taking the drug are bringing civil claims, seeking compensation for their monetary damages, physical harm and suffering.
What is the Ozempic lawsuit case number?
The Ozempic gastrointestinal lawsuits are currently joined in Multi-District Litigation In Re: Glucagon-Like Peptide – 1 Receptor Agonists (GLP-1 RAS) Products Liability Litigation, MDL-3094. The cases are joined in the United States District Court for the Eastern District of Pennsylvania. Each individual case that is part of the multi-district litigation proceeds retains its
own individual case number.
Note: Ozempic is also the subject of unrelated multi-district litigation regarding patents (MDL-3038). The cases have been consolidated in a Delaware court. The issues are unrelated to the issues in the defective drug products liability cases.
Who is the judge of the Ozempic multi-district litigation?
District Judge Gene E.K. Pratter was assigned to preside over the Ozempic multidistrict litigation. However, she passed away in May 2024. A new judge will be assigned to the case.
How many cases are a part of the Ozempic lawsuit?
As of June 2024, there are 101 cases pending in the Ozempic lawsuit multi-district litigation. New cases are being added periodically as victims come forward.
Multi-District Litigation – Cases Joined Together for Preliminary Proceedings
The Ozempic lawsuit started as separate lawsuits filed throughout the United States. At first, 18 cases were filed in 11 judicial districts. There were another 37 related cases in 15 districts.
Nine of the original plaintiffs believed that it would make more sense to build their cases together. They thought their cases were similar enough that they should work together for preliminary proceedings. They wanted to work together in discovery, preliminary motions, depositions and evidentiary rulings. On December 1, 2023, they filed a motion to transfer the cases from their respective courts.
On February 5, 2024, the courts agreed and ordered the cases combined for preliminary proceedings in multi-district litigation.
Not everyone wanted the transfer. Some plaintiffs thought that only claims against Novo Nordisk should be combined. The parties opposing MDL didn’t want multiple defendants combined.
However, the court transferred all claims involving similar allegations about GLP-1 RA drugs and whether they cause gastrointestinal issues. The court said that even though the two companies sold drugs with different molecular structures, complete overlap of issues is not required.
Current Status of the Ozempic Weight Loss Litigation
The Ozempic weight loss litigation is in the early stages. As of June 9, 2024, the court has issued four case management orders. These orders direct the parties to do certain things in preliminary proceedings.
Case management order no. 1 – February 15, 2024
● A statement that cases transferred to the court, and cases subsequently transferred to the court, will be subject to the court’s orders.
● Attorneys are directed to review the court’s policies and procedures.
● The court set the date, time and place for the first in-court case conference. The court set aside two hours of court time for the conference.
● Topics to be discussed included selecting plaintiff’s lead counsel, the responsibilities of lead counsel and allocation of tasks. The court said that pleadings, timing, future status conferences and other issues could be discussed.
Case management order no. 2 – February 16, 2024
● Waiving pro hac vice fees in the case.
● Requiring parties to submit the court’s pro hac vice form, if applicable.
Case management order no. 3 – April 23, 2024
● Appointing Liaison Counsel for Plaintiffs, and a mentor.
● Identifying and appointing counsel to the Plaintiff’s Committee.
● Authorizing Committee members to select additional counsel for the Committee, up to 25 total members.
● Allowing the Committee to create subcommittees.
● Ordering the Committee to propose conference dates.
Case management order no. 4 – April 24, 2024
● Requiring the parties to preserve potentially relevant evidence.
● Parties must keep documents, data and tangible things in their presence that are relevant to the claims and defenses in the case.
● Each party must take reasonable steps to avoid loss of the evidence. Auto-delete features must be disabled.
● Certain sources don’t need to be preserved, searched or produced from.
● Keeping evidence or information is not an agreement or concession that the material is relevant to litigation.
There have been other filings in the case. These filings are procedural, like asking the court for additional time to respond to the motion to transfer the cases to multi-district litigation and required proof of service documents.
The court held a status conference on March 14, 2024. Preliminary proceedings will continue, after which the court may schedule bellwether trials. These early trials inform the parties as to how cases may be decided if they go to trial.
Basis of a Claim
The decisions that people make about their medical care may impact the rest of their lives. The choices that people make about their healthcare should be informed.
A critical basis for the Ozempic lawsuit is the claim that the drug manufacturer failed to warn consumers about the risks of the drugs. Some claims allege that the warning label was too generic, listing minor symptoms but saying too little about gastrointestinal issues, and not
emphasizing the dangers enough.
Many patients saw the direct-to-consumer marketing campaigns, including $180.2 million spent to market the drug in 2022. Marketing efforts for Rybelsus were similarly robust in 2022, at $167.2 million spent. Much of the marketing budget was spent on national television ads.
The marketing worked, and sales climbed high that year. Novo Nordisk credited the marketing effort for its 36% revenue growth in North America in 2022.
Consumers say that with marketing efforts this strong, they had the right to complete information before taking Ozempic or another semaglutide drug.
U.S. products liability law and the Ozempic case
In the United States, drug manufacturers have a legal liability to make products that are reasonably safe. Product liability is the type of case that a victim may bring if they are harmed by a dangerous drug. One of the ways that a drug can be dangerous is if the public doesn’t have the information that they need about the risks and potential harm.
A claim may also be based on misleading statements in advertising. The lawsuits say that the drug manufacturer proclaimed the benefits of the drugs without emphasizing the potential risks. Plaintiffs say that the advertising campaigns were deficient enough that the drug companies
should be liable for damages.
Damages for Ozempic Lawsuit
The purpose of the Ozempic lawsuit is to compensate victims. A person who develops gastroparesis likely has significant losses due to medical expenses. They may have physical suffering.
Damages claimed may include economic and non-economic losses. Valuing damages is an important part of any case.
Proving an Ozempic Legal Claim
While you can file an Ozempic lawsuit, to succeed in an Ozempic lawsuit, a person must prove:
● They took Ozempic or a related drug.
● The drug was defective under legal standards.
● Because of taking the drug, the victim developed medical problems. There is causation between using the drug and the harm that occurred.
● Damages resulted to the victim including medical bills, other financial losses, physical pain, suffering and other damages.
Novo Nordisk is aggressively fighting claims. They have responded to the allegations and will be fighting the claims in the months to come. The parties will continue to discuss medical evidence and pursue their respective positions.
Justice for Ozempic Victims
Ozempic lawsuits are still in the early stages. New plaintiffs are continuing to join, and the cases are moving through preliminary proceedings. The court will schedule future dates as the parties develop their cases, pursue settlement and prepare for trial.
The FDA Wants To Reschedule Cannabis. Does That Mean All Employees Can Soon Legally Use It?
On May 21, 2024, the Drug Enforcement Agency (DEA) issued a notice of proposed rulemaking indicating that the U.S Food and Drug Administration (FDA) intends to transfer marijuana from Schedule I to Schedule II of the Controlled Substances Act (CSA). This notice is consistent with opinions from the Department of Health and Human Services (HHS) acknowledging that marijuana has currently accepted medical uses as well as HHS’s views about marijuana’s abuse potential and level of physical or psychological dependence. But assuming that the proposed rescheduling goes through, does that mean that cannabis is now federally legal, leaving employees free to consume cannabis like any other legal substances such as alcohol?
The short answer is “no.”
While rescheduling cannabis as a Schedule II drug may go a long way to opening doors for additional cannabis research and generally changing perceptions on cannabis use, such rescheduling does not make possession or use of cannabis “legal” at the federal level. The federal ban, though, is still against the weight of the direction many states are heading across the country. Recreational cannabis is now legal in 24 states and the District of Columbia. Considering that just 12 years ago there were only two states with legal recreational cannabis, it is not hard to see where the trend is heading. In fact, when accounting for medical cannabis programs, there are now only six states that do not offer any sort of legalized cannabis.
Perhaps unsurprisingly, recent drug testing data suggests that the increasing legality at the state level is resulting in increased cannabis use across the country. Positive drug tests for cannabis are on the rise. In Michigan, for example, positive cannabis drug tests have more than tripled since 2008. Notably, while cannabis positive tests are on the rise, use of other drugs such as opiates and cocaine have been steadily decreasing. Another study related to drug testing showed that employees are increasingly trying to thwart these drug tests. In 2023, drug tests with signs of tampering increased an astonishing 633% — the highest rate in more than 30 years.
With all these factors in mind, what might the “best practice” be for employers as it relates to the treatment of cannabis among their workforce? Of course, the answer is not a “one-size-fits-all” issue. The decision will depend on a number of factors, including certain jurisdictions’ prohibition on testing for cannabis, anti-discrimination laws protecting the use of cannabis, laws requiring drug testing for certain jobs, and position-specific questions surrounding job duties (e.g., desk job versus operating heavy machinery or other safety-sensitive positions). Still, what many employers may have considered as a best practice for years is one that should be reconsidered in light of these rapid developments.
EPA, USDA, and FDA to Clarify Overlapping Biotechnology Regulatory Frameworks
On May 8, 2024, the U.S. Environmental Protection Agency (EPA), U.S. Department of Agriculture (USDA), and U.S. Food and Drug Administration (FDA) released a joint plan to identify areas of ambiguity, gaps, or uncertainty in their coordinated regulation of biotechnology products. Consistent with a directive issued by President Biden in September 2022, the agencies’ plan identifies specific issues that each has either recently addressed or will work to address to promote such products’ safe use.
Key Takeaways
- What Happened: EPA, USDA, and FDA issued a joint plan for regulatory reform under their Coordinated Framework for the Regulation of Biotechnology.
- Who’s Impacted: Developers of PIPs, modified mosquitos, biopesticides, and other biotechnology products under EPA’s jurisdiction.
- What Should They Consider Doing in Response: Watch the three agencies’ regulatory dockets closely and consider submitting comments once new rules or draft guidance are published that may affect their products.
Background
President Biden’s executive order defined “biotechnology” as “technology that applies to or is enabled by life sciences innovation or product development.” Biotechnology products thus may include organisms (plants, animals, fungi, or microbes) developed through genetic engineering or manipulation, products derived from such organisms, and products produced via cell-free synthesis. These products may, in turn, be regulated under the overlapping statutory frameworks of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), Federal Food, Drugs and Cosmetics Act (FFDCA), Plant Pest Act (PPA), Federal Meat Inspection Act, Poultry Products Inspection Act, and more. Therefore, close coordination between EPA, USDA, and FDA is essential to ensure effective and efficient regulation of biotechnology products.
EPA Sets Sights on PIPs, Mosquitos, and Biopesticide Products
The agencies’ newly released plan identifies five biotechnology product categories where regulatory clarification or simplification are warranted: (1) modified plants; (2) modified animals; (3) modified microorganisms; (4) human drugs, biologics, and medical devices; and (5) cross-cutting issues. Under the new plan, EPA is engaged in all but the fourth category above.
For example, EPA has already taken steps to clarify its regulation of modified plant products, such as exempting from regulation under FIFRA and FFDCA certain plant-incorporated protectants (PIPs) created in plants using newer technologies. EPA next plans to address the scope of plant regulator PIPs and update its 2007 guidance on small-scale field testing of PIPs to reflect technological developments and harmonize with USDA containment measures.
Regarding modified animal products, EPA intends to work with USDA and FDA to coordinate and provide updated information on the regulation of modified insect and invertebrate pests. Specifically, EPA intends to provide efficacy testing guidance on genetically modified mosquitos intended for population control. As outlined in guidance published by FDA in October 2017, products intended to reduce the population of mosquitoes by killing them or interfering with their growth or development are considered “pesticides” subject to regulation by EPA, while products intended to reduce the virus/pathogen load within mosquitoes or prevent mosquito-borne disease in humans or animals are considered “new animal drugs” subject to regulation by FDA.
EPA also now intends to prioritize its review of biopesticide applications, provide technical assistance to biopesticide developers, and collaborate with state pesticide regulators to help bring new biopesticide products to market more quickly.
Further, the three agencies are making efforts to collaborate with each other and with the regulated community. The agencies jointly released plain-language information on regulatory roles, responsibilities, and processes for biotechnology products in November 2023 and now intend to explore the development of a web portal that would direct developers to the appropriate agency or office overseeing their product’s development or regulatory status. The agencies also intend to develop a mechanism for a product developer to meet with all agencies at once early in a product’s development process to clarify the agencies’ respective jurisdictions and provide initial regulatory guidance; to update their joint information-sharing memorandum of understanding; and to formally update the Coordinated Framework for the Regulation of Biotechnology by the end of the year.
Biotechnology product developers should closely monitor EPA, USDA, and FDA’s progress on the actions described above, as well as other USDA- and FDA-specific regulatory moves. Developers should assess the regulatory barriers to their products’ entry to market, consider potential fixes, and be prepared to submit feedback as the agencies propose new rules or issue draft guidance for comment.
FTC Moves to Strike Most Noncompetes: Considerations for Cannabis Companies
As Bradley previously reported, the Federal Trade Commission at the beginning of last year issued a notice of proposed rulemaking to effectively ban employee noncompete provisions as an unfair method of competition in violation of Section 5 of the FTC Act. Following a 16-month administrative process that drew more than 26,000 public comments, the FTC on April 23, 2024, issued its final rule that will, according to the FTC, “promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.”
Key Features of the Final Rule
Key features of the final rule include:
- Defining “noncompete clauses” as a term or condition of employment that either “prohibits” a worker from, “penalizes” a worker for, or “functions to prevent” a worker from (a) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (b) operating a business in the United States after the conclusion of the employment that includes the term or condition.
- Treating existing noncompetes differently depending on the category of worker.
- For “senior executives,” existing noncompetes may remain in force. The term “senior executive” refers to workers earning more than $151,164 who are in a “policy-making position.” As so defined, the FTC estimates that senior executives represent less than 0.75% of all workers.
- For all other categories of workers, existing noncompetes will be unenforceable following the effective date (i.e., 120 days following its publication on the Federal Register).
- Banning new noncompetes for all workers following the effective date.
- Requiring employers to provide “clear and conspicuous notice” to workers who are not senior executives and are subject to existing noncompetes that such provisions are no longer enforceable. The FTC included model language in the final rule that satisfies the notice requirements.
- Excluding banks but not bank affiliates. Because the FTC does not have regulatory authority over banks, it does not apply to banks. The rule does apply to bank affiliates however as those entities are within FTC jurisdiction.
- Excluding nonprofit entities. The final rule does not apply to nonprofit entities, such as nonprofit hospitals, as they fall outside of the jurisdiction of the FTC Act. The FTC notes, however, that not all entities that claim tax-exempt status in their tax filings are automatically outside of the scope of the final rule. Rather, the FTC applies a two-part test to determine whether the purported nonprofit is within the scope of the FTC Act, focusing on the source of the entity’s income and the destination of the income.
- Excluding noncompetes in the sale of business context. The final rule generally does not apply to business owners upon the “bona fide” sale of a business. The final rule expanded the sale of business exception found in the proposed rule.
- The final rule does not apply where a cause of action related to a noncompete accrued prior to the effective date of the final rule.
What Does the New Rule Mean for the Cannabis Industry in Particular?
The FTC contends that the final rule will benefit the U.S. economy by, among other things, increasing worker earnings, reducing healthcare costs, spurring new business formation, and enhancing innovation. But what will it mean for the U.S. cannabis industry specifically?
As we’ve written about before, there’s a significant amount of proprietary information that may give players in the cannabis space a competitive edge – e.g., customer lists, grow processes, or unique cannabinoid extracts, plants, and products. Because marijuana is still a Schedule I substance under the Controlled Substance Act, however, there are open questions about whether an entity engaged in marijuana-related commercial activity can avail itself of federal law protections, such as U.S. patent and trademark laws. If an entity cannot avail itself of those federal law protections, the ability to turn to state contract law becomes even more important to protect its investments. That’s where noncompetes could come in — going a long way to protect an individual from taking and utilizing a company’s or individual’s investments. The FTC final rule largely would put an end to the ability to use noncompete protections, save for the exceptions outlined above. That may be an even bigger blow to the cannabis industry as compared to other industries who can readily utilize federal law protections. On the other hand, the cannabis industry is largely transient and collaborative, and many cannabis companies and individuals in the industry may be willing to take the good with the bad when it comes to the absence of noncompete rules.
What’s Next?
First, the final rule is not yet in effect. It will go into effect 120 days after its publication in the Federal Register.
Second, we expect there will be significant legal challenges and efforts to halt the implementation of the rule.
The final rule was issued following a 3-2 vote by the commissioners, with the two newly appointed Republican commissioners – Melissa Holyoak and Andrew Ferguson – voting against the rule. In their prepared remarks, the dissenting commissioners questioned the FTC’s legal authority to take such sweeping action.
The final rule has already prompted a legal challenge. Shortly after the FTC’s public meeting approving the final rule, the U.S. Chamber of Commerce released a statement indicating its intent to “sue the FTC to block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.” True to its word, the Chamber filed yesterday a Complaint for Declaratory Judgment and Injunctive Relief in U.S. District Court for the Eastern District of Texas (Chamber of Commerce of the United States of America v. Federal Trade Commission, Case No. 6:24-cv-00148 (E.D.Tex. filed April 24, 2024)). The lawsuit mounts a number of legal challenges to the final rule.
Will Hemp Save the World, Before the Government Kills It?
There is a great line in the wonderful film Charlie Wilson’s War, where Charlie Wilson (played remarkably by the inimitable Tom Hanks) describes the successful, if relatively covert, involvement of the United States government in the Soviet-Afghan War: “These things happened. They were glorious and they changed the world… and then we f***d up the endgame.”
With the next Farm Bill somewhere on the horizon, I believe we are approaching a similar moment for the future of hemp. I believe the future of hemp is glorious and that it can change the world. What will we do to the endgame?
This is an analysis about the current state of hemp and whether that industry will revolutionize the world before the government relegates it back to the ash heap of history. It just so happens to dovetail with my personal experience representing clients in connection with the hemp business.
In the Beginning…
Back in the “stone age” (circa 2017) when I decided I wanted to be a cannabis lawyer, I began with a focus on hemp. [As a brief aside, telling people in Alabama you practice cannabis law in 2017 must have been what Noah felt like when he was telling people it was about to start raining.]
The 2014 Farm Bill, which for the first time legalized “industrial hemp” as distinct from marijuana under the Controlled Substances Act and allowed state agricultural departments and universities to license the production of hemp, cracked the door for a nascent and limited hemp market, and it was a remarkable time to advise new hemp operators and investors about how to maximize this opportunity within the contours of the law.
At the same time, I was regularly receiving calls from existing clients, colleagues within the firm, and strangers about how their non-cannabis companies should conduct themselves when approached by hemp companies who wanted to do business with them. The latter category included banks, insurance companies, real estate companies, and myriad companies who had questions about how their employees’ use of hemp interplayed with the companies’ existing drug testing policies. Most of the time the companies were reluctant to have anything to do with hemp, but the conversations were interesting, and it was clear that most companies realized the landscape was changing. It was the Wild West, and I was having a ball.
Rocket Fuel
Enter the 2018 Farm Bill and the explosion of the hemp industry. The 2018 Farm Bill dropped the word “industrial” and defined “hemp” as:
the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.
In addition to removing the limitations from the 2014 Farm Bill licensing, the 2018 Farm Bill also moved oversight authority from the Department of Justice and DEA to the USDA and FDA.
The 2018 Farm Bill was a tectonic shift, and we recognized the new regime’s potential almost immediately, predicting the following:
- Increased “smart” money and research. Because hemp has been a Schedule I substance along with marijuana for decades, many sophisticated sources of funding have abstained from financing the industry. This placed hemp at a competitive disadvantage to other commodities and prevented hemp from reaching its full potential. Now that hemp can be manufactured and sold without substantial legal risks, look for the money to flow toward this underserved sector. Publicly traded companies, private equity firms, venture capitalists and other investment groups will all take significant stakes in both the manufacturing and selling of hemp and hemp-derived products. In addition to traditional commercial development efforts, much of this cash is likely to be spent to hire top researchers to develop proprietary strands of hemp to meet a range of product applications and to take steps to protect the resulting intellectual property.
- Explosion of hemp and hemp-derived products. Fueled in large part by this injection of financing from sophisticated investors, there is likely to be an explosion in the ways that hemp is used. Hemp already has hundreds — if not thousands — of known uses, and that number should grow substantially once the industry is exposed to the market forces that come with smart money and increased research. The biggest winner may be the hemp-derived CBD business. Hemp-derived CBD is a compound believed to have significant therapeutic benefits without an appreciable psychoactive component. The Washington Post has reported that “dozens of studies have found evidence that [CBD] can treat epilepsy as well as a range of other illnesses, including anxiety, schizophrenia, heart disease, and cancer.” One industry analysis predicts that the hemp-CBD market alone could hit $22 billion by 2022. The health and wellness sector should see particular hemp-related activity and growth in the coming years.
- Increased ancillary services provided to hemp-related businesses. Because hemp has been included within the definition of marijuana under federal law for decades, most banks, law firms and other service providers have avoided providing services to hemp businesses to avoid the risk of charges of money laundering or conspiring to violate state and federal drug laws. The absence of such service providers has fostered a great deal of uncertainty in an area where certainty and clarity have been sorely needed. With hemp’s new legal status, look for professional service providers to enter the market in 2019 and beyond. Of course, entities looking to provide services to hemp-related businesses should take adequate precautions to ensure those businesses are only producing federally legal hemp.
- Consolidation and integration. An interesting phenomenon in “legal” marijuana states has been the rapid consolidation and integration of marijuana growers, processors and dispensaries. Some states have mandated vertical integration (e.g., the growers are the sellers) through regulation. And a number of large cannabis companies have acquired grow operations or multi-unit dispensaries rather than establish a cannabis presence in a state from scratch. The hemp industry is likely to follow a similar path, both through government regulation and because larger companies are likely to seek to obtain sufficient quantities of hemp through consolidation and vertical integration. Accordingly, attorneys and investors should anticipate significant merger and acquisition activity in the coming years.
- Federal regulations and state regimes. The 2018 Farm Bill does not create an entirely unregulated playing field for hemp. Over the coming months, the U.S. Department of Agriculture and Food and Drug Administration will issue regulations implementing the 2018 Farm Bill. State governments will also unveil plans governing the testing, labeling and marketing of hemp-related products, as well as the licensing and monitoring of hemp-related businesses.
I’m proud to say that we were pretty much on the money with these projections, and countless studies and data confirm that hemp can be a viable product with countless form factors that help shape the global economy.
That is when I realized that I might be able to make a career as a cannabis lawyer.
The Good with the Bad
Of course, the development of the hemp industry has not been without controversy – in fact it may be the controversy that has spurred much of the development.
I would be lying to you if I told you that every hemp or hemp-derived product was designed with the best of intentions or contained appropriate mechanisms to ensure consumer safety. There are certainly hemp-derived products on the market that have not been subjected to sufficient product development and testing, and that are being marketed in ways that rightfully should concern policymakers and the public. Novel, psychoactive cannabinoids that fall within the bounds of the terms, if perhaps not the spirit, of the Farm Bill fill the shelves of stores around the country with little to no mechanisms for enforcement. That should change, and Americans should have confidence that the products made available to them are safe and effective.
In response to this proliferation, a number of states have enacted rules and regulations restricting the production and sale of certain hemp-derived cannabinoids. A number of those rules – for example, age and purity restrictions for psychoactive cannabinoids – seem well-intentioned, and we expect to see more of those unless and until the federal government takes further action.
On occasion, however, it appears that the motivations of policymakers may be less pure. It is no secret amongst those in the cannabis industry that marijuana licensees in states that have legalized marijuana are no fans of the unregulated hemp-derived psychoactive industry. After all, marijuana companies are subject to astronomical taxes and endure regulatory costs that make turning a profit far more difficult than if they were able to offer a product that offered a somewhat similar “high” without the institutional overhead and headwinds. Florida may be the clearest and most recent example. With adult-use marijuana widely expected to become law in Florida soon, the state legislature recently passed a law largely prohibiting delta-8 and delta-10.
On the other hand, it would be wrong, even lazy, to suggest that the development of hemp-based products has been without substantial benefits to society as a whole. Entrepreneurs are developing hemp-based substitutes for any number of the most common products used around the globe, meaning that the addressable market for hemp is everyone on earth and beyond.
A younger version of me once wrote, in comparing the addressable market for marijuana to that of hemp:
Hemp, on the other hand, has the potential to dwarf marijuana in the global market. Unlike its sister plant, hemp has the capacity to replace products we use every day without us even realizing it. For example, hemp can provide a substitute for concrete, plastic, fuel, automotive parts, clothes, etc. These are products nearly all consumers need but they neither realize nor care what the products are made of, as long as they work. In that way, while the market for marijuana is limited to consumers looking to purchase marijuana, the market for hemp includes anyone who purchases products that can be manufactured by hemp. In part for these reasons, experts predict four to five times growth in the industrial hemp market in the next five years.
I stand by those words. I am convinced that hemp can change the world.
But I am equally convinced that local, state, and federal governments can, without the appropriate consideration for hemp’s benefits, relegate the plant back to its prohibition era status and deny the world its many benefits. The policy choices made by state governments, and perhaps most importantly by the federal government during the next Farm Bill, could fundamentally alter the future of hemp. Will it be a soon-forgotten shooting star that dazzled the world for a decade and then burned out, or will we look back at the past decade as the renaissance of one of civilization’s oldest and most versatile plants?
Conclusion
I’ll end where I began because Philip Seymour Hoffman’s work is revered by the Budding Trends community (and anyone with taste), and because the film’s ominous conclusion is a message for anyone who wants to see the hemp industry thrive in the years ahead.
As Hanks’ character celebrates the Afghan defeat of the Soviets, the hardened CIA analyst played by Hoffman offers this parable:
On his sixteenth birthday the boy gets a horse as a present. All of the people in the village say, “Oh, how wonderful!”
The Zen master says, “We’ll see.”
One day, the boy is riding and gets thrown off the horse and hurts his leg. He’s no longer able to walk, so all of the villagers say, “How terrible!”
The Zen master says, “We’ll see.”
Some time passes and the village goes to war. All of the other young men get sent off to fight, but this boy can’t fight because his leg is messed up. All of the villagers say, “How wonderful!”
The Zen master says, “We’ll see.”
The message behind this story is pretty clear. We’re prone to jump to conclusions about whether something is “good” or “bad.” We are especially quick to label something as “bad.” The reality is that things can be either good or bad, both good and bad, or neither. When it comes to whether Congress and the states will recognize hemp’s great potential, I guess we’ll see.
CTP Releases New 5-year Strategic Plan
On December 18, 2023, Dr. Brian King, the Director of FDA’s Center for Tobacco Products announced the Center’s new five-year strategic plan which outlines the Center’s programmatic and workforce initiatives and includes five goals, ten outcomes, and several corresponding objectives.
The new strategic plan incorporates recommendations from the Reagan-Udall Foundation report published in December 2022. The Reagan-Udall Foundation report provided fifteen recommendations for CTP which included improving transparency regarding the Center’s approach to Premarket Tobacco Product Application (PMTA) reviews and compliance and enforcement. The report highlighted industry concerns with the CTP’s framework for approaching PMTA reviews, particularly after FDA issued Refuse To Accept (RTA) letters, Refuse to File (RTF) Letters, or Marketing Denial Orders (MDOs) for millions of deemed tobacco products. The five-year plan seeks to address the issues of transparency, enforcement, and education.
The five goals are:
- Develop, advance, and communicate comprehensive and impactful tobacco regulations and guidance;
- Ensure timely, clear, and consistent product application review;
- Strengthen compliance of regulated industry utilizing all available tools, including robust enforcement actions;
- Enhance knowledge and understanding of the risks associated with tobacco product use; and
- Advance operational excellence.
To achieve these goals, CTP plans to develop and implement several guidance documents to ensure that regulations are clear and accessible. Furthermore, CTP will develop new processes to review PMTA efficiently and to communicate the review process and marketing decisions transparently. CTP also plans to pursue more robust enforcement actions by collaborating with other federal and state agencies.
CTP highlighted the importance of promoting education surrounding the risks of tobacco product use, particularly for preventing youth initiation, and educating adults on the benefits of cessation, including the relative risks of different tobacco products. The fifth and last goal regards CTP’s operational goals by supporting its workforce and operating efficiently.
In conjunction with this strategic plan, CTP also published the Center’s policy agenda of rules and guidance documents. The policy agenda provides guidance documents in development, including current and long-term priorities for the Center.
The Center’s current priorities include:
- Tobacco Product Standard for Menthol in Cigarettes;
- Tobacco Product Standard for Characterizing Flavors in Cigars;
- Tobacco Product Standard for Nicotine Level of Certain Tobacco Products;
- Prohibition of Sale of Tobacco Products to Persons Younger Than 21 Years of Age;
- Administrative Detention of Tobacco Products; and
- Requirements for Tobacco Product Manufacturing Practice.
The ultimate goal of the strategic plan is to reduce harm caused by tobacco product use and to work with regulated industries in a manner that demonstrates a commitment to science, health equity, stakeholder engagement, and transparency.