Tag: Hemp

Goin’ Down South: How the Southeastern U.S. Became the Current Hotbed of Cannabis Activity

Part of the reason we started a Cannabis Industry team at a Southeastern-based law firm before any Southeastern state had adopted a marijuana program was because we had a hunch that the expansion of cannabis would eventually make its way to our neck of the woods. And we guess it was just kind of a slow day around the office.

It turns out that our hunch – which even we are modest enough to admit was pretty much obvious and inevitable – turned out to be true. In the last seven years, there has been an explosion of cannabis activity and controversy in the Southeast. From marijuana in various forms to hemp and all of its iterations, the Southeast has been playing catchup with the rest of the country and in doing so is experiencing the progression of cannabis reform at an accelerated pace with the benefit of seeing the experiences of earlier cannabis adopters. We aren’t alone in observing this phenomenon. Jessica Billingsley, for Rolling Stone, has written on the topic several times.

Don’t get me wrong, we’re not so naïve as to think that states around the country aren’t also experiencing dramatic and dynamic debates and reforms about the cannabis industry. In fact, we’ve dedicated a great deal of time and effort to writing about those issues and how they reflect – or in some cases depart from – cannabis programs in other states. But the speed of reform efforts and their concentration in a specific portion of the country have made the Southeastern U.S. the – ok, at least a – current hotbed of cannabis activity.

C’mon. What’s Happening in the Southeast That Makes It So Special? Aren’t You Just Writing This Because You Live There? Could You Be More Egocentric?

Wow, that got a little weird and revealing there for a second but we’re back. For those who may not enjoy the privilege of calling the Southeastern U.S. home, here is a sampling of the cannabis activity currently taking place in the region:

Florida’s Medical Marijuana Market Matures, but Voters Narrowly Rejected the Ballot Initiative for an Adult-Use Program; Hemp Program Survives by Governor’s Veto (for Now)

Florida broke the seal on medical marijuana in the Southeast when it adopted a medical program in 2016. While the program has certainly had its hiccups, it has generally proven to be a popular program as it has matured over the years.

On April 1, 2024, the Florida Supreme Court ruled that voters would decide whether Florida will become the 24th state to legalize adult-use marijuana at the ballot boxes in November. The significant opposition that succeeded in keeping a similar initiative off the 2022 ballots evidently prevailed this year. The initiative came short of receiving the required 60% approval to pass with only about 56% of Florida voters voting in favor.

On the hemp front, earlier this year we wrote that the Florida Legislature passed a bill that would limit the amount of THC in hemp-derived products and upend the novel cannabinoid industry in the state by banning delta-8 and delta-10 products. But in a surprising move described by Marijuana Moment as “somewhat contradictory,” conservative Gov. Ron DeSantis vetoed the legislation, even as he campaigns against adult-use marijuana. This being the South and a controversial issue involving potentially extraordinary amounts of money, there are strange bedfellows and innuendo:

The governor of Florida is reportedly planning to veto a bill that would ban consumable hemp-derived cannabinoid products such as delta-8 THC, apparently because he’s hoping the hemp industry will help finance a campaign opposing a marijuana legalization initiative on the state’s November ballot.

As Gov. Ron DeSantis (R) prepares to step up his push against the legalization measure, officials close to the governor… say he’s plotting to leverage the hemp industry’s economic interest in participating in the intoxicating cannabinoid market to convince people to vote against marijuana reform.

Safe to same there’s more to come in the next couple of months for what has become the 5,000 lbs. gorilla in the Southeastern cannabis landscape.

Arkansas’ Medical Program Booms While Adult Use and Hemp in Limbo During Court Battles

Like Florida, Arkansas was one of the pioneers of bringing medical marijuana to the Southeast. Arkansans voted to approve a medical marijuana program in 2016 via Amendment 98, although the first legal sales did not occur until May 2019. The program eclipsed $1 billion in sales by late 2023, and as of August 2024, sales in 2024 exceeded $158.5 million. From all metrics, the program appears to be doing very well.

And, while an effort to place on the November ballot an initiative that would have further expanded the program was stymied by the Arkansas Supreme Court just before the election, a ballot initiative in 2022 to create an adult-use program didn’t fail by an insurmountable margin, with 43.8% voting in favor.

On the hemp front, all eyes are on the United States Court of Appeals for the Eighth Circuit. That court conducted oral arguments in the Sanders v. Bio Gen appeal on September 24, so a decision should be forthcoming. The trial court action was filed by hemp companies challenging an Arkansas law (known as Act 629) that the plaintiffs contended impermissibly outlawed hemp-derived consumable products in Arkansas. The appeal followed issuance of an injunction by U.S. District Judge Billy Roy Wilson blocking enforcement of Act 629.

Mississippi Struggling to Reconcile Supply and Demand on the Marijuana Front; Unsettled Hemp Rules

Mississippi surprised many observers when a statewide ballot initiative in 2020 went overwhelmingly in support of medical marijuana. After a couple of years of frustrating and largely obstructionist legal wrangling, Mississippi’s medical program is fully up and running now, going on almost two years.

One of the most notable and unique aspects of Mississippi’s program is the absence of any limitations on the number of licenses available to operators. While there are components of the Mississippi laws and regulations governing the program that necessarily limit how many licenses can be issued (e.g., local government opt-outs and distance setback limitations) the program is struggling due in large part to an oversupply of product and not enough patients (as of November 21, 2024, the state reports 48,129 patients). Last legislative session, the Mississippi Legislature modified the state’s medical cannabis law in certain ways that were aimed to improve patient access hurdles, and more amendments are expected in the upcoming session.

On the hemp front, Mississippi lacks any real legislative or regulatory guidance on the subject. Consequently, many in the state view the hemp-derived intoxicating products sold in gas stations and other retail stores as a real problem. Last legislative session, a bill (HB 1676) aimed to regulate intoxicating hemp products failed. Since then, state law enforcement has conducted raids and arrests of retail stores that sell products they believe are illegal under Mississippi law. Also, the Mississippi attorney general recently issued an opinion concluding that hemp-derived THC beverages could be illegal under Mississippi law. We wrote about that opinion here. The Mississippi legislature will almost assuredly revisit legislation governing these products next session while it also explores ways to amend the Medical Cannabis Act.

Texas Low-THC Marijuana Program Continues as Fierce Debates Rage Over Hemp

Texas passed the Texas Compassionate Use legislation in 2015, allowing certain qualified physicians to prescribe low THC products (max of 1% THC by weight) to patients having certain medical conditions. Currently, the state has only licensed three entities, all located in the central region of the state, as “dispensing organizations” to cultivate, process, and dispense low-THC cannabis. While the state has implied it may issue more licenses and a third-party consultant it hired recently recommended that it should, that has not yet occurred. The last application window closed on April 28, 2023. We, along with most everyone in the industry, is watching what Texas ends up doing with this program; everything is supposed to be bigger in Texas, and a real-deal medical cannabis program shouldn’t be any exception.

The hemp world in Texas slightly resembles the one in Arkansas; it’s mired in litigation. Texas has a robust legal and regulatory program that governs hemp and consumable hemp products. That program operated for years without much interruption until the Texas Department of State Health Services (TDSHS) took action in 2020 and 2021 to restrict the sale of certain consumable hemp products. This culminated in the publication of an official statement online in October 2021 stating that Texas law only “allows Consumable Hemp Products in Texas that do not exceed 0.3% Delta-9 . . . THC [, and] [a]ll other forms of THC, including Delta-8 in any concentration and Delta-9 exceeding 0.3% are considered Schedule 1 controlled substances.”

In response, a group of plaintiffs sued the TDSHS and its commissioner seeking to enjoin the “‘effectiveness going forward’ of the amendments to the terms ‘tetrahydrocannabinols; and ‘Marihuana extract’ in the Department’s 2021 Schedule of Controlled Substances.” The trial court granted the requested injunction, ordered the TSDHS to “remove from its currently published Schedule of Controlled Substances the most recent modifications” the subject definitions and any subsequent publications, and “enjoin[ed] the effectiveness going forward of the rule stated on [the Department’s] website that Delta-8 THC in any concentration is considered a Schedule 1 controlled

substance.” The state appealed, the Austin Court of Appeals affirmed, and the matter now sits with the Texas Supreme Court.

THC-infused beverages have also been a focus in Texas recently. As we wrote last month, the Texas Senate Committee on State Affairs held a hearing on October 17, 2024, to discuss how the state might soon regulate THC-infused beverages. That issue will most assuredly be addressed by the Texas legislature this next session.

Louisiana Medical Program Expands Amidst Fight Over Scope of Hemp Program

While Louisiana technically legalized medical marijuana in 1978 and passed several laws in the years that followed in that pursuit, the first products weren’t sold until 2019. The very limited license (only two authorized cultivators and processors) regime is now headed towards a bustling program. The number of dispensaries that can exist in Louisiana is currently capped at 30, but that number will only grow as the patient numbers increase in the regions identified throughout the state.

Louisiana’s hemp program, which is governed by a well-developed regulatory regime, is also in a current state of uncertainty. During the 2024 legislative session, the Legislature amended the hemp laws to restrict where certain hemp-derived products can be sold and their potency. As in Arkansas and Texas, the hemp industry quickly responded with litigation. In that matter, Hemp Assoc. of La. v. Landry, No. 3:24-cv-00871, in the U.S. District Court for the Middle District of Louisiana, was filed on October 18, 2024. The plaintiffs alleged that the 2018 Farm Bill preempts the legislation and is unconstitutional on other grounds. The state disagreed and moved to dismiss, but on November 19, 2024, the state informed the court that it would stay the effective date of the new legislation so that the parties could fully brief the pending motions and the court could reach a decision. The motions are due to be fully briefed in the coming days.

Georgia Trying to Get Its Act Together

The Georgia Access to Medical Cannabis Commission describes the Georgia law as “much more limited than some other states.” The statute does little more than allow registered people to buy and possess low-THC oil from licensed dispensaries. This oil may contain CBD and up to 5% THC by weight.

Only a select number of licensed producers can grow the cannabis that will eventually be turned into the allowed low-THC oil. As in many other states, the application and licensing process is quite strict.

To obtain a registration card, prospective patients must have a qualifying condition or disease and be registered through their physician. Once a patient has their card, they can buy low-THC oil and possess 20 fluid ounces or less so long as they keep it in the manufacturer-labeled pharmaceutical packaging.

On the hemp side, the Georgia Legislature recently passed SB 494, which Gov. Brian Kemp subsequently signed into law. This law introduces substantial changes to the hemp industry. The Georgia Department of Agriculture is in the process of drafting the corresponding and required agency rules. It appears that most hemp extracts like delta-8-THC, delta-10-THC, HHC, and other cannabinoids remain legal under Georgia law as “consumable hemp products.”

Alabama Medical Marijuana Program on the Ropes While Hemp Flourishes

Sigh… where do we even begin when it comes to medical marijuana in Alabama? There have been more twists and turns than a classic Iron Bowl.

The Legislature approved a medical program in 2021, and recent court hearings suggest that we are potentially no further along after three years, with a possibility of the Legislature being forced to take action to modify (or end) the program.

We have written extensively about the years of litigation and dysfunction that have plagued the Alabama medical marijuana program. In a nutshell, the cap on the number of licenses for various categories (cultivators, processors, dispensaries, etc.) has led to a scenario where applicants dissatisfied with the regulators’ decision to award licenses have sued on multiple occasions, and the regulators have either acceded to the demands or ended up in a court that has not acted quickly to impose order on the process.

In the midst of this chaos, the Legislature had an opportunity to tweak the law but overwhelmingly chose not to do so.

We’re choosing to take the optimistic view that the court system will be able to find a resolution to the years of litigation without putting the matter into the Legislature’s hands. We stress that view is very optimistic, but we should know more by the beginning of 2025.

On a brighter note for cannabis advocates, hemp is growing strong in the state, benefiting largely from a relatively liberal regulatory regime. Although the Legislature considered a significant rollback of hemp sales during the last session, the only law passed was a statewide age-limit on products containing hemp. There have been recent reports of law enforcement activity related to hemp businesses being raided for selling unlawful products, but on the whole Alabama should be considered hemp-friendly for the moment.

Tennessee Marijuana Reform Frustrated While Hemp Market Experiences Growth But Tighter Regulation

For years we were astonished that Tennessee was not a huge marijuana (at least medical) spot, but years of hearing over and over from friends and colleagues in the state have finally convinced us of the political complexities at play.

We, likely as most people, tend to view Tennessee as being dominated by Nashville, Memphis, Chattanooga, and other hemp-friendly areas of east Tennessee. If the decision was up to the citizens of those areas, Tennessee would likely have a well-established marijuana program. But, as it turns out, Tennessee is a big state with widely varying views on all ranges of social issues, including marijuana. For that reason, marijuana proposals have had little success in the largely conservative state Legislature. We still think Tennessee could be a monster player with the right program in place, but we’d be lying if we predicted that was imminent.

On the hemp side, Tennessee was an early adopter, and its hemp industry blossomed for years under a hands-off regulatory regime. In May 2023, Tennessee enacted T.C.A. § 43-27-201, which is an industry-friendly statutory framework for products containing hemp-derived cannabinoids like delta-8 and delta-10 THC. The statute delegated rulemaking authority to the Tennessee Department of Agriculture (TDA) to flesh out its requirements.

That is where the trouble began. In December 2023, TDA published emergency rules that largely aligned with T.C.A. § 43-27-201 with respect to its licensing and labeling requirements, leaving those operators that focus on edible hemp-derived cannabinoid products pleased. But the rules contained a bombshell: specifically, the requirement that hemp contain 0.3% or less total THC, which includes both delta-9 THC and THCA. The TDA maintained this total THC standard in the permanent rules it promulgated in September 2024.

The TDA’s total THC requirement is at odds with Tennessee’s hemp statute, which defines hemp as cannabis containing 0.3% or less delta-9 THC (with no mention of THCA). In reliance on this statutory scheme, many Tennessee hemp companies that focus on psychoactive products have made high-THCA smokable products a large part of their offerings. The TDA’s new rules, which go into effect on December 26, 2024, pose a grave danger to those operators.

Industry groups, including the Tennessee Growers Coalition, are preparing for war to prevent these new rules from going into effect. Stay tuned to Budding Trends for updates on the lawsuits against the TDA that are coming down the pike.

Kentucky Begins Medical Marijuana Program and Remains Hemp Stalwart

The OG of hemp, with the help of its powerful Sen. Mitch McConnell, Kentucky has an outsized responsibility for passage of the two most recent farm bills that have led to the explosion of the hemp industry. Kentucky’s hemp program remains strong, and many of its Congressional delegation represent a bulwark against efforts to severely limit the availability of hemp products.

Kentucky’s medical cannabis program is just now off to the races. Licenses are currently being awarded and industry observers are carefully watching the Bluegrass State’s progress as the program gets off the ground.

Nothing to Show Yet, But South Carolina Begins to Show Signs of Life in Cannabis Reform Efforts

Ah, South Carolina. Its siren song has tempted cannabis advocates for years with its diversity – political, geographical, geological, and otherwise. But to date, nada. We’ve written about the fits and starts with the South Carolina Compassionate Care Act in the past few years. The Legislature has not enacted the law as of yet, but we are keeping our eyes on it during the next legislative session.

On the hemp side, coming from a state that has famously been near the back of the line on cannabis liberalization, we’ll admit that we were surprised to read a recent letter from the solicitor general of South Carolina stating that, as a general rule, hemp beverages containing less than .3% delta-9 THC on a dry-weight basis are legal. We suspect that will be a topic of discussion at the next legislative session.

North Carolina Not Quite there on Marijuana , Stalled on Hemp

North Carolina is going to be a monster marijuana jurisdiction, but like Tennessee, the geopolitical makeup of the state has restrained cannabis liberalization to date. Maybe we should have known better than to predict that the Tar Heel State was going to take action on marijuana legislation in an election year in which the speaker of the N.C. House, Tim Moore (R), is running for an open U.S. Congress seat. Passing a marijuana legalization bill was not going to be a political priority and could have given political adversaries an opportunity to paint supporters as soft on crime, even if a majority of the state’s electorate does support some kind of legalization.

For its part, the state Senate passed yet another medical marijuana and hemp regulation bill, House Bill 563, though one of the most restrictive in the country, only to see it stall in the hose. As in years past, Moore has not allowed the House to take a vote on a bill and has cited his “majority of the majority” policy and lack of Republican support in the House as a basis for refusing to bring the Senate bill to the House floor for a vote.

It’s likely not going to move anytime soon, but what’s in HB 563? Half the bill is dedicated to the regulation of hemp, while the second half – the North Carolina Compassionate Care Act – opens the door to legalizing medicinal marijuana. On the medicinal marijuana side, the bill creates a state commission to oversee the distribution of medical marijuana and regulate which medical conditions are eligible for treatment. It also outlines the process for patients to obtain medical cannabis cards, creating restrictions on where cannabis can be smoked, and requires physicians to write prescriptions for patients to use medical cannabis.

Some Senate Republicans expressed concern that legalization of medicinal marijuana was a fast and slippery slope towards legalizing recreational marijuana. To alleviate that concern, an amendment was adopted that clarified that recreational use would remain illegal in North Carolina even if the federal government reclassified or legalized marijuana nationwide.

On the hemp regulation side, HB 563 would require all hemp product manufacturers and distributors to be licensed. In addition, there are new safety and testing standards, marketing and label restrictions, and more strict product regulations on the amount of cannabinoids that can be included in ingestible or inhalable products.

Politically, it makes sense for supporters of medical marijuana to tie its fate to hemp regulation. Hemp regulation has broad bipartisan support and would likely pass both chambers if presented as a standalone bill. By linking hemp regulation to the Compassionate Care Act, medical marijuana supporters are daring their House and Senate colleagues to vote against hemp regulation. For the time being, that leaves the hemp industry with the uncertainty, and opportunity, of North Carolina continuing to have very limited regulations for the industry.

Why Is the Southeast Experiencing Such Explosive, Concentrated Cannabis Activity?

Part of the reason for the accelerated pace of developments of cannabis reform in the Southeast is precisely because the Southeast started cannabis programs later than other parts of the country. As a result, Southeastern cannabis efforts are, on the whole, not as mature as markets in other states. There are examples from other states that legislatures and regulators can look to for how other states in recent years have addressed the issues just now facing Southeastern states.

There is a great scene in the movie Major League where Willie Mays Hayes, played by the wonderful Wesley Snipes, is removed from the Cleveland (then) Indians’ baseball spring training while he sleeps in bed because there is no record of anyone by that name being invited to spring training (because he wasn’t invited). When Willie wakes up in the morning to the sound of potential Indians running sprints, Willie jumps out of bed in his pajamas and starts running, eventually finding himself running between two uniformed players. Because of his remarkable speed (“I hit like Mays, and I run like Hayes”), Willie explodes past the other two even though they had a head start. The manager Lou Brown, played sublimely by the delightful James Gammon, immediately says “[g]et him a uniform.”

What the hell are we talking about? We think the Southeastern cannabis market is a little like Willie Mays Hayes. The market was late to the cannabis industry, but once it arrived it has the benefit of seeing the experiences of other states and, like Willie, has the benefit of hitting the ground running.

Separately, the issue of cannabis reform is ripe for political battles in the Southeast. The region is certain not as socially progressive on most issues like cannabis. After all, in this part of the country there are still knock-down, drag-out fights about whether to allow the sale of beer before noon on Sundays. But the region is proving to be more progressive than many would have thought, in part perhaps because people around these parts have heard anecdotal reports about friends and family who have used cannabis products safely and perhaps in part because we have seen that cannabis liberalization in other parts of the country has not led to the type of Reefer Madness scenarios long feared.

So, What’s Next?

As with most trends, the rapid expansion of cannabis activity mirrors – and is in many ways a microcosm – of the policies, setbacks, and successes experienced across America.

If we were certain what the future holds for cannabis in the Southeastern United States, we would be sitting on an island somewhere instead of writing blog posts. That said, we expect (1) clear, if not sometimes frustratingly paced expansion of medical cannabis across the region; (2) an expansion of qualifying medical conditions and form factors; (3) an eventual tipping point in the direction of adult-use programs; and (4) hemp continuing to see strong sales unless the federal or state governments enact laws to thwart that growth.

At the conclusion of the wonderful Ken Burns’ epic documentary on country music, the great Marty Stuart says the following about the genre:

Country music has something for everybody, and it’s inside the song, it’s inside the characters. It’s really colorful in here. I invite you in.

Cannabis in the Southeastern United States has something for everybody, and maybe not enough for some people. And we certainly have colorful characters making some of the important decisions about the future of cannabis policy in our little corner of the world. We see this area as one of massive potential growth, particularly with the help of the right people. We invite you in.

 

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© 2024 Bradley Arant Boult Cummings LLP

Holy Hemp: New Jersey Court Partially Invalidates Hemp Law

On Oct. 10, 2024, a New Jersey Federal District Court made a big decision on hemp. The Court largely invalidated New Jersey’s recent attempt to tighten controls on “intoxicating hemp products” like Delta-8 and Delta-10, which were previously sold in gas stations, smoke shops, and convenience stores without much oversight. The state had put forward amendments aimed at restricting these products to those over 21 and regulating them like cannabis. New Jersey argued that it was time to clamp down on these sales, citing public health concerns and the rising number of minors getting their hands on these potent, unregulated products.

NJ Gov. Phil Murphy had signed off on these amendments despite admitting the law wasn’t perfect. For him, protecting minors was the priority. And today, the Court shared that sentiment—partially. It kept in place only the part that prevents the sale of these products to minors.

As for the rest of the amendment? The Court struck it down. The reason? It found that New Jersey’s approach violated federal law, essentially treating hemp products from out-of-state differently from those produced locally under the New Jersey Cannabis Regulatory Commission’s new process. This selective control crossed the line, according to the Dormant Commerce Clause of the Constitution and provisions in the Federal Farm Act, which stops states from blocking the transport of hemp products.

The Court’s decision made it clear that New Jersey does have the power to regulate these sales, but the amendments need legislative fine-tuning to meet federal standards. So, while New Jersey’s push to regulate intoxicating hemp is on pause, this is far from over.

Here’s where the decision makes things complicated for sellers: By Oct. 12, shops were supposed to pull these hemp products from the shelves, including Delta-8 drinks and THC-A gummies. That means, until New Jersey’s Cannabis Regulatory Commission issues new rules, those products are off-limits.

For anyone in the hemp or cannabis business in New Jersey, it’s a loud reminder—stay compliant, stay updated, and be ready to adapt quickly to changes.

by: Benjamin Sheppard of Norris McLaughlin P.A.
©2024 Norris McLaughlin P.A., All Rights Reserved

For more news on Hemp Legality, visit the NLR Biotech, Food, & Drug section.

Missouri Cannabis Regulators Show Me a Well-Considered Clarification of Earlier Rule Essentially Banning Hemp Products

I can only assume that being a cannabis regulator is a challenging and usually thankless job. The laws are relatively new and constantly evolving. Operators are always pushing the science faster than regulators can promulgate thoughtful new rules. And of course, there is no shortage of bad actors in the cannabis business.

That said, Budding Trends has been tough on cannabis regulators when it seemed warranted. And we’ve had no shortage of material.

We wanted to take this occasion to applaud the recent letter from the Missouri Department of Health & Senior Services announcing a substantial rollback of Gov. Mike Parson’s Executive Order that appeared to ban all “psychoactive cannabis products.”

The governor’s order would, by its terms, essentially destroy the state’s market for products containing hemp-derived THC. To be fair, the stated purpose of the order – to keep psychoactive cannabis products out of the hands of children – is a noble goal and one shared by any responsible operator in the hemp-derived THC business. Unfortunately, the plain language of the order goes much further and threatens to end the sale of most hemp products in Missouri.

In comes Missouri Department of Health & Senior Service Deputy Director and General Counsel Richard Moore to the rescue. In a recent letter, Moore “clarify[ied] any misunderstandings about the Department’s efforts to keep Missourians and their children safe from psychoactive cannabis products, sometimes called intoxicating cannabis products.” As part of this clarification, and in furtherance of the department’s commitment to “transparency in its enforcement efforts,” the department will limit its focus to (1) hemp-derived THC products targeting children and (2) “any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of [hemp-derived THC products].”

The department does not have any intention, however, of initiating enforcement actions against other hemp-derived THC products. Specifically, “[h]emp or cannabidiol (CBD) products which are collected by extraction and have not been changed into a new substance, such as hemp protein powders, hemp milk, hemp flower, hemp teas or other drinks, CBD gummies, CBD drink additives, or foods with CBD” are not the focus of the department’s enforcement efforts.

I believe this represents a fair compromise that accomplishes both the governor’s stated and worthwhile goals of eliminating deceptive hemp operators and those who would sell hemp-derived THC products to children, as well as keeping the hemp regime implemented by the Missouri Legislature in place.

More states would do well to consider this approach. For an example of the opposite approach, consider our recent post on Mississippi’s potential ban on hemp beverages. Consider, too, a much different approach taken by the solicitor general of South Carolina, which we will write about in the coming days.

And perhaps most importantly, consider whether Congress can fashion a similar compromise as it considers federal hemp policy in the next Farm Bill in the coming months.

© 2024 Bradley Arant Boult Cummings LLP
For more news on Hemp Derived THC Regulation, visit the NLR Biotech, Food & Drug.

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.

© 2024 Bradley Arant Boult Cummings LLP
For more on Hemp, visit the NLR Biotech, Food, Drug section.

USDA Releases Reports on Economic Impact Analysis of the U.S. Biobased Products Industry and on Hemp Research and Innovation

On March 8, 2024, the U.S. Department of Agriculture honored the second annual National Biobased Products Day, “a celebration to raise public awareness of biobased products, their benefits and their contributions to the U.S. economy and rural communities.” USDA states that as part of its activities to honor National Biobased Products Day, it released two reports:

Economic Impact Analysis of the U.S. Biobased Products Industry

USDA states that its commissioned report “An Economic Impact Analysis of the U.S. Biobased Products Industry: 2023 Update,” shows that, based on data from 2021, the biobased products industry has grown nationwide despite the impacts of the global COVID-19 pandemic. According to USDA, key report findings include:

  • Biobased products, a segment of the bioeconomy, contributed $489 billion to the U.S. economy in 2021, up from $464 billion in 2020. This is an increase of $25 billion — a 5.1 percent increase;
  • The biobased products sector, and the jobs it supports, are shown to impact every state in the nation, not just the states where agriculture is the main industry; and
  • The use of biobased products reduces the consumption of petroleum equivalents. In 2017, oil displacement was estimated to be as much as 9.4 million barrels of oil equivalents. In 2021, the displacement grew to 10.7 million barrels of oil equivalents.

USDA notes that the findings span seven major sectors representing the bioeconomy: Agriculture and Forestry; Biobased Chemicals; Biobased Plastic Bottles and Packaging; Biorefining; Enzymes; Forest Products; and Textiles. The 2023 Update is the sixth volume in a series of reports tracking the impact of the biobased product industry on the U.S. economy.

Hemp Research and Innovation

USDA also released its “Hemp Research Needs Roadmap,” which reflects stakeholder input in identifying the hemp industry’s greatest research needs: breeding and genetics, best practices for production, biomanufacturing for end uses, and transparency and consistency. According to USDA, these priority research areas “cut across the entire hemp supply chain and are vital to bolstering hemp industry research.” USDA notes that growing demand for biobased products, like those from hemp, “creates potential for added-value use in food, feed, fiber and other industrial products that can improve the livelihoods of U.S. producers and offer consumers alternative biobased products.”

USDA also announced a $10 million National Institute of Food and Agriculture investment to Oregon State University’s Global Hemp Innovation Center. USDA states that the Center will work with 13 Native American Tribes to spur economic development in the western United States by developing manufacturing capabilities for materials and products made from hemp.

©2024 Bergeson & Campbell, P.C.
For more news on Hemp Research and Innovation, visit the NLR Biotech, Food, Drug section.

Navigating Hemp THC Beverages

Nonalcoholic beverages infused with delta-9 tetrahydrocannabinol (THC) derived from hemp (aka intoxicating hemp beverages) are becoming increasingly popular for consumers looking for an alternative to alcohol.

With major alcohol retailers like Total Wine entering the cannabis space, alcohol beverage producers may be looking for opportunities to leverage their existing experience in manufacturing, marketing and distributing alcohol beverages towards the emerging intoxicating hemp beverage market. While intoxicating hemp beverages are arguably legal pursuant to the Agriculture Improvement Act of 2018 (2018 Farm Bill), risks remain under federal and state food and drug laws. Accordingly, beverage producers looking to enter this emerging market should become familiar with the ambiguities involved.

Federal Treatment of Intoxicating Hemp Beverages

The 2018 Farm Bill removed hemp, defined as cannabis (Cannabis sativa L.) and derivatives of cannabis with extremely low concentrations of delta-9 THC (specifically, no more than 0.3 percent THC on a dry weight basis), from the definition of “marijuana” in the Controlled Substances Act. The federal government defines 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.” Accordingly, products that meet the definition of “hemp” may be marketed and sold in the United States and are no longer classified under federal law as illegal drugs.

How Is Hemp Regulated?

Under the 2018 Farm Bill, the US Department of Agriculture (USDA) has been assigned to regulate hemp production.

However, any hemp-derived foods, including beverages, are subject to regulation by the US Food & Drug Administration (FDA) under the Food, Drug, and Cosmetics Act (FDCA). While the FDA has largely avoided enforcement actions against such products, focusing most of its efforts on products making unsubstantiated medical and therapeutic claims, it has clearly concluded that it is a prohibited act under federal law to introduce any food in the market to which THC or cannabidiol (CBD) has been added. Therefore, the risk of federal enforcement remains until the agency changes its stance towards THC as a beverage additive.

State Regulation

While the federal government has been inactive in this space, the legal status of intoxicating hemp beverage products varies significantly by state. On the one hand, several states, including Minnesota, have expressly legalized the inclusion of hemp-derived cannabinoids in beverage products, with clear regulations regarding testing, labeling, advertising and more. On the other hand, some states have legalized hemp beverage products but lack a robust regulatory framework – leading to a mostly unregulated, laissez-faire market.

Further, many states fall into a grey area when it comes to the legality of such products. Some of these states have legalized hemp along the lines of the 2018 Farm Bill but have not officially opined on whether it can be added to beverage products, while others do not mention hemp products at all. A subset of states has expressly legalized hemp in beverages, as long as it complies with federal guidance, which currently does not affirmatively allow hemp to be used as a beverage additive.

One of the most extreme measures taken by state officials to ban hemp from beverage products is currently underway in South Carolina. The state’s Department of Health and Environmental Control (DHEC) recently issued a letter to the hemp industry warning that certain hemp products are not approved to be added to beverage products, including delta-9 THC.

In its letter, the DHEC also ruled that labels and packaging may not contain references to “THC,” “CBD” or “delta-9” products, or isolates, as this implies the product is no longer a food item but is a drug and is unlawful.

This new guidance is far from outlawing cannabinoids in beverages, but it affects a growing industry that has already been promoting intoxicating hemp beverages in the state. Indeed, some beverage manufacturers in South Carolina have been forced to halt production, citing confusion over the new labeling and packaging requirements. This demonstrates how the legal landscape around intoxicating hemp beverages can change rapidly.

Finally, it is important to note that even states that expressly allow and regulate THC-infused beverage products fall into a grey area when we consider the current state of federal regulations. Until Congress acts or the FDA changes its stance towards THC as a beverage additive, we will continue seeing a patchwork of different approaches.

 
© 2024 McDermott Will & Emery
by: Alva C. Mather , Christine Dower of McDermott Will & Emery
For more on THC, visit the NLR Biotech, Food, Drug section.

Blunt Rejection of Attorney Fees in Stipulated Dismissal

The US Court of Appeals for the Federal Circuit affirmed the rejection of attorney fees, finding that neither inequitable conduct nor a conflict of interest rendered the case exceptional given the limited factual record following a stipulated dismissal in a patent case. United Cannabis Corp. v. Pure Hemp Collective Inc., Case No. 22-1363 (Fed. Cir. May 8, 2023) (Lourie, Cunningham, Stark, JJ.).

United Cannabis Corporation (UCANN) sued Pure Hemp for patent infringement. After the litigation was stayed pending bankruptcy proceedings, the parties stipulated to the dismissal. Pure Hemp then sought attorney fees based on alleged inequitable conduct by UCANN during prosecution of the asserted patent due to nondisclosure of a prior art reference used in the patent’s specification and based on a purported conflict of interest by UCANN’s litigation counsel. The district court denied Pure Hemp’s request, finding that the case was not exceptional. Pure Hemp appealed.

Pure Hemp argued that the district court erred by (1) failing to find Pure Hemp to be the prevailing party in the litigation, (2) not concluding that the undisputed facts established inequitable conduct and (3) not recognizing that UCANN’s attorneys had a conflict of interest.

The Federal Circuit found that although the district court erred in not finding Pure Hemp to be the prevailing party, this was a harmless error. The Court explained that by fending off UCANN’s lawsuit with a stipulation dismissing UCANN’s claims with prejudice, Pure Hemp is a prevailing party under § 285. However, the Court concluded that this error was harmless because the district court ultimately concluded that this case was unexceptional.

The Federal Circuit found Pure Hemp’s arguments on inequitable conduct without merit. The Court explained that it had no findings to review because Pure Hemp voluntarily dismissed its inequitable conduct counterclaim and did not seek any post-dismissal inequitable conduct proceedings. Although Pure Hemp argued that it could prevail based on the undisputed facts in the record, the Court disagreed. It explained that even the limited record demonstrated at least a genuine dispute as to both the materiality and intent prongs of inequitable conduct and, therefore, the district court properly determined that Pure Hemp did not demonstrate that this case was exceptional.

The Federal Circuit also rejected Pure Hemp’s argument that copying and pasting portions from the prior art in the patent’s specification (but not disclosing the same prior art references) was inequitable conduct. The Court explained that unlike the nonbinding cases Pure Hemp relied on, the district court here did not find that the copied prior art was material, and the record gave no reason to disbelieve the explanation provided by UCANN’s prosecution counsel. The Court was also unpersuaded by Pure Hemp’s arguments to support inequitable conduct, explaining that the Court was not free to make its own findings on intent to deceive and materiality and, further, the district court was not required to provide its reasoning for its decision in attorney fee cases.

As to Pure Hemp’s argument that the case was exceptional because UCANN’s attorneys suffered from a conflict of interest, the Federal Circuit found that this argument was waived and, in any event, lacked merit because Pure Hemp presented no evidence to support the alleged conflict.

Finally, having sua sponte raised the issue of whether this was a frivolous appeal. The Federal Circuit determined that although it was “not pleased with how Pure Hemp has argued this appeal,” the appeal was nonetheless not frivolous because [Pure Hemp] properly argued that it was the prevailing party.

© 2023 McDermott Will & Emery
For more Intellectual Property Legal News, click here to visit the National Law Review.

Tenth Circuit Declares No Remedy for Hemp Farmer Whose Federally Legal Plants Were Seized

In January, the United States Court of Appeals for the Tenth Circuit issued a published opinion in Serna v. Denver Police Department, No. 21-1446 (10th Cir. Jan. 24, 2023), upholding the dismissal of a hemp farmer’s lawsuit against local government officials in Colorado who confiscated his plants.

The farmer – Francisco Serna – brought suit under the Agriculture Improvement Act of 2018 (the “2018 Farm Bill”) which legalized hemp across the country and included limitations on states’ ability to prohibit the transportation of certain hemp plants and products across state lines. However, the three-judge panel concluded that no provision within the law allows for a private right of action by an individual to challenge instances of perceived unlawful governmental interference.

Serna grew hemp in Texas and intended to bring several plants home with him from Colorado. But when he attempted to get the plants – consisting of “plant clones or rooted clippings” – through Denver’s airport, a police officer confiscated them under a departmental policy to seize plants containing any discernible level of THC. Even though Serna had documentation showing that the plants’ THC level was beneath the limit authorized by the 2018 Farm Bill – and therefore compliant under federal law –  the officer took the plants anyway.

Serna’s Legal Proceedings

Serna sued the Denver Police Department and the confiscating officer under Section 10114(b) of the 2018 Farm Bill, which prohibits states from interfering with interstate transport of hemp and products that comply with the law. Serna asserted that because his plants were complaint, the defendants violated the provision. However, a federal magistrate judge granted the defendants’ motion to dismiss, which the district court adopted.[1] Serna then appealed to the Tenth Circuit.

The Tenth Circuit also held that no private right of action existed for Serna to employ. The court’s conclusion rests on the determination that Congress did not intend that hemp farmers, like Serna, should constitute a protected class under the 2018 Farm Bill. Without that status, they cannot sue. The court focused on the plain language of Section 10114(b), reasoning that it “makes no mention of [a] purported class of licensed [hemp] farmers” and merely provides that “no state…shall prohibit the transportation or shipment of hemp” across its borders. Thus, the provision pertains only to “the person regulated rather than the individuals protected,” which is fatal to the private right of action inquiry. The court compared Section 10114(b) with other federal statutes that do create private rights of action, such as Title VI of the 1964 Civil Rights Act, which specifies that “[n]o person…shall…be subjected to discrimination.” 42 U.S.C. § 2000d.

Takeaways

The unfortunate result of this decision is that individuals who comply with the provisions of the 2018 Farm Bill during the course of their business operations cannot seek recourse from improper government meddling. As a result, the law is significantly less protective than anticipated. Rather than suing to protect their interests, entrepreneurs like Serna must instead depend upon other actors – perhaps state attorneys general – to pursue these types of cases. However, those non-stakeholders generally have less incentive to pursue lawsuits, particularly against peer law enforcement agencies, leaving hemp operators with no remedy to enforce their rights under the 2018 Farm Bill.

In a broader sense, the Serna case is a cautionary tale for those who expect federal descheduling of marijuana to resolve the regulatory complexities currently faced throughout the cannabis industry. If hemp operators working with products that are federally legal are unable to utilize the courts to challenge unlawful seizure of their products, then the effectiveness of federal legalization of cannabis may require an express private right of action.

Going forward, Serna has a limited period of time to request that the case be re-heard by the Tenth Circuit en banc (i.e., by the entire eleven-judge court) – otherwise, the three-judge panel’s opinion will remain the operative, binding outcome.

[1] The magistrate judge and the district judge differed on their bases for concluding that Serna could not sue under the 2018 Farm Bill. Specifically, the magistrate judge determined that Section 10114(b) neither created a private right of action nor a private remedy. The district judge, on the other hand, concluded that Congress did authorize a private right of action but no private remedy to enforce it was evident. This additional divergence is another example of how the 2018 Farm Bill is susceptible to conflicting interpretations, which will likely only increase going forward as other courts consider the issue.

Article By Emily M. Leongini, Shahiedah Shabazz, and Morgan R. Pankow of ArentFox Schiff LLP

For more cannabis legal news, click here to visit the National Law Review.

© 2023 ArentFox Schiff LLP

FDA Finalizes Cannabis Guidance Focusing on Clinical Research and Quality Considerations

On January 23, 2023, the U.S. Food and Drug Administration (FDA) issued its final guidance, “Cannabis and Cannabis-Derived Compounds: Quality Considerations for Clinical Research” (the Final Guidance). The agency outlines current recommendations for drug sponsors developing cannabis and cannabis-derived compounds for use in human drug clinical research. Cannabis and cannabis-derived compounds include botanical raw materials, extracts, and highly purified substances of botanical origin.[i] FDA published the draft version of the guidance in July 2020 and received 60 public comments. Below, we outline key points from the Final Guidance.

Background

  • The Agriculture Improvement Act of 2018 (Public Law 115-334), known as the 2018 Farm Bill, removed “hemp” from the definition of “marihuana” under the Controlled Substances Act (CSA). Now, hemp is not considered a controlled substance. “Hemp” is defined in the 2018 Farm Bill as including cannabis and derivatives or extracts of cannabis with no more than 0.3% by dry weight of the compound delta-9 tetrahydrocannabinol (THC). The Drug Enforcement Administration (DEA) still regulates as Schedule I controlled substances those botanical raw materials, extracts, and derivatives that contain cannabis or cannabis-derived compounds with delta-9 THC content above 0.3% by dry weight.
  • Cannabis and cannabis-derived compounds – even those meeting the 2018 Farm Bill’s definition of “hemp” – are typically subject to the same FDA clinical research regulatory requirements and standards as human drug products containing other substances.

Cannabis Sources and Quality Considerations

  • Sponsors may use cannabis (including hemp) in human drug clinical research if FDA deems the cannabis to be of “adequate quality.” The agency will review quality issues in the context of an investigational new drug (IND) application.
  • Historically, the National Institute on Drug Abuse (NIDA) Drug Supply Program (DSP) was the only domestic, federally legal source of cannabis for clinical research. That is no longer the case. Human drug sponsors may now source cannabis regulated as a Schedule I controlled substance from other DEA-authorized growers.
  • Human drug sponsors should consider the recommendations in FDA’s final guidance, “Botanical Drug Development” (Dec. 2016). Importantly, the agency does not recommend relying on published literature as a substitute for data from a full toxicology program to support drug product development for phase 3 clinical research (and beyond). Dedicated toxicology studies are specifically recommended for 7-COOH-CBD, the major human metabolite of cannabidiol.

CSA Controlled Status

  • When a drug sponsor submits an IND to FDA as part of cannabis-related human drug clinical research, the sponsor should determine the potential controlled substance status of any botanical raw materials, drug substances, and drug products by taking into consideration the delta-9 THC content. The agency encourages sponsors to calculate the delta-9 THC content in the proposed investigational product early in the drug development process and to consult with the DEA.
  • Generally, the delta-9 THC percentage in botanical raw materials is calculated as the amount of delta-9 THC (and THCA) naturally present in a material sample relative to the sample’s dry weight prior to extraction or other manufacturing steps. For intermediates or finished products containing cannabis or a cannabis-derived compound, sponsors should calculate the total delta-9 THC percentage using the composition of the formulation with the amount of water removed (including water contained by excipients). These calculations should not be used for other purposes (e.g., Chemistry Manufacturing and Controls (CMC)).
  • FDA may have concerns with drug abuse liability. As part of the agency’s review of a new drug application (NDA), FDA may conduct an abuse potential assessment. Such an assessment could impact drug product labeling as well as DEA scheduling or rescheduling.

Copyright ©2023 Nelson Mullins Riley & Scarborough LLP

For more Cannabis Legal News, click here to visit the National Law Review.

FOOTNOTES

[i] Fully synthetic versions of substances occurring in cannabis (e.g., dronabinol) fall outside the Final Guidance’s scope.

FDA Issues Warnings to 15 Companies for Illegally Selling Products Containing CBD

On November 25, 2019, the U.S. Food & Drug Administration (“FDA”) published a press release, published a revised Consumer Update, and announced the issuance of new warning letters to 15 companies for illegally selling and marketing various products containing hemp-derived cannabidiol (“CBD”).

To quote the FDA:

“Today’s actions come as the FDA continues to explore potential pathways for various types of CBD products to be lawfully marketed.  This includes ongoing work to obtain and evaluate information to address outstanding questions related to the safety of CBD products, while maintaining the agency’s rigorous public health standards.  The FDA plans to provide an update on its progress regarding the agency’s approach to these products in the coming weeks.”

In the meantime, however, these steps appear to be an effort to stem the tide of proliferation of CBD products on the market – and the growing consumer demand for those products.  It is great that the FDA intends to provide an update on its efforts to develop a regulatory pathway for CBD products under the Federal Food Drug & Cosmetic Act (“FD&C Act”).  But, it is frustrating that the FDA still refuses to identify a set date for that update – or, to publicly commit to a meaningful resolution of the regulatory uncertainty that persists for CBD products today.

A Reminder: Don’t Make Unsubstantiated Claims

As made clear in prior FDA warning letters – and the 15 letters released on November 25th – there continues to be significant regulatory risk in the labeling and marketing of CBD products for sale in interstate commerce.  However, the FDA’s enforcement efforts still appear to be focused on companies and products that engage in the most egregious violations of the FD&C Act – including those making disease claims and those marketed to (or for use by) children and other vulnerable populations.

Among other things, this round of warning letters address the following major issues:

  • Marketing products for use by children and other vulnerable populations.
  • Including a supplements facts panel on product labels, which indicated the company’s intention to market the product as a dietary supplement.
  • Marketing products that are intended for use in the cure, mitigation, treatment, or prevention of diseases and/or intended to affect the structure or any function of the body.
  • Posting materials on the companies’ social media websites that link to a third party’s content indicating that CBD can be used in the cure, mitigation, treatment, or prevention of diseases and/or intended to affect the structure or any function of the body.
  • Misbranding products intended to be marketed as drugs.
  • Marketing human and animal food containing CBD in interstate commerce.
  • Marketing unapproved new animal drugs by selling pet products containing CBD that are intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in animals and/or intended to affect the structure or any function of the body of animals.

Many of these issues have been referenced in prior actions and warning letters released by the FDA.  By now, it should be clear to all market participants that it is illegal (and irresponsible) to market your CBD products as a cure for cancer, Alzheimer’s, diabetes, or other medical diseases, ailments, or conditions.  CBD companies should heed this clear warning and stop the practice.  Just don’t do it.

The New Concerns

This round of enforcement action seems to signal that the FDA is taking a more aggressive stance on its view of CBD health and safety issues.  The press release and the consumer update both indicate that the FDA has broad safety concerns about CBD products, that there exist many unanswered questions and data gaps about CBD toxicity, and that some of the data available to the FDA raises serious concerns about potential harm from CBD.

The consumer update contains troubling statements like “CBD has the potential to harm you, and harm can happen even before you become aware of it,” and “CBD can cause liver injury.”  But, no direct evidence or substantiation for these claims is linked to the consumer update or press release.  Instead, the consumer update attempts to draw a corollary line between the data obtained from trials performed in connection with one FDA-approved CBD drug and the non-pharmaceutical products available on the market today.  Equating that data against the products available to consumers today does not produce an apples-to-apples comparison.  There are likely different scientific outcomes from, and different levels of toxicity caused by, the delivery of high dosages of concentrated CBD to mice in a clinical laboratory setting versus the relatively low dosages of CBD found in many food and supplement products available to consumers today.

More scientific research is absolutely needed on the efficacy and safety of CBD used in products intended for human consumption.  And that research will come in time.  But, the information released by the FDA this week appears to be an overstatement of the potential health risks associated with CBD products – at least, as they are known today.  There are health risks associated with bad products – and there are bad products on the market today – but that merely highlights the need for clear regulatory guidance from the FDA.

The Future of CBD

The FDA recognizes that there is a significant public interest in CBD.  It also recognizes that there are reports of CBD products containing potentially harmful contaminants, such as pesticides and heavy metals.   Yet, despite that strong interest and recognition of a need for regulation in the industry, the FDA has delayed its development and implementation of meaningful regulatory guidance for CBD companies.  That continuing delay does a disservice to the industry and to the general public.

Companies that cut corners and sell CBD products containing potentially harmful substances need to be regulated out of existence.  Consumers deserve to know that the CBD brands they purchase and use have been responsibly grown, responsibly and safely manufactured, and are free from potentially harmful substances, like heavy metals and pesticides.  And well-intentioned, responsibly operating CBD companies need and deserve clear regulatory guardrails within which they can safely – and legally – operate their business.

Unfortunately, it appears that regulatory uncertainty will continue to persist until there is more scientific data to support the safety and efficacy of CBD in consumer products.  Obtaining that additional research and data will take time, so the industry may face a long slog until the FDA identifies a clear, detailed regulatory “pathway forward” for CBD.  Until then, it is important for CBD companies to carefully consider the FDA’s position on CBD and the warnings sent this week, and to incorporate those factors into their internal compliance practices as they develop, produce, advertise, and sell their products in interstate commerce.

© 2019 Ward and Smith, P.A.. All Rights Reserved.

For more on cannabidiol/CBD regulation, see the National Law Review Biotech, Food & Drug law page.