FTC Warns Manufacturers About CBD Claims

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The Federal Trade Commission (FTC) announced today that it had sent warning letters to three companies over their advertising of products containing cannabidiol or CBD, one of the many active compounds of the cannabis plant. The letters reinforce the FTC’s position that advertisers may not make health-related representations for CBD products without satisfying FTC substantiation standards.

According to the FTC’s press release, the companies – which have not been identified publicly – advertised oils, tinctures, capsules, “gummies” and creams containing CBD as treating or curing serious diseases and health conditions. Disease claims require scientific proof, making it illegal for companies to advertise that a product can prevent, treat or cure human disease without competent and reliable scientific evidence to support such claims.

The FTC took issue with the following:
• A claim that CBD “works like magic” to relieve “even the most agonizing pain” better than prescription opioid painkillers
• A claim that the company has participated in “thousands of hours of research” with Harvard researchers, to bolster its claims that CBD has been “clinically proven” to treat cancer, Alzheimer’s disease, multiple sclerosis (MS), fibromyalgia, cigarette addiction, and colitis
• A claim that CBD products are proven to treat autism, anorexia, bipolar disorder, post-traumatic stress disorder, schizophrenia, anxiety, depression, Alzheimer’s disease, Lou Gehrig’s Disease (ALS), stroke, Parkinson’s disease, epilepsy, traumatic brain injuries, diabetes, Crohn’s disease, psoriasis, MS, fibromyalgia, cancer, and AIDS
• A claim that CBD is a “miracle pain remedy” for both acute and chronic pain, including pain from cancer treatment and arthritis
• A claim that CBD gummies are highly effective at treating “the root cause of most major degenerative diseases, including arthritis, heart disease, fibromyalgia, cancer, asthma, and a wide spectrum of autoimmune disorders”
• A claim that CBD cream relieves arthritis pain
• A claim that CBD oil may effectively treat depression, PTSD, epilepsy, heart disease, arthritis, fibromyalgia, and asthma

According to the FTC, the letters urge the recipient companies to review all claims made for their products, including consumer testimonials, to ensure they are supported by competent and reliable scientific evidence, and also include a warning that selling CBD products without such substantiation could violate the FTC Act and may result in legal action that could result in an injunction and an order to return money to consumers.

The recent warning letters follow similar joint warning letters issued by the FTC and the U.S. Food and Drug Administration (FDA) in March 2019 to three sellers of CBD supplements – Nutra Pure LLC, PotNetwork Holdings, Inc., and Advanced Spine and Pain LLC d/b/a Relievus. The letters alleged that the companies made false or unsubstantiated health claims in violation of the FTC Act as well as sold unapproved drugs in violation of the Federal Food, Drug & Cosmetic Act (FD&C Act).

As the market for CBD goods – including cosmetics and supplements – continues to explode, companies vying for market position must be aware of action taken by the FTC and FDA and stay away from making health or drug claims that could subject them to enforcement by these agencies. Conkle, Kremer & Engel attorneys stay current on the latest developments to help those how manufacture, distribute and sell products containing CBD avoid regulatory trouble.

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Breakthrough: CBD is Almost Legal

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We have posted previously about the difficult circumstances facing consumer product manufacturers who want to follow the popular trend to include CBD in their products, ranging from food to cosmetics and beyond.  We are now pleased to report that some clarity had been added in the just-enacted 2018 U.S. Farm Bill, and the path to including CBD in consumer products is becoming much easier.

The big breakthrough in the 2018 Farm Bill is that it legalized hemp by changing troublesome language in the federal Controlled Substances Act (CSA) in two important ways. First, it removes hemp and any hemp derivate from the definition of “marihuana.” Hemp is defined as any part or derivative of the cannabis plant with 0.3% or less THC (dry weight). This change means that CBD derived from hemp will no longer be considered a controlled substance under the CSA. Second, the Farm Bill amends the definition of “Tetrahydrocannabinols” or THC to exclude the THC that is found in trace amounts in hemp.  This was important because THC is a psychoactive ingredient, and trace amounts that are too small to cause psychoactive effects might otherwise compel hemp and its products to be treated as controlled substances.

This change is exciting news for companies who are eager to follow the market trends of adding CBD to products.  Even though CBD remained technically illegal under federal law prior to the passage of the 2018 Farm Bill, sales of consumer products containing CBD already exceeded $350 million in 2017. That number is expected to jump significantly with the availability of legal CBD and the entry into the market of companies who were hesitant to incorporate CBD into their products because of the questionable legality.  Still, companies that are eager to incorporate CBD into their products should proceed with caution if they want to ensure that their products are legal under federal law.

While some might believe that all CBD is now legal, that is not correct.  Not all CBD will be legal, and manufacturers must take care to assure and document that the CBD they use comes from legal sources.   For one example, CBD derived from cannabis plants with more than 0.3% THC (dry weight) remains illegal under federal law.  CBD is only legal if it is: (1) derived from hemp, and (2) produced by a licensed grower in a manner consistent with the Farm Bill and associated federal and state regulations.

The Farm Bill invites states to submit a plan to the US Department of Agriculture that outlines how the state will monitor, license, and regulate the production of hemp. State departments of agriculture must consult with the state’s governor and chief law enforcement officer on the plan. If a state does not have a plan approved by the USDA, the USDA will have available a federal program for monitoring, licensing, and regulating hemp production. Hemp and its derivatives are only legal if grown under license pursuant to these state or federal programs.

It is clear that not all CBD has become legal overnight. The state and federal licensing and regulatory programs under which hemp can be legally grown will take months to establish.  Once such programs are established, businesses should engage in due diligence to ensure that the CBD they are purchasing is derived from hemp grown under license from state or federal programs, and they should maintain documents to be able to demonstrate the chain of production.

This welcome development is a major crack in the dam that prevented cannabis-derived products from entering consumer markets.  Watch for more soon, as other federal regulatory agencies such as the FDA consider controlled ways to permit CBD to be added to foods and pharmaceuticals.

CK&E attorneys will continue to monitor and stay up to date on the development of state and federal CBD ingredient and hemp cultivation programs, and are ready to help clients navigate complex and rapidly-changing federal and state regulatory schemes. If you have questions in this or other regulatory areas, contact CK&E at counsel@conklelaw.com or 310-998-9100.

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What do Goop, Sexual Energy, Jade Eggs and CBD Have in Common?

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Answer: Unproven Health Claims

Goop, a life-style branding company founded by Gwyneth Paltrow, was recently fined $145,000 by a consortium of California Counties for making exaggerated and false advertising claims about its products.  The makers and distributors of everything from clothes to perfume, and face cream to condoms, Goop has a well-documented history of over-the-top marketing claims.  In the action brought by the County District Attorneys, the government took exception to the claim made by Goop regarding its Jade Egg product.  Goop claimed among other things that the egg product, when inserted into the vagina, prevented uterine prolapse and improved sex.  In the parlance of the regulators, this was an unsubstantiated or unapproved new drug claim.

In similar fashion, cannabidiol oil or “CBD” products are at the forefront of aggressive (sometimes overly aggressive) health and medical claims. Everyone knows about “medical” marijuana, and CBD is one of several “active” ingredients found in marijuana and hemp plants which is often associated with the beneficial effects of the plant: pain relief, stress or anxiety relief, anti-nausea, and anti-inflammatory.  This phenomenon has lead to a budding market in consumer products featuring CBD, accompanied by assertive health claims.  The CBD market already covers a wide range of products, including cosmetics (skin creams), food products  (edibles), and even CBD laced beer.  To add to the confusion, a compound found in marijuana was recently approved by the FDA for treatment of a rare seizure disorder.

And this highlights the problem, especially for marketers of cosmetics.  The only FDA-approved medical claim for marijuana compounds is directed to a rare seizure disorder, and this is a tiny market. To make a valid advertising claim that a  skin cream product treats, for example, eczema, psoriasis or a rash, the company or brand would need to have FDA approval of the active ingredient for that particular disease or condition at issue.  Absent such approval, the marketing claim would likely be regarded as an unapproved new drug and subject to regulatory fines and seizure.  Thus, for example, if you want to make a skin-protectant claim for your product, you would need to use one of the FDA approved ingredients for such claims, and limit the claim to the language approved in the FDA monograph for skin protectants.  To illustrate the point, witch hazel is one of the FDA approved skin protectant active ingredients. If you use witch hazel as an ingredient in your product, in the correct percentage, it would allow you to make the claim “[r]elieves minor skin irritations due to either i) insect bites, ii) minor cuts, and/or iii) minor scrapes”.

The point of all this is to make sure that your advertising claims are reviewed and approved by experienced legal counsel.  This is a common area for regulatory action, as well as private class actions.  The FDA routinely polices the internet looking for unsubstantiated and unapproved new drug claims. When the FDA finds a violation, it sends out a warning letter that will look something like this.  You do not want to be the first one on your block to own one of these.  Consult your CK&E attorney before you put a label on your product, make an advertising claim on your website, press send on an email blast promotion, or even drop a product catalog in the mail.  Yes, even old school mailers can get you in trouble.

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CBD is Turning Up Everywhere – But is it Allowed?

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One of the hottest trends in many industries is the addition of cannabis-derived extracts to consumer product formulas.  This is likely driven by the widespread popularity of local and state attempts to legalize medical or recreational marijuana use.  The personal care product industry is no exception to the trend, as any number of new product lines from moisturizers to mascara are being released with cannabis extracts in their formulations.  Cannabidiol (CBD) is turning up in all types of consumer food and drink products, from honey to craft beers.Honey with CBD

The cannabis plant contains over 113 known cannabinoids, or naturally-occurring compounds that interact with receptors in the human body, including cannabidiol (CBD) and THC. Since psychoactive effects are often attributed to the THC ingredient, it is generally avoided in consumer products, but CBD is considered to have no psychoactive properties and is becoming a popular ingredient, as is its cousin, hemp seed oil.  Some believe CBD can have health benefits – but more about that later.  In the current confusing state and federal legal environment concerning marijuana, many consumer product companies are wondering, is it legal to include CBD in my products?  The short answer is no. The long answer is “it’s complicated.” And the most important answer is that the environment is changing fast, so in the near future the question may become moot.

To understand the current complications, a little background on cannabis extracts is essential.  First, hemp and marijuana are both varieties of the cannabis sativa plant.  Various cannabis extracts can be sourced from different parts of the cannabis plant in a variety of ways. The most common cannabis extracts used in personal care and many other products are hemp seed oil and CBD oil. Hemp seed oil is produced by cold-pressing the seed of a hemp plant, while CBD oil is generally produced from the leaves and flowering tops of either a marijuana plant or a high-CBD hemp plant. Marijuana has high amounts of THC, the psychoactive ingredient that produces the “high” of marijuana. Hemp, on the other hand, typically contains only trace amounts of THC, but can be bred to have high amounts of CBD. While hemp seed oil differs from CBD oil, the legality of the two are intertwined. In short, hemp seed oil imported from abroad is legal, while hemp seed oil sourced from hemp grown in the United States may be legal in certain circumstances. CBD oil, on the other hand, is at present illegal under federal law under all circumstances.

Sterilized seeds and oil and cake made from the seeds of the cannabis plant (we’ll refer to these as “Hemp Oil” for the sake of simplicity) do not fall under the purview of the Controlled Substances Act (the CSA), which regulates federal U.S. drug policy. Hemp Oil is not deemed to be a controlled substance, so the production, distribution and possession of Hemp Oil is legal.  However, there are heavy regulations on the cultivation of “industrial hemp” (cannabis plants with THC concentration <0.3% by dry weight) from which Hemp Oil is derived. In simplified terms, Hemp Oil must be either imported into the U.S. or derived from industrial hemp legally grown pursuant to a 2014 Farm Bill. Pursuant to the 2014 Farm Bill, industrial hemp may only be grown for commercial purposes under specific pilot programs that have been adopted in particular states.

Unlike Hemp Oil, CBD is most easily derived from the leaves and flowering tops of cannabis plants.  CBD sourced from the leaves and flowering tops of the marijuana plant is illegal under the CSA, because the leaves and flowers of cannabis plants are not exempt from the definition of the CSA. But CBD can also be derived from industrial hemp, and since the passage of the 2014 Farm Bill it was commonly believed that CBD derived from legally grown industrial hemp would be legal. But it’s not that simple.  In 2017 the DEA implemented a final rule specifically targeting cannabinoid extracts, which includes CBD extract, regardless of its source. The final rule defined a new category of “marihuana extract” under the CSA that specifically rendered cannabinoid extracts a controlled substance illegal in general distribution and use. The DEA reiterated that any such cannabinoid extracts substance “will continue to be treated as Schedule I.”

The legality of the DEA’s new “marihuana extract” definition is questionable, but at present the new category of “marihuana extract” stands under the CSA, making CBD illegal under federal law. Hemp Oil is still legal and available for use in personal care products if imported into the US or grown pursuant to the state-licensed commercial hemp grower pilot programs. In May 2018, the DEA issued an internal directive acknowledging that products and materials made from the cannabis plant that fall outside of the CSA’s definition of marijuana (such as “sterilized seeds incapable of germination, and oil or cake made from the seeds”) can be “sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations.” But this directive does not make CBD legal in the DEA’s view.

Despite the dubious legal status of CBD oil and to a lesser extent Hemp Oil, many companies are choosing to forge ahead and add cannabis extracts to their products. Many such risk-takers believe that DEA enforcement against CBD-containing products is virtually nonexistent, and demand for consumer products containing CBD is high, so the potential risk is outweighed by perceived market benefits.

That conclusion is reinforced because there is a widespread perception that soon all these concerns could go up in smoke. Congress has begun action to remove industrial hemp from the definition of marijuana under the CSA. Such a move would also remove any extracts derived from hemp from the new definition of “marihuana extract.” Reports indicate that Congress may pass the bill before the end of 2018, effectively making CBD oil derived from hemp legal across the United States.  If that comes to pass, the product manufacturers who decided to jump the market and add CBD to their products even when it was legally dubious to do so may feel vindicated.

Honey with CBD Benefits ClaimedBut CBD is not a magic elixir that relieves brand owners from overreaching in their labeling and advertising.  In a future blog post, we’ll address the hazards of claiming health benefits from use of non-medical products, including those containing CBD.

Conkle, Kremer & Engel attorneys stay up to date on important regulatory developments affecting their clients in the manufacturing and resale industries, and are ready to help clients navigate the fast-changing regulatory federal and state landscape.  If you have questions in this or other consumer product regulatory areas, contact CK&E at counsel@conklelaw.com or 310 998-9100.

 

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Conkle Firm Attorneys at Craft Beer Summit

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Conkle, Kremer & Engel attorneys Evan Pitchford and Zachary Page will attend the California Craft Beer Summit September 6-8, 2018 in Sacramento, California.  The Summit is presented by the California Craft Brewers Association, the preeminent craft beer trade group and legislative advocate in California, which is in turn one of the most progressive states in terms of its policies towards the craft beer industry.  The Summit is one of the largest West Coast craft beer-oriented industry events, with thousands of industry professionals and exhibitors in attendance each year.

Mr. Pitchford and Mr. Page will attend to meet with industry professionals and keep current on the latest industry trends, including legal developments, craft brewing distribution and business issues, and evolving beer styles.  For example, this year’s Summit seminars include the cutting-edge topic of brewing, selling, and advertising products with cannabis-derived ingredients such as hemp and cannabidiol (CBD) oil, creative uses of ABC licenses, updates on the Tax and Trade Bureau’s guidelines and requirements, and discussions on the changing and more competitive retail environment in California.

Conkle, Kremer & Engel brings its decades of experience to bear on a number of beer industry-specific issues, such as brand protection and intellectual property, distribution and vendor relations, state and federal regulatory issues, advertising and labeling, employment law, and litigation and alternative dispute resolution in state and federal courts.  If you’re an industry professional or craft beer-related business who will be at the California Craft Beer Summit and would like to connect with Mr. Pitchford and Mr. Page before, during or after the event, please contact them at e.pitchford@conklelaw.com and z.page@conklelaw.com.  They would be happy to arrange free initial discussions about particular issues you may be facing.

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Cosmoprof North America Features Challenging CBD, Natural and Organic Product Lines

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On July 29 and 30, 2018, Conkle, Kremer & Engel continued its annual firm attendance at Cosmoprof North America in Las Vegas, visiting with longtime and new clients and observing new brands and trends in the personal care industry.  This year’s edition of Cosmoprof had over 36,000 attendees with a record-breaking 1,278 exhibitors from 45 countries.  CK&E attorneys attend to connect with clients and others in the cosmetics, personal care, packaging, labeling and professional beauty markets, to help clients secure distribution agreements, and to learn about the newest industry innovations and issues.

This year, trends included substantial expansion of the mens’ care and beard care sector, along with CBD-infused cosmetics and hair care products and natural and organic hair regrowth formulas.  Organic products sold in California must meet strict requirements, and Products with “natural” claims can present special challenges and risks, as CK&E has addressed in previous blog posts, such as “What are Natural Products Anyway?”  A new twist has been recent growth (no pun) in “hair regrowth” products labeled as “natural” or “organic” .  Those classes of products face special issues in addition to whether they can fairly be called “natural” or “organic,” in that hair regrowth claims can at times run afoul of federal prohibitions on products that make drug-like claims without FDA approval, as well as federal and state labeling and advertising regulations.  Finally, a new class of beauty and hair care products are based on Cannabidiol (CBD) content, taking advantage of increased acceptance of cannabis-based products.  Yet CBD products continue to pose their own special issues, which will be the subject of an upcoming www.conklelaw.com blog post.  CK&E is well-versed in counseling clients on all such issues, from brand protection, vendor and distribution issues to the latest CBD, natural and organic product concerns.

Lastly, foremost on the minds of many manufacturers and distributors who sell in California were the new requirements for Proposition 65, the well-known California law requiring “Prop 65” warnings for products which contain chemicals known to cause cancer or reproductive harm.  New warning label requirements go into effect on August 30, 2018, which CK&E has already summarized on its blog.  CK&E is actively advising manufacturers about the most efficient and effective ways to address the changes and avoid the risks of inadvertent violations.

CK&E’s attorneys continue to pride themselves on keeping abreast of developments in the personal care market, along with assisting clients of all sizes with growth and protection of their brands and interests.  CK&E is an active member of the Professional Beauty Association, the Personal Care Products Council, and other important industry trade organizations.

 

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