July 05, 2018

Is the Groundwork Being Laid for New Federal Cannabis Regulation?

3 min

FDA approves first cannabis derived drug product. NACB finalizes a packaging and labeling standard—advertising standard expected soon.

The U.S. Food and Drug Administration's (FDA) recent approval of Epidiolex may one day be looked at as a watershed moment in the history of marijuana regulation. The GW Pharmaceuticals product is an oral solution containing cannabadiol (CBD)—a chemical constituent of cannabis—indicated for the treatment of two rare and severe childhood-onset epilepsy disorders. This is the first time that the FDA has formally recognized a legitimate medical use for a component of marijuana. Within the next ninety days, the Drug Enforcement Administration (DEA) is expected to take action that will likely make CBD much easier to procure for research by removing it from Schedule 1 of the Controlled Substances Act. This is the first crack in the federal regulatory regime that we have seen since the first state initiative legalizing medical marijuana (California Proposition 215) was approved in 1996.

Marijuana businesses need to recognize, however, that the DEA's action will not affect federal laws that prohibit the manufacture and distribution of CBD-containing products without FDA approval. As noted here, FDA has concluded that CBD products cannot lawfully be sold as dietary supplements or food. As we previously noted here, the FDA has written several Warning Letters to companies marketing CBD products with egregious claims over the past few years. There are significant questions relating to the safety of such products—particularly foods. If they continue to proliferate, FDA may consider more severe actions—such as product seizures—to enhance deterrence.

Interestingly, this comes at a time when federal standards for cannabis products are starting to take shape. In May, the National Association of Cannabis Businesses (NACB) finalized a packaging and labeling standard, and an advertising standard (proposed last March) is expected to follow shortly. NACB is a self-regulatory organization comprised of cultivators, wholesalers, distributors and others with an interest in the cannabis industry. Although these standards are not laws, they are important to monitor. Non-compliance could lead to expulsion from the NACB and have other negative consequences. In addition, they could be used to shape future laws and regulations.

The NACB's packaging and labeling standard contains rules relating to child-resistant packaging and tamper-evident packaging. In addition, it sets forth label content requirements (e.g., batch number, cultivator license numbers, warnings, and ingredients) and prohibitions (e.g., false and misleading statements, as well as appeals to minors). The proposed advertising standard also includes both required and prohibited content. In addition, it covers promotional gifts, merchandising, product placement, and record keeping. NACB may be considering significant changes to the proposed advertising standard. Some have argued that NACB should have created different rules for medical and recreational uses, and that the rules are unnecessarily more restrictive than those that apply to the alcohol industry (e.g., the proposed standard prohibits the use in a cannabis advertisement of a celebrity endorsement "that targets an underage person or is commonly used to market products to person under 21 years of age").

Although the FDA approval, anticipated DEA rescheduling of CBD, and the development of the NACB standards seem to be laying the foundation for a new federal regulatory scheme, meaningful change does not appear to be imminent. The differences in federal and state laws likely will keep cannabis businesses in legal limbo for the foreseeable future.