Update: The Farm Bill, Hemp Legalization, and the Status of CBD

Is CBD Legal?—Not so Fast
On December 20, 2018, President Trump signed the Agriculture Improvement Act of 2018, otherwise known as the 2018 Farm Bill (“Farm Bill”). The Farm Bill makes sweeping changes to the legal status of hemp and lays the groundwork for a national market for hemp and hemp-derived products. However, while hemp and hemp-derived products, such as CBD, no longer qualify as controlled substances under federal narcotics laws, they are subject to a complicated patchwork of other state and federal laws. As a result, the timeline for the rollout of a commercial hemp market under the 2018 Farm Bill will vary from state to state. And, even once the market is operational, the federal food safety laws impose significant limitations on the types of hemp-derived products that may be legally marketed and sold across state lines at this time.

Industrial Hemp is No Longer a Controlled Substance
Marijuana is a Schedule I controlled substance under the Federal Controlled Substances Act (“CSA”). Other Schedule I drugs include heroin and LSD. Until the passage of the 2018 Farm Bill, the CSA defined marijuana as “all parts of the plant Cannabis sativa L., and resin extracted from the plant” regardless of THC content. Hemp and marijuana are both Cannabis sativa L. They are distinct, however, in the concentration of THC. Specifically, hemp is a variety of Cannabis sativa L. with low concentrations of THC, .03% or lower. Marijuana is the plant Cannabis sativa L. with THC concentrations exceeding the .03% threshold. Because the definition of marijuana under the CSA has, historically, been silent regarding the concentration of THC and, instead, is simply the plant Cannabis sativa L. itself, both hemp and marijuana have been captured under the definition and, thus, have both been a Schedule I drug.

The Farm Bill amends the CSA to exempt hemp—defined as the plant Cannabis sativa L. with a THC concentration of no more than .03% on a dry weight basis—from the definition of marijuana. The result of this amendment is that the possession, cultivation, processing, and sale of hemp (Cannabis sativa L. with less than .03% THC) and hemp products is no longer a violation of the CSA. Possession, cultivation, processing, and sale of marijuana (Cannabis sativa L. with more than .03% THC) and marijuana products continues to be a violation of the CSA.

Industrial Hemp Can Only Be Produced Pursuant to an Approved State Plan or USDA Regulations
Although the Farm Bill exempts hemp from the CSA, it mandates that the cultivation of hemp be regulated either by an individual state’s Department of Agriculture or tribal government pursuant to a plan approved by the U.S. Department of Agriculture (“USDA”) or, in the absence of an approved state or tribal plan, a regulatory regime promulgated by the USDA.  Hemp may only be cultivated pursuant to USDA regulations—as opposed to a state or tribal plan—if the producer has received a license from the USDA. Any industrial hemp producer that fails to obtain a license from the USDA or to operate in compliance with an approved state or tribal plan, may be subject to an enforcement action. For violations that are the result of operator negligence, such enforcement actions can include the operator being prohibited from producing hemp for a 5-year period. For violations that are grossly negligent or intentional, the Farm Bill directs the enforcement authority to refer the operator to the state and federal attorney generals for potential criminal prosecution.

The Commercial Industrial Hemp Market Is Unlikely to Be Fully Operational for Sometime
The timeline for hemp production authorized by the Farm Bill will vary from state to state and depend on whether and when a state or tribal government opts to submit a plan. At this time, the USDA has not issued approval for any state plans and has not developed regulations for implementing an industrial hemp program in states that opt not to submit a plan. Both the review and approval of state and tribal plans and the promulgation of federal regulations for implementation of a federal regulatory regime will take time.  Once a state or tribal government has submitted a plan, the USDA has 60 days to approve or disapprove the plan. This means that the earliest that we are likely to see approved plans is Q2 of 2019. This is assuming that the USDA does not elect to draft implementing regulations for approving state and tribal plans. For states that choose not to submit a plan, it will likely be significantly longer. While the Farm Bill directs the Secretary of the USDA to implement regulations as expeditiously as possible, the process for promulgating regulations is governed by the Administrative Procedures Act and includes notice and public comment periods with prescribed time lines.

Hemp and Hemp Products are Also Subject to Other Federal Regulations
The Farm Bill explicitly states that the Food and Drug Administration (“FDA”) shall have the authority pursuant to the Food, Drug, and Cosmetics Act (“FD&C Act”) and the Public Health Services Act to regulate industrial hemp and industrial hemp products and promulgate new regulations and guidelines relating to the production, marketing and sale of hemp-derived products. On the same day that the Farm Bill was signed into law, the FDA issued a press release asserting its jurisdiction over cannabis and cannabis-derived products, including products derived from hemp, and taking the position that cannabis and cannabis-derived products are subject to the same regulatory requirements as other substances regulated by the FDA.

In the press release, the FDA expressed concerns about the regularity with which companies were making unsubstantiated claims about the therapeutic benefits of CBD and THC, stating that any cannabis product that is marketed with a claim of therapeutic benefit must be approved by the FDA as a drug for its intended use prior to being shipped in interstate commerce.  The FDA also took the position that because both THC and CBD are active ingredients in FDA approved drugs—Meridol (THC) and Epidiolex (CBD)—that it is unlawful for a company to market and sell these products interstate as a dietary supplement or a food additive. This includes the marketing and sale of CBD products intended for consumption by animals.

That is, the FDA is taking the position that it is illegal to market and sell a CBD product over state lines without that product being approved by the FDA as a drug, a costly process that takes years. The potential consequences for marketing and selling interstate (or accepting for purposes of retail sales) an approved drug as or in a dietary supplement or in a food product includes jail time. The FDA does have the authority, however, to promulgate a regulation that would permit CBD to be sold as a dietary supplement or food additive despite its status as an approved pharmaceutical ingredient. The press release suggests that this is something that the FDA is considering, indicating that the agency intends to hold a public meeting to solicit input from stakeholders in 2019. The FD&C Act also includes a process for petitioning the FDA to promulgate such a regulation.

While the FDA’s position likely substantially limits the opportunities for the marketing and sale of a wide range of CBD products in the immediate future, there are likely some options available for manufacturers looking to develop brands and establish and maintain important interstate supply chains in the interim.

Ensuring Compliance with FD&C Act and Other Applicable Laws and Regulations
In the event there is a change in the law authorizing the interstate marketing and sales of CBD as a dietary supplement or food additive, it is essential that any company intending to sell or market such a product be aware of the regulatory criteria that applies to dietary supplements and food additives. Under the FD&C Act, the FDA has regulatory authority over four classes of products: drugs, dietary supplements, food additives, and cosmetics. The Act defines each product class. The class a particular product falls under is important as each class is subject to different regulations governing, among other things, pre-market approval and labeling. For example, while dietary supplements do not, as a general rule, require pre-market approval, there are important pre-market notice requirements, some of which have specific timelines, for products that contain a new dietary ingredient, or products that make health claims, nutrient content claims, or structure/function claims. There are similar requirements for food additives and cosmetics that contain certain ingredients.

In sum, while hemp and hemp-derived products, such as CBD, are no longer a controlled substance they are subject to a complicated patchwork of state and federal laws. Violations of the Farm Bill and federal food safety laws carry consequences ranging from prohibitions on participation in the market to jail time. Accordingly, it critical to fully understand the current status of the law before producing or sell hemp and hemp derived products.  For questions about the legal status of hemp and hemp-derived products or about the legality of marketing and shipping hemp-derived products please contact Hannah King, Co-Leader of Drummond Woodsum’s Regulated Substances practice group.