U.S. Government Warns CBD Companies: The Bigger Compliance Picture

CBD and US GovernmentLast month, the U.S. Food and Drug Administration (“FDA”) issued warning letters to six cannabis companies, some of whose products were claimed to contain cannabidiol (“CBD”). The FDA warned the companies about marketing and selling unapproved drugs to diagnose, mitigate, treat or prevent diseases in humans or animals.

The FDA letters are direct and specific in their warnings and required actions. For example, the FDA’s February 26 letter to Hemp Oil Care about the company’s Cibdex Hemp CBD Complex Drops and other products stated the following:

  1. The FDA determined that Hemp Oil Care’s website promoted the company’s products as mitigations or cures for diseases such that the products must be regulated as drugs by the FDA under the Federal Food, Drug, and Cosmetic Act (“FDC Act”).
  2. Hemp Oil Care’s products are “new drugs” under the FDC Act because they are not recognized as safe and effective for the health conditions that Hemp Oil Care listed on its product labels.
  3. New drugs cannot be legally introduced into interstate commerce without the FDA’s prior written approval. Such approval requires scientific information to demonstrate the new drug is safe and effective.
  4. Hemp Oil Care violated the FDC Act because it misbranded its products. The diseases for which Hemp Oil Care marketed its products cannot be self-diagnosed or self-treated by people other than health care professionals. For this reason, Hemp Oil Care’s instruction labels informing users whether and how to use its products violate the FDC Act.
  5. Hemp Oil Care is responsible for investigating the FDA’s alleged violations and for preventing future violations.
  6. Hemp Oil Care must ensure its compliance with all federal laws and FDA regulations.
  7. If Hemp Oil Care fails to promptly address the violations, the FDA can take legal action without further notice – including seizing goods belong to Hemp Oil Care and taking measures to suspend Hemp Oil Care’s business operations.
  8. The FDA gave Hemp Oil Care 15 business days to notify the FDA how the company was correcting the violations.

As of the publication of this blog post, Hemp Oil Care’s website cannot be accessed.

The item 6 compliance “catch-all” above in bold font is important not only for the CBD companies that received FDA Warning Letters, but also for all commercial marijuana companies. Even though marijuana operations in legalized states are illegal under federal law, the federal government expects cannabis companies to comply with federal laws and regulations that apply to all companies. As demonstrated by the FDA Warning Letters to the companies producing CBD products, failure to do so can have significant consequences.

The FDA did not specifically target Hemp Oil Care and the other companies that received Warning Letters because they were involved with cannabis-related CBD products. The FDA’s website contains many other Warning Letters to companies alleged to have violated FDA laws by introducing new drugs. Rather, like all these other companies, CBD companies must take steps to understand whether FDA laws and regulations apply to their operations and take the actions necessary to comply with such laws. The same is true for companies engaged in commercial marijuana operations in states where such operations are legal – specifically regarding product labels and claims.

With the Justice Department’s August 29, 2013 Memorandum on Guidance Regarding Marijuana Enforcement and February 14, 2014 Memoranda on Guidance Regarding Marijuana Related Financial Crimes, President Obama’s Administration provided the general framework on how federal and state governments will work together to regulate state-legalized cannabis companies. These memoranda also provide cannabis companies information on how to manage their operations and address critical risks.

As last month’s FDA Warning Letters to CBD companies demonstrate, marijuana companies are not immune to federal regulatory oversight simply because they are involved in cannabis-related commercial activity. Cannabis companies’ biggest risks may not be their involvement in marijuana-related activities, but rather ignoring commercial regulations with which all companies, regardless of industry type, must comply.