Ackrell Capital Cannabis Investment Report outlines FDA regulatory stance on THC/CBD foods and supplements

ACKRELL CAPITAL Cannabis Investment Report | December 2017 a dietary supplement but not represented for use as a conventional food or as a sole item of a meal or the diet. A dietary supplement generally is deemed to be a food under the FD&C Act. The FD&C Act does not require foods or food labels to be pre-approved by the FDA, but it does give the FDA broad authority to regulate the safety of food and food labels and to prevent interstate commerce in adulterated or misbranded food. Facilities engaged in manufacturing, processing, pack- ing or holding food for consumption in the United States are required to be registered with the FDA. The FD&C Act requires most foods to bear nutrition labeling and requires food labels that bear nutrient content claims and certain health messages to comply with specific requirements. The FDA is authorized to enforce safety and labeling regulations by conducting inspections, sampling, recalls and seizures, and by pursuing injunctions and criminal prosecutions. Cannabis-Based Foods and Dietary Supplements The FDA has published guidance (most recently updated in August 2017) concluding that (i) the FD&C Act does not permit foods to which THC or CBD have been added to be sold in interstate commerce and (ii) any product containing THC or CBD is not a dietary supplement. For this conclu- sion to be legally correct, based on the FD&C Act provisions cited by the FDA, it would need to be demonstrated that neither THC nor CBD were marketed in or as a food or as a dietary supplement before the occurrence of certain approvals and clinical investigations of drugs that include THC (e.g., Marinol) or CBD (e.g., Sativex or Epidiolex). The FDA publication does not demonstrate that neither THC nor CBD were marketed in or as a food or as a dietary supplement before such occurrences and merely states that the FDA is “not aware of any evidence that would call into question” its conclusion. The FDA’s conclusion has not been subject to any legal challenge, and it remains unresolved whether certain cannabis-based products, particularly hemp-derived CBD products, might be regulated by the FDA as foods or dietary supplements rather than as drugs. FDA Policy and Enforcement In December 2016, the FDA published a document titled Botanical Drug Development; Guidance for Industry that discusses several areas in which, due to the unique nature of botanical drugs, the FDA believes it is appropriate to apply regulatory policies that differ from those applied to nonbotanical drugs. The guidance discusses challenges inherent to botanical drugs, including challenges related to ensuring therapeutic consistency, and suggests certain steps to address those challenges. The guidance was published only months after the DEA announced a new policy designed to increase the number of DEA-registered cannabis cultivators and permit-registered cultivators to grow cannabis for privately funded commercial drug development projects. These parallel developments indicate to some that the federal government is opening a pathway to federal approval of cannabis-derived drugs. The FDA has the legal authority under the FD&C Act and related regulations to significantly dis- rupt the state-legal cannabis industry in the United States. The FDA has issued warning letters during the past several years to distributors of hemp-based CBD products but has not broadly enforced fed- eral law against the cannabis industry. A cannabis-focused publication on the FDA website states that in deciding whether to initiate federal enforcement, the FDA may consult with its federal and state 76 © 2017 Ackrell Capital, LLC | Member FINRA/SIPC HOUSE_OVERSIGHT_024712