Despite the legalization of cannabis sales in many states and Congress’s removal of hemp and hemp-derived cannabidiol (CBD) from the list of scheduled drugs under the Controlled Substances Act, recent events serve as a reminder that the sale of CBD-containing products remains a legal minefield.
On September 10, 2019, the U.S. Federal Trade Commission (FTC) issued warning letters to three companies that sold oils, tinctures, capsules, gummies and creams containing CBD challenging the companies to provide competent and reliable scientific substantiation for their claims that the products could prevent, treat or cure human disease. One month later, the FTC and the U.S. Food & Drug Administration (FDA) jointly issued a warning letter to the seller of various CBD-containing products informing the company that the agencies considered its products to be unapproved new drugs and misbranded drug products. On November 25, 2019, the FDA issued warning letters to 15 additional companies selling CBD-containing products asserting that the products constituted unapproved new drugs, misbranded drugs, adulterated human foods, unapproved new animal drugs and/or adulterated animal foods. Shortly thereafter, several of the companies that had received FDA warning letters found themselves named as defendants in putative class action lawsuits claiming that the companies wrongfully sold CBD-containing products. Although the FDA has promised to “work quickly to clarify our regulatory approach for products containing cannabis and cannabis-derived compounds like CBD,” the FDA has yet to issue draft regulations.
In its warning letters, the FDA emphasized that CBD products promising to relieve pain or to treat a medical condition are treated as drugs, and that, with one exception – a prescription drug used to treat two rare forms of epilepsy – such products constitute unapproved new drugs sold in violation of the federal Food, Drug and Cosmetic Act. The FDA also asserted that the CBD-containing products were “misbranded drugs” in violation of the Food, Drug and Cosmetic Act because “their labeling fails to bear adequate directions for use.” As the FDA sees it, because CBD-containing products promising to alleviate symptoms of hepatitis, autism, cancer and other serious medical conditions “are not amenable to self-diagnosis and treatment by individuals who are not medical practitioners,” the products by definition were not labeled with “adequate directions for use” and therefore violated federal law. The FTC also took the position that selling CBD-containing food products violated federal law, both because such sales violated the statutory prohibition against selling food products to which a drug has been added and because it is a federal offense to include in food products a food additive, such as CBD, that has not been approved by the FDA.
Predictably, the warning letters triggered a number of putative class-action lawsuits, in which the plaintiffs argued that they had been denied the value of what they thought they were purchasing because the products were, in fact, illegal. Even though the lawsuits do not claim that would-be class members were physically harmed, they argue that an illegal product by definition has no value – and that each buyer therefore was deprived the value of the purchase price. This theory recently gained the support of the U.S. Court of Appeals for the Eleventh Circuit, which held, in a case not involving CBD, that a purchaser of an “adulterated dietary supplement . . . receive[s] a product that Congress judged insufficiently safe for human ingestion” and that, consequently, “the purchaser of such a supplement received a defective product that had no value.” In short, sellers of illegally-marketed products are conceivably liable to every purchaser for the full purchase price – plus substantial attorneys’ fees.
At the same time, several other lawsuits have been filed claiming that sellers of CBD-containing products duped purchasers by including less CBD than indicated on labels or advertising. These plaintiffs don’t seek to recover the entire price of the products, but rather the difference between what they paid and what the allegedly inferior products are actually worth.
The FDA’s stance in the absence of a regulatory framework for sales of CBD products should strike a note of caution for anyone marketing CBD-containing products as health treatments or foods. Although all such sellers are at risk receiving an FDA warning letter or becoming embroiled in litigation, the most obvious targets are sellers who go beyond merely noting the presence of CBD in their products and make extravagant claims. Marketers of CBD-containing products are therefore well advised to play it straight and to avoid promoting any benefits attributable to CBD.