The 2014 Farm Bill opened the floodgates for the widespread distribution of CBD products by distinguishing hemp from marijuana in the Controlled Substances Act. As a result, the CBD market is expected to grow at a staggering rate of 706% in coming years. Given the ravenous demand, many health practitioners seek a share of this lucrative market.
Practitioners who choose to develop, distribute or promote CBD products should proceed with extreme caution. At some point, the FTC, FDA, state medical boards, and possibly a group of unhappy consumers will make an example of an unlucky few. Prudent legal advice at the moment is to avoid these business practices until standards for dosing, timing and populations for safe consumption are established by the FDA. Practitioners planning to distribute or promote CBD products should be aware of the following concerns.
- Ethical Considerations
The American Medical Association (AMA) discourages product promotions through its ethics opinions, which prohibit conflicts of interest between care for the patient and a practitioner’s financial self-interest. The AMA counsels physicians who choose to promote or sell health-related products to (1) offer only products whose benefits are scientifically validated and (2) address conflicts of interest with full disclosure and professional responsibility in promotion and distribution.[1] While the AMA Code of Ethics is not binding, it is often referred to as the “gold standard” for state medical boards. Currently, health researchers are compiling data for hemp-based products. It would be difficult to prove scientific validation of benefits absent publication of conclusive evidence used to set protocols for safe consumption.
State medical boards have the authority to initiate enforcement actions. The majority of states expressly prohibit the exercise of undue influence over a patient by selling goods or services in an exploitative manner. See, NY EDUC. § 6530(17); 225 ILCS 22(18). Some states utilize statutory language which seems directly tailored for the CBD market. Texas, for example, expressly prohibits the advertising or promotion of goods or products sold outside the normal course of business.[2] In addition, employing complementary or alternative health care methods may constitute violation of the Texas Medical Practice Act if these methods are employed prior to conventional procedures.[3]
Be aware that State medical boards will not permit the delegation of personal obligations. Even as a consultant with an enforceable indemnity agreement, you are responsible for the information you offer to the public.
As a practitioner promoting a CBD product, avoid negative attention from your state medical board by implementing and adhering to written policies. Your policy should include disclosing conflicts raised through promotion and/or sales and obtaining patients’ written consent before distribution. Inform patients of the risks involved in taking CBD products and make sure the lack of clinical data is clearly divulged and understood. Finally, limit sales in accordance with your state’s requirements and maintain your primary role as a licensed health practitioner. Contact a health and wellness law attorney for assistance implementing a policy to protect your personal and business interests.
- Federal Trade Commission
The Federal Trade Commission (FTC) protects consumers and fair competition by preventing anticompetitive, deceptive, and unfair business practices. To further this objective, the FTC requires all promotion to be truthful and nonmisleading. Promotional claims regarding the beneficial effects from products must be substantiated by competent and reliable evidence. For healthcare-related claims, especially regarding serious diseases, this requires well-controlled human clinical testing. “Well controlled” means that double-blind studies measuring the efficacy of CBD compounds are required before a licensed practitioner (or any entity) can legally promote the benefits of CBD. At this time, only a handful of products have satisfied this level of scrutiny (further discussed below). Therefore, CBD products across the country purporting to treat medical conditions are being sold in violation of federal law. It is only a matter of time until the FTC tightens the reigns and takes action against select offenders, sending a message to the industry.
Overstating qualifications as a health provider may also constitute misleading advertising. If your practice is unrelated to processes affected by the use of CBD compounds, it is inappropriate to use your qualifications as a licensed professional to promote CBD products.
Even merely promoting a product can put you at risk. The FTC has extended liability to producers, endorsers, advertising agencies, and product inventors under the broadly-applied theory that they were involved in the creation of the advertisement.
The FTC has the authority to seize profits obtained by unfair business practices, impose civil penalties, restrict business activities and/or initiate criminal prosecution. In addition, disciplinary action by the FTC is likely to draw attention from state attorney general’s offices seeking to enforce consumer protection laws separately or in conjunction with federal investigations. As a result of these strict (and fairly subjective) requirements, your health practice faces a mortal threat if the FTC’s attention is drawn. Contact a health and wellness attorney to ensure your promotional claims are substantiated and your business remains compliant with federal regulations.
- Federal Drug Administration
The Federal Drug Administration (FDA) continues to have the authority to regulate products containing cannabis or cannabis-derived compounds under the Food, Drug and Cosmetic Act (FDCA). In a recent policy statement, the FDA reported it will treat CBD products as it does any other FDA-regulated product.
CBD products will not likely be afforded the more lenient regulatory standards afforded to dietary supplements. Supplements can be marketed unless the FDA finds they are unsafe or contain false or misleading labeling. In contrast, drugs must be show safe and effective prior to marketing.
The FDA classifies products as a drug based upon intended use. Under the FDCA, the purpose of a “drug” is to diagnose, treat, prevent, cure or mitigate disease. A product may also be considered a drug if it is intended to affect the normal structure or function of the body. For example, if the product is used for the purpose of mitigating pain or promoting restful sleep. The intended use of a product can be determined by claims made by product labeling, marketing tools or through consumer perception. Therefore, Product A may be “intended” to treat Disease X if the FDA determines consumers purchase the product to treat Disease X. In this example, Product A would be classified as a drug, regardless of an individual buyer or seller’s intent. In addition, the FDA has expressly stated that CBD products are excluded from the definition of dietary supplements
Thus far, the FDA has only approved three CBD products; (1) Epidiolex, for the treatment of pediatric seizures associated with two rare forms of epilepsy, (2) Marinol and (3) Syndros, which are both used to treat anorexia in patients with AIDS.[4] Absent required FDA approval, products marketed or purchased to diagnose, treat, prevent, cure or mitigate disease are being sold in violation of federal law.[5]
The FDA has resolved to take enforcement action against illegal drug marketing based on the degree of risk presented by the product. In a recent consumer update, the FDA stated its concerns; “Misleading and false claims associated with CBD products may lead consumers to put off getting important medical care, such as proper diagnosis, treatment, and supportive care.”[6] FDA enforcement action can include civil fines up to $10 million, seizures of property or profits, injunctions to prevent business activities and/or initiation of criminal penalties which can extend to ten years in federal prison and/or fines up to $250,000.[7]
FDA attention can consequentially impact business operations as well. A warning letter received July 22, 2019 by Curaleaf, Inc. caused shares in the company to fall 8%.[8] In addition, the threat of violating federal law can open doors for personal injury claims by dissatisfied consumers. To mitigate personal and business risk, contact a health and wellness attorney before promoting or distributing CBD products.
- Civil Lawsuits
Uncertainty, misunderstanding and disparity in the law governing hemp and marijuana products can give rise to a variety of civil claims. Unforeseen consequences of consumption may trigger strict liability statutes and varying state policies may limit populations to whom CBD distributors can safely target.
Strict liability applies to manufacturers, distributors and retailers who place unreasonably dangerous products into the market which cause harm. If applied, precautions taken by defendants cannot be used as a legal defense. Determining whether a product is unreasonably dangerous is based on the expectations of a reasonable consumer, given the risks and utility of the product. Legal risk arises when potential harms and conclusive benefits of CBD products are not yet fully developed. Clinical evidence may expose unanticipated safety concerns, giving rise to liability from prior sales.
Claims of fraud, negligence or detrimental reliance may arise from disparities in state laws surrounding the sale of CBD-based products. If a product is sold or advertised to a consumer living in a state with less progressive cannabis laws, a promoter or distributor may be liable for foreseeable consequences of consumption. Lawsuits have been brought against distributors of CBD-based products for failed drug tests and resulting loss of employment.[9]
The promotion of CBD products avails health practitioners to a myriad of legal risks. While the prudent approach is to wait until clinical evidence offers protocols for administration, insatiable public demand and the potential for significant health benefits are undeniably persuasive. As a health practitioner, should you choose to stake a claim to the CBD market, contact a health and wellness attorney for assistance establishing protocols for these business activities.
Thanks to Attorney Paul Fenaroli for writing this blog post.
[1] AMA, Code of Medical Ethics Opinion 9.6.4, Ethics: Sale of Health Related Products. https://www.ama-assn.org/delivering-care/ethics/sale-health-related-products (last visited, Sept. 22, 2019).
[2] 22 Tex. Admin. Code § 164.6(c).
[3] 22 Tex. Admin. Code § 200.3.
[4] U.S. Food and Drug Administration, Scientific Data and Information about Products Containing Cannabis or Cannabis-Derived Compounds; Public Hearing, May 31, 2019. https://www.fda.gov/news-events/fda-meetings-conferences-and-workshops/scientific-data-and-information-about-products-containing-cannabis-or-cannabis-derived-compounds.
[5] 21 U.S.C. § 352.
[6] U.S. Food and Drug Administration, What You Need to Know (And What We’re Working to Find Out) About Products Containing Cannabis or Cannabis-derived Compounds, Including CBD, https://www.fda.gov/consumers/consumer-updates/what-you-need-know-and-what-were-working-find-out-about-products-containing-cannabis-or-cannabis (last visited Sept. 22, 2019).
[7] 21 U.S.C. § 333(b).
[8] Jensen, Kristin. BIOPHARMA DIVE. FDA warns cannabis company for illegal marketing of CBD products. July 24, 2019. https://www.biopharmadive.com/news/fda-warns-cannabis-company-for-illegal-marketing-of-cbd-products/559442/ (last visited Sept. 22, 2019).
[9] Horn v. Medical Marijuana, Inc. 383 F.Supp.3d 114 (W.D.N.Y. 2019).