Introduction

Vadim 00:01
All right, and we are back in class. This is Vadim, the CBD professor from CBD School here with another episode of the CBD school podcast for you. I’ve got a very interesting guest today for you. We’ve got another lawyer who specializes in the cannabis space to bring us up to date on everything that’s going on in the legal landscape. I am here with Jonathan Havens of Saul Ewing Arnstein and Lehr. It’s a law firm headquartered in Baltimore. And Jonathan has a lot of background with FDA regulatory compliance, and all matters of cannabis regulation. So Jonathan, welcome to the show.

Jonathan 00:49
Thanks so much for having me, Vadim. I appreciate it.

Vadim 00:53
Yes. So I’m very excited to get into this topic with you because obviously, it is ever-evolving, right? So, how did you get into this space? What’s your background for the listener? I’m just going to make you repeat what you just told me.

Jonathan 01:13
So again, thanks for having me really excited to be here. So I describe myself as the accidental cannabis attorney, you know, some people say: “Oh, this is such an interesting area of the law, it’s evolving, it’s very exciting. You must have had a plan to get into this space.” And I wish I could say I was that thoughtful and planned out. But really, it was by happenstance. So after law school, I went to the US Food and Drug Administration. I started my legal career there as a regulatory counsel. So as its name suggests, I was working on everything from regulations to compliance and enforcement. And, you know, I was really learning more about what the FDA regulates. And in fact, FDA regulates quite a bit, which we might get into in a little while, although I’m sure we’ll focus mostly on the cannabis and CBD front. But the bottom line is from that first position, you know, in my first job in my legal career, I learned about food and drug regulation. I then went into after I left the FDA, into the law firm world and started representing clients, you know, private clients, before government agencies, federal, state, and local.

And it was in 2015, someone approached me at the firm I was with and said: “We have this group from Colorado and they want to get licensed in Maryland” where I was practicing at the time “to grow and process and dispense cannabis. Can you help them? We know you’ve done some state regulatory work.” And I said, very honestly, to the lawyer at my firm, I said, I really have no idea what that means or what that looks like. You know, I, at that time, Maryland, did not have a functioning cannabis program. It really only had a proposed process. You could submit applications, but no one had received licenses at that time.

But I said: “Listen, this is what I do. I figure out new sets of regulations, I help clients figure out how to comply with them, and how to operate their businesses.” So I really just, you know, I jumped into the deep end of the pool, I learned as much as I could about cannabis. And I started realizing pretty quickly that this was an area of the law that I should get smart on, because it was certainly not going away. And it was growing very, very quickly. So I helped the client, I worked on their applications, and it was really off to the races from there. So that was my accidental introduction into the cannabis space.

And then around the same time, actually a little bit later, I was visiting my best friend in New York, and I witnessed his son have one of his first seizures. And, you know, there was not known at that time as much as known now about the potential utility of medical cannabis to treat seizures. And in fact, you know, rare childhood seizure disorders. So as I was learning more about the cannabis space, I was also doing research to try to understand what my friend’s son was going through and it was just this kind of snowball effect. As you know, more clients came to the fold. As I was doing more research and I was learning more about marijuana and hemp and CBD, it all just kind of combined. And, you know, that was like I said, 2015 2016 and here we are. It’s a big part of my practice now.

Vadim 05:00
Oh, nice. So you really grabbed onto this, you know, bull and have rode it because from 2015 I remember there wasn’t much going on other than people just applying for licenses. I was based in Pennsylvania then and it was very similar to Maryland, where everyone was trying to get the licenses and approvals. And now it’s, I don’t really know about Maryland, but I know, because my family, I don’t live in Pennsylvania anymore, but my family does and I have a medical card there. And their program is very good and organized. And I’m sure Maryland is going well, too.

Jonathan 05:39
In Maryland, it is going well. I think Pennsylvania, the interesting thing about Pennsylvania is that at the time the program came online, they learned the lessons of the other states around it, right, you know, the states all want to take advantage of this for a number of reasons. I mean, but from a medical context to help patients fill unmet medical needs, right.

And so Pennsylvania came online, after some of the programs of its, you know, neighboring states and learned, okay, here’s how we should have this licensure process set up. Here’s what we should do with qualifying conditions, here’s what we should make these prospective businesses show us to make sure that they have the wherewithal to actually stand up these businesses. So the long answer short or short answer long, Pennsylvania has a robust program. Maryland also has a robust Medical program. I think, you know, it’s, it’s gone through some growing pains, but it is, you know, it’s off to the races now. And then, now, all these states are starting to look at do we develop adult use programs, and I think Pennsylvania is a little bit farther along in that discussion than Maryland. But they’re both having that discussion.

Vadim 06:56
And you’re based in Baltimore, right?

Jonathan 06:59
I am. I practice out of both our Baltimore and Washington DC offices, although our firm has 16 offices around the country so we’re you know, we have a national reach.

Latest FDA Regulatory Update on Hemp-derived CBD

Vadim 07:11
Oh, nice. Okay, well, let’s talk about CBD and specifically hemp CBD and bring everyone up to speed on what’s going on right now with the FDA and hemp CBD.

Jonathan 07:23
Sure. So, this is a timely conversation. So the industry has been waiting for quite a long time. For some, quote “clarity” out of FDA on exactly what is allowed. With regard to CBD. I say, quote, clarity, because FDA has actually been pretty clear about what you can and cannot do with CBD, which I’ll, which I’ll get into in a minute. But the reason I say it’s a timely conversation now, is that we obviously as everyone knows, unless you’ve been living under a rock, recently had a new president inaugurated, President Joe Biden. And what happened was at the end of the Trump administration, there was a document from FDA that was pending before the White House Office of Management and Budget, or OMB, as it’s called for short. And this document is called a cannabidiol enforcement policy. And this was a document that FDA sent to OMB last July, and it had been pending and pending and pending, and no one had seen the document, everyone had their predictions about what it would contain, when it was going to be released, what it would do to industry, how helpful it would be, how maybe unhelpful it would be. The bottom line is, on January 20, it was still pending and Joe Biden was inaugurated. And President Biden initiated a regulatory freeze. And he said anything that was pending at OMB that hadn’t been cleared by the Trump administration, essentially had to be re-dealt with or re-reviewed, in order for it to see the light of day.

And so what happened was this cannabidiol enforcement policy was pending at OMB on January 20. On January 21, just a day after Joe Biden was inaugurated, FDA withdrew the guidance document, and everyone in the CBD industry groaned and they said, alright, here we go again. So I’m here to tell you, I don’t think that’s such bad news. I actually think we could see that document pretty quickly. But it’s possible that FDA might have to resubmit it to OMB, it’s possible that FDA might just release it on its own without sending it back to OMB. But the bottom line is we still haven’t seen this enforcement policy. And why is that important? I mentioned a minute ago that some in industry are waiting for clarity from FDA on the CBD front. But the bottom line is FDA has been pretty clear about what’s allowed in the CBD space. So let’s talk about what that is to make sure everyone is on even footing and understands what we’re talking about.

So, back in 2018, December of 2018, to be exact, Congress passed and President Trump signed into law, the Agriculture Improvement Act, and that is shorthand referred to as the Farm Bill. The 2018 Farm Bill legalized for the first time, hemp, federally for commercial purposes. I know some people will scratch their heads and say, Jonathan, you’re an idiot. There was a 2014 farm bill that legalized hemp. Well, that 2014 version really talked about research programs or pilot programs and it wasn’t until the 2018 version where we had Congress saying, and the president signing into law, a bill that that said, okay, you can actually grow process, you know, sell hemp and its derivatives for commercial purposes, you know, at retail, for example. And so hemp, it was critical, what Congress was saying, look, we’re gonna take hemp, which is Delta-9 tetrahydrocannabinol, or THC for short and as long as it has a Delta-9 THC concentration of 0.3% or less by dry weight, it is no longer quote “marijuana” under the Controlled Substances Act, meaning it’s not federally illegal, and you can you know, you can do what you want with that, with with that product and its byproducts. So some people thought, Oh, this is great. The hemp industry rejoiced.

Well, the FDA said not so fast. There was a pesky little provision in that bill that you might have noticed that said that nothing in this bill undermines FDA authority to regulate the products that it regulates. Translation, if FDA says that you can’t put CBD products into say food products, then that’s the law. And that’s what FDA has said, in fact, and so we have this interesting universe within the hemp space whereby CBD topical products, you know, products that you rub on your skin have been recognized as legal by FDA, but CBD ingestible products, you know, dietary supplements, foods, those sorts of things, are illegal. As with everything else that I’m going to say today, that’s not the end of the story.

Today, the FDA has not been active in the enforcement space. And what I mean by that is they’ve only issued warning letters to CBD companies who sell ingestible products that make very, that they’re very aggressive disease claims, meaning, you essentially have to say that your product cures very serious diseases or conditions to get an FDA warning letter. And so a lot of CBD companies out there, our clients included, have sold CBD products in many different states, and have been completely fine have not received warning letters from FDA, because they’re not making those aggressive claims, or they’re not making claims at all.

Vadim 13:07
One thing I wanted to go over. So basically, the, with the Farm Bill, the one in 2018, the main thing that people should understand, right, is that it still allows the FDA to control it the way that they see fit, and especially when it’s something that’s ingestible.

Jonathan 13:27
Right. So I think the best way to look at the farm bill is that it legalized hemp from a Controlled Substances Act perspective, it did not affect, meaning it didn’t legalize CBD in certain formats. You know, it basically said FDA, you have the authority to regulate the products that you’ve always had the authority to regulate and if and when someone puts CBD into an FDA regulated product, that’s FDA jurisdiction, and they can determine what’s permissible there. So you’re absolutely right there.

FDA’s CBD Warning Letters: Making Claims 

Vadim 14:00
Okay. And, with a lot of companies listening to the podcast and entrepreneurs in this space. So you know, that they’re always wondering, and this is obviously something that they would use a lawyer for, like your firm, but where they’re wondering like, how far can they push their marketing? Can they say stuff like it helps promote restful sleep, or it helps alleviate discomfort. From my understanding, I worked for many years in the supplement space before CBD, the FDA doesn’t want you to make specific claims like ridiculous things like basically this will cure your Crohn’s disease.

Jonathon 14:46
Yes, you’re absolutely right in terms of, and it’s interesting, you use the word “promote”, and that’s a very common term in the supplement space. So you know, supplements are not regulated like drugs are regulated, it’s easier to get a supplement on the market than it is a drug, which you would expect, right? Because drugs treat and potentially cure specific diseases, specific disease states and conditions, whereas dietary supplements are to maintain or promote, you hear the term structure function claims, right? So it, you know, it goes to addressing a certain structure or function of the body, one of the things you’ll hear in the supplement space is, you know, helps promote healthy gut function. It doesn’t cure Crohn’s disease, but maybe it helps maintain your intestinal flora. So it’s, it’s helping your body to do the things that your body really already does, but kind of get rebalanced in a way. And it supplements the diet as the name dietary supplement would suggest, to do something, but it’s, as you said exactly the same, it’s not curing or treating an actual specific disease or condition. But rather, it’s helping to promote something helps to maintain healthy cholesterol levels, or, you know, helps to maintain healthy joints function or helps to maintain, you know, healthy gut function. But again, you notice, with all the things I just said, we’re not talking about heart disease, we’re not talking about Crohn’s disease. We’re not talking about arthritis from a pain from arthritis or, you know, specific types of things that are associated with specific diseases. So you’re absolutely right, that that’s kind of the main difference between supplements and drugs. Right, it’s maintaining healthy function versus addressing or treating a specific disease or condition.

Vadim 16:49
Exactly. And what I’ve always said, for people that are working on their marketing, is just have it reviewed by someone like Jonathan, who has that FDA background that can find problems, because it can get very gray, you know, sometimes there’s one step away from something you’re supposed to say or not. So it’s easy when you’re making a big list of benefits to maybe make a mishap. It really seems like they’re going after companies that are being obvious. I didn’t see the last round of warning letters. I don’t remember when they sent them. They went after Charlotte’s Web a while back, right. So what was that? Was Charlotte’s Web making a disease claim?

Jonathon 17:36
Yeah, there have been a few rounds of warning letters and I don’t know the exact number of warning letters to date that FDA has issued, but it’s been in these waves, right. And what people need to understand is that the FDA, and other government agencies for that matter, they like to make a splash when they take enforcement action, right? They like to go after bigger players. They like to go after bigger sales. I’m not suggesting that smaller CBD companies have evaded FDA. But they do go after bigger names that are sold in bigger stores because it makes bigger headlines, right? And these agencies all have limited resources, which is one of the reasons FDA has not taken more CBD enforcement action; they’ve gone after kind of the most aggressive companies.

So the claims that we’ve seen FDA go after in the space are, as you said, the more aggressive ones. In the latest round of enforcement letters, which I think were in November, December of last year, we saw things like COVID 19 treatment. I believe we saw cancer. So I believe we saw epilepsy, diabetes. I mean, these are very aggressive claims. Now, you’ve sometimes seen pain claims, but they’ve been aggressive pain claims, for example, comparing the impact that CBD would have to the effect that opioids or very strong FDA regulated and FDA approved pain drugs would have. So, you know, I don’t want to get into specifics about what FDA said about a specific company. But I can say just generally, there are a few buckets of things that the FDA has gone after. It’s those very aggressive disease or drug treatment claims or gone after claims for conditions that really only drugs are suitable treatments, not a non-approved supplement type or topical type product. But the bottom line is, and why the CBD space has proliferated, despite FDA saying that you shouldn’t be putting CBD into an ingestible format is unless you’re making those very aggressive claims you haven’t heard from FDA directly, you might have read their guidance, you might have heard quotes from some FDA officials. But I can tell you, because we represent a number of CBD brands, and to my knowledge, our clients don’t either make claims at all or aggressive claims. If they’re listening to us, they haven’t received warning letters, knock on wood, and I assume that will continue, because they’re not making even close to the level of claims that FDA has expressed concern about.

So, you know, the bottom line is to date again, while FDA has said no CBD in ingestibles, no CBD in supplements or conventional foods, they haven’t issued any warning letters to ingestible companies, CBD companies, unless they’re making pretty aggressive claims. And to put up kind of a finer point on it. To your point, but Vadim, you were saying, you know, you should consult with an attorney. Look, I always tell people, I understand you don’t want to spend your hard earned dollars on consulting with an attorney. But the lines here can be very fine especially when you’re operating in a space where you know a government agency has already told you that you shouldn’t be doing something that you’re doing. We don’t tell people, look, ignore the government and go ahead and sell your product. What we say to them is, we understand you’re selling these products, you should be aware of the fact that the FDA has said you shouldn’t be doing this. Well, you know, FDA, while this is a fight that might be fought in court later on, the law of the land today is that FDA has said you shouldn’t be doing this. But, if as a business, you’re deciding you’re going to, here’s how you might mitigate your risk in the space. And that is through making sure your claims are as neutral as possible, or as non-disease focused as possible. Making sure you have substantiation for what you’re saying. Making sure your products are tested, that they contain what you say they do, you know the right CBD content, and so forth. But figuring all that out without consulting with, you know, someone who focuses on these things and follows the FDA. I’m not saying you have to hire me or my firm, but you should consult with an attorney. It’s something that I do recommend, again, if you want to talk to us, we’d be thrilled to talk to you. But I’m not here to tell everyone you have to hire us, I would just say you should do your homework.

Vadim 22:25
Oh, yeah, sound advice. And we’ll provide everybody with the information on how to get in touch with you and all that good stuff at the end. And, yeah, I think people can probably maybe save money to buy instead of like, if you’re just a startup, and you’re not have a huge budget for legal expenses, you could prepare all your copy, and then have it reviewed by a lawyer as opposed to paying for consultations on like, well, how do we do this to this? And that? I mean, it seems more cost effective to have it reviewed. Would you agree?

Jonathan 22:55
I always say, and again, I know that people don’t want to spend their money as a startup, or a newer brand, on regulatory, or, you know, legal. But let’s say you have a lawyer review your first set of labels, and they catch some things that would draw the ire of a regulator. Dealing with that on the front end, and paying, you know, whatever it is, a few thousand dollars, or several thousand, whatever the cost is, for however many labels you have. Doing that on the front end is going to be way cheaper than hiring a lawyer to come and defend you against a warning letter from FDA. And, not even just defending you against the warning letter because a warning letter in and of itself is bad because it’s publicized, you know, you might get kicked out of some of your retail stores, some of your investors might sue you for selling an illegal product. A plaintiff’s attorney could come after you. That warning letter is kind of a waterfall moment or can be a waterfall moment, because once you get it, the FDA unfortunately posts these warning letters to its website and sometimes puts them in a press release. It’s not going to be a private moment between you and FDA. So, I absolutely agree it’s better to address these things on the front end to prevent you from receiving one of these in the first place.

CBDeceipt: What is this FTC Crackdown Initiative?

Vadim 24:17
Yep, yeah. So what is this? I don’t know a lot about this, but I just heard about it. So this operation CBDeceipt, what is that? Can you tell us about that a bit?

Jonathan 24:29
Yeah. So I’m chuckling not because it’s funny, but because the Federal Trade Commission, which is another federal agency, that enforces advertising and substantiation requirements for products that FDA regulates and other products, by the way, having nothing to do with FDA. The FTC comes up with these, what I call humorous quotes around it, names, enforcement names, and, you know, it’s operation CBDeceit. It’s all kind of one word, and it’s a play on words with CBD. You know, I’m sure some official at the FTC got a good chuckle out of the name.

But the FTC has, along with FDA, when FDA issues these rounds of warning letters, has issued enforcement actions of its own around the CBD space. So some people might say, well, why are there two federal agencies taking enforcement action on the same products or the same class of products. So the FDA regulates the underlying products. And let’s say you’re making a disease claim about a dietary supplement, and you haven’t gotten that product approved as a drug, the FDA is going to say this is an unapproved drug product and we’re going to go after you for alleged violations of the Federal Food, Drug and Cosmetic Act. Well, here comes the Federal Trade Commission and says, oh, and by the way, you said that this cures pain better than, you know, 90% of traditional over the counter drug products. And where’s your substantiation for that? We don’t see any and we don’t think you have it. So there’s this old you know, adage, truth in advertising, right, making sure that whatever you’re saying you have substantiation for, and under the Federal Trade Commission Act, you need to possess substantiation for claims that you make in advertising at the time you disseminate your advertising, and advertising can be what’s on your label, what’s on your website, what you say at trade shows what you say, on a TV commercial, on the radio, it can be a lot of different things. So there’s sharing of jurisdiction, so to speak, there’s a memorandum of understanding between the FDA and the FTC, whereby the FTC will regulate the advertising side of things and the FDA will regulate the you know, the underlying product, the label, you know, the things that you would expect the FDA to regulate. So we’ve seen the FTC go after some of the same companies that the FDA has gone after and we’ve seen the FTC go after some of some different companies. Right. So it’s not, you know, there, there are some overlapping companies but there’s also companies that have only received FTC, enforcement action and some companies that have only received FDA enforcement action. The bottom line is, there is no shortage of federal and state regulators for that matter who want a piece of this pie. We haven’t even talked about states yet. I’m sure we’ll get it right. But yeah, you have to worry about the FDA and the FTC on the federal level.

Vadim 27:51
That’s the first time I’ve heard that. I mean, it makes sense. It’s so the FTC deals more with advertising of products, right? Marketing?

Jonathan 27:58
Yeah and you know, for those of you who have spent time in the supplement space, this will not be a surprise, right, in terms of the FTC has been active in the dietary supplement space. For years, you’ve seen some pretty major consent orders against household supplement companies, for making claims, you know, they’ve gone after weight loss and brain health, and, you know, other things like that, you when you’re making claims that seem too good to be true, the FTC, that’s the space they play in, well, another space that they play in pretty well as the multilevel marketing space, these systems, whereby you have distributors and representatives who buy a bunch of inventory, and then they have to recruit coaches, and so on, so forth. Look, I think there are very compliant multi-level marketing enterprises out there, but some of them are pyramid schemes. And, and the FTC goes after those as well and you’ve seen that in the supplement space. So there’s a lot of overlap between what FDA and FTC do in the supplement space, including the CBD space.

How is CBD Regulated as an Ingestible Supplement?

Vadim 29:09
So I have to ask you, and this is like, obviously a matter of opinion. But from your experience working with these regulatory agencies,do they really care about the American people? Are they protecting the people? Or are they, do you think, working more on the side of their own interests, whatever those may be?

Jonathan 29:32
I get this question a lot, and look, I know that it’s been a long slog, and that the hemp industry and the CBD industry, I kind of consider them to be one but, you know, look, I know that FDA policies have not helped hemp farmers because when you can’t, when you can’t sell to the end user or there are restrictions on what you can sell it depresses prices. I totally get that. I also have to disclaim, look, I do a lot of work in the hemp industry, and people say, everything you’re saying is, you know, is bogus, and you’re just on the side of government. No, I’m, I’m here to tell you what the policies are and what they are, honestly, because I think people that pull punches and tell you, you know, anything different than what I’ve said, so far, they’re not being honest with you and that’s just setting you up for failure.

You can only address and overcome these hurdles by understanding what the underlying policies are, and then to mitigate risk against enforcement based on those policies. But ignoring the policies and burying your head in the sand is just foolish, and you’re not gonna be able to run for very long. But to answer your question more specifically, here’s what I would say. The FDA is charged with protecting the public health and the FDA’s position on CBD has been, we just don’t know enough about this product category about the long term health consequences from consuming CBD to be able to endorse this class of products. And we’re not saying that we will never allow CBD. But until we have more data, to see how CBD is metabolized, and to see how people consume it, and what conditions it might be amenable for, we cannot say that it’s allowed in ingestible formats. What’s the converse of that? The converse of that is, look, there are many other countries that have studied this, that have said, you know, and Australia is one of them, I think, and I’m paraphrasing. I’m not an Australian food and drug attorney ao take this with a grain of salt, but, you know, up to 70 milligrams per serving is okay. And you can consume CBD regularly in both topical and ingestible format and it’s not going to, for example, damage your liver, which is one of the things that the FDA has alleged it might do.

But, look, the FDA is a public health agency. They’re not a public pressure agency. So despite the tremendous pressure they’ve been under to change their policies and to move quicker. As a former federal regulator, the FDA is a regulatory agency that is discharging its mission that has been, you know, given to it by Congress, the FDA, there’s a law, the Federal Food, Drug and Cosmetic Act that has a provision in it that says the following. If something has been studied as a drug, and approved as a drug, before it was available as a food ingredient, it can’t be a food ingredient unless FDA issues a regulation to the contrary. What does that mean? What it means is CBD was studied as a drug and then approved as a drug before it was commercially available. It was studied as a drug before it was commercially available as a food ingredient. And FDA hasn’t issued a regulation to say that it can now be a food ingredient.

So what that means is that the Federal Food, Drug and Cosmetic Act, when you interpret it, what FDA has said their view is you can’t have CBD in a dietary supplement or conventional food because it’s a drug ingredient in FDA eyes. So the only way you’d be able to do that is if the FDA issued a regulation in the contrary. So what FDA is saying is, look, if Congress wants to change the law, Congress go ahead and change the law. And if CBD and hemp industries, you want Congress to change that law, go talk to them. But if you want us to issue regulation, to change the status of CBD into allowed in supplement formats, it’s gonna take us a while. FDA’s notice and comment rulemaking can take years and FDA has said it could take, in the CBD context, you know, four years or so. So, you know, again, you asked what are FDA’s motivations here. And while some industry might say this is stupid, and you know, a roll your eyes moment, I would say that FDA is is trying to follow the science and try to understand, okay, you know, what do we know about CBD, I think they know enough to allow CBD and certain amounts, and then say, we’re going to allow this for now and we’ll study it in higher amounts and we’ll address that later. So I do think that the FDA is moving slower than they need to. But people out there need to understand, you know, these are a number of long serving government employees who have jobs to do and they can’t just overnight change the policies that FDA has had. They could, but it would take a lot of movement and a lot of people to sign off on something. That’s just not typically how these agencies work. So, you know, the bottom line is, I think industry should look to Congress to move the ball down, you know, down the field quicker than the FDA seems to be prepared to do. I know that was a long answer but I hope I addressed some of the concerns that I think the industry has, questions about why this takes so long.

Vadim 35:03
I think I appreciate that. I mean, it’s like for the people listening that want to make changes, it’s really Congress that that you should go for, right? I mean, I don’t know how this works, but you’re not going to make the FDA isn’t the one making the rules or just enforcing what they’re what they’re told whether you agree with them or not, or think that they have special interests or bribes, and then there’s some dirty stuff like Scott Gottlieb. I don’t know. He’s not with them now, though. Right. Scott?

Jonathan 35:30
Right. Yeah, he is the previous commissioner of the FDA.

Vadim 35:35
Yeah, and I haven’t researched him heavily but I’ve seen stuff about from reliable sources of him not disclosing interests, pharmaceutical interests, stuff like that. And I’m sure there’s tons of that you can dig up and conspiracies. But the main thing to understand is, if you want change, it’s not the FDA that you want to try to deal with, right? It’s Congress, the people that are making the laws.

Jonathan 35:57
Right. So there’s, there’s kind of parallel paths. And look, there’s a lot of information out there where people say, oh, you know, this FDA commissioner is in bed with this company and, you know, look, people can say what they want about these people that serve in these positions, people who could be doing a lot of different things. They make a lot less money when they go to the FDA. Having worked at the FDA and worked, you know, with some of these people, look, no one is perfect but there are a lot of talented people that work in these regulatory agencies. And while they might not do everything that everyone likes all the time, I do think by and large, they do a pretty good job.

What I will say is, you know, a couple things. Number one, you know, there are all sorts of ethics, disclosures, disclosure forms, and they’re vetted by a lot of different people. So, you know, the notion that people aren’t disclosing what they need to be is, you know, if that didn’t happen, that’s not necessarily a failure of one person. That’s a failure of a lot of different people. So it’s not so easy to do, to cover up those things. So that’s why I tend to take those allegations with a grain of salt, number one. Number two, and more importantly, to the regulation question, there are parallel paths. So FDA could issue a CBD regulation, say allowing CBD in the ingestible formats. But, what I’m telling people is, if we see this cannabidiol enforcement policy that we talked about a bit ago in this conversation, and it’s not what industry wants, I think industry would be better served by going to Congress and saying, look, we know there’s this bill out there, and one of the bills is called HR8179, which would say that CBD in supplements is legal and FDA has to recognize that as legal. That’s a very quick fix solution, not a perfect solution, but a quick fix solution. And that would force FDA’s hand. It wouldn’t solve all the problems but that’s going to be a lot quicker than a four year notice and comment rulemaking process.

So I’m not telling people to abandon the FDA process. But I am telling people to educate themselves on who does what, and if you want FDA to be forced to allow a certain product category, and the law says something that FDA has said forces them to treat a product in a certain way, you know, go to Congress. So I think you should just know who does what, and all the moving parts here. And, you know, these, again, these agencies have their missions, the Federal Trade Commission protects consumers, the FDA protects consumers in a different way, you know, from a health perspective. They’re going to continue to enforce the things that they enforce, they’re not going to go away. And if you want to change in the law, you should look at Congress to do that.

How do Current Regulations Impact Delta-8?

Vadim 38:47
Good to know that and as far as the question I have, we get all these questions about, we’re moving on to a new subject here, we get all these questions about like so before before CBD got big there was this law about how, I don’t know the exact wording, but all of the parts of the cannabis plant are illegal type of thing. So like it or like synthetic derivatives, you know what I mean? So you have to like cover loopholes but now there’s these new products. There’s a couple of new loopholes coming out.

One example is Delta-8 THC and then another example is THC levels. In the hemp I’ve grown, I know there’s some THC in it. So it’s just math. If you take enough of it, you can get enough, you can extract it and, if you know what you’re doing, you can extract THC from a hemp plant. And, and another thing is like you get you see the whole 0.3% THC thing you see certain brands, I’m not gonna name them because it’s just not important for the conversation, but you see certain brands, playing with the percent and creating a product that has {more than 0.3%}, it almost doesn’t seem to make sense how they’re selling it. So talk to us about that, like how people can navigate that aspect of the space. Are these loopholes? Or what? What are these things?

Jonathan 40:20
Sure. So, uh, you know, I was kind of waiting for us to get into Delta-8 because that is hot.

Vadim 40:25
That’s hot. Yeah, hot topic today.

Jonathan 40:27
So, you know, we talked about Delta-9 tetrahydrocannabinol, which Delta-9 has always been the focus from a controlled substances perspective. So people get very creative, you know, where there’s a will there’s a way and people say, well, you know, you can get to something called Delta-8, and because Delta-8 isn’t addressed in the Controlled Substances Act that that is legal, because it’s not addressed directly. So the bottom line is, we don’t have a great sense from federal agencies, what exactly the status of Delta-8 is. What I’ve told my clients is, and I won’t write an opinion letter, saying that Delta-8 is completely legal. And then the reason for that is because I’m not sure that the Drug Enforcement Administration DEA views Delta-8 is completely legal. One of the things I’ve heard about Delta-8 is that it produces a euphoric feeling or high, similar to a Delta-9 THC high. So there are analog rules out there, which is essentially aimed at designer drugs, right? Like if someone is out there producing a drug that mimics a drug that’s directly addressed as a controlled substance, then it stands to reason, our government not going to allow that. If you’re out there selling something that gets you very high, and looks pretty similar chemically to Delta-9 THC, the government is not going to allow that. And so, you know, first things first, I am not a chemist. My high school chemistry teacher, if they’re listening, would be horrified that I’m even talking about chemical structure. But if something mimics the high of a controlled substance and has a similar chemical structure, and what similar means, well, that’s half the battle, right? What does the chain need to look like? And what sort of bonding do we need to talk about? I mean, I don’t even know what I just really said but it sounded somewhat reasonable from a chemistry perspective.

The bottom line is, a lot of people like to tell me, well, Delta-8 is legal because it’s from hemp. And it’s not addressed like Delta-9 is. What I would say is: If it gets you high and has a similar chemical structure, I would say that the DEA might have a different answer to that, you know, so take that and park it for a second. Also consider that over the summer. In August, DEA issued an interim final rule that they claimed was just implementing the 2018 Farm Bill. Well, as everybody who’s read any of that interim final rule knows, it did more than just implement the Farm Bill. It talked about synthetics. And some people say, well, Delta-8 is an organically derived compound from the hemp plant. Well, I’ve heard that it’s to get the Delta-8, there is some sort of a process or synthesis that needs to occur. It’s not just like, you can take your hemp plant and press it and you extract Delta-8, you know, you can just immediately extract Delta-8. It’s more of a conversion from, I think, from Delta-9.

I don’t I, again, some of your listeners might know more about this than I do. I’m not an extractor. We certainly work with extractors but I don’t know that I have a great handle on exactly how Delta-8, how you get to Delta-8. The bottom line is there are enough questions out there that I don’t think the government either has wrapped its head around or has wrapped its head around and is comfortable that it is synthetically derived or that it is similar enough instruction to Delta-9, and acts like Delta-9 in terms of producing that higher that euphoric feeling. And so they’re going to treat it as Delta-9. The bottom line is, a lot of people are out there saying: well, I have a legal opinion saying that Delta-8 is completely legal. Well, let me tell you, you know, one of the problems with a legal opinion, one of the problems with the legal opinion is, you know, it’s a piece of paper. And yes, it will help you in terms of doing business but if the Drug Enforcement Administration comes into your processing facility, and they see a bunch of Delta-8, and they consider that to be a controlled substance, that legal opinion is not going to be your get out of jail free card. It’s going to be something that you can come back to that law firm and say: You told me this was legal, I got arrested, I’m going to sue you.

Vadim 45:18
Yeah, it’s a different purpose. And well, it’s not something to protect you.

Jonathan 45:24
It is literally not a get out of jail free card. Right, you know, maybe you will have some recourse with the lawyer that drafted the opinion. And you’re, you’re gonna have to sue the law firm, right to say that what they said was, in fact, wrong. And you know that, and there are all sorts of rules about how you can rely on legal opinions to that I’m not even getting into because that’s way beyond the scope of this discussion. The bottom line is, Delta-8 is interesting. Delta-8, you know, there are a number of questions out there. But in my mind, I’m not ready to tell people: yeah, you’re completely good to go on Delta-8, and the government would completely lose in court, if it ever took it to court. There are I’m sure cases out there that will be brought. You know, where DEA will be called out for its position on Delta-8. But I just don’t think we know enough yet and so, you know, it’s not defined. But again, let’s talk about just reason for a second. If you are selling a product, in a convenience store, and you tell people it will get you high and it acts just like Delta-9 THC, but isn’t illegal, because it’s not addressed directly in the Controlled Substances Act, do you really think the government is not going to have something to say about that? I’m not telling you that you’re going to lose in court, if you took DEA to court, necessarily, although you might. But, you know, just think about that and think about if that’s a risk you want and if it is, and you want to hire a lawyer to come up with a creative interpretation, or just a reasonable interpretation that differs from the government’s, that’s fine. But be honest with yourself and be honest with who you’re hiring, right? If someone says, I can draft you a legal opinion, and you were never, there’s never any risk of enforcement, and you are definitely going to beat DEA in court, if we ever go to court. If someone makes all those guarantees, I would be a bit skeptical because I don’t know.

Vadim 47:38
Yeah, it’s still a wait and see, right, this whole Delta-8

Jonathon 47:41
Maybe there are lawyers out there that are way smarter and way more talented than I am, I have no doubt about that. I’m certainly not the smartest person in the room. But I would just say it’s an unsettled category and I would take it with a grain of salt and say and take it for what it is, a new area of the law that needs to be figured out further than it has been figured out so far.

How are THC Concentrations in CBD Products Regulated?

Vadim 48:05
Exactly. There’s one thing that people misunderstand massively is the 0.3%. The 0.3% THC is the product, the full volume of the product. It’s not like the cannabinoid percent of just the cannabinoids, it’s 0.3% of the whole volume of the product. So like three fluid ounces or something, right? Is that right?

Jonathan 48:34
Right. So there’s a lot of discussion about 0.3%. So remember, again, the Farm Bill said that that hemp is legal. So hemp is cannabis. A lot of people like to say hemp and cannabis are different. Hemp and cannabis sativa, it’s all the same. You know, there’s different seeds, perhaps that people will tell you about and one would grow you know cannabis with a THC concentration above point 3% But look, it’s all cannabis sativa L. Okay. So hemp is cannabis sativa L with a Delta-9 THC concentration of 0.3% or less by dry weight. Well, what does by dry weight mean? And how do you get to those concentration levels? And when does a product become hot? This has been a big point of contention. And one of the things that industry has been grappling with as USDA, another federal agency there again, there’s no shortage, US Department of Agriculture, which has issued rules around the growing and processing of hemp, you know, has talked about. When do you measure the THC concentration and where do you measure it on the plant, you know, you there’s this notion of the flowering tops of the plant and, you know, the different parts of the plant and where it’s measured and time that it’s measured. So look, the bottom line is that THC concentrations can vary when you’re measuring it, how far from cultivation, you know, when it’s when it’s being planted when the plant is mature, when it’s cultivated, when it’s harvested, when it’s tested, when it’s processed. You know, I’ve heard from some of our processing clients, it is impossible to not have a hot product during the processing phase. By kind of the laws of chemistry, it will go above 0.3%.

Vadim 00:43
That’s true. And I think they allow for that, I think they understand that right?

Jonathan 50:47
There is now a recognition for the first time that you can, you know, that you can remediate. So there used to be a negligence threshold within USDA rules of applying 0.5%. Now it’s up to 1%. But again, remember, this isn’t that you can have a 1% product, it’s that the government won’t charge you with negligence if you have {a product that measure over 0.3%}

Vadim 51:17
yeah, you can’t sell it.

Jonathan 51:19
Right, exactly. You can remediate it. But it’s also there’s, there’s limitations. And this gets into the text of the rule. It’s not like your process can have all the time, one person, you know, you could be spinning out 1% 1% 1% 1%. You know, at certain times, there’s limitations on how many times per year you can get to that without the government saying you’re negligent. Again, the bottom line is, and it’s way beyond the scope of a discussion like this, it’s important to have someone look at your procedures and your processes to say, does this meet what the government is saying, are the required elements of the rule? If USDA, or DEA comes in and looks at what we’re doing and our samples, are we going to be charged with negligence or violation of the Controlled Substances Act. But what we’re getting to is kind of a meeting of the boundaries of these rules, these regulatory actions with the, you know, the reality of how you get to these products in the first place. The government thinks one thing and industry says it’s impossible to meet that. How do we remediate these products so they’re not controlled substances? And there will be some sort of meeting in the middle. But there’s, there’s kind of an imperfect answer for now. Because I think what the government’s approach is, is not really doable from an industry perspective. So that’s why you see industry commenting on these rulemakings and why your listeners should engage in the rulemaking process to say to the government look, you know, we appreciate what you’re doing. But this is impossible, you can’t meet these, we can’t meet these standards, you know, as you’ve set them forth.

Vadim 53:03
Got you. What about the final products like, like, a tincture or something with the percent? Like how our people, it’s point, like, just to clarify for the listeners, it’s for someone new, it’s 0.3% of the whole, like, whatever base you have in there to like, MCT oil, everything like that, right?

Jonathan 53:20
Yes. So it’s, it’s it’s 0.3%, of the, of the extract of the hemp extract. So, it’s not necessarily going to be, you know, like, let’s say, your tincture is 100, is like 100 I don’t know, like, let’s say it’s 50 milligrams. I’m just saying, just for easy math sake. And there’s a milligram of CBD in there. You know, let’s, I’m just, I’m just writing out some quick things here. So if we’re, if we’re gonna say that the whole product itself is 50 grams, right, and the CBD of that product is 10 grams. It’s not necessarily that the THC concentration of the whole product is 0.3% of that 50 grams. So it’s not point three of that, you know, a 0.3% of that 50 grams, it’s 0.3% of, you know, the, the the extract the CBD, you know, the hemp extract. So, what I would say about that is, the government hasn’t done a great job of talking about finished products, they’ve really only talked about the extracts. So I don’t know that we have a great sense of what the government’s feelings are about finished products. It’s really only the extracts itself. So if you’re a processor out there, you should treat, you know, whatever the extract that you’re selling to contract manufacturers, whatever you’re providing to them, I would say a defensible position would be 0.3% THC concentration of that extract. So I don’t know that talking about finished products for the finished product manufacturers isn’t necessarily a sound metric or measurement to be talking about yet, because I don’t really think we have a great sense from the government of whether they think that’s an appropriate measurement. But if you’re treating the extract itself, and you’re saying 0.3% of that, of what the processor produced, I think that’s a relevant measurement.

Vadim 55:51
Wow, that’s very interesting because I was confused about that. It was one I was going back and forth with. Because if you look at a test result of a product, you can look at the cannabinoids, how many grams of cannabinoid or milligrams full of all the cannabinoids, and then see what percentage of all the cannabinoids like, let’s say there’s 10 cannabinoids. What percentage of all those 10 is the THC? And then other people interpret it as the whole product so that they can, you know, whatever it may be, that helps them make the formulation they want. But what you’re saying there is that it’s really the only clarity is on the extract side, and the finished product side is not so clear.

Jonathan 56:34
Yeah, I would ignore the finished product A, B, you know, there are a lot of not a lot, but there are some brands out there that will want to get to as much THC legally as they can. But making these products is difficult, because of the variability, right? These are organic compounds, there can be variability from batch to batch, which is why a lot of our clients do 0% THC, because they don’t want to be close to that line. Because the difference between 0.3% and point three one is the difference between hemp and marijuana which is the difference between not a Controlled Substances Act violation and a CSA violation. So I wouldn’t get cute with it and I wouldn’t try to say, oh, well, we’re pushing the boundaries, and we’re going to make a calculation with, you know, as aggressive of a calculation as possible.

Whatever calculation you make, I would be as conservative as possible. I would say, you know, whatever the THC concentration is in the most concentrated formula of it so that you’re never dealing with the government saying this has more than zero, you know, 0.3% at this stage, and you’re like, no, no, the finished product is this, or the extract is this, you know, if the government comes in, says, show me the plant testing for how you got to this, and the plant tested, you know, at 0.6%, I think the government would be well within their boundaries to say that that’s a hot product, because the government likes to say, once a hot product, always a hot product, even if you remediate. Now, that’s a little bit of a ridiculous position to take. But the bottom line is that if you’re a processor, and you’re getting your hemp plant from someone else, you should have upstream testing. If you’re a finished product company, you should have upstream testing to the processor and to the hemp unit to the hemp cultivator. You should make sure that all the way up the chain, the product, the plant has been tested to make sure that at all stages, it has been a legal product, because if you’re unknowingly selling a controlled substance, it’s a strict liability statute. And whether you know or you know, know directly or don’t know, directly, you’re still liable. So just burying your head in the sand and saying, well, the person told me it was okay. Have agreements in place, be able to have a certificate of analysis that says this was tested upstream. It’s never been hot. Those are things that are very important.

Vadim 59:13
So are they testing? I want to get clear. Are they testing like tinctures? Are they testing finished products to see if it’s hot? Like FDA? DEA? Someone? Yeah, DEA FDA.

Jonathan 59:28
FDA has been testing products in the market for a while. They submitted a sampling report to Congress last year, they’re doing a more robust sampling report. I’m sure the DEA is doing the same thing, especially when they see FDA’s testing results that suggest that a lot of these products have more than the illegal amount of THC. So, absolutely, people should expect that finished products are being tested. And if there’s more than 0.3% THC in a finished product, you can absolutely expect to hear from the DEA.

Vadim 1:00:00
So what if you, okay I think I just understood it, so it’s legally considered the 0.3% of the hemp extract and if you’re selling a tincture, I guess the whole tincture is considered hemp extract? Or maybe, could you go to court with a lawyer and say, no, it’s 0.3% of the extract within the MCT oil or something like that? Or would they just look at the whole bottle as hemp extract? Does that make sense? Maybe I wasn’t clear.

Jonathan 1:00:29
Yeah, it does make sense. So I think what you’re saying is, what if, what if the DEA says that the whole product has 0.3% THC? And the company said, no, not the whole product has 0.3%, it’s only 0.3% of the cannabinoid. If a product out there, on the whole, you know, if point 3% of a finished product has THC in it? I would. I don’t know that you’re going to win that in court. You know, from a, from a farm bill perspective, maybe, maybe you would, but I don’t know that the DEA is gonna buy that argument.

Biden Administration and CBD Regulation

Vadim 1:01:21
Right. Right. Right. Yeah. I think, yeah. It would be a hard one to win. But yeah, that is interesting and I think people just need to be careful and be prudent, probably with DC until there’s more clarity, perhaps, and there are risk takers. You know, there’s products out there I know, that are hotter than others. So that’s the risk that they’re taking. With this new administration, what do you think their take is going to be – meaning Biden and his team on CBD in general?

Jonathan 1:02:00
Yeah. So I don’t know that, that there’s going to be a market shift in the Biden administration’s approach to CBD as opposed to the Trump administration’s approach to CBD. I think, you know, this is an FDA issue. I don’t see, you know, a top down approach. I don’t see the White House saying, FDA, this is how this has to be, and we’re going to, you know, we’re going to tie your hands on this, or we’re going to say you have to do this. I think the administration is going to let FDA figure it out. I mean, FDA has a CBD working group. I just don’t see the Biden administration being too heavy handed about CBD. Now, what I will say is, a lot of people expect that the buying administration’s going to be friendlier to cannabis generally than the Trump administration. And what I would say to that is, you know, look, obviously, we have a democratic controlled Senate. We have a democratic controlled House, and we have a democrat occupying the White House. Some people have said, oh, we’re going to have cannabis legalization very quickly. You know, first of all, I don’t necessarily agree that that’s the case. I think cannabis legalization takes time. I do think that things like the Safe Banking Act might be calendered for debate in the Senate quicker than they were when Mitch McConnell was the majority leader in the last Congress because he never calendered any cannabis reform measures, but cannabis legalization is hard and I’m not even sure that all 50 Democrats in the Senate support it right now. So you know, that’s kind of a different story.

But some people say, Well, if there’s cannabis legalization, or cannabis reform, then this CBD issue falls by the wayside. You know, the bottom line is FDA, his position on CBD doesn’t have anything to do with cannabis and the federal illegality of cannabis. It has to do with the fact that there’s this drug exclusionary rule in the Federal Food, Drug and Cosmetic Act that we talked about before. And unless Congress amends the FD and C act, and says that, you know, CBD can be put into dietary supplements or conventional foods, I’m not sure you’re gonna see much of a shift. So I don’t know that there’s gonna be a huge movement from the Biden administration to either make it easier or harder for the hemp and the CBD industries. I think it’s going to be status quo. And it’s going to be up to FDA and Congress to figure it out.

Advice for CBD Companies on How to Avoid FDA Warning Letters

Vadim 1:04:25
Gotcha. Okay. Well, going forward, what if there was one piece of advice that you would offer to CBD companies in this space, what would that be?

Jonathan 1:04:40
One piece of advice. That’s a good question.

Vadim 1:04:48
Like one main thing, to have in mind.

Jonathan 1:04:49
Yeah. So I would say the theme is too good to be true. So if someone is selling you extract and it’s extraordinarily cheap, I would say that’s probably too good to be true. Meaning they’re probably selling it to you, but they’re not giving you any documentation to suggest that the THC concentration is legal, right? You know, if you’re a retailer, and a brand is selling you product, but tells you that if the store asks the brand, is this product legal? Can we sell it in all 50 states? You know, what protection do you provide to us a regulator comes knocking and they say, oh, yeah, you’ll be fine. But you know, and you never hear from them again. You know it’s too good to be true.

If someone is promising you that their CBD product is going to cure every ailment under the sun, but they can’t show you any proof of the same, you know, and they don’t have any approval from FDA, too good to be true. You know, this space is complicated. It requires a sophisticated approach. It’s not a fly by night operation. You know, we’ve talked a lot about the federal regulators, but in the absence of FDA being super aggressive, a lot of states have taken their own positions on this. And there are certain states that treat hemp and hemp-derived CBD as a controlled substance within their states, and states are allowed to do that. They have their own controlled substances acts, which are not preempted by the Federal CSA. So if, if a hemp brand tells you that their product can be sold in all 50 states, in all formats possible, I would, I would challenge them on that. It’s just not true. So you know, look at California, look at Idaho, look at Kansas, there are states out there that don’t like these products. So the bottom line is, if people are offering you these maxims, these views, you know, every all, no doubt, you know, no challenges, you’ll have no issues with the government, this is all settled law, I would just take that with a grain of salt and do your homework.

I’m not suggesting to you that you shouldn’t be in this space, we represent a lot of companies that are and that are operating, you know, in a very compliant fashion and have not had issues with federal, state or local regulators. But they’re operating responsibly, you know, this is not one of those things that you can just, you know, sell in one state and if a problem arises, close up shop and sell in another state and if a problem arises, just go from state to state. You need to have a concerted approach that takes into account the risks to mitigate those risks, and to ask questions from your suppliers, from your insurers, from your retailers, from your lawyers, from your consultants, from your, you know, in house companies, from outside, you know, consultants, this is just not it’s not something that you can do quickly, you know, kind of on the quick and cheap. You need to be more conservative about it. So that’s kind of a theme that I would echo.

Wrap-up and Contact Information

Vadim 1:07:53
It’s very wise. I appreciate that a lot. Thank you, Jonathan. We could probably go on for hours. I’m fascinated by this stuff. Because I actually wanted to be a lawyer. I didn’t go to law school, but I love all the details. I was a philosophy grad. So it’s all very nitpicky and interesting. I’m sure we can go on for a long time. But with respect for your time, we can close this one out. Where can people find you though, if they want to consult with you or just connect with you to ask you questions, or work with your law firm? How can people find you online?

Jonathan 1:08:30
Sure. And thanks again, this was a great conversation. And as you said, we could go on for hours. There is no shortage of issues. And I would say, not that I don’t love being a lawyer, but, you know, I would say you dodged a bullet. You know, it’s all in jest. But you know, I’m always fascinated with people who aren’t lawyers since I spend so much time with lawyers day in and day out.

As getting in touch with me, so again, as you mentioned at the top, my name is Jonathan Havens. I’m with the law firm of Saul Ewing Arnstein and Lehr. You know, I would say probably the easiest way is to just Google Jonathan Havens, you know cannabis, CBD, regulatory FDA, whatever you’ll find me. My email address is [email protected]. I’m on Twitter as @regulatoryatty for Regulatory Attorney. But you know, if folks want to get in touch, please, please do so be happy to talk to you even if you’re not interested in hiring us. I always just love hearing from different stakeholders. If I said something that you said, you know, that’s not true, that’s not been my experience, I love it when people challenge me on things because I learn things and I certainly don’t have all of the answers. So again, Vadim, really appreciate the opportunity and I look forward to hearing from your listeners.