Duane Morris LLP cannabis attorney, Seth Goldberg, on CVS and Walgreens decision to sell CBD

Apr 3, 2019

Recently the nation’s top two drugstore chains, CVS and Walgreens, both surprised the hemp industry and advocates by announcing that they would be carrying CBD products in stores in a number of hemp-friendly states. This follows from the passage of the 2018 federal farm appropriations bill that included language to differentiate hemp and marijuana and remove hemp and CBD from the DEA’s list of controlled substances.

While there are a number of hemp-friendly states, the matter of what’s legal and what’s not legal to produce and sell is far from settled. For example, the FDA has issued guidance stating that it is unlawful to add CBD to food products until and unless CBD is granted GRAS status (generally regarded as safe), which may or may not happen.

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To get some sense of the factors involved in the decision of CVS and Walgreens management to carry CBD products, we spoke to attorney Seth Goldberg, Partner at Duane Morris LLP. His experience in highly-regulated markets along with his entrepreneurial interests brought him into the cannabis and hemp industry. Recognized as a Trailblazer in Cannabis Law by the “National Law Journal”, Mr. Goldberg now serves as “head of the firm’s multidisciplinary cannabis practice”. He was named one of the 30 most powerful cannabis attorneys to know in the cannabis industry by “MG Magazine”. Duane Morris LLP has attorneys in offices throughout the U.S., with expertise in licensing for cultivation, processing, and dispensing of hemp- and marijuana-derived products.

Here’s what Mr. Goldberg has to say about the recent announcements by CVS and Walgreens, as well as some insight into the future of the CBD market.

We all know what the upside is for CVS and Walgreens. What are they risking? Why do their lawyers say they can do this?

Well, right now, in light of the 2018 Farm Bill, hemp has been removed from the Controlled Substances Act and from the purview of the Department of Justice and the Drug Enforcement Agency. It is not treated by those agencies like cannabis that contains more than .3 percent THC. So, the risk of that kind of criminal enforcement is no longer present with respect to hemp, and that certainly would have been a factor in the decision making. I can’t tell you what their lawyers advised, but I would expect that the removal of hemp from the Controlled Substances Act was a significant factor in the decision making.

So, the federal government’s certainly not going to bother them. They chose particular states. But are there still any risks whatsoever for them, legally, in these states?

Yeah, I think that whether it’s CVS, Walgreens, or other manufacturers, processors, retailers of hemp-derived CBD, there is a range of risks. It is a regulated product. While it may have been removed from the Controlled Substances Act, the regulatory framework vis-à-vis the United States Department of Agriculture and the U.S. Food and Drug Administration is unclear. It’s unclear whether actions taken today would be somehow violative of regulations that may be propagated later this year. In fact, just yesterday FDA Commissioner Gottlieb indicated the FDA will continue to exercise enforcement discretion and could take action against “over the line” health claims, such as that CBD cures disease.

We’ve had some confusion. We had one Idaho federal court conclude even that because the 2018 Farm Bill, with respect to hemp, has not been fully implemented, that hemp-derived products today are still controlled substances. I don’t agree with that view, but there’s confusion still. And so, with that confusion, with that uncertainty, there is a risk that even federal authorities—federal courts—could get it wrong from a federal standpoint. They could be unclear as to whether the removal of hemp from the Controlled Substances Act is effective today.

[On hemp and CBD, the FDA and USDA are still playing catch-up]

We expect that that regulatory framework over the next year will become more certain and provide clarity, but until then, the federal framework is uncertain. So you can’t be sure that there won’t be some federal enforcement action. I think that uncertainty creates risk, but CVS’s approach, by doing this in select states, demonstrates that from a state standpoint, there’s still a risk.

The state regulatory framework also presents uncertainty and risk. For one thing, states regulate hemp differently from state-to-state, and no state has had [their hemp regulations] federally approved under the 2018 Farm Bill. So, the 2014 Farm Bill plans that the different states have are still effective. Some of those programs speak directly to hemp-derived products, some don’t, and I think what you see in the way CVS and Walgreens have done this is they’ve obviously been very careful to identify those states that they think would be hemp-friendly, states where they think they can market these products with less risk.

The FDA has made it clear that they’re not yet, shall we say, kosher with the idea of adding CBD to food products. But, looking at the list of products CVS and Walgreens are planning on carrying, it seems that everybody’s okay with topicals and cosmetics. Is that correct?

I think it is still unclear with respect to the FDA. I think the FDA has said that CBD is an active pharmaceutical ingredient and views CBD to be a drug product and to be restricted as such. It has said it will exercise enforcement discretion and scrutinize “over the line” health claims, and I would expect FDA might even do so with respect to those kinds of products.

Do they actually distinguish between pure CBD and CBD oil or extract? What about CBD itself being much more restricted than CBD oil? Do you know if the products Walgreens and CVS are selling are pure CBD-infused products or are they CBD-rich hemp extract products?

I don’t know what products they’re selling, I can’t answer that question. I don’t think the FDA has made that distinction at least with respect to the guidance it has provided.

Do you think it is possible that the FDA will say CBD oil is fine, but the minute you infuse a product with pure CBD, you’re creating a drug?

I think the FDA has kept everything on the table regarding future regulations and is taking the approach now of exercising discretion. Participants would be wise to not cross the line on health claims with respect to any CBD containing products.  

So, there’s still a lot up in the air. I don’t expect to see CBD coming up in things like sleep aids or painkillers anytime soon.

I think the FDA’s focus, at least right now, has been to discourage making health claims with respect to CBD products. So, putting it into a sleep aid or putting it into something where you’re advertising it as a painkiller would certainly be of concern to the FDA. Putting CBD into food would be of concern to the FDA. Those are the things that the FDA has spoken to, but the regulations or guidance the FDA ultimately issues will likely go broader and provide a lot more clarity on these things. Until then, certainly, health claims and putting it in food and beverages are things that will raise concern with the FDA.

This is probably just like any other substance or product, but what if somebody comes back and says, “Hey, this CBD got me high,” and the product has been tested and has .5 percent instead of .3 percent?

That raises a lot of issues. I think one of the things you’re going to see both from the USDA and from the FDA are requirements with respect to testing—CBD content, testing THC content, all kind of testing with respect to impurities and contaminants—really trying to get to some uniformity. Without those standards and thresholds, it’s a little hard to know what a consumer could do to either take action with respect to against a manufacturer.

But certainly manufacturers, processors, and sellers of CBD products need to be very careful as to THC content, because that takes you back into the Controlled Substances Act. Once you’re over the .3 percent THC limit, then you are now potentially dealing with a controlled substance. So, you have to be careful with respect to how a consumer might view that problem of crossing the .3 percent THC line. You really have to be careful if you’re in the supply chain that the product is truly below the .3 percent THC threshold so that you’re not dealing with a controlled substance.

Do you think we’ll see Walmart and the other big retailers following suit pretty quickly here?

It doesn’t seem out of the realm of possibilities. I expect that the pharmacy retail chains and grocery store chains are really evaluating this question very closely, which is why I think the USDA and FDA are also paying close attention to hemp products, including hemp-derived CBD.

We are fielding questions about this every day from different inputs in the supply chain because it obviously presents such a great opportunity in a new market, which was the intent of the 2018 Farm Bill. People are really anxious to do this and do it the right way.

I really think the bottom line is that the 2018 Farm Bill certainly has paved the way to marketing hemp-derived products, but right now the federal regulatory framework is still evolving, which creates some uncertainty from a federal standpoint.

State regulatory frameworks are not yet operating under the 2018 Farm Bill and the regulations pertaining to hemp differ from state to state. So it really requires some very careful analysis, as you can see, from this select state approach that CVS and Walgreens have taken to be able to market and sell hemp-derived CBD products.

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