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Marketing Considerations for CBD Companies in 2021

Dec. 28, 2020, 9:00 AM

The CBD market has seen exponential growth over the past two years, with products now readily available on store shelves across America. From lotions to drinks to pet food, a myriad of products are now being infused with CBD (cannabidiol), one of the many chemical compounds found in the hemp plant.

While the industry is rapidly growing, it remains to be seen how many CBD companies will survive in this highly regulated industry.

It is anticipated that in 2021 the Food and Drug Administration will issue formal regulations that will further define the parameters of selling CBD products to consumers. Until then, however, in order to mitigate risk and avoid having to completely course correct, CBD companies must do their best to navigate and comply with the applicable federal guidance and state regulations on what is permitted to be sold to consumers.

Following are several pointers on how to do that.

Verify Your Hemp Source and Its Testing

The 2018 Farm Bill specifically defined “industrial hemp” as cannabis with less than 0.3% of the psychoactive compound delta-9-tetrahydrocannabinol (THC) on a dry weight basis. Any CBD product that is being sold in the market today therefore must contain less than this extremely low concentration of THC, which, unlike its marijuana counterpart, will not cause any psychoactive effect when used by consumers.

Many states have laws requiring that a scannable QR code be prominently displayed on the outer product label, which links directly to the batch testing result for that specific hemp product to show THC levels. Failure to verify that sourced hemp or CBD extract meets the federal THC standard could expose a company to product liability risks or criminal penalties for selling a controlled substance.

Do Not Make Health Claims

The FDA has only approved one pharmaceutical with CBD, Epidiolex. Beyond that single drug, the FDA has not approved or deemed CBD as safe or effective for use in treating any disease, diagnosis, or condition.

Unsubstantiated health claims have been the primary target of the FDA to date; over the past two years, the FDA has issued dozens of warning letters to companies making outlandish claims that their CBD products will cure serious diseases such as cancer, and most recently, Covid-19. Therefore, companies must avoid marketing or labeling their CBD products as being a potential cure or treatment for any health condition or disease.

Companies should also avoid any suggestions that their products assist with common ailments, such as “pain relief,” “anxiety relief,” or “sleep aid.” Furthermore, CBD companies should also provide an express warning on their labels, marketing materials, and website notifying consumers that the products have not been approved by the FDA.

Know FDA Guidelines

The second biggest area of regulatory scrutiny has been marketing CBD products as dietary supplements. Due to the use of CBD as an active ingredient in at least one pharmaceutical drug, the FDA has expressly directed that it cannot be marketed as a dietary supplement or be added to either human or pet food.

While it is clear from restaurant menus and the supermarket shelves that companies are indeed selling a plethora of CBD-infused supplements and food products, companies must understand that these products could expose them to FDA warning letters or other civil penalties.

The only expressly approved use of CBD by the FDA is in cosmetics, such as topical lotions, creams, or soaps. If a company is selling a CBD-infused cosmetic, then it must still comply with onerous FDA regulations regarding cosmetic labeling, which range from specific font sizes to warning language to label placement.

Know State Laws Where You Do Business

There are over a dozen states which have issued specific regulations on CBD products: California, Colorado, Florida, Indiana, Louisiana, Minnesota, New Mexico, New York, Ohio, Texas, Utah, Vermont, and West Virginia.

State regulations largely focus on the CBD product label. Common state law requirements include the name and address of the manufacturer, batch identification, information providing the consumer the ability to see the batch test results (QR code or internet link), disclosure of the milligrams of CBD per serving, product expiration date, and in some states, even the name of the manufacturer or the laboratory certifying the test results.

As the hemp and CBD markets expand, more states are considering implementing additional regulations in 2021 as they await further guidance from the FDA. For example, proposed regulations pending in New York would permit up to 25 milligrams of CBD per food or beverage product and up to 3,000 milligrams of CBD per dietary supplement.

These proposed regulations conflict with FDA guidelines, which prohibit CBD in either of these types of consumer products. In order to ensure companies are fully compliant, companies should be familiar with the laws in all states where they sell products.

The main takeaway for CBD companies is that it is a complex and highly regulated industry. When looking to manufacture, launch, and market a new CBD product, it is highly recommended that a company consult with legal counsel who is familiar with the federal and state laws and specifically, about product marketing and labeling requirements in the cannabis industry.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information:

Kelly Huff and Georgette Castner are attorneys experienced in practicing cannabis law at Montgomery McCracken Walker & Rhoads LLP, a full service law firm with over 100 attorneys in Pennsylvania, New York, New Jersey, and Delaware who provide legal services to clients nationally.

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