On May 3, 2019, the Florida legislature passed SB 1020, creating the state hemp program and authorizing the Florida Department of Agriculture and Consumer Services (FDACS) to enact regulations to govern the program. The bill, first filed in the Florida Senate on February 13, 2019, passed with overwhelming support; the final version passed by a margin of 39-0 in the Senate after passing 112-1 in the House. Governor Ron DeSantis has until May 18, 2019, to veto the bill or it will automatically become law.
“The historic vote,” according to FDACS Commissioner Nicole Fried, is in response to the federal 2018 Farm Bill, which “removed the prohibitions on industrial hemp in place since 1937 and authorized states to create hemp programs.” Id. If SB 1020 becomes law, it will fundamentally alter the treatment of hemp and hemp extracts, including cannabidiol (CBD) products, under Florida law.
On May 2, 2019, the United States Patent and Trademark Office (USPTO) made available a new examination guide aimed at clarifying the examination procedure for trademarks used in connection with cannabis and cannabis-derived goods and services.
These guidelines are a direct response to the signing of the Agricultural Improvement Act of 2018 (2018 Farm Bill) into law on December 20, 2018. The 2018 Farm Bill changes certain federal authorities relating to the production and marketing of “hemp,” defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.” These changes include removing hemp from the Controlled Substance Act’s (CSA) definition of marijuana, which means that cannabis plants and derivatives such as cannabidiol (CBD) that contain no more than 0.3 percent THC are no longer controlled substances under the CSA.
On April 30, 2019, the California Department of Food and Agriculture (CDFA) made available registration applications to cultivate industrial hemp. The CDFA’s approved regulations require, among other things, a prospective cultivator to register with the county agricultural commissioner where the cultivator is located and pay a $900 registration fee.
However, even though applications are now live, several counties throughout California still restrict or prohibit the cultivation of hemp. The CDFA has identified the following counties as restricting hemp cultivation: Amador, Calaveras, Glenn, Humboldt, Lassen, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Napa, Nevada, Orange, Placer, Sacramento, San Bernardino, San Joaquin, Santa Barbara, Shasta, Sierra, Siskiyou, Sonoma, Tehama, Trinity, Tulare, Tuolumne, Yolo, and Yuba.
It remains unclear how these current regulations will be affected by the Agricultural Improvement Act of 2018 (2018 Farm Bill). Under the 2018 Farm Bill, the CDFA is required to submit its hemp-production plan to the United States Department of Agriculture (USDA) for approval but as of the date of this post the USDA has not issued regulations relating to that review. Additionally, it is unclear how this program will operate in the interim under the 2014 Farm Bill. We will continue to watch as this program develops alongside the USDA’s 2018 Farm Bill program.
USDA has issued its first guidance since the passage of the 2018 Farm Bill. Because the Farm Bill removed hemp from the Controlled Substances Act, the importation of hemp seeds will now be regulated by USDA as an agricultural product, not DEA. USDA stated that by removing hemp from the CSA, the Act “removed hemp and hemp seeds from DEA authority for products containing THC levels not greater than 0.3 percent. Therefore, DEA no longer has authority to require hemp seed permits for import purposes.” Importation of hemp seeds from international sources will now be permitted if accompanied by the appropriate phytosanitary certification and will be subject to inspection by Customs and Border Patrol.
The reference to DEA authority is significant and confirms that DEA no longer has jurisdiction over hemp or products derived from hemp such as CBD oil. DEA needs to update its own guidance documents in light of the 2018 Farm Bill. USDA is working on regulations to implement the state cultivation program provisions of the Farm Bill. They are expected to be in place in time for the 2020 growing season.
As with CVS, Walgreen’s decision to sell hemp-derived in CBD in select states, as opposed to rolling those products out nationally, is likely the result of the still developing federal regulatory framework for hemp, which includes forthcoming regulations and guidance from USDA and FDA, and differences in the laws pertaining to hemp and hemp-derived CBD products from state-to-state.
Notwithstanding the challenging regulatory environment, the mass marketing of hemp-derived CBD, now that hemp is no longer a federal controlled substance, provides a lucrative opportunity for the hemp-derived CBD supply chain – cultivators, processors, and retailers, including the major pharmacy chains. However, the “select state” approach Walgreens and CVS have taken demonstrates that careful is analysis of the federal and state laws and regulations at play is necessary before entering the hemp-derived CBD market.
CVS Pharmacy’s announcement that it will be selling hemp-derived CBD topicals, including creams, sprays, roll-ons, lotions and salves in Alabama, California, Colorado, Illinois, Indiana, Kentucky, Maryland and Tennessee, should really come as no surprise, as the mass marketing of CBD has been an eventuality since hemp was removed from the Controlled Substances Act’s definition of marijuana with the signing of the 2018 Farm Bill in December 2018. CBD’s therapeutic benefits, without the psychoactivity of THC, have made products containing CBD the darling of the cannabis industry.
However, as CVS’s decision to market hemp-derived CBD products in select statesdemonstrates, the 2018 Farm Bill was not a total green light. USDA has yet to establish regulations fully implementing the federal hemp program, which would allow states to establish their own rules for cultivation, processing and sale of hemp, meaning state-by-state differences in the laws concerning cannabis, including hemp, must be assessed before marketing products like hemp-derived CBD. Such federal regulations should be promulgated later in 2019, ahead of the 2020 growing season.
In addition to USDA, FDA has authority over CBD-containing products under the Food, Drug and Cosmetics Act, adding another layer of regulatory complexity that makes the 2018 Farm Bill’s removal of hemp from the CSA more of a yellow light for marketing hemp-derived CBD. Thus, manufacturers and distributors of CBD products must assess how CBD fits in with FDA and state rules concerning drugs and drug approvals, active pharmaceutical ingredients, health claims and labeling, and foods and beverages. FDA has said it is evaluating CBD closely, and should be providing guidance later in 2019.
Because the light is still yellow on the marketing of hemp-derived CBD, manufacturers and distributors should carefully evaluate the federal and state regulatory framework before marketing their CBD products.
A recent decision by a Federal Magistrate Judge for the United States District Court for the District of Idaho upheld the seizure of an industrial hemp shipment in January after the enactment of the 2018 Farm Bill.
On January 24, 2019, Big Sky, a Colorado-based company, shipped industrial hemp from Oregon thorough Idaho on its way to Colorado. The hemp was seized in Idaho and the driver arrested for illegal transportation of marijuana. The crime carries a 5 year mandatory sentence. Big Sky sued for a temporary restraining order to release the hemp under the 2018 Farm Bill. The Court found that because no plan from the State of Oregon had been approved by the Department of Agriculture, the seized hemp was not produced in accordance the 2018 Farm Bill. The Court held that at this point time, without USDA approval of a state hemp plan, the Interstate Commerce Clause provisions of the Farm Bill do not apply. A Temporary Restraining Order was denied on 2/2 and the Preliminary Injunction was denied on 2/20. Big Sky Scientific LLC v. Idaho State Police et al., No. 1:19-cv-00040-REB (D. Idaho, February 2, 2019). The case is on expedited appeal to the Ninth Circuit. Opening brief is due 3/20.
This decision is contrary to the intent, if not the letter, of the Farm Bill. It creates confusion about the what is permissible now, prior to USDA regs and approval of state plans.
Update: The Senate passed this bill on December 11, 2018; the House of Representatives passed it on December 12, 2018. It was signed into law on December 20, 2018.
Duane Morris will be following further developments and issuing updates.
Key Points:
The 2018 Farm Bill removes hemp from the Controlled Substances Act;
The 2018 Farm Bill confers on the Department of Agriculture (“DOA”) authority over hemp, including CBD derived from hemp;
States desiring to have primary regulatory authority over hemp must submit a plan to DOA pursuant to which the state will establish hemp regulations to provide for the growth and use of hemp, including CBD derived from hemp;
No laws will be erected to prohibit the interstate transportation of hemp, or CBD derived from hemp;
The Food and Drug Administration may intensify its involvement with CBD as more products for human consumption hit the market;
Banking and insurance for hemp derived CBD products should become increasingly available as those products are no longer “unlawful”; and
CBD derived from unlawful marijuana is still unlawful.
Enter the 2018 Farm Bill, known as the “Agriculture Improvement Act of 2018,” set forth in final form in a Conference Report yesterday, and which will be voted on as early as this week and could be signed into law next week. The 2018 Farm Bill defines hemp as follows: The term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis. It goes on to explicitly remove hemp from the Controlled Substances Act, as follows:
SEC. 12619. CONFORMING CHANGES TO CONTROLLED SUBSTANCES ACT. (a) IN GENERAL.—Section 102(16) of the Controlled Substances Act (21 U.S.C. 802(16)) is amended— (1) by striking ‘‘(16) The’’ and inserting ‘‘(16)(A) Subject to subparagraph (B), the’’; and (2) by striking ‘‘Such term does not include the’’ and inserting the following: ‘‘(B) The term ‘marihuana’ does not include— ‘‘(i) hemp, as defined in section 297A of the Agricultural Marketing Act of 1946; or ‘‘(ii) the’’. (b) TETRAHYDROCANNABINOL.—Schedule I, as set forth in section 202(c) of the Controlled Substances Act (21 U.S.C. 812(c)), is amended in subsection (c)(17) by inserting after ‘‘Tetrahydrocannabinols’’ the following: ‘‘, except for tetrahydrocannabinols in hemp (as defined under section 297A of the Agricultural Marketing Act of 1946)’’.
The 2018 Farm Bill confers on the DOA the regulation of hemp, and contemplates federal regulations that would allow for states to become the “primary regulator” of hemp. Importantly, the 2018 Farm Bill explicitly provides for the interstate transportation of hemp and prohibits states from restricting the interstate transportation of hemp, stating “nothing in this title or an amendment made by this title prohibits the interstate commerce of hemp (as defined in section 297A of the Agricultural Marketing Act of 1946 (as added by section 10113)) or hemp products…No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.”
Significantly, the 2018 Farm Bill does not remove CBD derived from THC-containing marijuana from the Controlled Substances Act. Consequently, the DEA’s pronouncement as described above is still in effect, CBD derived from unlawful marijuana is still unlawful. However, there is now clarity. CBD derived from “hemp,” as defined in the 2018 Farm Bill, and grown pursuant to state regulations established pursuant to the 2018 Farm Bill, is lawful and may not be the subject of federal prosecution.
Banking: It should be underscored that banks and other financial institutions, such as investment firms and insurance companies, that have been cautious or reluctant about CBD products because of their connection to unlawful marijuana may view the 2018 Farm Bill as a green light for banking, investing and insuring hemp derived CBD products as hemp and CBD derived from hemp are no longer “unlawful.”
Most importantly, the 2018 Farm Bill does not eliminate the regulation of hemp or CBD derived from hemp. Rather, it envisions the promulgation of additional federal regulations and state regulations intended to promote its growth and use, and federal agencies like the FDA may increase their involvement with CBD. Those interested in participating in the hemp and hemp derived CBD markets should retain counsel well-versed in the pertinent state and federal regulations to provide guidance that will allow for the achievement of business objectives.
Authored by Robert Prince, Ph.D, https://www.duanemorris.com/attorneys/robertwprince.html
On Thursday April 18, 2018, at 8:00AM-12:30PM EST, an FDA advisory panel will consider whether to recommend or not recommend approval of GW Pharmaceutical’s cannabis-based drug Epidiolex ® for use in treating two rare types of epilepsy in children- Dravet syndrome and Lennox-Gastaut syndrome. Epidiolex is an oral formulation of a purified form of cannabidiol (CBD) a component found in cannabis. CBD does not have any psychoactive effects as compared to another component of cannabis tetrahydocannabinol (THC). Epidiolex has less than 0.1 percent of THC.
If approved, Epidiolex would be the first botanical cannabis product approved in the U.S. for any indication. The FDA has approved Marinol® and Syndros® for uses in the U.S. for the treatment of anorexia associated with weight loss in AIDS patients. Both products contain dronabinol, a synthetic delta-9-tetrahydrocannabinol. Another FDA approved drug Cesamet® contains nabilone, which is a synthetic drug with a structure similar to THC that is used to treat nausea and vomiting.
The FDA released briefing documents on April 17, 2018, which did not seem to raise any major issues with Epidiolex, resulting in the share price of GW Pharmaceuticals to rise sharply- up 2.27%. The Center for Drug for Drug Evaluation and Research (CDER) indicates that it plans to provide a free of charge, live webcast of the April 19, 2018 meeting of the Peripheral and Central Nervous System Drugs Advisory Committee. Information regarding the webcast, including the web address for the webcast, will be made available at the following website: http://www.fda.gov/AdvisoryCommittees/Calendar/default.htm. At the time of writing this note, the FDA has not provided any login information for the webcast.
You may have read a piece by CLR on Duane Morris’ approach to the national cannabis market late last year.
They are running ahead of their competitors and continue to do so.
They are one of the few firms in the Am Law 200 to have taken up the challenge presented by this de-centralized and sometime rather chaotic corner of the American economy.
Seth Goldberg, based in Philadelphia, practices in business and litigation with a particular emphasis in highly regulated industries such as healthcare and Pharma, saw the opportunities in cannabis and hemp early on in the game and has developed a multidisciplinary cannabis practice drawing across a wealth of experience in the firm.
The practice now comprises 48 attorneys, of whom a good 30 or so are partners.
They are taking the sector seriously and here at CLR we’re surprised that more in the top echelons still aren’t doing the same. …
It’s a question we posed to Seth during our hour long conversation and he concurred that he was equally surprised at the lack of cannabis / hemp practice development at the larger firms on the eastern seaboard.
