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Industry Voice: Best practices for CBD companies in uncertain times

By Lee Gray January 21, 2020, 04:13 pm MST

The burgeoning CBD market finds itself in a very unique and unsettling time. 

With interim final rules in place from the USDA, the path is now cleared for nationwide hemp production. But with recent regulatory actions, the FDA has strongly signaled that significant roadblocks remain to marketing food, supplement, and animal products using CBD derived from hemp. 

Despite this regulatory dilemma, the CBD industry continues to grow by leaps and bounds. The Nielsen Company projects that the U.S. market could reach $2.75 billion in 2020 in spite of the current regulatory uncertainty.

Adding to the chaos are a recent surge of class action lawsuits filed against CBD companies that may pose even a greater threat than FDA enforcement actions. Generally, these cases claim various problems with either the CBD products themselves (dose levels or contaminants) or product labeling (false health benefit claims or other false information on labels). 

Balancing growing market demand and increased risks is a difficult task for CBD companies right now, but an essential one. Although it is likely impossible to completely avoid the risks of lawsuits or regulatory action, CBD companies may at least reduce these risks by following some of the best practices of other FDA-regulated companies like food, beverage and pharmaceutical companies, such as Current Good Manufacturing Practices (CGMPs) and stringent labeling requirements.

With respect to product labeling, think of the Miranda warning given to suspects when arrested: Anything you say on a label and website can and will be held against you in a court of law. Simply put, until fully substantiated by adequate science-based testing accepted by the FDA, CBD companies should stay away from making any claims at all regarding any health benefit from CBD to humans or animals. In addition, product labels should clearly state the dosage (in milligrams) of each serving size. It is also a good idea to warn against cumulative dosing.

Although it is unclear whether CBD companies must presently comply with the FDA's CGMPs required of food and beverage companies, it is a best practice to do so now. Adhering to a robust set of written protocols not only assures product quality and safety, but it may be helpful in defending against potential lawsuits in the future. The foundation of any effort to adhere to CGMPs is developing, documenting, and following appropriate standard operating procedures (SOPs) for numerous aspects of your manufacturing process, including:

  • Hazard analysis: Analyze and evaluate all aspects of your facility, employees and production process for potential hazards, including biological hazards, chemical contamination, and other physical hazards. This analysis should include evaluating: formulations of final products; raw materials/ingredients; facility condition, design, and function; product packaging and labeling; storage/distribution; and sanitation/employee hygiene.

  • Preventive controls: Determine, develop, and implement appropriate controls to prevent or minimize identified hazards. These controls include process controls (including parameters and maximum/minimum measured values) and sanitation controls (procedures, necessary materials, and frequency) needed to minimize or prevent the identified hazards. 

  • Supply chain controls: Your supply chain controls should include verification activities, such as onsite audits, sampling and testing supplied ingredients, and reviewing supplier's relevant records (e.g., SOPs, QC/testing results, regulatory communications). The program should also document that applicable risks have been adequately controlled or minimized.

  • Product recall plan: Establish steps that must be taken and assign responsibility for taking those steps to evaluate problems with products in the field. This will help determine whether a recall is necessary and how to notify customers and distributors of hazards, return or dispose of product, notify public of product hazard to protect public health, conduct effectiveness checks, and properly dispose of recalled product.

Despite the allure of large profits from growing demand for CBD products, companies should take the time and expense necessary to follow some best practices to minimize the significant risks facing manufacturers today. 

Lee Gray is a partner at Holland & Hart LLP focused on the manufacturing and food & beverage sectors. Reach him at lgray@hollandhart.com.

The statements made are provided for educational purposes only and do not constitute and should not be taken as legal advice. The opinions expressed do not necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author.

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