CBD

CBD industry is destined to be accompanied by regulation and litigation

CBD and CBD-containing products are everywhere, but there are major misunderstandings about their regulatory status. CBD is cannabidiol, one of more than one hundred different active compounds in the hemp plant. The 2018 Farm Bill changed the legal status of hemp, separating it from the Schedule 1 substance “hemp” in the Controlled Substances Act. The effect of this is to legalize plants and their derivatives that meet the definition of hemp. However, only a few hours after the President signed the bill, the Food and Drug Administration (FDA) quickly pointed out that the FDA has not revised food, beverages, dietary supplements, cosmetics and others subject to the Federal Food, Drug and Cosmetic Act (FD&C Act).

In 2020, CBD-related regulation and litigation have strengthened several aspects of the CBD (and other hemp derivatives) industry, including:

Companies participating in the CBD industry must carefully deal with the regulatory and litigation environment;

The object of the claim is not only the brand owner, but also raw material suppliers, manufacturers, distributors and retailers;

Make sure your product contains what you say and the quantity; and

Perhaps most importantly, check your claims carefully, because false, misleading or excessive claims are the fastest and most direct way to obtain government review and class action claims.

From a regulatory point of view, 2020 has “more similarities” with the FDA’s claims. The FDA continues to seek public opinion on the CBD regulations, but has not yet taken any formal action regarding the regulatory approval of its use as an ingredient in FDA-regulated products. However, the FDA continues to make improper claims or distribute contaminated products to companies. The FDA has issued 21 warning letters, more than half of which are for the disallowed effects of COVID-19; others include cancer, pain relief, arthritis, arterial blockage, heart disease, immune disease, diabetes/blood sugar control, stress and anxiety, ADHD, depression, etc. related warnings. The FDA continues to claim that the use of CBD in food violates the FD&C Act, and it must not be added to any food or beverage products.

The Federal Trade Commission (FTC) also studied CBD’s marketing litigation in more depth in 2020. It also issued warning letters to companies marketing CBD to address COVID-19 claims, and in December announced the “first enforcement crackdown on fraudulent requests” in the CBD market, which was called “Operation CBDeceit” Part of the initiative. The FTC enforcement action targeted six companies, each of which used false and misleading health claims as grounds, resulting in a maximum fine of $85,000 among other measures. One thing to note in particular is that an enforcement action of Operation CBDeceit also involved claims related to cannabidiol (CBG), a different cannabinoid compound derived from cannabis.

The market is beginning to see more and more claims related to other cannabinoids, and the regulation and litigation review of these other derivative products is not expected to be any different from CBD. Of course, the FDA and FTC warning letters and enforcement can invite private groups to file a lawsuit. By 2020, there will be twenty new presumptive claims lawsuits filed against CBD companies in California, Florida, Illinois, and Massachusetts, as well as substantive rulings in many cases filed before the end of 2019.

These cases revolved around consumer protection claims, alleging litigation liability. For example, the content of the product sold is lower than the labeled CBD content, misleading consumers about the legality of the product, and making false or misleading claims about the benefits of CBD.

CBD industry is destined to be accompanied by regulation and litigation

The American Herbal Products Association AHPA, through its Cannabis Products Committee, has used AHPA’s expertise for more than a decade to cooperate with regulatory agencies and other agencies that affect the herbal product industry to assist the emerging cannabis industry. When it comes to a new market segment, AHPA’s experience will be invaluable, and for today’s hemp and CBD markets, its value is incomparable. With the continuous changes and inconsistencies in the regulatory environment, companies in this field need to learn from the experience of AHPA, which has also transformed other herbal products from unregulated status to mature and prosperous products.

CBD industry is destined to be accompanied by regulation and litigation

China also has the Chinese Medicine Association. According to the importance of Chinese medicine in China, the status of the Chinese Medicine Association should be much higher than that of the American Herbal Products Association. However, the Chinese Medicine Association has not yet had any connection with hemp and CBD, but the Narcotics Association has established an industrial hemp branch. Moreover, the China Traditional Chinese Medicine Association has not been lucky in the past two years, and may avoid hemp and CBD.

“Awarded Scandal” event

On December 21, 2019, at the “2019 China Traditional Chinese Medicine Innovation and Development Forum and the “China Traditional Chinese Medicine Corporate Social Responsibility Report” Conference” hosted by the China Association of Chinese Materia Medica, Hongmao Pharmaceutical was awarded the “2018 Social Responsibility Star Enterprise” Honorary title, Bao Dongqi, vice president of Hongmao Pharmaceutical, won the “2018 Annual Person of Social Responsibility Award”.

Chinese medicine company Buchang Pharmaceutical is also among them. A “good news” issued by Buchang Pharmaceuticals on December 23 said: “In view of its outstanding contributions to the practice of public welfare and the fulfillment of social responsibility, Buchang Pharmaceuticals was awarded the title of Social Responsibility Star Enterprise in China’s Traditional Chinese Medicine Industry, and President Zhao Chao was honored. ‘2018 China’s Traditional Chinese Medicine Industry Social Responsibility Person of the Year’.

“Violation Commendation” Incident

On January 20, 2020, the Ministry of Civil Affairs announced that due to the violations of the China Association of Traditional Chinese Medicine in the process of commending Hongmao Pharmaceutical and other companies, the Ministry of Civil Affairs recently issued a warning and imposed a confiscation of 207,29 million of the illegal proceeds. Punishment.

On December 21, 2019, the China Association of Chinese Materia Medica held the China Traditional Chinese Medicine Innovation and Development Forum and the “Report” press conference. During the conference, the association awarded Hongmao Pharmaceutical and other 20 companies the honorary title of “2018 China’s Traditional Chinese Medicine Industry Social Responsibility Star Enterprise”, and awarded 19 relevant heads of enterprises the honor of “2018 China’s Traditional Chinese Medicine Industry Social Responsibility Person of the Year”.

After investigation, the China Traditional Chinese Medicine Association collected a total of 849,000 yuan in this event, spent 641,700 yuan, and illegally earned 207,29 million yuan. At the same time, this commendation did not set the evaluation criteria and selection procedures. Only based on the relevant enterprise conditions stated in the “Report”, Zhonghongxing Company put forward the list of awards, and issued award certificates and plaques in the name of China Association of Chinese Medicines. On December 26, 2019, the association issued a letter of apology to the public on its website, announcing the withdrawal of this commendation and withdrawing all honor certificates and plaques issued.

The Ministry of Civil Affairs stated that the above-mentioned actions of the China Association of Traditional Chinese Medicine violated the relevant provisions of the “Interim Regulations on the Management of Social Organization Evaluation and Recognition Activities”. In accordance with the “Regulations on the Registration and Management of Social Organizations” and the “Administrative Measures on Credit Information of Social Organizations”, the Ministry of Civil Affairs issued a warning to the China Association of Traditional Chinese Medicine and imposed an administrative penalty of confiscation of illegal income of 207.29 million yuan, and included it in the list of abnormal social organization activities .

Downgrade penalty

On September 9, 2020, the Ministry of Civil Affairs website issued the “Announcement of the Ministry of Civil Affairs on Lowering the Evaluation Level of 23 Social Organizations”, which included the China Traditional Chinese Medicine Association, which was controversial last year for commending companies such as Hongmao Pharmaceutical.

“In view of the fact that the China Association of Traditional Chinese Medicine has basically passed the annual inspection for two consecutive years, and at the same time it has been warned by the Ministry of Civil Affairs and imposed an administrative penalty of confiscation of illegal income, it is now decided to reduce the assessment level of the China Association of Traditional Chinese Medicine from 4A to 2A.” Among social organizations, the China Traditional Chinese Medicine Association became the only social organization that was downgraded by two levels.

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