If you follow this column and keep a close eye on the cannabidiol (CBD) industry, you know that the FDA deems the sale and marketing of CBD-infused dietary supplements unlawful. This rationale stems from an exclusion clause in the definition of “dietary supplement” under the Food, Drug and Cosmetic Act (FDCA) that generally disallows the use of an FDA-approved “drug” as a dietary supplement (the Drug Exclusion Rule). Specifically, the Drug Exclusion Rule provides that an article cannot be marketed as a dietary supplement if it was investigated or approved as a drug before the article was marketed as a dietary supplement (or food). Consequently, because CBD was investigated and approved as a new drug ingredient — Epidiolex — before CBD was marketed as a dietary supplement, the sale and marketing of these products violates the FDCA.
Yet, despite the FDA’s position, a growing number of CBD stakeholders have been arguing that the Drug Exclusion Rule does not apply to their CBD products sold and marketed as dietary supplements because they contain full- or broad-spectrum hemp extract, as opposed to CBD isolate, which is the substance that was approved in Epidiolex.
This distinction can be linked to a 2001 court decision, Pharmanex, Inc. v. Shalala, which pertained to the status of lovastatin, a compound found in red yeast rice. Although red yeast rice had been used for healing purposes for thousands of years, the isolated compound was approved by the FDA as a drug ingredient in the treatment of cholesterol.
Following the approval of lovastatin as a drug ingredient, the FDA challenged the use of this substance in a dietary supplement and prevailed. The court held that the lovastatin found in the dietary supplement was not in its natural form because its manufacturer deliberately selected and used a method to produce specific levels of lovastatin that were greater than those naturally present in red yeast rice. In addition, the court determined that the product sold as a dietary supplement was a drug because it was expressly marketed as the isolated lovastatin compound.
The Pharmanex case could dictate how the FDA treats hemp CBD dietary supplements, specifically full- and broad-spectrum hemp extracts.
Hemp, including full- and broad-spectrum hemp extracts, contains many active compounds, including cannabinoids and terpenes. Hemp can be processed in a number of ways, some of which will isolate those active compounds. The active compounds can be isolated through chemical extraction by removing water, fiber, and other unwanted materials. Alternatively, hemp can be processed without the use of chemicals.
Epidiolex is an example of a CBD isolate. Generally, a CBD isolate contains no other compounds. In turn, full- and broad-spectrum hemp extracts contain a full range of cannabinoids — minus THC in the case of broad-spectrum hemp extract.
Following the reasoning in the Pharmanex case, CBD isolate may be subject to the Drug Exclusion Rule, but processed hemp, such as full- and broad-spectrum hemp extracts, may not. This is because, like red yeast rice, hemp has been consumed as a food and a nutritional supplement for thousands of years. Hemp and full- and broad-spectrum hemp extracts are not the same as a CBD isolate. Like lovastatin occurring in its natural form, hemp and full- and broad-spectrum hemp extracts are not chemically enhanced. However, CBD isolate or processed hemp that contains isolated and increased concentrations of CBD would be comparable to the isolated lovastatin compound in the Pharmanex case, and thus, could only be legally sold as drugs.
The parallels between the Pharmanex case and CBD are hard to ignore. However, while this legal argument has merit, it is purely speculative. Indeed, to my knowledge, no CBD company has yet brought forth this legal theory to challenge the FDA’s position in a court of law.
Nevertheless, it is worth mentioning that in its statement released shortly after the enactment of the Agriculture Improvement Act of 2018 (the 2018 Farm Bill), the FDA suggested that it may consider such argument against the application of the Drug Exclusion Rule to full- and broad-spectrum hemp extracts in regulating CBD products:
[P]athways remain available for the FDA to consider whether there are circumstances in which certain cannabis-derived compounds might be permitted in a food or dietary supplement. Although such products are generally prohibited to be introduced in interstate commerce, the FDA has authority to issue a regulation allowing the use of a pharmaceutical ingredient in a food or dietary supplement. We are taking new steps to evaluate whether we should pursue such a process. (Emphasis added).
Indeed, as the agency explained in its 2016 draft guidance for new dietary ingredient notifications, the FDA Secretary has the authority to override the Drug Exclusion Rule by issuing “a regulation, after notice and comment, finding that the ingredient, when used as or in a dietary supplement, would be lawful under [the FDCA].”
Moreover, the recent introduction in Congress of H.R. 5587, which would exempt hemp CBD from the FDCA’s Drug Exclusion Rule, thereby permitting the sale of hemp CBD as a dietary supplement in interstate commerce, suggests that lawmakers are not pleased with the agency’s current treatment of hemp CBD products and support the industry’s position that CBD products be regulated as dietary supplements.
Only time will tell how the FDA will ultimately regulate CBD products, but one thing seems certain: if the FDA opts to maintain a strong stance and treat all CBD dietary supplements as “drugs,” then the parallels between red yeast rice and hemp CBD will likely be litigated to settle this issue.
Nathalie Bougenies practices in the Portland office of Harris Bricken and was named a “2019 Rising Star” by Super Lawyers Magazine, an honor bestowed on only 2.5% of eligible Oregon attorneys. Nathalie’s practice focuses on the regulatory framework of hemp-derived CBD (“hemp CBD”) products. She is an authority on FDA enforcement, Food, Drug & Cosmetic Act and other laws and regulations surrounding hemp and hemp CBD products. She also advises domestic and international clients on the sale, distribution, marketing, labeling, importation and exportation of these products. Nathalie frequently speaks on these issues and has made national media appearances, including on NPR’s Marketplace. Nathalie is also a regular contributor to her firm’s Canna Law Blog.
Jordan Rothman is a partner of 
