Cannabis in the Beauty and Wellness Industry: Regulations and Best Practices

Cannabis is trending in the beauty and wellness industry.  More and more companies are infusing hempseed oil and CBD derived from hemp in salves, lotions, creams, oils, extracts, and lip balms, among other products.  Although the industry is taking off, the legal framework lags behind the expansion of the industry and broad acceptance of consumers to purchase these products.  This primer provides a 101 on the current state of the regulatory agency, applicable laws, and best practices as it relates to the beauty and wellness industry.

Federal Agencies That Regulate the Beauty and Wellness Industry

The beauty and wellness industry is primarily regulated by the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC).

The FDA is tasked with protecting the public health by ensuring the safety, efficacy, and security of the nation’s food supply, cosmetics, drugs, etc.  To date, the FDA has not approved marijuana as a safe and effective drug for any indication.  However, the FDA has approved some drugs containing synthetic versions of marijuana substances and cannabis.

The FTC is tasked with the promotion of consumer protection (including regulating advertising and marketing of consumer products) and elimination and prevention of anticompetitive business practices.  There is no action on cannabis or its derivatives to date.  The FTC has been silent on that issue and has not given any guidance or taken any action as to cannabis consumer products.

Relevant Regulations for Cannabis Products

The Controlled Substances Act (CSA) is a federal law that criminalizes the distribution, sale, possession, and use of marijuana.  Marijuana is designated as a Schedule I drug, which incurs the most severe penalties.  Recently, there has been an emphasis on de-scheduling marijuana (i.e., taking it out of Schedule I).  While marijuana is illegal, extracts and byproducts from the cannabis plant, such as sterilized hempseeds, hempseed oil, and fibers, are legal.

The Agricultural Act of 2014 (the Farm Bill) is a federal law that removed federal restrictions aimed at growing industrial hemp.  It provides an explicit definition for industrial hemp:  Cannabis sativa L., and any part of such plant, whether growing or not, that has less than 0.3 percent THC concentration on a dry weight basis.  The Farm Bill gives states the ability to pass laws permitting hemp cultivation.  The Farm Bill also created pilot research programs to study the benefits of cultivating hemp in the United States.  In 2017 estimated sales of U.S. hemp reached approximately $600 million in annual sales.  Production in 2017 grew to nearly 140% of 2016 production.  While the Farm Bill is economically successful, appropriations for the 2014 Farm Bill expired on September 30, 2018.

The Hemp Farming Act (the 2018 Hemp Bill) is part of a larger omnibus farm bill that would legalize hemp and its byproducts by removing Cannabis sativa L., classified as “hemp,” from Schedule I controlled substances.  However, marijuana would remain a Schedule I drug.  The 2018 Hemp Bill is supported by Democrats and Republicans.  The bill is pending in Congress, and although its passage is likely, it will probably be delayed due to midterm elections.

The Food, Drug, and Cosmetic Act (FDCA) gives the FDA the authority to promote and protect the public health by assuring the safety, effectiveness, and security of human and veterinary drugs, vaccines, and other biological products for human use, and medical devices, among other things.  The FDA is also responsible for regulating drugs, food, cosmetics, and dietary supplements.

Only FDA-approved products may make medical claims, and those claims must be consistent with FDA-approved labeling and give fair balance to risk information.  The FDA focuses its enforcement on products nationwide making egregious health claims, including products alleged to contain CBD.  Because CBD is still a Schedule I drug, it is regulated by the FDA as a drug and must meet strict labeling and advertising requirements.  There have been numerous warning letters to companies that are illegally selling products online that contain CBD and claim to prevent, diagnose, treat, or cure cancer, because their claims are unsubstantiated.  The FDA’s warning letters for CBD-related products can be found here.

However, the FDA has approved three drugs that use synthetic cannabinoids:  Marinol and Syndros (which include synthetic THD) to treat anorexia associated with weight loss in patients with AIDS, Cesamet (which includes synthetic nabilone) to treat nausea and vomiting associated with chemotherapy.  In June 2018, the FDA approved Epidiolex (which includes naturally extracted CBD) to be used in the treatment of rare forms of epilepsy.  The FDA’s approval of Epidiolex marks the first FDA-approved drug that contains a purified drug substance derived from marijuana.  The FDA’s press release on Epidiolex can be found here.

The Federal Trade Commission Act gives the FTC the authority to regulate and prevent unfair methods of competition and unfair or deceptive business practices in interstate commerce.  Consumer products must be properly labeled, and claims related to the benefits of those products must be truthful and clear and conspicuous to the average consumer.  However, the FTC has yet to issue any formal guidance on marijuana and related businesses.  While the FTC has not issued explicit guidance for health and beauty products containing cannabis derivatives, it is important that the labeling be accurate as to the ingredients, and any claims that are made in connection with the products must be substantiated.

State regulations.  States have also legalized the cultivation and use of cannabis and its derivatives.  Medical marijuana is legal in at least 29 states and DC, and recreational marijuana is legal in at least 9 states and DC.  Hemp cultivation is legal in at least 35 states.  CBD derived from marijuana is legal in DC and the states that have also legalized recreational use of marijuana.

Since 2013, the federal government has allowed actions by the states in the legalization of the cultivation and use of marijuana and its related products for all purposes.  This has resulted in a lack of clarity in understanding the parameters of what is and is not legal under state and federal regulations.

Best Practices for Companies Selling Cannabis Beauty and Wellness Products

Beauty and wellness products that contain cannabis derivatives that are hemp-based and have no or low amounts of THC can be legally sold.  Because regulatory scheme is still in flux, there is a lack of clarity about how regulatory agencies will enforce laws against companies selling CBD-based beauty and wellness products. However, there are some best practices companies can take to avoid regulatory pitfalls:

• Stay educated. Monitor the changing legal landscape on the federal and state level.
• Be truthful and accurate. Ensure that the labeling and advertisements associated with the products are true and accurate.  For example, be clear on product packaging as to whether the ingredients contain hempseed oil or CBD derived from hemp.
• Be able to substantiate your claims. Don’t make claims you cannot substantiate and don’t make health benefit claims where the actual benefits of the products are still unknown.
• Be transparent. Educate customers on the website or product packaging by including information about the source of the products’ ingredients, the manufacturing process, and legal status of the ingredients.
• Be diligent. Consider testing the products you are selling yourself instead of relying on other third parties’ potentially inaccurate tests.

If you have any questions about this post or any other related matters, please feel free to contact our Cannabis Law Practice Group.