Natural Products Insider

JAN-FEB 2019

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4 INSIDER January/February 2019 In the News America's hemp industry has been given the go-ahead to farm and sell products in interstate commerce without fear of criminal prosecution for selling a controlled substance. President Donald Trump in December 2018 signed into law a sweeping Farm Bill that excluded hemp from the Controlled Substances Act (CSA) and the Drug Enforcement Administration's (DEA) reach. The Farm Bill is expected to fuel seismic shifts in the hemp market, attracting institutional investors and payment processors, authorizing research, creating additional incentives to refi ne testing and quality standards, and spurring development of new products. Most of all, it will free the plant from cultural bondage. "Now that the realities of cannabis are coming to light, we will fi nally be able to unleash the full potential of hemp here in the United States," said Derek Riedle, publisher of Civilized, a digital media company in the cannabis space. "What's happening with the Farm Bill is exciting. Hemp is incredibly versatile, and for so long it's had a bad reputation because of the stigma around marijuana. For decades, the government hasn't been able to distinguish between the two plants—it's like having a twin brother who breaks the rules, but you get in trouble, too." Among the benefi ciaries of the 2018 Farm Bill: marketers of hemp-derived cannabidiol (CBD) in conventional foods, cosmetics and dietary supplements. Even without the groundbreaking legislation, in 2018, U.S. CBD sales grew by more than 80 percent, reaching an estimated US$590 million, according to the Brightfi eld Group. Already, an estimated 750 brands are in the hemp-derived CBD business, according to a market assessment by Colorado-based brand Functional Remedies. "This is a watershed moment for CBD in the United States," said Bethany Gomez, director of research at the Brightfi eld Group, whose estimates of a $22 billion CBD market by 2022 represents the most optimistic projection of the category's fortunes. "CBD [will] make its way to the shelves of larger-scale, mainstream distribution channels and pave the way for the large mainstream consumer packaged goods [CPG] companies in industries like drinks, beauty, pet, skin care and tobacco to develop CBD products and capitalize on this emerging industry." "What would be the result?" from passage of the Farm Bill, asked Patrick Rea, co-founder and CEO of CanopyBoulder, a seed-stage business accelerator and venture fund for ancillary cannabis startups, in an interview conducted in late October 2018. "Institutional capital that has stayed away from hemp, CBD and cannabis would be unleashed." Added Rea: "Every step of the way, where there's a signal that we're moving toward federal legalization, the amount of capital fl owing into the industry grows, and the valuations of the companies grow." Lex Pelger is head of education and outreach at Bluebird Botanicals, a marketer of CBD oil. In an interview before the Farm Bill was passed by Congress and signed into law, he weighed in on the bill's consequences for the natural retail market. "It's going to very much sweeten the investment for the industry because the idea is that a lot of the major players in the natural retail market are waiting for this fi nal confi rmation before they pull the trigger," he said. Pelger suggested "major retailers already know who they want to be buying from." Other supplement companies also are expected to enter the CBD market now that federal law clearly distinguishes marijuana from hemp. Said Michael McGuffi n, president of the American Herbal Products Association (AHPA): "On Jan. 1 [2019], you'll see old-line supplement companies introduce hemp and CBD. It's an important step forward. We want some of those herb brands that we know make high-quality product to get out there and let consumers know there's a high-quality product." Despite the hemp industry's exuberance, marketers of CBD still face formidable roadblocks: FDA and its interpretation of the Federal Food, Drug & Cosmetic Act (FD&C). Thanks to clinical trials conducted by GW Pharmaceuticals PLC, whose drug Epidiolex has been approved by FDA to treat certain forms of epilepsy, FDA has asserted CBD cannot be sold in conventional foods and dietary supplements. In December, after Trump signed the Farm Bill, FDA's top offi cial said it remains unlawful to market CBD or delta-9- tetrahydrocannabinol (THC) in dietary supplements or introduce food to which the cannabis-based compounds have been added into interstate commerce, even if the substances are derived from hemp. But FDA Commissioner Scott Gottlieb, M.D., disclosed his agency is considering whether to pursue the issuance of a regulation that would authorize the use of CBD in foods and dietary supplements. It's a legal pathway never invoked since the passage of the Dietary Supplement Health and Education Act (DSHEA) almost 25 years ago, but at least one trade organization—AHPA—has been discussing it publicly for several months as a potential option for the CBD market. Gottlieb's statement "contained, for the very fi rst time, new hope for a new path toward FDA's acceptance of hemp-derived CBD as a food additive or nutritional supplement," the U.S. Hemp Roundtable noted in an email to its members. Meanwhile, the hemp industry is bullish about its prospects. "The future is bright as hemp solidifi es itself as a legitimate product at long last— liberated from the restrictions of the Controlled Substances Act," said Dylan Summers, director of government affairs and compliance at Lazarus Naturals, a hemp-derived CBD manufacturer. "Although challenges will arise as FDA navigates just how to regulate hemp products and hemp-derived cannabinoids, our endeavor will remain to pave the way for testing and quality standards throughout the industry." Hemp Industry Feeling Optimistic After Trump Signs 2018 Farm Bill by Josh Long and Todd Runestad

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