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    Online Exclusives

    Hemp Industry Experts Call for Unity in Turbulent Years to Come

    Murky regulatory status, competition from synthetic analogues, a global pandemic, and politics will present challenges to the hemp industry.

    Hemp Industry Experts Call for Unity in Turbulent Years to Come
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    By Mike Montemarano, Associate Editor05.26.20
    At the Hemp Collective Summit, which took place virtually this year due to the COVID-19 pandemic, two industry leaders discussed the most beneficial ways in which the industries behind cannabidiol (CBD) and other hemp-derived products should brace themselves for a murky, high-stakes regulatory future.
     
    Since the enactment of the federal 2018 Farm Bill, legislation which allowed hemp farmers to grow and sell hemp-derived materials containing less than 0.3% THC, a patchwork of regulatory matters pertinent to hemp products have been enforced at different levels of discretion by all 50 U.S. states. Investor enthusiasm, consumer demand, and product launches exploded, peaking in 2019.
     
    John Grubb, managing partner at Summit Venture Management, described the hemp/CBD marketplace as adhering to “dog years,” in that the pace of the market dynamics in this arena move about seven times as quickly as those in any other segment of the dietary supplements industry.
     
    In spite of all this, there exists what Grubb described as a “broken link” in the regulatory structure surrounding CBD and hemp products at the federal level. While the 2018 Farm Bill, by all intents and purposes, was supportive by design of these products’ eventual path to market, no federal regulations exist to allow CBD or other hemp extracts to be sold directly as ingestibles (foods, beverages, or dietary supplements), greatly confounding the entire marketplace and consumers clamoring for extracts of the cannabis plant.
     
    “The FDA in its latest report wrote in a tone that left the market unsettled,” said United Natural Products Alliance (UNPA) President Loren Israelsen. He projected that a clear regulatory pathway for CBD supplements and other products to get to market may be as many as two to three years away. “The Farm Bill clearly shows intention to allow the lawful production of hemp to help farmers create a meaningful consumer products base for hemp. Where will these hemp products go if 75% of hemp production is tied into making CBD?”
     
    “The oxygen supply of this industry is diminishing,” Grubb said, after pointing to a number of severe valuation declines and spending cuts experienced by both small CBD businesses and also companies with the greatest amount of seed money and initial investment, largely brought on by the sheer regulatory risk involved in making advances in CBD products. Those getting in at the ground floor are facing a “tremendous amount of downward pressure,” Grubb added.
     
    Not every company that has put investments into CBD on the ground floor will weather the storm created by the uncertainty of the 2018 Farm Bill, but amid an estimated 1,500 to 3,500 brands that do, even the moderate projections for future CBD CAGRs are massive.

    Nonetheless, to see the industry dwindle down in competition would be a “tragedy,” Israelsen said. Further amplifying the difficulty in sustaining business is the COVID-19 pandemic. “COVID-induced sobriety is exacerbating retail challenges and smothering legislative priorities,” Grubb said. “There have been no meetings on The Hill despite many representatives showing sympathy to the industry for the broken link between the Farm Bill and the legalization of ingestible CBD.”
     
    Israelsen believes that, now more than ever, key players and investors in the CBD industry must present a unified front to federal regulators in pursuit of non-dietary ingredient acceptance for full-spectrum and broad spectrum hemp extracts, as well as CBD in dietary supplements, which will likely be the best shot for a clear, legal status on hemp extracts.
     
    NDI Likely to Trump GRAS
    “DSHEA (the Dietary Supplement Health and Education Act of 1994) provides a clear regulatory pathway to allow a substance that is approved as a drug to also be used as a dietary ingredient,” Israelsen said. CBD, as a molecule, has been patented as a drug called Epidiolex, which is used to treat seizures in children with rare, life-threatening disorders. “DSHEA never anticipated that one of these ingredients would be a controlled substance eventually released, which means that we would either need permission by FDA to submit these applications, or request that Congress directs the FDA to receive these NDI applications.”
     
    NDI status seems more achievable for CBD than the alternative GRAS (Generally Recognized As Safe) FDA status, due to the fact that NDIs require manufacturers to abide by maximum dosages made apparent to consumers. FDA will likely be much more resistant to offering CBD a GRAS status due to a number of trials indicating that the substance can cause liver damage in clinical settings, and due to the fact that so little is known about the long-term usage of CBD in high quantities. Dietary supplements are much more likely to be an approved format for CBD delivery than foods, which require all ingredients to have a GRAS status.
     
    “An NDI allows for a maximum, discrete dosage form,” Israelsen said. “It allows for cautionary language and explicit dosing language, and that can’t be done with food products. Foods have to be considered safe in any quantity, and FDA is concerned that a GRAS approach won’t take in the safety considerations involved with foods and beverages oversaturating the amount of allowable CBD and hemp extract constituents.”
     
    Widening the Spectrum
    Additionally, Israelsen said there is a broadening school of thought supporting the pursuit of approval for full- and broad-spectrum hemp extract as opposed to CBD, due to the fact that pharmaceutical companies are attempting to achieve patents on molecular isolates from hemp, and that there is a burgeoning development of synthetic CBD analogues which could achieve patent status through the benefits they provide. Already, isolates of the phytocannabinoids THCB and CBG are being studied for potential health benefits.
     
    “I think the wise choice is to recognize our situation, and leaders must recognize the collective benefits that naturally-derived hemp extract provides. We need order and harmony within this marketplace to police ourselves,” Israelsen said. “Some companies might naturally want to go alone, because the first company to get an NDI might be king of the mountain, and the advantage would be exceptional. I believe there will be multiple winners or no winners; no one individually will be able to convince FDA to give them what I believe will be the most difficult NDI to make.”
     
    Israelsen expressed doubts as to whether CBD could receive NDI designation at this point, now that it has been approved as a drug. For these reasons, he believes the best path forward is to pursue NDIs for full-spectrum hemp extracts, which contain over 120 cannabinoids excluding THC believed to be beneficial in many ways, along with flavonoids and terpenes which have known beneficial properties.
     
    “The FDA is reluctant to approve a dietary ingredient version of a recently-approved drug,” Israelsen said. “There is a broadening school of thought that hemp extract is the most appropriate subject of research, and can offer more product diversity.” Approaching NDI status for the whole plant provides a “richer pool of opportunity,” Israelsen said.
     
    With all of these stipulations in mind, synthetic hemp analogues are further challenging the long-term viability of an already-burdened fledgling market surrounding the herb that has been cultivated for thousands of years.
     
    “Companies are specializing in synthetic copies of cannabinoids,” Israelsen said. “They’ve organized themselves into a group that are also lobbying congress and FDA, and they’re seeking molecular neutrality between natural and synthetic, and are seeking out equal recognition with hemp benefits seen in the Farm Bill. They believe they can produce synthetics more cheaply than hemp-derived products, and have a competitive price advantage, and would like to move against pharmaceutical products to become generic producers.”

    Largely, it appears to most in the industry that synthetic alternatives would negate the incentives provided to hemp farmers, which were essentially the ends of the 2018 Farm Bill. Israelsen said members of Congress have been briefed on this issue, and that some seem intent to protect the naturally-derived hemp extract marketplace.
     
    “Congress will remember what they did in 2018 to help the farmer, and will recognize the existential threat that synthetic cannabinoids place on the industry,” Israelsen said.
     
    Whether any major moves in the political sphere will happen any time soon is another story, given how difficult it is for bills to pass at this time in large part due to the urgency in passing legislation related to COVID-19, and in part due to the politicking that will take place until November involving proponents of the 2018 Farm Bill, including Senate Majority Leader Mitch McConnell.
     
    “It’s exceptionally difficult to project any kind of timing due to COVID and Senator McConnell’s reelection campaign. There are greater electoral politics at play,” Israelsen said. “I believe that if Las Vegas was open right now they wouldn’t be taking bets on this. We have a short and treacherous pathway to protect the potential of this marketplace.”
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