The Path to Greenlighting CBD

Last week, the industry was energized by the Drug Enforcement Administration’s order placing certain drugs containing cannabidiol, or CBD, in Schedule V of the Controlled Substances Act. This marks the first time in history that the DEA has removed any type of cannabis from Schedule I, and clears the way for the sale of the first non-synthetic, cannabis-derived medicine to win federal approval.

Under the CSA, CBD remains a Schedule I substance, which means that it is not considered to have any currently accepted medical use. On June 25, 2018, the Food and Drug Administration announced that it approved the drug Epidiolex for the treatment of seizures in connection with epilepsy. Epidiolex is an oral solution that contains CBD, and is also the first FDA-approved drug derived directly from the cannabis plant. According to the DEA order, because the drug was recently approved by the FDA, it is now considered to have an accepted medical use. Therefore, it no longer meets the criteria for placement in Schedule I. The shift in policy means that Epidiolex may now be prescribed by doctors and accessed by patients through traditional pharmaceutical channels, rather than through a marijuana dispensary or compassion center.

While many in the CBD industry cheered the DEA’s announcement, the final order should not be misinterpreted as a rescheduling of the CBD compound itself. The order applies only to “FDA-approved drugs that contain CBD derived from cannabis and no more than 0.1 percent of THC.” At the moment, only Epidiolex meets this criteria. However, other CBD formulations could qualify under this definition in the future. In fact, several drugs containing CDB are already on stand-by for FDA consideration. It is important to note that the order also does not apply to hemp-derived CBD products—a fact that frustrated many who thought that the DEA would simply reschedule CBD without the precondition of FDA approval.

Nevertheless, the DEA’s announcement arrived at an auspicious moment for the legalization movement: more states are poised to legalize adult-use and medical markets, including four ballot initiatives during next month’s elections. While the 2018 Farm Bill (which includes the Hemp Farming Act) remains tied up in negotiations, if it becomes law, it will open the door to a hemp-derived CBD market estimated to reach $2 billion by 2020.

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Burns & Levinson is again partnering with Viridian Capital Advisors to host the second annual State of the Cannabis Industry Conference: Growth Opportunities for Professionals, Operators and Investors. This exclusive industry event – taking place on October 4th at the Hilton Boston Dedham – will explore opportunities in the rapidly growing, multi-billion-dollar cannabis industry, and investment considerations for professional investors. Register and reserve your spot today!