California Finally Breaks From FDA On CBD: Governor Newsom Signs AB-45

On October 6, 2021, California Governor Gavin Newsom signed AB-45, creating an explicit framework for the manufacture and sale of hemp-derivative products in the state of California.

While hemp was legalized at the federal level with the passage of the 2018 Farm Bill, both federal and state agencies have been slow to clarify the kinds of products to which hemp-derivatives like CBD may be added. In particular, the U.S. Food and Drug Administration (FDA) still has not published any regulatory guidance since December 2018, when it declared that notwithstanding the passage of the Farm Bill it still considered CBD an illegal adulterant under the Federal Food Drug and Cosmetic Act.

Many states have simply followed the FDA’s lead on this issue since the passage of the Farm Bill. In California, the Sherman Food, Drug and Cosmetic Law previously prohibited the sale of hemp-infused foods and cosmetics because they met the definition of an adulterated product. AB-45 changes that by amending the Sherman Food, Drug, and Cosmetic Law so that dietary supplements, food, beverages, cosmetics, and pet food are not considered adulterated solely because of the inclusion of hemp or its derivatives. The bill also establishes registration requirements for hemp product manufacturers, provides substantive rules that govern the packaging, labeling, and testing of finished hemp products, and prohibits the manufacture and sale of inhalable hemp products in the Golden State until a tax on such products is enacted. The bill also addresses the inclusion of Delta-8 THC and “other comparable cannabinoids” in finished hemp products. These and other key provisions of AB-45 are detailed herein.

Regulation of Hemp-Infused Products

AB-45 creates standards for hemp used in the manufacturing of food and cosmetic products. For example, a manufacturer must be able to demonstrate that the hemp used in its products comes from a state or country that has an approved industrial hemp program that inspects or regulates hemp to ensure safety for consumption and was grown in accordance with the governing laws of the applicable state or country of origin.

AB-45 also provides that the California Department of Public Health (“the Department”) may impose additional regulations on the manufacture and sale of hemp products. In particular, the Department may determine maximum serving sizes for hemp-derived cannabinoids, hemp extract and derivative products; active cannabinoid concentration per serving size; the number of servings per container; and other requirements for foods and beverages. It may also impose an age requirement for the sale of certain industrial hemp products upon a finding of a threat to public health, as well as regulate and restrict the cap on extract and the amount of total THC concentration at the product level based on the product form, volume, number of servings, ratio of cannabinoids to THC in the product, or other factors, as the Department deems necessary.

Retail Sales

The passage of AB-45 authorizes the sale of hemp-derived products in California retail outlets. With respect to sales in cannabis dispensaries, on or before July 1, 2022, the Department must prepare a report to the Governor and Legislature detailing the necessary steps to allow for the incorporation of hemp cannabinoids into the cannabis supply chain. This report will address the incorporation of hemp cannabinoids into manufactured cannabis products.

CBD-Infused Food and Beverages

The Sherman Food, Drug, and Cosmetic Law defines an adulterated food or cosmetic product as one that bears or contains any added poisonous or deleterious substance that is unsafe.^[1] In January 2021, the Department declared CBD to be an unsafe additive because it is not approved by the FDA and is an ingredient in a FDA-approved pharmaceutical (Epidiolex).^[2] Put simply, AB-45 overrides that determination by expressly exempting CBD from the definition of “THC.” California law now permits the addition of hemp and its derivatives, including CBD, into food, dietary supplements, beverages, and pet food, so long as such products comport with AB-45, including the requirement that any food and beverage products are prepackaged and shelf-stable, and other applicable laws and regulations. Notwithstanding, AB-45 prohibits the inclusion of hemp derivatives in medical devices, prescription drugs, products containing nicotine or tobacco, and alcoholic beverages.

Though AB-45 legalizes the manufacture and sale of CBD-infused food, beverage, and cosmetic products in California, CBD-infused products are still considered adulterated and illegal by the FDA as a matter of federal law.

Inhalable Hemp Products

AB-45 prohibits the manufacture of inhalable industrial hemp products for the purpose of sale in California unless and until the Legislature establishes a tax structure on such products. The enactment of a tax for inhalable hemp products will trigger further regulations contained in AB-45 governing inhalable hemp products, including that inhalable products must not be sold to consumers under the age of 21 and must not contain flavorings other than natural terpenes and other substances that the Department deems dangerous including, polyethylene glycol (PEG), vitamin E acetate, medium chain triglycerides (MCT oil), and squalene or squalane.

AB-45 does not prohibit California manufacturers from producing inhalable hemp products within the state for the sole purpose of sale in other states, provided that the laws of states in which such products are directed permit them.

Delta-8 and Other “Comparable Cannabinoids”

Delta-8 THC, as well as THCA, Delta-9 and Delta-10 THC, are included within the statutory definition of “THC” or “THC or comparable cannabinoid.” AB-45 excludes products containing THC isolate from the definition of “industrial hemp.” The bill also requires all industrial hemp products to have an accompanying certificate of analysis from an independent testing laboratory confirming that the total THC^[3] concentration does not exceed 0.3% and was tested for all hemp derivatives identified on the product label or in associated advertising. As finished hemp products may not contain THC isolate, or more than 0.3% total THC, this effectively renders unlawful the manufacture or sale of products that contain only compliant levels of Delta-9 THC but increased levels of Delta-8 and other comparable cannabinoids. In other words, a product containing more than 0.3% THC of any variety cannot be sold in compliance with AB-45. To be clear, AB-45 exempts CBD from the definition of THC, thus CBD is not subject to the same concentration limitations.

Minor cannabinoids like Delta-8 have gained popularity among consumers, but are receiving increasing attention from regulatory agencies, including the FDA and CDC, which recently issued warning statements concerning Delta-8. California regulators have made it clear that products containing more than 0.3% of Delta-8 THC (or any other comparable THC cannabinoid) cannot be sold outside of the regulated cannabis market.

However, the Department reserves in AB-45 the right to exclude from the definition of “THC or comparable cannabinoid” one or more isomers of THC if it determines that the isomer does not cause intoxication. While making this determination, the Department will consider scientific evidence showing the pharmacologic effects of the THC or cannabinoid in humans and other animals, if such evidence is available.

Registration with the State Department of Public Health

AB-45 requires manufacturers of hemp infused products to register with the Department, just as they would if they were manufacturing any other food, cosmetic, or dietary supplement. Manufacturers producing CBD-infused pet foods must obtain the required licenses for manufacturing pet foods. Out-of-state manufacturers seeking to import raw hemp extract into California must also register with the Department.

Marketing, Packaging, and Labeling

AB-45 prohibits hemp manufacturers, distributors, and sellers of industrial hemp products from making any “health-related statements” about industrial hemp products. Health-related statements are those that are untrue in any particular matter as to the health effects of consuming products containing industrial hemp, including statements of a curative or therapeutic nature that, expressly or impliedly, suggest a relationship between the consumption of a hemp product and health benefits or effects on health. Of course, this is an area of FDA enforcement as well. Even after AB-45, manufacturers, distributors and retailers of hemp-derived CBD products should avoid making any unsubstantiated health claims regarding CBD-infused products.

Additionally, the bill prohibits marketing to children and people who are pregnant or breastfeeding. Further, advertising in any form of media may only be displayed where 70% of the audience is reasonably expected to be 18 years of age or older.

The bill creates requirements for the information that must be displayed on industrial hemp product labels. An industrial hemp product that is a food, beverage, or dietary must include the following information:

• A label, scannable barcode, internet website, or quick response (QR) code linked to the certificate of analysis of the final form product batch by an independent testing laboratory that provides all of the following information:
  • The product name;
  • The name of the product’s manufacturer, packer, or distributor, and their address and telephone number;
  • The batch number, which matches the batch number on the product;
  • The concentration of cannabinoids present in the product batch, including, at minimum, total THC and any marketed cannabinoids or ingredient, as required by the department in regulation; and
  • The levels within the product batch of contaminants.
• The product expiration or best by date, if applicable.
• A statement indicating that children or those who are pregnant or breastfeeding should consult avoid using the product prior to consulting with a health care professional before using the product. about its safety.
• A statement that products containing cannabinoids should be kept out of reach of children.
• The following statement, “THE FDA HAS NOT EVALUATED THIS PRODUCT FOR SAFETY OR EFFICACY.”

An industrial hemp product that is a cosmetic must include the following information:

• A label, scannable barcode, internet website, or quick response (QR) code linked to the certificate of analysis of the final form extract or the final form product batch by an independent testing laboratory that provides all of the following information:
  • The product name;
  • The name of the product’s manufacturer, packer, or distributor, and their address and telephone number;
  • The batch number, which matches the batch number on the product;
  • The concentration of cannabinoids present in the product batch, including, at minimum, total THC and any marketed cannabinoids; and
  • The levels within the product batch of contaminants.
• The product expiration or best by date, if applicable.
• The following statement, “THE FDA HAS NOT EVALUATED THIS PRODUCT FOR SAFETY OR EFFICACY.”

The labeling requirements of AB-45 will apply to products manufactured 90 days or more after the enactment of the bill.

Testing

All finished hemp products must be tested in raw extract final form by an independent testing laboratory, prior to being incorporated into a product. The certificate of analysis from the laboratory must confirm that the hemp used to make the product is from a batch of hemp that was tested by the laboratory, a representative sample of the batch contained a total THC concentration not exceeding 0.3% on a dry-weight basis, and the tested sample of the batch did not contain contaminants that are unsafe for human or animal consumption. AB-45 further stipulates that the testing requirements for hemp contaminant levels will be the same as those for cannabis.

Product batches may be reprocessed or remediated after failed testing but batches may not be distributed or sold unless the reprocessed or remediated batch has been retested and successfully meets all testing requirements. Remediation is not permitted once a product enters the retail market, however.

Enforcement

AB-45 requires a hemp product manufacturer to obtain an industrial hemp enrollment and oversight authorization from the Department. The Department will charge a fee for this authorization which will be deposited in the newly-created Industrial Hemp Enrollment and Oversight Fund. The money in this fund will be used for authorization activities and oversight, inspection, and enforcement activities pursuant to provisions in AB-45. The fees and types of authorizations will be promulgated by the Department after further rulemaking.

The bill further provides that the California Department of Food and Agriculture, State Department of Public Health, and Department of Cannabis Control may work together to facilitate compliance and enforcement against unlicensed manufacturers and hemp products that do not meet applicable requirements, if deemed necessary.

This is not intended to be an exhaustive overview of AB-45. Please reach out to a member of Goodwin’s Cannabis practice with any questions about the requirements of AB-45 and the permissibility of specific products.

Kelsey Middleton was a contributing author to this Client Alert. Additional contributions by Cannabis Legal Intern Zac Weiner.

^[1] HSC 110445 
^[2] CDPH Information on Industrial Hemp (IH) Derivatives Including Cannabidiol (CBD)
^[3] “Total THC” means the sum of THC and THCA.