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COWEN COLLABORATIVE INSIGHTS February 25, 2019 Regulatory Considerations For CBD (Assaraf - Washington Research Group) 2 Any portion of this report prepared by a 2018 Farm Bill member of Cowen Washington Research — The Agricultural Improvement Act of 2018 (also known as the 2018 Farm Bill) was Group is intended as commentary on _ signed into law by President Donald Trump on Dec. 20, 2018. The main CBD-related political, economic or market conditions — changes in the law are that it: 1) declassifies industrial hemp as a Schedule | substance and is notintendedasaresearchreportas — under the Controlled Substances Act, 2) shifts regulatory authority over hemp from the defined by applicable regulation. — Drug Enforcement Administration to the Department of Agriculture, and 3) provides autonomy for states to regulate the industry. However, the 2018 Farm bill does not change the FDA's oversight authority over CBD products intended for human consumption. The statutory language emphasizes that “nothing in this subtitle shall affect or modify .. the authority of the Commissioner of Food and Drugs ... under the Federal Food, Drug, and Cosmetic Act [FDCA]... to promulgate Federal regulations and guidelines that relate to the production of hemp.” FDA Implications FDA Commissioner Scott Gottlieb issued a statement and FAQ immediately following the signing of the 2018 Farm Bill, essentially reminding CBD manufacturers of FDA’s continued regulatory authority over CBD products. On the positive side, Gottlieb indicated that the FDA is open to engaging with industry players early to clarify uncertainty and to help develop a clear and consistent pathway for bringing legal CBD products to market. To that end, the FDA intends to hold a public meeting “in the near future” to gather stakeholder input on CBD products, including the perspectives of consumers and manufacturers. The FDA will use this meeting to inform an “efficient regulatory framework for allowing product developers that meet the requirements under [FDA] authorities to lawfully market these types of products." On the other hand, Commissioner Gottlieb expressed concern over the proliferation of CBD products making drug claims. According to Gottlieb, “the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce. This is the same standard to which we hold any product marketed as a drug for human or animal use. Cannabis and cannabis-derived products claiming in their marketing and promotional materials that they're intended for use in the diagnosis, cure, mitigation, treatment, or prevention of diseases (such as cancer, Alzheimer’s disease, psychiatric disorders and diabetes) are considered new drugs or new animal drugs and must go through the FDA drug approval process for human or animal use before they are marketed in the U.S." Even before the passage of the Farm Bill, the FDA has kept a close watch on certain health claims being made by CBD manufacturers. A simple web search on the FDA's website turns up dozens of previous warning letters to CBD manufacturers making such claims (see below for links to FDA warning letters). According to Gottlieb, “the FDA will continue to evaluate and take action against products that are being unlawfully marketed and create risks for consumers.” In his statement, Gottlieb also presented the following warning for CBD additives to food and beverages: “Additionally, it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary COWEN.COM 75 HOUSE_OVERSIGHT_024891