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What Can Cannabis Businesses Learn from Curaleaf?


October 2, 2019
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Curaleaf Holdings, One of the Largest Cannabis Companies in the U.S., Recently Found Itself on the Receiving End of a Stern Warning from the U.S. Food and Drug Administration (FDA) 

Curaleaf Holdings (Curaleaf), one of the largest cannabis companies in the country, recently found itself on the receiving end of a stern warning from the U.S. Food and Drug Administration (FDA). The FDA action highlights that businesses in the cannabis industry must be mindful about how they tout their products and that making unsubstantiated claims can lead to costly legal headaches.

What Can Cannabis Businesses Learn from Curaleaf?

FDA Warning Letter

CBD products have flooded the market in recent years. While regulators like the FDA have largely taken a hands-off approach to the sale of such products, they are beginning to take a close look at how they are marketed, particularly with respect to health claims.

The FDA warning letter accuses Curaleaf of making unsubstantiated health claims about their cannabidiol (CBD) products and misbranding them as drugs. According to the FDA,  Curaleaf’s “CBD Lotion,” “CBD Pain-Relief Patch,” “CBD Tincture,” and “CBD Disposable Vape Pen” products are drugs under Federal Food, Drug, and Cosmetic Act (FD&C Act) because they are “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.” The claims cited in the FDA letter include:

  • “CBD has also been shown to be effective in treating Parkinson’s disease.”
  • “CBD has been linked to the effective treatment of Alzheimer’s disease . . ..”
  • “CBD is being adopted more and more as a natural alternative to pharmaceutical-grade treatments for depression and anxiety.”
  • “CBD can also be used in conjunction with opioid medications, and a number of studies have demonstrated that CBD can, in fact, reduce the severity of opioid-related withdrawal and lessen the buildup of tolerance.”
  • “CBD has been demonstrated to have properties that counteract the growth of the spread of cancer.”
  • “CBD was effective in killing human breast cancer cells.”
  • “Heart disease is one of the leading causes of death in the United States each year, and CBD does a number of things to deter it. The two most important of these are the ability to lower blood pressure, and the ability to promote good cholesterol and lower bad cholesterol.”

As the FDA states in its warning letter, Curaleaf’s CBD products are not generally recognized as safe and effective for the above-referenced uses and, therefore, are considered “new drugs” under the FD&C Act. This means that they may not be legally introduced into interstate commerce without prior approval from the FDA.

Dietary Supplements

The FDA letter also accuses Curaleaf of misbranding its CBD products as dietary supplements. In support, it cites statements on the company’s website, such as: “Cannabidiol (CBD) is a natural constituent of industrial hemp and is a dietary supplement.” However, as the agency explains, the FDA has concluded based on available evidence that CBD products are excluded from the FD&C Act’s dietary supplement definition.

CBD Pet Products

The FDA’s warning letter also addresses CBD products geared towards pets. As detailed by the FDA, Curaleaf claims that its CBD oil can “Decrease autonomic arousal symptoms like fast/irregular heartbeat, panting, and general distressed feelings” and “Prevent the longer-term health effects of anxiety,” among other claims.

Because the Curaleaf’s products are intended to mitigate, treat, or prevent disease in animals, the FDA considers them drugs. To be legally marketed, a new animal drug must have an approved new animal drug application, conditionally approved new animal drug application, or index listing under the FD&C Act. Because Curaleaf’s products did not satisfy these criteria, the FDA considers them unsafe and adulterated and, thus, marketing them violated the FD&C Act.

Potential Legal Liability for Unsubstantiated Claims

Curaleaf has removed the health claims at issue from its website and social media accounts. However, the company may still face liability.

While the FD&C Act does not include a private right of action, an FDA warning letter can lead to related legal action, including lawsuits under the federal Lanham Act and state consumer protection laws for false and misleading advertising. In the case of Curaleaf, it is facing a lawsuit alleging that the company violated Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5, by knowingly making materially false and misleading statements to the investing public that artificially inflated the price of Curaleaf stock.

Key Lesson for Cannabis Companies

While the FDA is working on new guidelines for cannabis products, it also appears to be stepping up its scrutiny of health claims about CBD. Before making any claims about the therapeutic value of your CBD products, it is imperative to consult with an experienced cannabis attorney who understands how to navigate the complex and rapidly evolving regulatory landscape.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, at 201-806-3364.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.