What to Expect From the FDA's CBD Hearing

Clear as mud. That's pretty much the status of cannabidiol (CBD) products in the United States after the 2018 Farm Bill was signed into law in December. Although the bill legalized hemp, it left the details for regulating the industry to the Food and Drug Administration (FDA).

FDA Commissioner Scott Gottlieb quickly expressed concerns about companies making unsubstantiated claims of the health benefits of CBD. He also stressed that any use of hemp-derived CBD in foods or dietary supplements was illegal. However, Gottlieb recognized the need to establish regulations that would provide clarity for companies seeking to market hemp CBD products.

A key first step in setting new CBD regulations will be taken on Friday, May 31, when the FDA will hold a public hearing to obtain input on what its regulatory strategy should address.

Multiple issues

You can count on potential safety issues associated with CBD being a major topic at the FDA hearing. In particular, the agency will listen to any concerns about the levels of CBD, the mode of delivery, and/or the interactions it could have with other substances. But the FDA hopes to hear about any available data that could address some of those concerns, too.

The FDA is also interested in ensuring that any CBD regulations it makes don't negatively impact the development of new drugs based on CBD. Last year, the agency approved the first CBD drug made from cannabis plants -- GW Pharmaceuticals' Epidiolex.

Expect the FDA hearing to delve into some mundane topics including manufacturing and product quality standards. Establishing such standards is an important function for the FDA with prescription drugs, medical devices, foods, and cosmetics.

There are also several marketing issues for CBD products that the FDA needs to resolve. Friday's hearing will likely include plenty of discussion about CBD labeling requirements, especially on foods containing CBD.

Multiple viewpoints

The FDA extended an open invitation to individuals and organizations with an interest in CBD regulations to make formal presentations at the hearing. While the agency only selected some of the applicants to present on Friday, it emphasized that it was "seeking to have a broad representation of ideas and issues presented at the meeting."

The published agenda for the FDA hearing includes time slots for oral comments and formal presentations from a wide range of interested parties. Representatives from the academic community, the agriculture industry, manufacturers, and retailers will participate in the meeting. In addition, healthcare professionals and advocates for consumers, patients, and public safety will be given time to weigh in on the potential CBD regulations.

But the FDA isn't limiting participation to the private sector. The agency also plans to listen to state government officials with interest in shaping the CBD regulations.

Why the FDA hearing is important

There's a big reason why this week's FDA hearing will attract a lot of attention: A lot of money is at stake. Cannabis market research company Brightfield Group predicts that the U.S. hemp CBD market could be worth $22 billion annually by 2022. Piper Jaffray analysts aren't quite as optimistic but still expect the U.S. CBD market could reach $15 billion in annual sales within the next five years.

Those estimates won't be achieved, though, without regulations in place to remove uncertainties related to making and selling hemp CBD products. Some large companies have already jumped into the market, including top Canadian cannabis producer Canopy Growth (NYSE: CGC), which is building a hemp production facility in New York, and big pharmacy retailer CVS Health (NYSE: CVS), which began selling some CBD products in March. However, others have been more hesitant to act until the FDA establishes more clarity.

But don't look for the FDA to move quickly to finalize regulations after Friday. The agency plans to accept comments from the meeting through July 2. It will then move forward with developing draft regulations and will seek input on them before they are finalized. This week's hearing is an important step -- but just one of many -- in clearing the way for what could be a massive CBD market in the U.S.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.