Cannabis producers cautioned against profiteering from COVID-19 research

Image of COVID-19 positive blood in a vial sitting atop cannabis leaves

As published research over the past two weeks showed that cannabis products such as CBDcannabinoid acids and even synthetic cannabis compounds might prevent or treat COVID-19 infections, excitement among entrepreneurs spread.

Interest in the seemingly stagnant hemp biomass, CBD and CBG markets soared to heights not seen in three years.

Prices are on the rise again, and cannabis producers are fielding calls from a slew of interested parties hoping to cash in on the news.

But is it too early for marijuana and hemp entrepreneurs to profit from research that hasn’t yet been tested in human clinical trials?

And what are the compliance and legal risks for cannabinoid product makers peddling goods as coronavirus cures?

Researchers and industry leaders are urging caution among consumers and industry alike.

“Science is not the result of one or two studies. It’s a long process based on peer review and the opportunity for replication of results,” said Jody McGinness, executive director of the Vancouver, Washington-headquartered Hemp Industries Association.

“As much as we are encouraged by studies that open up people’s eyes to the possibilities, we want to caution anybody against extrapolating from the results of early studies to any type of claims about the efficacy of cannabinoids.”

Industry ramping up anyway

For Bend, Oregon-based hemp producer Wesley Ray, an Oregon State University study showing cannabinoid acids can prevent COVID-19 from entering human cells has validated his own work growing and processing CBDA and CBGA over the past few years.

Since news broke about the research, Ray and his partner Shannon Little have been inundated with calls and emails from retailers, formulators, distributors, recreational marijuana businesses and even government entities seeking raw material, crumble and tinctures to produce white-label products and more.

“And then you have the bigger companies that are wanting to do some pretty crazy numbers (like) 25 kilos every two weeks,” Ray said.

He’s selling CBGA and CBDA crumbles in bulk for $2,900 per kilogram or $5,000 per single kilo.

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“The prices on that are obviously up. And if farmers are smart, they would hold back their biomass and not just liquidate it,” Ray said.

“I would put $20 a pound on my CBG biomass right now, just because I know how many pounds are going to go in to make a kilo and I know the input costs – and I don’t think the lab should be the only one making margins.”

Prices haven’t seemed to go up across the board yet in response to recent research results, but it’s still early and the interest is clear, according to Julie Lerner, the founder and CEO of Denver-based commodity selling platform PanXchange.

“There is no doubt that demand and inquiries are picking up for several processors in the country, but so far activity has been mostly directed toward CBDa and CBGa products,” Lerner told MJBizDaily via email.

“Demand has not yet picked up in biomass; our January prices are on par with December. However, a late-month rally pushed winterized crude prices up $5/kg this month.”

Compliance matters

The research findings supporting the role of cannabis in human health move “the scientific conversation forward” and show the industry is one step closer to “unlocking the many benefits of cannabis,” said Asa Waldstein, principal of Boulder, Colorado-based Supplement Advisory Group, which advises herbal products and cannabis entrepreneurs on federal compliance.

That said, “it is a prohibited act to promote non-drug products as a cure for any disease or virus,” Waldstein cautioned in an email to MJBizDaily.

“I urge companies to fight the urge to exploit this news to sell products.”

As has been the case with all other claims that have prompted the U.S. Food and Drug Administration and the Federal Trade Commission to sanction cannabis product manufacturers, anything on a commercial website or social media is considered marketing, he pointed out.

“Although unadvisable, if a company must risk posting about (cannabinoid and COVID-19 research), they should ensure there is no mention of their product or company in the post or blog,” Waldstein said.

“This includes removing any shopping cart-linked call to actions and product pictures.”

Waldstein added that FDA and FTC authorities consider the “reasonable consumer takeaway,” which means if consumers believe a company’s blog or post is about its products, the authorities do, too.

“I asked a top FTC official about ‘educational’ blogs on commercial websites. He responded, ‘What is the purpose of posting an educational blog on a commercial website, if not to sell products?’” Waldstein said.

“This further demonstrates the authority’s position when posting about disease therapies on a supplement site.”

And with the number of “cringe-worthy product claims” aiming to cash in on scientists’ research, companies promoting COVID-19 research with links to products should consider FDA and FTC enforcement “a given,” Waldstein said.

He pointed to 25 coronavirus-related warning letters that the FTC sent earlier this month that show the regulator’s “renewed dedication” to stopping companies from making misleading claims.

“The FDA/FTC makes examples of companies not following the rules, especially in areas they want to highlight,” he explained in an email.

“I predict we should see a batch of CBD-A and COVID warning letters coming out in the next couple of months.”

Universities could push back, too

It’s not just government compliance that companies need to consider.

Cannabis entrepreneurs that are openly promoting products in the name of university research might also be violating intellectual property laws provided to researchers, said Jay Noller, director of the Global Hemp Innovation Center at Oregon State University.

“There’s this presumption that because it was published, it’s theirs to use,” Noller told MJBizDaily.

“International and U.S. patent law is such that to not check in with the publisher or that institution, we’ve seen that in other industries where the presumption leads to downstream reaches for violation of that IP.”

Even in cases of publicly financed research, scientists and universities have IP rights on findings that can produce results such as inventions, scholarly publications, new plant varieties, confidential information and more – even if they are proof-of-concept or laboratory-scale prototypes that require additional research and development before they can be commercialized.

Hemp entrepreneurs therefore need to do due diligence that they aren’t violating prior IP, Noller said.

Perhaps because the makers of the only CBD drug sanctioned by the FDA, Epidiolex, aren’t in headlines suing over-the-counter CBD makers, some cannabis operators might assume they are safe to market their own CBD products.

But that’s a risky assumption, Noller said, pointing out that such cases can take years to build, as in the seven-year patent battle over smartphones between Apple and Samsung.

Further, cannabis companies should consider that investment in research could yield faster industry development than investments in marketing, Noller said.

“We saw that for three years: branding, marketing. And then you have one science paper come out on a very, very limited budget. …That’s how it’s going to work.”

“So I think we’ve we’ve been able to demonstrate, if not shame, the industry into its disproportionate attention to fantasy versus reality, and that’s truth in science.”

Laura Drotleff can be reached at laura.drotleff@hempindustrydaily.com.