RCA Radio is a podcast bringing you the latest news and insights in regulatory, compliance, and quality assurance. A transcript for “Episode 004: Regulating Cannabis” follows. Listen to the episode here and on your favorite listening apps, including Apple Podcasts and Spotify.
Erika Porcelli: Hello and welcome to RCA Radio, a podcast covering the latest news and challenges and regulatory compliance and quality assurance that are facing the pharmaceutical medical device and biologics industries. I’m your host, Erika Porcelli. In this episode, we discuss the burgeoning cannabis industry and the framework currently governing and regulating cannabis. We also look at anticipated regulatory developments at the federal and state levels, as well as the FDA’s likely path on oversight of this market.
Today I’m joined by Neil Pankau. Neil is RCA’s Executive Vice President of Pharmaceuticals and has been closely monitoring developments as this new market emerges. Neil, welcome.
Neil Pankau: Thanks for having me.
Erika Porcelli: Absolutely. It’s a pleasure to have you.
Neil Pankau: I’m excited to get started on my first podcast ever.
Erika Porcelli: Well, I know we’ve been talking a lot about cannabis and I think one of the things that would be really helpful for our listeners is if you could provide us a bit of background on cannabis, marijuana, CBD, all of the other things that come along with it and how the landscape has evolved over the last three to five years.
Neil Pankau: Sure. And this may be real basic for some people. For somebody like me who was not familiar with the product, it’s all academic and learning for me. So I think first we should discuss the terminology, so we know what we’re talking about, because a lot of these terms seem to be used interchangeably and they really shouldn’t be. So again, it might be basic for some, but for others this might help clarify the topics we’re discussing here today.
So for those who are unfamiliar with the terminology and what the difference is, cannabis is a family of plants and they include both hemp and marijuana. A couple of other terms that I think folks are familiar with. For our purposes, from a regulatory standpoint, hemp is defined as cannabis with a THC content less than 0.3%. So we’ll get to the THC in a moment.
“Cannabis is a family of plants [including] both hemp and marijuana. … For our purposes, from a regulatory standpoint, hemp is defined as cannabis with a THC content less than 0.3%.”
Marijuana, on the other hand, is cannabis with the THC content greater than 0.3%. And cannabis, it produces a variety of compounds. And the two most, I think famous or well known out there are CBD, cannabidiol, that folks seem to be seeing everywhere. And THC, which is and, I’m probably mispronounced this, but delta-9-tetrahydrocannabinol. And the THC is the one with the psychoactive properties. That’s the high that people get. That’s the recreational marijuana smokers that had been there for years.
So what has started the buzz, no pun intended, although I think it’s been building for some time. I don’t know why I said that. But the triggering event really comes from the Agriculture Improvement Act of 2018 or the Farm Bill, as everybody knows it as. The 2018 Farm Bill makes hemp production and distribution legal under federal law and it established as a regulatory framework for oversight at the federal, state and tribal levels.
So how do you define hemp? Well, back to the definitions I provided. The key is the amount of THC in the plant. The Farm Bill makes production and distribution of hemp legal, as long as the plant contains no more than a 0.3% concentration of THC. So anything above that 0.3% means that it remains as a schedule one controlled substance. So that’s really the cutoff.
Erika Porcelli: So hemp is not controlled because it’s less than 0.3%, but the cannabis is because it’s greater than 0.3.
Neil Pankau: So yeah, your hemp is, there’s a number of industrial uses for hemp, a very valuable crop. So this 2018 Farm Bill allowing for the production of hemp is really a boon and a lot of folks already are taking advantage of it. Hemp naturally doesn’t contain high amounts of THC. There’s going to be trace amounts. I don’t know the agricultural aspect, whether you need to, that if it does go above 0.3%, it’s like 0.3% dry weight, if there’s ways of extracting that out of it. But generally speaking, hemp is not going to cross that threshold, which is where they, that’s why they made it to cutoff.
Erika Porcelli: Interesting.
Neil Pankau: So you get all the values of it, but you’re not growing the marijuana or the pot, if you will, the marijuana being the other one that does contain high amounts of THC.
Erika Porcelli: So I know initially when marijuana entered the market it was for medicinal purposes and we’ve seen a lot of states moving towards legalization for recreational use. What is the current framework in place? And part two, where does state regulation fit in with federal oversight? And should we anticipate seeing some new guidance come out from the FDA?
Neil Pankau: All right, well yeah, there’s a lot to unpack there. And that’s a number of, there’s multiple questions. So let me try to answer the first one. So you’re right, more states are legalizing it for recreational use or they’re opening up their existing laws regarding the medicinal marijuana use, increasing the number of dispensaries or that sort of thing.
“It’s clear that the industry is far way ahead of where the regulators are in terms of development of a framework. … With the development of guidelines, it creates certainty for businesses. So it’s not so much the rules themselves, but give me the guard rails of what they are and then I’ll figure out how to make my business successful…”
But what that does, as folks are well aware of, it creates a patchwork of what’s allowed and what isn’t. And nobody likes dealing with a patchwork because it makes it difficult, if not impossible, for businesses involved in this industry to actually grow their business, again, no pun intended there, or it forces them to devote an inordinate amount of time and resources towards understanding the legal and regulatory ramifications of the entire supply chain. Whether you’re producing it, whether you’re distributing it, whether you’re selling it through the commercialization. So they don’t know what’s allowed and what does isn’t. Add to that other laws that are peripherally related to the use of marijuana cannabis. And it’s clear that the industry is far way ahead of where the regulators are in terms of development of a framework that would provide some guidelines and with the development of guidelines, it creates certainty for businesses. So it’s not so much the rules themselves, but give me the guard rails of what they are and then I’ll figure out how to make my business successful once I have that regulatory framework in place. And that’s what I think the industry is creating.
So you hear a lot about this green rush, the new crop and this is going to explode like the tobacco industry did years ago. Well, I think that green rush is been a bit delayed and I think the reason, part of the reason for that, if not the primary reason, is that there’s not that regulatory framework in place. And it’s not being developed, at least not at the pace that observers or people that are involved in this industry would like.
So that brings me to your second question, which is what is the federal oversight of this? Well, right now there really isn’t the federal oversight that could clear up some of this patchwork we’re seeing from the various states that we’re seeing today. So the FDA’s moving slowly, as one would expect them to do, but they held an open meeting in May of this past year and is currently accepting comments and input on it. But again, the FDA, like any other federal agency, they’re not going to move quickly and certainly not quickly enough for this industry. So there needs to be some sort of regular structure, again, put in place to provide that direction to everyone involved in this industry, whether you’re a producer, manufacturer, or distributor or even a consumer of it, in order for, I think this green rush, as people are calling it, to really take flight. So does that answer your question?
Erika Porcelli: Yes, it does. It does. Thank you. And I know there’s been a lot of speculation in the market. So it’s an interesting topic I think on many levels. For companies that are currently producing cannabis or are involved in the production of CBD based products, what should they be doing now? What controls should they begin to consider ahead of any current pending or future regulations on the state or federal level?
Neil Pankau: So I think the real gaps here, and part of the reason that the FDA is moving so slowly on this, if I could be candid, is that cannabis and the compounds derived from cannabis, like CBD, have not been studied or subject to the scientific rigor that the public expects or benefits from, for example, from the drug industry. And anybody listening this was involved in that can probably write off six, a dozen, two dozen various studies. And it’s not to say that there aren’t numerous studies out there that seem to indicate that there are in fact benefits for various conditions of CBD. Let’s just focus on CBD, as that seems to be the most widely available, prevalent studied compound, although there’s thousands of compounds that can be derived from the cannabis plant.
“The [reason the] FDA is moving so slowly on this … is that cannabis and the compounds derived from cannabis, like CBD, have not been studied or subject to the scientific rigor that the public expects or benefits from, for example, from the drug industry.”
So focusing on that we have, with the exception of Epidiolex, which is a CBD based drug approved drug that got approved last year, with CBD as the active ingredient in it. The FDA’s really kind of made their position clear. They look at CBD and therefore one can extrapolate from that all other compounds one would derive from cannabis, as drugs. So you see thousands and literally thousands of CBD infused products out there. So the FDA is regulating those in such a way as look, these are drugs and they’re issuing a number of warning letters to companies out there, that’s the enforcement arm for folks who aren’t familiar with the FDA. A number of warning letters have been issued due to unsubstantiated claims with these CBD products.
So you’ve got the FDA really focused on enforcement in two avenues. One, the marketing of unapproved new or a misbranded human drug product, a no-no. And two, for those that are looking at classifying themselves as a dietary supplement, unsubstantiated claims or lack of structure function claims, which are allowed with dietary supplements, that are being made by companies marketing their products under the dietary supplement or food aspect of it. So again, they can have one anecdotal study but it’s not enough for the agency or for the FDA to allow that specific claim. You can’t be some peripheral or some anecdotal evidence. So you’ve got to have your well-controlled, your randomized, developed clinical studies, as similar to what one would have with a drug product, in order to have the necessary support for any claims you’re making.
“You’ve got the FDA really focused on enforcement in two avenues: (1) The marketing of unapproved new or a misbranded human drug product, and (2) for those that are looking at classifying themselves as a dietary supplement, unsubstantiated claims or lack of structure-function claims.”
And add to that the FDA is looking at these as drugs and up until last year, any cannabis was a schedule one controlled substance. So even if people wanted to study this, difficult to do so when you have DEA regulation over it. Now, with the approval of this API, of this Epidiolex containing a CBD, they’ve moved that to a schedule five, still a controlled substance, but at least schedule one where it’s absolutely prohibited is no longer the case. So there’s got to kind of be that freeing up of the, to allow companies or individuals the ability to study this further and develop that scientific rigor or evidence in order to substantiate or make some of these claims that are currently being made.
Erika Porcelli: Yeah, I think it’s interesting because as you and I have talked about, this is a new and emerging regulation. There are a number of different uses. So you have the food based products, right? Candies, brownies, whatever, whatever.
Neil Pankau: The gummies.
“The FDA is looking at these as drugs and up until last year, any cannabis was a Schedule 1 controlled substance. So even if people wanted to study this, [it has been] difficult to do so when you have DEA regulation over it. Now, with the approval of this API, of this Epidiolex containing a CBD, they’ve moved that to a Schedule 5, still a controlled substance, but [not] … absolutely prohibited.”
Erika Porcelli: Yeah, exactly. That treat pains and aches and whatnot. But then you see the pharmaceutical companies that are literally using this as incorporating it into their drug product to treat a specific more serious condition. So I don’t know if you have any comment there on that, but I thought it was interesting because it’s two completely different ends of the spec.
Neil Pankau: Well, the May meeting was fascinating to me and I attended virtually. I had it televised all day, so we’re sitting here in my office. I had it on all day in my office. My 12 year old son happened to be at work with me that day. So he got to go home and tell his mom he learned all about weed. But it was a fascinating open meeting. I had it on in the background. At times I was paying more touch than others.
But of all the different constituents and interested parties that were involved there, you had high profile law firms commenting on it. You had a number of large pharmaceutical companies commenting and really pushing for stringent regulations because they want to create a barrier to entry. They’re looking at this from a business perspective. And then you had mom and, a lot of what I would classify as mom and pop shops commenting on you need to free up regulations in order for us to introduce this wonderful product to the rest of the world.
And I don’t mean that to be facetious or anything because I’m ambivalent. I think my current thinking on the benefits of it are, I think there’s just too much evidence, whether you want to call it anecdotal, or there are some well controlled studies out there. I think there are benefits to this product. Don’t get me wrong, but I don’t think it’s been done to the level that any approved drug by the FDA out there has been tested or studied. In fact, I think while we’re moving slowly from a lot of observers’ perspective, a lot of this legalization and freeing up of regulations is kind of being done by public fiat or just because public opinion is turning more positively toward it. And again, I’m one to look at it positively as well, especially if there are benefits, but there’s got to be… I want to have confidence in what it is I’m taking. And I think that’s the key area that industry or organizations that sets standards, if you will, need to accelerate in order to create these guard rails for industry to comply with or get out of the business.
“I want to have confidence in what it is I’m taking. And I think that’s the key area that industry or organizations that sets standards, if you will, need to accelerate in order to create these guard rails for industry to comply with or get out of the business.”
Erika Porcelli: Yeah, I agree. It’s a good point. So I know again, we’ve said a couple of times this is emerging, but do you see or have you seen any trends that have come out as the FDA really put some scrutiny on the industry?
Neil Pankau: So yeah, I mentioned it a little bit earlier. There’s a series of warning letters that the FDA, again, thousands of CBD based products. You can look at probably a dozen warning letters that the FDA issue just this past year. So we’re talking 2019, if you do a quick of warning letters. And it’s been basically around, you’ve got a misprinted or unapproved new drug and you’re making unsubstantiated claims. And I think any of us could go to heck, we could go to our supermarket today and probably pick off half a dozen items that are making unsubstantiated claims about the benefits of their CBD infused products today. So the FDA’s putting enforcement in place that way.
The second piece, and again, part of it is with these warning letters that you see, but the position’s being put up by the FDA’s look, they’re looking at this as a drug. They’ve already approved a drug and a company went through all of the rigmarole of getting a new drug approval for a product that who’s active pharmaceutical ingredient, the API, is in fact CBD. So that is the view of the agencies.
So there’s going to be regulation coming. There’s going to be at some point in time, as I’ve said to some clients we have already, there’s going to be CGMP requirements in place. When that happens is I think difficult for anybody to predict. But what makes us so exciting to me is I feel like we’ve got a blank, a clean palette here, that industry, with these open meetings I think with some legislative efforts, some lobbying or what have you or just putting well thought out position papers in place can have a hand in the development of what I do think will be a green rush eventually of developing this industry. And that’s what kind of makes it really exciting to me at this point in time.
Erika Porcelli: So what should folks be concerned with if they’re currently working in the industry or trying to enter the industry and how does a company like RCA help them, support them through this? Is there review of quality management systems? How does that all play into it
Neil Pankau: So I think that’s a good question, really the key question, why are we, RCA, having this discussion? I think there’s a lot already… so I say it’s a blank pallet, right? I think there’s a lot of guidance out there already that one can take from regulation of the drug industry in terms of what companies should be working on or should be focused on.
So part of my background, as you know, I used to work for Walgreens in their corporate legal department. There’s a lot of DEA regulations in place and the DEA still has some involvement here. So you should be looking at security concerns, distribution concerns, tracking your product. From an FDA and drug perspective, you should be looking at, we talked CGMPs. You should be looking at your good manufacturing processes. There are a number of FDA guidance out there about drugs that are developed from botanicals. So there’s guidances on actual taking botanicals, turning them into a drug product.
“You should be looking at security concerns, distribution concerns, tracking your product. From an FDA and drug perspective, you should be looking at … CGMPs. You should be looking at your good manufacturing processes. There are a number of FDA guidance out there about drugs that are developed from botanicals.”
Well why is that? That’s as applicable to the cannabis industry as it is to anything, right? Especially when we’ve got one drug approved and we’ve got thousands of compounds. I look at any number of drugs that could potentially be approved with compounds derived from the cannabis plant. Those guidances have been out there for years and I think industry should be looking at these. But the fact is up until recently a lot of folks who are involved in the cannabis industry are not familiar with FDA regulations. We at RCA have a number of regulatory experts. We have a number of quality experts that can help get facilities up and running and do the necessary verification and validation work to put out a quality product.
And you haven’t asked the question, but I’ll, to add it in here and feel free to interrupt if you like, but I think one of the key things that’s going to spell success or lack of success for a lot of companies, and I don’t care if you’re big or small in this industry, is I guess to put it simply operating within a state of control.
Back in my Walgreens days, we used to do testing of a number of vitamin manufacturers, which litter the shelves, right, if you just look at the dietary supplements. And the level of strength or what they said was in those vitamins and what was actually in them, and this is going back even before 2000, when I, I’m a lot older than I care to admit, was a huge discrepancy. I think the same thing is occurring today, so all of these dietary supplements, all these CBD products out there, I don’t think the public can or frankly should trust what that labeling saying as to what they contain and the strength of what those products contain. I think to the extent you can have a quality control system in place that can produce consistent product. That, as much as anything, is going to dictate whether you’re successful in this business or not.
“I don’t think the public can or frankly should trust what that labeling [is] saying as to what they contain and the strength of what those products contain. I think to the extent you can have a quality control system in place that can produce consistent product. That, as much as anything, is going to dictate whether you’re successful in this business or not.”
Erika Porcelli: So I’m going to go off on a little side tangent and I’m going to ask for your opinion. I know that right now the way that most states have their recreational products set up is you go to a dispensary and you buy your product from them. Do you ever foresee this product being in a place where it is sold in places like Walgreens or CVS, Target, over-the-counter type of things outside of a dispensary?
Neil Pankau: So are you talking, so I’ve been using the terms interchangeably as well, which I’m using cannabis kind of as a general term, but are you asking specifically marijuana in this case, the stuff with the psychoactive effects of THC?
Erika Porcelli: Not, well I guess maybe, because that’s the controlled element, right? So if you go to like Massachusetts, you can go into the dispensary and you can get a range of different products. You can buy the edibles, I think. I don’t know if you can buy the inhalant or not. But I mean to your point, what you said before, it does seem a little bit like a supplement and maybe that depends on what it is. If it’s a hemp product, which you can buy in a store, I think, right?
Neil Pankau: Yeah. Yeah. So let me, this is purely opinion and speculation and certainly anybody listening who wants a further discussion, happy to do it. But this is purely speculation on my part. I look at it as, and maybe I’m taking a very libertarian point of view, but from a THC based product, we sell alcohol today, right? And that can have… there’s regulations around the sale and consumption of alcohol. You can’t drink and drive.
Until we have a regulatory framework in place, I think that the same should be applied to the psychoactive pieces of cannabis. So let’s call it marijuana for general purposes. So there’s got to be that control. So what is driving under the influence of marijuana mean? Well, there’s different definitions and interpretations of that across the states right now. So I think until you have those in place, you’re not going to see it.
To answer your question, I think someday you will see it. One can look to the Netherlands for this. You can go into a store, you can go into a dispensary if you will, anybody off the street who’s of legal drinking age. So let’s call it likely 21 years of age. Anybody with a valid ID should be able to go in and purchase that. Now what you do after you imbibe that and ingest that in whatever way you’re talking, whether it’s eaten, whether it’s smoked, and I don’t know, there are other ways, but there has to be a legal framework in place of how you deal with that or address that or ensure, in this case, the public safety in that. You can’t drink and drive, you probably shouldn’t be able to smoke and drive.
“There’s regulations around the sale and consumption of alcohol. You can’t drink and drive. Until we have a regulatory framework in place, I think that the same should be applied to the psychoactive pieces of cannabis. … So what is driving under the influence of marijuana mean?”
So yeah. Long-term. Yes. Now if you want to ask me for when we’re sitting here in 2019. That’s one I’m not going to speculate on. I think it’ll be sooner rather than later. I think it will be in our lifetime, certainly maybe within the next 5 or 10 years. But there’s a lot of other steps that need to be taken before you see something like that.
Erika Porcelli: Yeah. Yeah. It’s just, it’s interesting because things have changed so much even in the past four years.
Neil Pankau: Sure. Even in the past, really the Farm Bill, 2018 Farm Bill was passed in December, 2018. Now, I think everybody, I don’t think it was any surprise, but even so, in less than a year, look at just the avalanche of CBD based products we’ve seen out there. You can’t turn around without running into a CBD based product. So that’s 10 months. So, think what the other 10 months we’ll bring.
And again, that’s why anybody who holds themselves out as an expert in this industry, I’m not saying that they’re not, but the ground is constantly shifting that I think unless you’re paying attention to this sort of thing every day like we are here, you’re going to miss developments or you’re going to miss opportunities to get an advantage over your competitor if you’re in this business or something, because it really is changing on a daily basis. In fact, you and I laughed about this before we started the podcast, we were supposed to do this a month ago and I’m like, “Well, I want to kind of see what’s going on here. Well, I want to see what these developments are here. Well, I want to get a little more information here.” But the fact is on an almost daily basis, there’s information. So the discussion you and I are having here today could be a very different discussion 30 days from now, let alone a year from now.
“Unless you’re paying attention to this sort of thing every day like we are here, you’re going to miss developments or you’re going to miss opportunities to get an advantage over your competitor if you’re in this business or something, because it really is changing on a daily basis.”
Erika Porcelli: That is true. And perhaps a followup podcast would be appropriate in a couple of months as things change.
Neil Pankau: I can’t wait for the five-star reviews we get for the podcast. So if there’s a lot of one-star reviews, maybe not.
Erika Porcelli: So do you have any final thoughts and closing?
Neil Pankau: Yeah, I do. So my thoughts on this are based on the questions I’ve received from others, companies out there and producers out there, there’s a lot I think folks need to do to educate themselves and I think we can probably break that down into a digest format for you and tell you what’s important, what isn’t. I know I’ve got a number of questions from people who are looking at expanding their operations. So from a manufacturing perspective and what do they need to be thinking about. Certainly GMP, I think at this point in time is a competitive advantage. In a year, two years, three years, it’s going to become a requirement. What does GMP look like? We have experts on the drug side that can apply a lot of GMP on the food side, on the dietary supplement side, that we can apply a lot of the requirements that we see and what is important and what isn’t to this particular industry.
“I’ve got a number of questions from people who are looking at expanding their operations. From a manufacturing perspective … [GMP] is a competitive advantage. In a year, two years, three years, it’s going to become a requirement.”
Getting to interpreting legislation, frankly getting to legislators to get them to understand a company’s position on it are things that RCA has done in the past and in other industries and can help with here. So, I look at GMPs but at the end of the day, if I’m saying the most important thing is quality control, knowing what’s in your product. And that comes from years of being involved in the dietary supplement side and vitamins and knowing that what the public’s ingesting isn’t maybe what they think it is or it certainly isn’t what is on the labels.
So you look at your promotion, what you’re promoting it for, and basically being able to produce on a repeatable basis what you say you are actually producing. I think those are the key items that folks need to focus on right now. So once there are standards in place, they can say, “Yep, we meet those standards and here’s how we meet those standards and here’s the documentation and proof showing that we meet those standards consistently.” Those are going to be the successful companies. The companies who don’t do it or say that they do it and then turns out that they don’t, they’re not going to be around.
“The most important thing is quality control, knowing what’s in your product. … So you look at your promotion, what you’re promoting it for, and basically being able to produce on a repeatable basis what you say you are actually producing.”
Erika Porcelli: Yeah. Well Neil, thank you for taking the time to provide us with your insights today. To learn more about RCA’s services, visit www.rcainc.com. And thank you to our listeners for tuning into this episode of RCA Radio. Be sure to subscribe to be the first to know when we upload a new episode. Thank you.
Neil Pankau: Thanks for having me.
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