Responsibility of Consumer Safety in an Unregulated Market

Most consumers in today’s market have an unspoken, unrealized expectation that products available on the shelf have been vetted for safety and are therefore inherently safe and legal to purchase.

In a regulated market, this is inherent. In fact, regulation of consumer goods for the last 100 years or so has created this built-in expectation. For the most part, the consumer trust is well deserved.

However, in emerging markets, especially those that are unregulated or poorly regulated, the trust is misplaced.


Regulations for Hemp-based Products

Currently, the hemp-based product market is mostly unregulated. Federally speaking, the only regulation that is relevant to consumer products pertains exclusively to the Delta-9 THC percentage by dry weight of hemp plant material and is under the regulatory authority of the USDA.

The other regulatory agency that you would expect to see at the table regulating consumer goods in the hemp industry is the FDA. However, due to the FDA’s own internal regulatory obstacles, has left the industry in chaos with its current approach.


Waiting for the FDA

The FDA has a little-known – and arguably ill-conceived – regulation that states if a product or compound is approved as a drug first, it cannot then be sold as a food or a dietary supplement. For example, if Excedrin (which contains caffeine as an active ingredient) had been approved prior to the consumer sale of coffee, coffee would never be allowed to be sold since it contained a previously approved drug.

This self-imposed regulation has created an issue for the FDA, as months prior to the signing of the 2018 Federal Farm Bill that legalized the sale of hemp-derived products, Epidiolex was approved as a drug. Epidiolex is – in short – a CBD isolate product.

Due to the aforementioned regulation, the FDA has taken the stance that hemp-derived products cannot be a food or dietary supplement, and therefore cannot exist in any ingestible form.

Despite pressure from the industry, congress, and consumers, the FDA continues to hold their position.


Operating in Grace

You might be asking yourself, “If the FDA says CBD gummies are illegal, why can I buy them at my local grocery store?” The short version is the FDA is pseudo-allowing the industry to operate and sell goods, so long as no medical claims are being made. IE, the entire industry is operating underneath a policy of grace – or rather, enforcement discretion.

Every single ingestible (gummies, candy, tincture, drink mix, etc) in the hemp-industry currently operates in this gray area. As such, there is no requirement to follow standards that would otherwise apply to manufacturers and distributors.

For example, if hemp-products were regulated as a dietary supplement by the FDA, there would be significant requirements for following GMP (Good Manufacturing Practices), maintaining records for recall tracking, and supporting a system for SAR (Significant Adverse Reaction) reporting. These operational requirements, among many others not listed, are the reason that consumers feel safe when they purchase products off the shelf. In their absence, manufacturers are free to do whatever they want, so long as they don’t catch the attention of the FDA directly, which as we previously discussed, will only become a problem if medical claims are being made.


Unreasonable Expectations

With the industry existing as it does today, if a consumer wants to ensure that what they consume is safe, and furthermore, correctly dosed, the onus is on them to do the work. This requires the consumer to understand: extraction methods for the cannabinoids and where the hemp-derived cannabinoid oil came from; who the actual manufacturer of the product was and  what policies and procedures that manufacturer is or isn’t following; how to get a copy of a COA (Certificate of Analysis), what a COA even is, how to read it, and how to ensure it is accurate and not fraudulent; the legal limits of various cannabinoid components; how to calculate dry weight; how certain cannabinoids are created such as Delta-8 THC and what agents are used; and lastly whether or not the lab that created he COA is accredited, by whom, and why that matters.

It is easy to see that expecting a consumer to learn, understand, and apply that knowledge to every purchase they make is beyond unreasonable. It isn’t normal, it isn’t fair, and it shouldn’t be expected.


Accountability Lacking

The truth is, in the current industry the responsibility for consumer safety does rest on the consumer themselves, but it should reside with the manufacturer. In the absence of forced regulation, it is critical the industry producers self-regulate as well as hold piers in the space accountable. We need to create a culture of responsibility among manufacturers and distributors.

Ask anyone in the industry if the culture is one of “money first, safety second,” or if it is “safety first, money second,” and if they have been in the industry for any measurable amount of time, they’ll promptly answer that it is unequivocally the former. Cash is king in the hemp-industry, and while some might say that is “just good business,” I am here to tell you that it isn’t.


Getting Started

As a new group entering the space, you might be crunching the numbers, looking at competitors, and assessing your go-to-market strategy. During this research phase, you may quickly determine that you need to keep your prices as low as possible to be competitive, as the variety in the market is generally lacking (we can discuss the fallacy that under-cutting the price of your competition is the only way to succeed, but it is all-to-common strategy in the CBD space).

Once you decide to undercut pricing, you start doing the math backwards. It doesn’t take long to realize that you are going to have to cut corners to compete. Skip full panels on the input oil, don’t pay for FDA consultation on your labeling, use the cheapest manufacturer you can find (who often is cheap because they are cutting corners and not running a GMP facility), only test your first batch made, etc.

Eventually, you can get your pricing in line with the industry well enough to bring your product to market, but in doing so, you sacrifice the quality and safety checking that would otherwise be forced upon you.

Maybe you’re a good person with wonderful intentions. Perhaps you trust your oil provider and your gummy producer, so you feel that cutting these corners isn’t really a safety issue. Perhaps you don’t really think it is a big deal to not-disclose THC milligrams on your label because it has to be under 0.3%, so the amount is negligible anyway. You might have the best of intentions, but by doing this, you are perpetuating the problem and contributing to an unsafe industry, squarely placing an unfair responsibility on the consumer.


Taking Responsibility For Our Actions

As a manufacturer of hemp-derived products myself, I understand the issues that start-ups face in this industry. I understand the lack of guidance, the shady characters, and the tough-market to crack. I get it. But let me tell you: it is absolutely unacceptable to conduct business this way.

It is time that manufactures and distributors alike take responsibility for the products we are giving to consumers. We need to self-regulate and create legal, safe products for our customers to consume. If we continue – as an industry – to allow the culture in the industry to be lackadaisical in the area of safety and standards for consumer products, we are creating an industry that consumers will slowly learn to mistrust (as many already have).

If we lose consumer trust, we lose the industry. Furthermore, if we do not self-correct, the FDA’s inevitable regulatory framework will do it for us, and I can promise you that if the industry continues to prove to the FDA that we have ill-intent (cash first, safety second), the FDA will will come down hard, making a regulatory framework that will virtually crush all but the largest players in the space.


Where Do We Go From Here?

Every part of the supply chain needs to take it upon themselves to institute – and follow – SOPs that create a safe end-user-product. Check your inputs, quarantine new material, safety check with a reliable, trusted lab. Double check your outputs, test in batches, track everything. Label your products accurately and completely. Help educate your end-consumers. Hold others in the industry accountable to do the same.

If we do not step up our game as an industry and take responsibility for safety, we are hurting consumers as well as the future of the entire industry.

About the author

Kairos Venture Group

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