What does the FSA’s guidance mean for manufacturers and insurers?
CBD is one of a relatively new and fast growing type of product known as nutraceuticals. The nutraceutical market is worth US$220 billion and has been projected to reach US$312 billion by 2025. CBD is expected to make up around US$10 billion of that market. Clearly, this presents many opportunities for manufacturers and their insurers but also concomitant risks.
Manufacturers and insurers should be alive to the considerations around labelling regarding the benefits and risks of using CBD and other nutraceutical products, and the correct concentrations of the active ingredients in the products.
This is especially important where there are known high-risk potential users, for example those who are pregnant, breast-feeding and taking other medication. These groups have been advised by the FSA not to use CBD products. Healthy adults are advised to take no more than 70mg of CBD a day unless under medical direction due to the possible adverse reactions (including liver injury, drug on drug interactions somnolence, gastro-intestinal issues, decreased weight, transaminase elevations, fatigue, malaise, asthenia, rash, insomnia, sleep disorder/poor quality sleep and infections).
This guidance comes from the FSA and has been approved by the government’s Committee on Toxicity. Businesses are susceptible to product liability claims if they are currently producing, importing into the EU or selling CBD products which are incorrectly labelled, unsafe or contain illegal substances. This is especially true of CBD products which claim certain medical benefits while not being licensed as a medicine.
Evidence of compliance
Prior to the requirement to submit novel food authorisation applications by 31 March 2021, insurers may be wise to insist that producers of existing CBD products provide evidence that their product complies with the requirements of the novel food authorisation process before offering coverage, or to set higher premiums where that information is not available.
Given the FSA’s advice on 19 March 2020 that no new CBD products should be sold without a valid authorisation, insurers should also confirm that any unauthorised products they are being asked to insure were already on the market before that date when offering cover.
Businesses which fail to submit an application for authorisation for their CBD products by the 31 March 2021 deadline may be at greater risk of product liability claims and product recall if they continue to sell the products, as their products will no longer be deemed safe to remain on shelves. Insurers should consider their wordings to ensure that such products will no longer be covered under their policies.
Businesses whose applications for authorisation for their CBD products are made by the 31 March 2021 deadline but are subsequently rejected, may find their products targeted by claimant law firms looking to act for consumers who may have suffered ill-effects.
The rejection of the authorisation, but more importantly the reason(s) for the rejection, may be one important aspect in establishing whether the products met the relevant level of safety required to defend any such claims. Manufacturers who do not take steps to address any reasons for the rejection of authorisation and continue to market the product may find themselves the subject of claims, as well as regulatory intervention.
The requirements of a valid novel food application are burdensome and, as noted above, require preparation and submission of a dossier of scientific, and other, information. The process can be lengthy. Manufacturers of existing CBD products should currently be preparing their applications to ensure submission by the 31 March 2021 deadline. Whilst this detailed process will provide reassurance to customers and engender faith in the safety of both new and existing CBD products, it may be prohibitively expensive, complicated and time consuming for smaller manufacturers of CBD products and lead to a narrowing of the market.