Last Week’s Hemp Commentary

Bioavailability of Cannabinoid Extracts

Bioavailability is on the mind of many CBD operators now, whether a vertically integrated hemp and CBD company or a formulator buying wholesale extract for retail product ingredients.  Marketing is increasingly addressing bioavailability, which forces the conversation for many operators in the space.  Further research will likely push the market to prioritize bioavailability, and plenty more research before it is available to formulators or consumers.

FDA regulations that limit the amount of CBD that can be added to a beverage, for instance, will make bioavailability that much more of an issue in dietary supplement markets.   Various processes that change the size or characteristics of a CBD molecule are employed to increase absorption rates.  Nano-emulsification processes use high-shear emulsification, chopping the ~2000 nanometer CBD molecules to ones a quarter that size or less.

Some processes shave that down below 100 nanometers, to even 16 nanometers, lab analysis has shown.  Hydrophobic CBD molecules are far too large to be wrangled by our cells, and some estimates – and a growing body of research – show that ~10% absorption is typical for CBD.  The rest is waste. Proprietary processes using ultrasonic waves chop the molecule down to size and emulsify it with a number of surfactants that subsequently allow for homogenous liquids.

Pharmaceutical companies have been working on processes to increase absorption rates for many years. Turmeric derived curcumin is up against the same challenge.  Research developing commercially viable methods to mainline the substance to the bloodstream has driven innovation in response to growing demand for turmeric products.  Piperine – derived from black pepper – was identified as a substance that enhanced absorption of curcumin, making the addition of this substance standard as consumers learned more about it.  Piperine has also been researched as a potentiator for CBD, and has proven effective.

Now, some CBD companies are leaning on the technology to enhance the efficacy of their products.  CELLg8® Hemp is the proprietary product produced by Puffin Hemp. The process encapsulates CBD molecules into naturally occurring liposomes that are optimally designed with both shape and size in mind.  Research published in the American Journal of Endocannabinoid Medicine has shown as much as 17x absorption for liposomal CBD, and faster absorption rates.

Nano-emulsified CBD isolate was the general answer to the problem presented by a barely absorbable hydrophobic substance, allowing manufacturers to successfully mix lipophilic CBD with beverages.  Products on the market today use some form of nano-sized CBD, but this can range widely, from ~20 to as large as 250 nanometers for one major US manufacturer.  These processes may be indispensable as FDA rules come down, allowing formulators to offer a more consistent, lower dosage. More research into these issues will benefit the segment, especially consumers.  Given the popularity of cannabinoids today, we expect continued innovation from within, but the segment will also benefit from other general pharmacokinetic research.

Bernabe and Company Lead the Way

Without any meaningful action on the part of the FDA to regulate cannabinoids, states have filled the vacuum with their own policies.  There is no consistency from state to state for the few that explicitly allow CBD in various products, but more states have enacted statutes to set some “guard rails” – as advisor to Governor Andrew Cuomo (D-NY), Axel Bernabe notes – for the developing industry, which sits at the intersection of agriculture, health and wellness, food, and manufacturing.  Long-term, policy structure that protects and fosters growth as part of its aim will buoy hemp markets and help stabilize hemp prices.

Bernabe has been intimately involved in pan-cannabis issues and has enthusiastically driven the process in New York to address the explosive hemp sector from a policy position.  Hemp is all of the other cannabinoids besides THC he observes, revealing a high level view of markets.  Legislation passed late last year deferred CBD decision making, so this recent development is an evolution of that bill and addresses the giant elephant in the room, creating cannabinoid chaos.

Florida tackled CBD regulation headfirst, and as a result of their safety testing, found lead in Florida products right out of the gates. Florida’s regulations, like New York’s, require specific labeling, and have set the bar higher for manufacturing.  New York’s regulations, effective January 1, 2020, require proof of a GMP audit from extractors.  The fees in New York are much higher than Florida’s, or many other states, but regulators there are keen to properly finance their enforcement efforts and set a high standard.  This certainly gives New York manufacturers a competitive edge, where we foresee foreign buyers seeking out New York operators.  This is also an advantage in domestic markets.

New York is charging retailers $300 to sell CBD products, whereas Florida is charging $650.  Aside from this, the Empire State’s fees for extractors, $5500, or manufacturers $2500, far exceed costs to license in Florida.  New York will also require a THC warning for all products besides isolate, and have set a maximum CBD dose at 25mg, taking a “low and slow” approach after extensive deliberation on the addition of CBD to food and beverage.  The CBD infused beverage market in New York is poised for growth on the heels of these new policy developments.  The 25mg limit creates more impetus to use formulations with high bioavailability, as noted in yesterday’s Hemp Bulletin.

California attempted to pass CBD legislation this summer, but the effort was adeptly thwarted by hemp producers and other hemp stakeholders.  That bill made hemp flower illegal, and compelled producers to use certified seed.  The MJ lobby in California has been a proponent of these policy elements, as they watch hemp flower bear down on them in the rear-view mirror.  Florida, California, and New York are among the largest state economies in the US, accounting for significant demand.  Hemp flower alone will generate tens of millions of dollars in these states; good news for flower producers.   ***Correction***  Flower appears to be off the table in NY.  Barnabe makes a point in this interview to differentiate raw flower from pre-rolls and vapes, but alas, his statement doesn’t comport with the policy:

…not being flower product including cigarette, cigar or pre-roll, or any other disallowed form as determined by the department;

The other elephant in the room being addressed by New York is the high THC content for hemp extract during manufacturing.  The statute says this:

Intermediate sales of hemp extract containing up to 3.0% THC are authorized, provided that the sale is between licensed processors in New York State and the proper documents accompany the extract during transport. All solvents and methods used to extract hemp extract must be approved by the Department.  

This is an example of progressive policy that will have a meaningful impact on the development of fragile new hemp markets.  It comes after the DEA published its IFR that proposes intermediate sales of products with elevated THC are illegal.  Hemp continues to be a remarkable case study in states’ rights and policy making that is like nothing before it.  The mélange of hemp policy in the US will persist until the implementation of the 2018 Farm Bill and development of FDA rules.  New York has circumvented the FDA in respect to CBD, and also the DEA with its 3% policy.

Knowing that 3% THC extract is not a threat to the health and safety of New Yorkers, Barnabe and company have made a bold statement that other states will notice and will likely embolden them to blaze their own trail.  New York worked with surrounding states and also states like Oregon and Colorado in the development of their policy.  The policy is well informed and tackles the issues salient to public health, without stifling a new market for New York hemp producers and manufactures.  Cuomo has proposed a hemp summit for January, a demonstration of continued interest in the developing sector.  The policy is far from perfect, and we’re unaware what political forces ultimately made flower illegal.  The Cuomo Adminstration’s legalization efforts may have ultimately caused them to delay on hemp flower.  The concern being that hemp flower would create issues with law enforcement, and influence that lobby or its sympathetic electorate.

Global Cannabis Policy

Cannabis policy, including hemp and MJ, is complex in the US and evolving rapidly, though geographically disproportionate.  Not only the US is wrestling with the issues, it is also being confronted by governments around the world, and by intergovernmental organizations like the WHO and UN.   The UN has been the major driver of international cannabis policy, vis-à-vis the Single Convention on Narcotic Drugs 1961 (SCND), where cannabis is classified as Schedule 4, a category home to substances with high abuse potential and no therapeutic benefits.

Most governments no longer view cannabis as such, many of them have legal pathways for medical or even recreational use.  The US FDA has even approved cannabis-based prescription drugs, excluding it from SCND’s Schedule 4 by default.  But both the US and the EU are resistant to any further liberalization of overall cannabis policy, viewing it as the proverbial camel’s nose. The US sets the tone for global drug policy, along with Europe, where wealth and drug consumption are greatest globally.  The EU Commission, that groups governing body, recently interpreted hemp derived cannabinoids as narcotics, based on the 1961 SCN and subsequent Convention on Psychotropic Substances 1971.  The ruling this summer ironically paved a runway for artificial cannabinoids in the EU.

The US perspective was clarified earlier this month at a gathering of the UN Commission on Narcotic Drugs, hosted virtually from Vienna.  U.S. State Department attorney Patt Prugh laid out the US position, which agrees with the removal of cannabis from Schedule 4, but resists any notion to explicitly exempt hemp derived cannabinoids from any enforcement.  Prugh notably said that this would “introduce legal ambiguities and contradictions that would undermine effective drug control.”  Hemp Flower certainly has made a name for itself in this respect.  Some lawmakers were horrified to learn that they had made MJ enforcement impossible in their districts, as a result of supporting hemp policy.

Novel Foods has been the regulatory pathway for CBD operators in EU markets, but that process is on hold until something changes.  That “something” is the status of hemp-derived cannabinoids, which fortunately for hemp operators, is being put to a vote by the UN in December.  The removal of “extracts and tinctures” would clear the way for hemp extracts to be evaluated for novel food status.

The UK policy going forward is distinct from the EU’s, where the UK Home Office classifies THC only as a narcotic.  The Foods Standards Agency will be reviewing Novel Food applications formally after January 1, 2021.  Operators eager to access UK markets have reason for optimism.  Elsewhere in the world, countries like the Bahamas, a commonwealth country traditionally opposed to liberalizing cannabis policy, is looking to cannabis to help generate revenues,jobs, and social change.  The country is entirely reliant on tourism and lost significant revenues after the pandemic shut the ports of entry.  The pandemic follows a series of destructive hurricanes, including the obliteration of Abaco, a thriving out island that was uninhabitable after Dorian thrashed it for hours.  The Bahamian policy move is being recommended by the Economic Recovery Committee, a body chartered to address the country’s economic challenges.

Looking to cannabis for revenues is a common theme globally, and certainly US state governments are accelerating their look at policy changes.  South America and Asia are also pursuing similar policy, and some governments have set 1% as the threshold for THC, giving a competitive edge.  But hemp policy is far from aligned nationally or globally, and this continues to pose the gravest challenge to market development.  The financial strains caused by the pandemic, and social upheaval caused by inequity and polarizing politics has unexpectedly provided some impetus for pan-cannabis policy change, but this is hardly a clear path.  Leadership is still needed at all levels for policy development that will shape markets for generations to come.

Certified Seed

Certified seed is the foundation upon which modern agriculture is built.  Farmers of conventional crops have access to reliable, stable seed that is built on that same foundation, but is far more sophisticated after decades of conventional breeding, and now decades of transgenic work.  Hemp prices aren’t directly influenced by seed performance, but profitability is.  Modern farmers expect seeds to perform and rarely or never encounter the kind of failures seen in hemp production.  Seed certification is the only way a producer can ensure that the seed meets their performance expectations, because a third party has inspected the crop, tested the crop, tested the seed for purity and germination rate, and provides assurance that the growing plant’s characteristics match what is advertised. Beyond this, assurances are extended with the caveat that CBD hemp produces a complex array of cannabinoids, and we are a long way from stable cannabinoid profiles.

State Departments of Agriculture created some confusion in their hemp programs with requirements to use seed that is “certified” as being THC compliant.  THC is only a part of the picture in hemp production.  Essential agronomic traits are the key to success in growing hemp, and farmers need to eliminate seed variability as a major source of frustration and financial risk.  Unfortunately, hemp seed policy varies widely among states, with no short-term alignment on the horizon. South Carolina lists several  “Permitted Seed Providers”, but there is no indication that the seed sold by these providers meets any standards besides general standards for seed production and labeling in SC.

Colorado and Oregon have the most structured hemp seed certifying programs, with Oregon’s being a newer development.  Colorado now boasts 23 certified varieties, Oregon has so far certified 2. These 2 are not yet adorned with the universally recognized blue tag indicating certified seed, pending approvals by the National Variety Review Board.

These state programs share similarities, in that they comply with the Federal Seed Act (FSA), and generally use a process that vets the variety for THC compliance and screens it initially to assure some uniform phenotypic expression.  Colorado’s and Oregon’s process both require acceptance by a variety review board, whether state or Association of Official Seed Certifying Agencies (AOSCA).

Colorado’s process requires a variety be grown at one of the four state test farms, while Oregon inspects a grower’s facility or farm while the crop is growing.  The Oregon Seed Certification Service is administered through OSU and housed at the Corvallis campus.  The standards for certifying varieties in Oregon are high, and necessarily so.  Germination requirements of 85% exceed that of the FSA, but are lower than a farmer may hope.  Most of the Oregon sites are greenhouses because of the state’s 4 mile buffer requirement.  A grower can demonstrate that their ventilation is equipped with HEPA filters and may receive a variance, or they may produce off-season.  Fiber and Grain seed producers do not have the buffer requirement.

AOSCA is active in all states and plays a role in any seed certification.  They have developed standards  for hemp and also publish a list of varieties that are eligible for certification. The agency provides some consistency across state lines, in the process of certifying hemp seeds. Seeds are certified that they are consistent with the description, are distinct, uniform, and stable.  Seed in storage can’t be certified because the growing crop must be inspected 3 times during the season.  Producers need to start the process before planting.

OSU will certify feminization rates and have high standards for acceptable feminization: 99.9%.  They’ll publish this rate on the blue tag if the grower uses the OSU lab for testing.   This provides a clear advantage in the marketplace, compared to buying seed off of craigslist, or an internet site, with no assurances.  Numerous upstart seed companies have struggled to meet basic expectations for a business, much less that of seed breeder.  The 2 programs described here are also export oriented, knowing that seed sales to other states and countries is a lucrative line for many growers.  Export is more complex, requiring more steps, and dictated by the destination countries’ policies.  Texas and Florida require certified hemp seed, and this growing trend will create opportunity for certified seed producers in OR and CO, while fostering some consistency in crop production.  States that show leadership in this area will help to build a strong foundation for the development of the newest agricultural commodity.