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ACKRELL
CAPITAL
Cannabis Investment Report | December 2017

introduction into interstate commerce” of any drug, medical device, food, tobacco product or cosmetic
undertaken without the required FDA approval, permit or registration.

An article that includes cannabis or a cannabis derivative could conceivably qualify as a drug, medi-
cal device, food, tobacco product or cosmetic (or a combination). For example, a skin lubricant infused
with cannabis extract and intended to relieve muscle pain may be both a cosmetic and a drug, and a
prefilled device used to administer a metered dose of vaporized THC for treating nausea may be both
a medical device and a drug. Industry dialogue regarding the FD&C Act and the FDA tends to focus
on cannabinoid-based drugs and the potential for certain cannabis products to be regulated as food or
a related category of products known as “dietary supplements,” and we expand on both topics in the
following discussion.

Drugs
Generally, the FD&C Act defines a “drug” as any one of the following:

(i) Any article recognized in the official U.S. Pharmacopoeia, U.S. Homeopathic Pharma-
copoeia or National Formulary.

(ii) Any article intended for use in the diagnosis, cure, mitigation, treatment or prevention of
disease in humans or animals.

(iii) Any article (other than food) intended to affect the structure or any function of the body
of humans or animals.

(iv) Any article intended as a component of any of the foregoing.

The FDA oversees the manufacturing of drugs by inspecting domestic and foreign manufacturing
plants, by sampling drugs from retail stores, distribution warehouses and manufacturing plants and by
evaluating complaints and reports of defects from consumers and health care professionals. The FD&C
Act generally prohibits a company from introducing a drug into interstate commerce without the FDA
having first approved the drug as safe and effective for treating a specified medical condition.

FDA approval of a drug as safe and effective for treating a specified medical condition generally
involves the following steps:

(i) The drug’s manufacturer performs laboratory and animal tests to determine how the drug
works and whether it is safe enough to test on humans.

(ii) If the manufacturer determines the drug is safe enough to test on humans, then the manu-
facturer submits for FDA review an Investigational New Drug (IND) application.

(iii) Upon review of the IND application, if the FDA determines the drug is safe enough to test
on humans, then the FDA approves the manufacturer to proceed with human clinical trials.

(iv) The manufacturer performs a series of human clinical trials and submits the resulting data
for FDA review in the form of a New Drug Application (NDA). Upon review of the NDA,
if the FDA determines the drug’s benefits outweigh its known risks and the drug can be
manufactured in a way that ensures a quality product, then the drug is approved as safe and
effective for treating the specified medical condition.

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