Curaleaf and CVS -- A Cautionary Tale

The CBD sector changes fast. Opportunities open and close daily. It’s often hard to see what’s really going on through all of the chaos and noise, and little news blips can sometimes reveal a lot about how the industry works. 

On Monday this week, Curaleaf, one of the CBD brands being carried by CVS, was hit by the FDA with a warning letter for the blatant functional claims they were making about their products on their website and social media, improper marketing of drugs for animals, as well as labelling suggesting CBD is a dietary supplement. 

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As a result, CVS pulled a number of their products, and the entire CBD sector lost 9% of its value on the stock market on Tuesday morning. Even some cannabis stocks went down, although both cannabis and CBD stocks regained most of the loss by the end of the day. Curaleaf itself lost 8%, but this is just a quarter of the bump they got after announcing CVS would carry them in March.

It’s commonplace for CBD brands to receive warning letters. Even upstanding brands receive them from time to time. What is surprising about the Curaleaf situation is that these extremely preventable events took place in spite of the level and scale of the Curaleaf / CVS relationship.

CVS is number seven on the Fortune 500, with $184B in annual revenue. The company faces strict compliance burdens in everything they do, from pharmaceutical sales on down. Meanwhile, Curaleaf, which is the leading cannabis multi-state operator in the US, has a $3.45B market cap and faces detailed and extensive cannabis compliance rules in 12 states. 

So when CVS selected Curaleaf out of the hundreds of CBD brands available to them, we all assumed both parties had done the kind of diligence that we at CWI take every one of our partner brands through.

We’ve been saying all along that brands that want to play in the big leagues need to have their affairs buttoned up. But what we never guessed was that giant national brands and retailers are not up to this standard either. 

CVS publicly announced they were trialling CBD products over a year ago. And yet they ultimately went with a brand that lacked the most basic regulatory risk reduction strategies. And now everyone is paying for that shoddiness. 

In their response to the FDA, Curaleaf CEO Joseph Lusardi tells us that “Our industry needs, wants and appreciates the work the FDA is doing to ensure there is regulation and compliance in the CBD marketplace.” Amen to that. It’s exactly what we said to the FDA in our submission to their public comment process in their CBD rulemaking. 

There’s a lot for us to learn from these events. Some of the biggest lessons are:

  • CWI could have prevented all of this if we had been involved. One of our core competencies is FDA compliance and CBD labeling best practices. 

  • All of our partner brands (Stanley Brothers, New World CBD, ChrgD+, and Mighty Self) are low risk compared to much of what is out there, even in the biggest retailers

  • The big retailers do not know how to properly vet CBD products, even after spending more than a year on rolling them out

  • Prominent CBD brands do not know how to comply with FDA rules

  • Being in a major retailer draws the attention of the FDA

  • The FDA looks at everything, including websites and social media

  • Receiving negative attention from the FDA can have serious negative repercussions, even if the letter itself does not carry consequences

As CBD matures into the mainstream marketplace, these factors are going to be more important than ever. Cultivating Wellness continues to be at the forefront of responsible regulatory engagement, helping our brands navigate the constantly changing landscape and providing our customers with the best hemp-based CBD products there are.

If you’d like to know more, please get in touch!