Hard to Know What You’re Getting
Even as public awareness of CBD’s healing potential has grown, it remains difficult to assess the quality, safety, and, importantly, the origin of most CBD products, thanks to the 80-year federal prohibition of cannabis and the resulting lack of both research and regulation.
Dr. Ethan Russo, leading cannabis researcher
Even though the law does not classify CBD as a Schedule I narcotic, the DEA claims that it is. (CBD, unlike THC, is not psychoactive.) That discrepancy leaves a lot of gray area when it comes to knowing how to operate. “It’s why some manufacturers don’t list CBD on the label,” says Heather Jackson, CEO and co-founder of Realm of Caring, a patient research and advocacy nonprofit in Colorado. “They may list ‘hemp extract,’ which is code for the entire cannabinoid content, but not necessarily CBD.”
Until recently, hemp growing and production was banned in the United States. As a result, much of the CBD being used today is extracted from hemp grown in Europe, or in some cases, China. (Google “CBD powder” and Alibaba and see what comes up.) This is troubling. Hemp has an extraordinary ability to absorb toxins from polluted soils—it’s a natural soil remediator. After the 1988 Chernobyl nuclear reactor meltdown, hemp was planted around the contaminated disaster site for exactly that reason. Oils extracted from plants grown near soils contaminated by pesticides or industrial effluents may contain those impurities in concentrated amounts. In today’s CBD market, manufacturers are under no obligation to tell consumers where their hemp was grown or to test it for contaminants.
“God knows what toxins are in the hemp processed in countries like China or Romania, which don’t have the same laws about pesticide use that we have,” says Dr. Ethan Russo, a neurologist, ethnobotanist, and one of America’s leading researchers into medical cannabis. “I don’t trust any of it and I don’t think anyone else should either.”
It’s a tough choice for patients: $200/month for CBD or $11/month for Advil.
The good news is that it’s increasingly possible to source higher-quality, laboratory-tested CBD derived from organic hemp grown in Western European countries—Austria, Germany, the Netherlands—with strong environmental regulations. High-quality hemp oils from Europe now wholesale for 0.5 cents to 1 cent per milligram. If encapsulating, bottling, and labeling that oil doubles the production cost, a manufacturer filling a pill bottle with 30 20-mg capsules (a standard dose) and selling that bottle online for $60 (8 cents/mg) is realizing at least a 400% markup.
While that may suit American manufacturers, it’s challenging for financially strapped patients who must cough up $200 to $300 a month—the equivalent of a monthly car lease—for CBD meds. In a rational world, health insurance would cover much of that cost. But the federal government still refuses to treat cannabinoid medicine with any sort of rationality. For people on fixed or low incomes, CBD isn’t a sustainable option, especially compared to an NSAID like Advil, which clocks in at about 6 cents per pill, or about $11 per month.
Dr. Lester Grinspoon, the renowned Harvard psychiatrist who wrote the 1972 best seller Marihuana Reconsidered, dubbed medical marijuana “the people’s medicine,” precisely because it could be made economically or grown at home. But at this price, CBD is more of a luxury product than an affordable treatment, less for the people and more for the pashas.
The Price of Risk
I’m a patient, but I’m also a small business owner. I understand the challenge of conducting business in the cannabis space, which in many states is still considered a criminal activity. The media crows about “marijuana millionaires,” but the weight of prohibition can often be crushing to a small business with high startup costs, low revenue, and a fair amount of risk.
Federal law doesn’t directly address the status of CBD. But the DEA claims it’s illegal.
CBD producers shoulder a greater risk than the maker of any “normal channel” medicine. With the Trump administration sending mixed signals on hemp oil—the DEA’s notorious December 2016 Federal Register rule had manufacturers fretting that the government would ban it outright—the risk could suddenly turn hazardous.
Still, it’s difficult to fathom why CBD, derived from an easily grown and processed weed, is ten times more expensive than a precious metal.
Is Green the New Silver?
Prohibition imposes a criminal risk factor, certainly. But cocaine carries a far greater risk factor than CBD. And at $100 per gram, cocaine sells for the same exact price—$2,835 per ounce. So legal risk can’t be the only reason.
As I asked industry manufacturers, retailers, consumers, and researchers to explain the high price of CBD, five answers were consistently floated: inefficient farming and production, the costs of introducing a new product into an unregulated market, insufficient consumer information, limited patient access, and greed.
Wanted: Better Hemp Farming
Modern hemp farmers say that hemp cultivation methods in the United States are antiquated and inefficient. “Farmers spend way too much money using outdated methods on something which grows quite simply,” says Jacob Goldstein, co-founder of two-year-old Green Mountain CBD in Vermont.
Goldstein, who counts Seventh Generation founder Alan Newman as one of his primary investors, sells one of the lowest-cost CBD products on the market.
Growers “are cloning plants before transferring them to soil, which requires massive manpower and expensive real estate and can cost hundreds of thousands of dollars,” Goldstein told me. “We don’t do clones, so we don’t need $1000/square foot climate-controlled grow rooms and we don’t need all the manpower required to get them into the ground.”
Instead, Green Mountain breeds its own high-CBD seed crops indoors, which, Goldstein says, makes for stronger roots and heartier plants. Green Mountain then cultivates the plants on its small, 14-acre farm. Medical marijuana is legal in Vermont, so Green Mountain has fewer concerns about state law enforcement officials raiding the farm. Some hemp farmers in other states haven’t been so fortunate.
Other hemp producers use pricey extraction processes, often with harsh solvents such as butane or hexane that require further processing to remove. Green Mountain pares its costs by extracting with coconut oil, which Goldstein claims has the added benefit of enhancing the bioavailability of the CBD in each dose.
That all sounds good. But Green Mountain doesn’t employ scientists to test its products and guarantee consistent and reliable dosing. That may be another way to minimize production costs, but it means consumers are essentially trusting the Green Mountain brand to deliver the 600 mg of CBD it promises on the label—and deliver them without pesticide residues or other adulterants.
CW Hemp, the Colorado makers of the oil that successfully treated Charlotte Figi, does test its products through a third-party lab. The company also has a staff microbiologist test regularly for molds and other microbes. CW Hemp’s revenues allow the company to voluntarily follow CGMP (Current Good Manufacturing Practice) methods, even though it’s not required. “That’s the gold standard, and it adds costs,” says Jesse Stanley, CW Hemp co-founder and vice president.
The company grows its own famously CBD-rich plants. Patients registered with Realm of Caring, the nonprofit group created by the Stanley brothers, can purchase its CBD oil in bulk for as little as 5 cents per milligram. If you’re not registered with Realm of Caring, CW Hemp will ship its CW Simply capsules anywhere in the United States for 6 cents per mg. It’s hard to know exactly what you’re getting, though, because CW Simply says each capsule contains 15mg of “Charlotte’s Web extract oil.” Does that mean each capsule contains 15mg of CBD? We’re meant to infer it, as Charlotte’s Web is synonymous with low-THC, high-CBD cannabis. But we can’t know for sure. The company may be skittish about actually listing CBD due to federal legal concerns—but that doesn’t do a patient any favors.
Green Mountain was founded about two years ago. The company sells its products exclusively online and does very little marketing. When I told a fellow patient about the company’s products, he was skeptical. “I’ve come to know and trust some of the pricier manufacturers precisely because they’ve invested millions in establishing that brand,” he said. “They’re less likely to cheat me, because they have more at stake.”
Well… possibly. It’s true that the costs of building a trustworthy brand, while unseen by consumers, are not insignificant. In an industry where the usual markers of quality assurance (FDA approval, state-mandated testing) simply don’t exist, brand equity becomes an important indicator of quality.
In the absence of an authority to police the brands, though, consumer awareness guarantees nothing. Reputations can be built on unsubstantiated claims. In 2015, the FDA tested 26 CBD products produced in California, Washington, and Arizona and discovered that many contained miniscule amounts of CBD—or none at all. One year later the FDA repeated the test on 22 CBD products from other states: same result.
Botanical Bells and Whistles
Here’s another way to command a high price: Create sophisticated formulations, package them beautifully, and sell them for a premium. The beauty industry was built on this formula. Most of the $300 potions on the shelves at Sephora cost about $2 to make, according to Perry Romanowski. Romanowski is a cosmetic chemist and co-founder of BeautyBrains.com, a site that educates consumers about the science behind the cosmetic industry.
CBD companies know this strategy well.
“Not all CBD products are created equal,” says Kurt Forstmann, hemp category manager for Colorado-based Dixie Brands, one of America’s largest and best-known cannabis companies. “The vast majority are just squirting CBD in coconut oil and calling it medicine. Our products have synergistic ingredients that potentiate the medicinal qualities, and many of them are as expensive as CBD.”
A year and a half ago, Dixie created the Aceso brand, which offers THC-free CBD products to consumers around the country, regardless of the legal status of their state. Aceso’s “Calm” formulation combines L-theanine (a Green Tea extract), plus two pharmaceutical-grade terpenes: linalool, which is found in lavender; and limonene from grapefruit. It’s packaged as a beverage powder, with 7.5 mg of CBD per sachet, at a price of 22 cents per mg. (The company’s CBD capsules, offered under the Dixie Botanicals brand, offer CBD at about 20 cents per mg.)
Aceso Calm certainly smells luxurious. But are those terpenes an integral part of a medically effective entourage effect, working in harmony with the CBD—or do they just please the olfactory sense? They jury’s still out, again, due to the lack of scientific studies. We do know one thing for sure: The addition of terpenes do enhance the cost.
Even if those supplementary ingredients equal the costs of CBD, though, Dixie’s products are still three to four times the price of Green Mountain’s. To give Dixie its due, the company spends a lot of money double-testing every batch of imported CBD oil for heavy metals, pesticides, microbes, and solvents—once when the oil arrives at their facility, and again after the final product is assembled. “We don’t trust anyone in this business,” Forstmann says.
Hemp-Sourced Vs. Cannabis-Sourced
Another way of judging the value of hemp-derived CBD is to compare it to the CBD extracted from more expensive cannabis flowers.
Unlike the other manufacturers surveyed in this article, Aunt Zelda’s, a small patient collective based in Bodega Bay, CA, makes its CBD tinctures and balms using cannabis flower, which is usually about two to four times more expensive than hemp. Their CBD oils, which are typically blended with THC, cost 2.25 cents per mg to manufacture, and that cost includes lab testing, tinted bottles, packaging, compliance, labor, rent, and utilities.
Unlike most CBD manufacturers, Aunt Zelda’s posts its independent lab test results online. A 600-mg bottle of their CBD-THC oil costs $13.50 to produce. It wholesales for $27. California distributors tack on another 30%, which ratchets the price up to $34. Dispensaries double that—a typical markup in any retail business—to about $70.
Aunt Zelda’s delivers CBD to the patient at 11.6 cents per mg—but only in California. Because their oils contain more than 0.3% THC, they sell only to authorized California medical cannabis patients. And it’s not easy for patients to find; retail partners listed on Zelda’s website do not actually list Zelda’s CBD on their own menus. Aunt Zelda’s might make some of the highest-quality CBD in America, but it’s extremely difficult for most patients buy.
Today’s CBD market is young and unnaturally warped by prohibition. As it matures, prices will stabilize—and hopefully decline.
Aunt Zelda’s is a nonprofit patient-based service. Revenue is important, but it’s not the sole driver of the operation. That raises a question. If Zelda’s meticulously crafted, high-end cannabis-sourced product sells for 11.6 cents per mg, how can a bottle of CBD tincture made from cheap imported hemp oil, of unknown quality and purity, sell online for two to five times the price?
The answer can be found in a complicated mix of factors. Today’s CBD market is young. Four years ago it was practically nonexistent. It’s also unnaturally warped by cannabis prohibition, legal uncertainties, the absence of FDA regulations, and insufficient consumer information and access. Some companies are producing high-quality, locally sourced, lab-tested, and toxin-free CBD. Others are importing cheap hemp oil of unknown quality and slapping a CBD label on a bottle. It’s extremely difficult for patients to know the difference. Aunt Zelda’s produces excellent CBD guaranteed by lab results—but almost nobody outside California can buy it.
Manufacturers are rushing in with products and tossing out prices to see what sticks. If you believe in market efficiency, a middle price zone will eventually emerge when today’s massive inefficiencies subside. Companies will learn how to increase their quality and decrease their prices and still turn a profit.
That occurs, however, only when markets mature. Right now, “there are a lot of snake oil salesman trying to profit off people in need,” Jesse Stanley told me. “It’s unfortunate, but those dynamics are very real.” In the long run, though, Stanley believes the scamsters and low-quality manufacturers will be driven out, and the promise of this theoretically affordable plant-based medicine will have its due. “CBD is a new product that is revolutionizing the way we treat disease,” he said, “and I think we’ll see amazing things in the future.”