What GW Pharma's Blockbuster Acquisition Means for Cannabis
In the wake of Jazz Pharma's planned $7.2 billion acquisition of GW, we take a look behind the GW Pharma NY & Federal cannabis lobbying curtain.
In the cannabis industry’s largest planned acquisition to date, GW Pharmaceuticals, the “global leader in developing cannabinoid-based medicines,” agreed to be acquired by Jazz Pharmaceuticals plc for a whopping $7.2 billion. Jazz spending roughly 7/8th's of its own market cap ($8.425 billion) signals their bullishness on the cannabidiol (CBD) medicine industry going forward.
GW Pharmaceuticals is a big name in the cannabis industry as the company that produces Epidiolex, the only FDA approved CBD drug in existence. The current authorized use of Epidiolex is limited to treat rare diseases Lennox-Gastaut and Dravets syndrome and in result the potential market for patients is small. However, according to Business Insider, GW Pharma CEO Justin Gover said on a call with Jazz CEO Bruce Cozadd that GW has “first-in-class candidates across disease states such as autism, schizophrenia, and other neuropsychiatry targets.” Jazz CEO Bruce Cozadd said in the same investor call that Epidiolex has "near-term blockbuster potential," and reinforcing that the neuroscience is a key focus for Jazz Pharmaceuticals. Gover said that “this is just the beginning for Epidiolex," and that their CBD medicines are based in "real and compelling science." Currently, GW has another product going through Phase III trials in the US, already approved as Sativex in the EU, a botanical drug cannabis extract mouth spray used to treat multiple sclerosis and other symptoms.
Further concerning those in the cannabis industry is the fact GW holds a whopping 1,420 patents related to cannabis pending across forty countries. The patents relate to plants, plant extracts, extraction tech, pharmaceutical formulations, drug delivery, the therapeutic uses of cannabinoids, and plant-variety rights.
GW has been expanding their political influence both federally and in New York. Generally, the company has pushed back against state regulations allowing cannabinoids such as CBD in food or supplements, pointing to potentially harmful side effects, specifically liver toxicity, uncovered in their clinical trials. Many hemp industry advocacy groups have pointed out that the Epidiolex clinical trials used dosages up to 100x that of standard industry practice and beyond GW’s trials there have been no studies showing such liver toxicity.
Due to the medical exclusionary rule in the Federal Food, Drug, and Cosmetic (FD&C) Act, any drug that is used in a pharmaceutical cannot be used in food goods unless specifically allowed by the FDA. As such, CBD has not been allowed as an ingredient in food or supplements. This policy has made it difficult for CBD producers to market their products for export and has caused many retailers and e-commerce platform to restrict sales altogether. The FDA has also been practicing “discretionary enforcement” in sending letters to companies who market CBD as a supplement or in food with health claims. In 2019, FDA considered altering this rule and potentially authorizing CBD use in food and dietary supplements, but then cited “clinical investigations conducted by GW,” determining that CBD should be excluded from conventional foods or being marketed as a dietary supplement, in its decision to keep the rule as is. GW argued that restricting CBD to medicine would preserve “incentives for the pharmaceutical industry to invest in [CBD] medicine.”
Which is why CBD regulatory systems allowing CBD use in foods, such as New York’s, threaten GW’s stake in the market.
In New York
GW has been lobbying in Albany heavily in the past year and will surely continue to do so, if not ramp up the pressure now that New York is enacting their new hemp extract regulations and is primed to legalize cannabis for adult-use this year. According to the New York State Joint Commission on Public Ethics, for the pay period of January-June 2020, GW lobbied on 64 bills in New York, many of which are up for review again in the current legislative session.
There were some standard, predictable bills: A2824, which “relates to insurance coverage for medical marijuana,” which made it to Assembly Committee and is in this new session (A242).
Bill A2217, “Relates to allowing for the use of medical marihuana for autism spectrum disorder,” and Bill A1616, “Relates to adding autism as a covered condition for medical marihuana,” both medical conditions which GW is looking into treating with yet-to-be-announced products. A2217 has been reintroduced to the Legislature as A1659, and A1616 likewise as A1150.
GW also does not like New York’s Hemp Extract Bill, as sources have noted. The Hemp Extract Bill (S6184A/A7680), signed into law in December 2019, regulates CBD in food and drink in the New York market. According to the New York Joint Commission on Public Ethics, which shows lobbying information, GW hired firms and also lobbied on its own behalf in Albany. It is unclear which bills they lobbied on. While the information for 2020 is very clear, showing specifically which bills they lobbied on (as evidenced by the above), 2019 is opaque. Firms were hired to lobby on “Potential matters related to the pharmaceutical and health care industry,” “General goodwill” to the Governor’s Office, “Administration Issues” related to the Department of Health (DOH), and most importantly state bills on “Cannabis related issues.” The only lobbying with a clear focus or meaning was “Epidiolex descheduling” with the DOH. We are guessing that somewhere hidden is the fact that GW lobbied on the Hemp Extract Bill, as sources have said. This bill threatens their hold on their corner of the market, and they will try to squash such bills in other states going forward.
Federally
On a federal level, GW’s position in the CBD medicine market would be fundamentally threatened by bills such as H.R. 5587 and H.R. 8179, which both aim to alter the medical exclusion rule to allow CBD for use in dietary supplements and the like.
H.R. 5587, “To amend the Federal Food, Drug, and Cosmetic Act with respect to the regulation of hemp-derived cannabidiol and hemp-derived cannabidiol containing substances,” aims to do just that. It has 13 co-sponsors, and it was last reviewed by the House Agriculture Subcommittee on Biotechnology, Horticulture, and Research.
H.R. 8179, the “Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2020,” accomplishes the same thing so long as the CBD in question complies with certain regulations and dietary requirements as laid out in the FD&C Act. It has 29 co-sponsors and it was only introduced into the house in September, referred to the House Energy and Commerce committee. This same bill was reintroduced into the 117th Congress.
To Sum it Up
With Jazz Pharmacuticals betting big on GW pharmacuticals we can expect the company to continue vigorously defending their market position. This could present challenges for states like New York who are moving to protect the cannabinoid supplement and food industry. The lobbying efforts could also push the FDA to begin more regulatory enforcement of CBD products currently on shelves and reinforce their opposition to efforts such as H.R. 5587 and 8179.