The Food and Drug Administration still refuses to acknowledge electronic cigarettes may be a healthier alternative to traditional cigarettes, even though much of the rest of the world actively promotes smokers switching to e-cigs as safer.

The agency used an outbreak of lung injuries and deaths this summer related to vaping to urge the public to stop using the devices altogether until it knows more about what caused the illnesses, even though it all but confirmed they were related to illicit e-liquids bought over the internet.

Scientist putting drops of oil in a bottle next to marijuana plants.

Image source: Getty Images.

Now the agency is using a similar tactic with cannabidiol, or CBD, the nonpsychotropic compound found in marijuana and hemp, reiterating that not only is it illegal to use CBD in food or to market it as a supplement, but that there are also just too many unknowns for people to safely use CBD.

The results of both of these actions were predictable: The companies invested in these products were crushed in the market. 

The future is still cloudy for CBD

The FDA admits there is "significant public interest" in cannabis and cannabis compounds like CBD, but it warns consumers not to be lulled into thinking they're safe. The agency did approve GW Pharmaceutical's (NASDAQ:GWPH) Epilodex drug containing CBD to treat two rare illnesses. But even the pharmaceutical-grade compound in Epilodex exposed users to potential side effects including liver damage, reactions to other drugs, and harm to male reproductive function.

The potential ramifications of using over-the-counter formulations of CBD remain murky, especially if people are using it simultaneously across multiple applications, such as in edibles and in topical creams. The impact on certain populations like the elderly, children, or even lactating mothers is unknown.

It's not exactly fear-mongering, especially since the FDA says it wants to use a science-based approach to approve products to market and the agency needs to be cautious when it comes to public health. It says it wants consumers to have the facts before using CBD products.

Yet the regulatory body hasn't moved quickly in formulating a clear policy on CBD, all the while citing the risks associated with it, which results in the scales tipping toward opposition. And it could be years before official policy becomes more balanced.

Erecting hurdles to adoption

That's not unlike the situation with e-cigs, which are generally recognized as a safer and healthier option for smokers. The FDA has yet to label any device as reduced-risk (but it did approve Swedish Match's brand of snus, which is a moist, powdered tobacco product).

Although the agency's advisory panel recommended that the heat-not-burn e-cig from Philip Morris International (NYSE:PM) be approved for a reduced-risk label, the FDA has not acted on it for three years now, even though the application was submitted months before the marketing application.

Instead, the FDA has spent a lot of time taking the industry to task for a reported rise in teenage use of e-cigs and has targeted leading manufacturer Juul Labs for particular scrutiny. Altria (NYSE:MO) was forced to write down more than a quarter of the value of its $12.8 billion investment in the e-cig maker, which it was also excoriated for by investors. The agency has also proposed banning all flavored e-liquids, even though adults use flavors to help them transition away from smoking.

Never let a crisis go to waste

Rather than encourage smokers to make the switch to e-cigs, the FDA has made it clear that it views any nicotine use as harmful and has erected an expensive, labyrinthine approval process (so far, only two of the biggest tobacco giants have managed to submit applications for review). The deadline for the industry is May 2020, suggesting many won't make it.

It also used the outbreak of lung illnesses to bolster its animus against the industry, even though not a single e-cig manufacturer has been implicated in the health scare. 

As a result, the growth in e-cig use has tumbled while the decline in cigarette smoking has eased, suggesting people have stopped using e-cigs and taken up smoking again. That can hardly be considered a policy win.

CBD and e-cigs remain in limbo

The recent policy clarification on CBD doesn't seem much different. The FDA used the opportunity to highlight the risks and discuss how it's cracking down on companies violating its rules, but didn't offer any illumination on when a cohesive framework for regulation would be forthcoming. Since we already knew the FDA would lean against CBD use, much as it is against e-cigs, it makes it difficult for any pot producers wanting to offer CBD-infused products.

Investors in both CBD and e-cigs may want to proceed cautiously as the regulatory landscape remains uncertain because of the FDA.