Plumes of Praise, Puffs of Pain

FDA's proposed OTP deeming regs receive mixed reaction

Published in CSP Daily News

By  Mitch Morrison, Vice President & Group Editor
Melissa Vonder Haar, Tobacco Editor

"At the end of the day, while there are some positive aspects to these regulations, it is clear that science is not playing much of a role in the process," Siegel said. "That does not bode well for the potential of electronic cigarettes to seriously challenge the combustible tobacco market, and thus to save hundreds of thousands of lives."

Ron Tully, spokesperson at National Tobacco Co., which last year entered into a long-term distribution agreement with the V2 e-cig brand, raised another worry.

Although he too supported FDA's efforts to limit youth access of other tobacco products, Tully cited concerns that FDA's proposed measures would hurt smaller manufacturers and product innovation.

"We have concerns with the direction of some elements proposed regulations and their impact on small companies. We sincerely hope that the agency will carefully review the comments of industry stakeholders, and that FDA ultimately recognizes the need for an alternative regulatory regime for many of the transformative and progressively innovative products that came, and will continue to come to the market, post Feb. 15, 2007."

Jeff Stier, risk analysis director at the National Center for Public Policy Research, placed emphasis on the FDA's comments that its proposed regulations are "foundational."

"The devil will be in the details of future regulatory decisions," said Stier. "If the regulations are too heavy-handed, they'll have the deadly effect of preventing smokers from quitting by switching to these dramatically less harmful alternatives."

And like National Tobacco, he feared the deeming regulations would favor the deeper-pocketed manufacturers: "The expensive and burdensome requirements will heavily favor big companies at the expense of smaller innovative ones, thus slowing product improvements that would make e-cigarettes a more appealing alternative to even the most addicted smokers."

But an important silver lining, he noted, was the effect FDA's actions could have on local and state governments looking to impose harsher limits on e-cigs.

"Some city and state legislatures have been using the lack of federal regulations as an excuse to institute their own draconian regulations, from public use bans to outright bans on flavored e-liquid. It will be harder to justify those bans now that the FDA is asserting federal oversight," Stier said.

Necessary Barriers?

What some like Tully and Stier see as potentially stifling barriers, others see as more mixed for both the good and potentially the bad.

The proposed strictures "increase the barriers to entry for existing manufacturers, which is positive," said Wells Fargo tobacco analyst Bonnie Herzog. "However, our main concern remains around e-cig/e-vapor innovation which, if stifled, could dramatically slow down industry growth and conversion from combustible cigs, which would ultimately result in net negative public health impact. Clearly, this would be in direct opposition of the agency's goal."

Nik Modi, tobacco analyst at RBC Capital Markets, said he sees the proposed rules as a win for tobacco's Big Three--Altria, Reynolds and Lorillard, "particularly Lorillard, as the FDA did not mention rules on flavors and advertising."

Modi also pointed to something not raised by the FDA: "We find it interesting this statement does not mention 'vapor products' [open systems, e-liquids, tanks, mods] as we have pointed out … this is currently the fastest-growing category within tobacco."

Chuck Conner, former president of the American Lung Association and currently senior advisor at The Electronic Cigarette Industry Group (ECIG), credited FDA's action as laying a foundation for a broader nicotine policy.

"The cardinal rule moving forward," he said, "should be to recognize the distinctions between combustible cigarettes and electronic cigarettes."

 

How Will Regulation Change the Course of OTP Retailing?

An exclusive CSP webinar asks "what's next" for tobacco sales. Get the latest insights in e-cigarette, OTP and cigarette retailing, plus key initiatives across the tobacco category, in an exclusive CSP webinar with Nik Modi, tobacco analyst for RBC Capital Markets, and Joe Teller, director of category management for Swedish Match NA.

Mitch Morrison .

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