May 9, 2016 CSP

4 Problems for Electronic Cigarettes Post-‘Deeming’

WASHINGTON -- Perhaps no segment stands to be more impacted by last week’s announcement of the U.S. Food and Drug Administration’s (FDA) final “deeming” regulations than electronic cigarettes. While many had hoped the FDA might acknowledge the segment’s place on the continuum of risk, the final regulations read very similar to the agency’s original proposal: no change to the Feb. 15, 2007, predicate product date, no change to the premarket tobacco application (PMTA) requirement and no acknowledgement of e-cigs’ potential as a reduced harm alternative.

“What we’re seeing is the whole problem of the unintended consequences of the fear of unintended consequences,” David Sweanor, an adjunct professor of law at the University of Ottawa’s Center for Health Law, Policy & Ethics, told CSP Daily News. “The concern that something might go wrong with e-cigarettes, so we have to protect people from it.”

Vaping manufacturers and harm-reduction advocates alike were quick to echo Sweanor’s concerns.

 

“The impact on this industry of this ‘one-size-fits-all’ tobacco regulation will be horrible if it stays as is,” said Arnaud Dumas de Rauly, president of France-based e-liquid manufacturer Gaiatrend. “Putting vapor technology products in an antique regulatory scheme, that’s going to kill the entire market.”

Specifically, here are four of the biggest concerns surrounding e-cigs and deeming:

Who Survives?

At “several hundred thousand dollars” (according to FDA Center for Tobacco Products director Mitch Zeller), the cost of a single PMTA application stands to be prohibitive to the majority of independent vapor companies. However, Cowen Group analyst Vivien Azer pointed out it’s not just PMTA costs manufacturers have to worry about.

“As expected, these regulations present a hurdle for the e-cig industry and in particular smaller manufacturers, while our large publicly traded companies are better equipped to manage through this increased regulation, in particular the meaningful user fees that will be required,” Azer wrote in a research note, adding those user fees will range between $800,000 and $1.2 million the first two years. “We expect that for smaller manufacturers, these fees, coupled with the cost of product applications, will prove onerous.”

“This again would be costly and burdensome for the entire industry and prove more challenging for the smaller manufacturers since they don’t have the same financial and regulatory resources of Big Tobacco,” agreed Wells Fargo tobacco analyst Bonnie Herzog.

These financial requirements are why vaping advocates have decried the final deeming regulations are an effective ban of the e-vapor category.

“This is not regulation,” said American Vaping Association president Gregory Conley. “It is prohibition that will cost lives, kill jobs and further entrench America's largest cigarette companies.”

Flavors

Although the final deeming regulations do not technically ban flavors, Zeller dropped hints that the agency could choose to do so in the future and would also be taking flavors into consideration when evaluating new product applications.

Citing evidence from the National Youth Tobacco Survey (NYTS) suggesting 73% of minors using e-cigs do so because of flavors, Zeller said, “PMTA is one of the ways we’re going to try to account for the potential risks and the potential benefits of flavors in things like e-cigarettes. On an application-by-application basis, the industry is likely going to have to address the impact of initiation of their products based on the presence of particular flavors.”

In other words, while flavored e-cigs might not be officially banned, the FDA is under no obligation to approve any flavored products.

Innovation

As previously discussed, a 2007 predicate product date could potentially stop new product innovation in its track.

“The new deeming regulation will become effective in early August,” Azer said. “Beyond that date, we believe that it will likely be prohibited for manufacturers to launch new products without prior approval.”

While this is troublesome for any tobacco category, constant innovation has been a crucial part of the success of e-vapor products. Even if manufacturers can find an e-cig that was on the market by 2007 to serve as a predicate, the technology has evolved drastically in that past nine years.

“I think the FDA is really quite lost because they’re dealing with innovative technology that they, by and large, don’t seem to understand,” Sweanor said.

“I don't see the possibility for the continued growth of this market under these circumstances,” Michael Siegel, a professor of community health sciences at the Boston University School of Public Health, wrote in his Tobacco Analysis blog. “The regulations will stifle innovation. They take away any incentive for innovation because of the burdensome new product application process.”

A Black Market

Conley, and others, have pointed out that prohibition didn’t work with alcohol, didn’t work with marijuana and will not work with electronic cigarettes. If the FDA’s regulations ultimately result in an effective ban of most vaping products, Conley believes a black market can and will develop.

Clive Bates, a British consultant and anti-smoking advocate, recently proved just how easy it is for consumers to access liquid nicotine: per his blog, Bates successfully ordered a bottle of 99% pure liquid nicotine from China, despite a European Union restriction on liquid nicotine strengths. It stands to reason that U.S. consumers could ultimately order similar products and mix their own e-liquids.

“People have more imagination and determination than regulators can ever give them credit for,” Bates wrote. “This type of regulation [from the FDA] just degrades the value proposition of the alternative to cigarettes, so more people continue to smoke. But people who are committed to it [will] look for a workaround.”

Melissa Vonder Haar