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 The Food and Drug Administration's action brought regulation of
e-cigarettes, cigars, pipe tobacco and hookah tobacco in line with
existing rules for cigarettes, smokeless tobacco and roll-your-own
tobacco. The new rules take effect in 90 days.
The rules promise to have a major impact on the $3.4 billion
e-cigarette industry that has flourished in the absence of federal
regulation, making the nicotine-delivery devices the most commonly
used tobacco products for U.S. youngsters.
The FDA said it will require companies to submit e-cigarettes and
other newer tobacco products for government approval, provide it
with a list of their ingredients and place health warnings on
packages and in advertisements.
Health advocacy groups hailed the move. Industry officials said the
regulations could hurt smaller companies and cripple a their
job-creating business due to the expense of the regulatory process.
Wall Street analysts expect the regulations to herald a new wave of
consolidation led by big tobacco companies.
E-cigarettes are handheld electronic devices that vaporize a fluid
typically including nicotine and a flavor component. Using them is
called "vaping."
The FDA will require age verification by photo identification, ban
sales from vending machines except in adults-only locations and stop
the distribution of free product samples.
The new regulations had been highly anticipated after the agency
issued a proposed rule two years ago on how to oversee the
e-cigarette industry and the other products.
"Millions of kids are being introduced to nicotine every year, a new
generation hooked on a highly addictive chemical," U.S. Secretary of
Health and Human Services Sylvia Burwell told reporters, calling the
rules a first step toward breaking the cycle of addiction.
Burwell said health officials still do not have the scientific
evidence showing e-cigarettes can help smokers quit, as the industry
asserts, and avoid the known ills of tobacco.
The e-cigarette vapor industry, which includes e-cigarettes, vapors,
personal vaporizers and tanks, is expected to have about $4.1
billion in sales in 2016, Wells Fargo estimated in a recent research
note.
"These new regulations create an enormously cost-prohibitive
regulatory process for manufacturers to market their products to
adult smokers and vapers," said Cynthia Cabrera, president of the
Smoke-Free Alternatives Trade Association, representing the
e-cigarette industry.
Three million U.S. middle and high school students reported using
e-cigarettes in 2015, compared with 2.46 million in 2014, according
to the most recent federal data.
A University of Southern California study of high school students
last year found that those who used e-cigarettes were more than
twice as likely to also smoke traditional cigarettes. While some
researchers believe e-cigarettes pose lower cancer risk because they
do not burn tobacco, other researchers view e-cigarette vapor as
potentially harmful because of chemicals released during the burning
process.
"This is a real epidemic and banning the sales of these products to
minors, much like cigarettes, is a critical step to protecting their
health now and into the future," said Democratic U.S. Representative
Lois Capps of California.
Reynolds American Inc, Imperial Brands Plc and Altria Group Inc are
among the largest makers of e-cigarettes.
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Altria, which makes Marlboro cigarettes and e-cigarettes, said it
was concerned the regulations reached back to 2007 to determine
which products to review, spokesman David Sutton said. Reynolds,
which sells Newport and traditional cigarettes as well as Vuse
e-cigarettes, will discuss with the FDA how to establish a
reasonable structure for review and approval, spokesman David Howard
said.
CONTROVERSY OVER FLAVORS
Public health advocates also have urged the FDA to ban the use of
flavored nicotine liquid in e-cigarette and personal vaporizers.
They contend the flavors, which can range from bacon to bubble gum,
lure youngsters into taking up vaping.
FDA officials said they would consider future regulation on flavors
based on further study of vaping's potential risks and benefits. The
FDA did ban flavors in cigars.
The agency said as more scientific data emerges on potential dangers
from e-cigarette vapor, it will consider restricting advertising of
the products.
In 2009, Congress allowed the FDA to extend its oversight to all
tobacco products. The agency began looking at e-cigarettes, which
were quickly gaining traction in the U.S. market.
Cigars had previously not been regulated by the FDA. Cigar makers
had lobbied for their more expensive, typically hand-rolled products
to be excluded from such oversight.
The FDA will review products introduced after Feb. 15, 2007, but
will give manufacturers of e-cigarettes and these other products up
to two years to submit applications. E-cigarette makers can continue
to sell those products while the review is pending.
Agency officials expect that most products on the market will
require its review, a costly prospect for the many smaller
manufacturers of vaping devices.
"The winners are the large tobacco manufacturers, primarily Altria <MO.N>
and Reynolds (American) <RAI.N>, which have the experience and
financial wherewithal" to deal with FDA processes, Morningstar
equity analyst Adam Fleck said. "The net result is a very fragmented
e-cigarette market is likely to be consolidated."
The cigar market is expected to grow to more than $8.9 billion in
2019, up from $7.4 billion in 2009, according to Euromonitor. It is
dominated by Swisher International, Altria and Imperial, which
combined in 2014 sold about half of the cigars in the United States,
according to Euromonitor.
Companies will be allowed to continue marketing their products while
the FDA conducts its reviews, which could take 12 months after
submission.
(Reporting by Caroline Humer, Jilian Mincer and Bill Berkrot in New
York and Clarece Polke and Toni Clarke in Washington; Editing by
Michele Gershberg and Will Dunham)
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