The Food and Drug Administration s first shot at regulating electronic cigarettes comes across as an attempt at finding common ground among public health, scientific and economic standpoints, according to analysts and advocates.
E cigs are battery powered devices that heat a liquid nicotine solution in a disposable cartridge and create a vapor that is inhaled.
Among the main FDA recommendations are a ban on sales to underage youths, requiring health warning labels, FDA review of existing and future products and no more free samples.
However, the FDA did not call for an outright ban of e cigs, as some anti tobacco advocates had pushed for. It did not curtail Internet sales or current marketing efforts that include television and social media. It also is not recommending curtailing flavorings, such as candy and fruits, that advocates say make e cigs appealing to youths.
The agency could propose more regulations once approved standards are in place. Analysts warned it could take several years to get initial standards in place.
Bonnie Herzog, an analyst with Wells Fargo Securities, said the proposed regulations are broadly as expected and not as restrictive as some had feared.
In general, they increase the barriers to entry for existing manufacturers, which is positive.
However, our main concern remains around 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.
Jason Healy, president of blu eCigs, owned by Lorillard Inc., told The Associated Press that the FDA is taking a responsible approach.
It shows the FDA’s commitment to look at particular e cigarettes in a science based way rather than just conjecture. Obviously we’ve got a long way to go. This may be just some calm before the storm.
The most pressing challenge for the FDA is how to regulate legal tobacco products that are not considered safe for human consumption as made.
Among the ways the FDA is trying to bridge that regulatory quandary is spending up to $273 million over five years to operate 14 tobacco centers of regulatory science, two of which will be based at UNC Chapel Hill.
The devil will be in the details of future regulatory decisions, said Jeff Stier, risk analysis director for the National Center for Public Policy Research. 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.
Stier said one silver lining about FDA e cig regulations is that they may stem or halt steps taken by some cities and state legislatures 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.
Herzog estimated there was $2 billion in overall e cig revenue last year. She projects up to $10 billion by 2017.
She predicts Reynolds will have $4 billion in revenue from e cigs in 2021, compared with $3.9 billion from conventional cigarettes. That s compared with barely any e cig revenue and $6.4 billion in conventional cigarette revenue for 2013.
However, Herzog said it will pivotal to see whether the FDA moves to differentiate e cigs from e vapors an emerging competitor in electronic vapor products that can be a more affordable alternative to traditional cigarettes than e cigs.
She said a 15 milliliter bottle of smoke juice costs about $15. That means vaping is substantially more affordable than combustible cigs and rechargeable e cigs, she said.
Since e vapor products tend to be less addictive than combustible cigs, vapers typically taper down the nicotine levels of their smoke juice, with many vapers eventually reaching zero nicotine. The cigarette alike e cigs as they are today are already becoming your father’s e cig.
Stephen Pope, managing partner of Spotlight Ideas in London, said he will watch to see if the FDA tries to overreach with proposed regulations.
There is momentum in England toward regulating e cigs as medicinal therapy, while the European Union may try to dilute the concentrate of liquid nicotine to the point that the e cig experience is rendered meaningless, Pope said.
One major contention of e cig opponents is that that the products could serve as a gateway to cigarettes and other tobacco products. They therefore oppose current e cig TV commercials as well as social media marketing at entertainment venues.
Pope said, however I do not know of any reputable tobacco firm in the developed world that had actively sought to market its products to children. Let s face it today s youths are not na ve. They, more than any generation, know of the dangers of smoking.
The world of tobacco merchandise is overflowing with warnings. So if one partakes, one does so with clear and complete knowledge.
Pope said it is an appropriate ambition of the FDA to seek heightened new product approval, just as required in the pharmaceutical. To this point, the tobacco firm must be accountable.
It would serve the FDA better to be coordinating an international effort to stamp out poor products and let the well tested and proven products drive cheap and inferior products out of business.
Herzog said having a two year regulatory buffer on products allows e cig manufacturers and marketers to keep marketing sales and importantly, continue to bring new products to market.
As a reminder, the FDA cannot enact a federal tax on e vapor products or ban Internet sales, as these would fall under the realm of Congress. Further, the FDA cannot legally ban e cigarette advertising as that is considered commercial speech, which is protected by the First Amendment.
We believe the FDA understands the continuum of risk but does not yet have all the answers.
Dr. Gilbert Ross, executive director and medical reactor for the American Council on Science and Health, an industry group, said he is concerned that requiring 99 percent of the current products to apply for FDA approval is unduly onerous and are not based on sound science.
Greg Conley, a research fellow on tobacco policy for The Heartland Institute, a right leaning industry group, said the proposed FDA regulation all but guarantees the closure of tens or hundreds of small and medium sized businesses that have no connection to Big Tobacco.
The FDA estimates that just one application will require over 5,000 man hours to complete, meaning that the true cost of a single application is likely in the millions.
Herzog said that with the initial recommendations being made public, it should create an industry marketplace beneficial not just to Altria, Lorillard and Reynolds.
While the Big 3 are a triple threat treasure troves of cash, distribution power at retail and superior brand building capabilities we think there is plenty of room for other players that are currently entrenched in retail channels, Herzog said.
We are impressed with the strong brand equity of some of these smaller players and businesses they have built and the role they played in creating an exciting new category.
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January 05, 2013, 15 59
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