Court Ruling Turns Drugmakers Into Tobacco Companies
Wednesday, December 29, 2010
Posted by: Natalia Gromov
Commentary by Matt Barry
Dec. 29 (Bloomberg) -- A court ruling that electronic cigarettes can be regulated as tobacco products instead of drugs is likely to upend the world of tobacco regulation.
This decision promises to blur the line between tobacco products and various medications, such as nicotine gums and patches, to expand the market for traditional smoking-cessation devices, and to generate additional tobacco tax revenue for governments.
A U.S. Court of Appeals panel ruled Dec. 7 that electronic cigarettes may be sold as tobacco products, rather than quit-smoking devices, which would free manufacturers from U.S. Food and Drug Administration drug regulations.
As long as they make no claims about helping people stop smoking, manufacturers are enabled by the ruling to sell gums, patches, lozenges and other products that contain nicotine derived from tobacco under looser standards applied to cigarettes.
The FDA appealed the ruling Dec. 20 and asked the full court to hear the case. The agency said the appeals panel erred in defining tobacco products so broadly.
If the decision stands, it means nicotine gum could be marketed like a pack of Altria Group Inc.’s
Marlboro cigarettes -- "Welcome to Nicorette Country" -- instead of relying on doctors and pharmacists to recommend its use.
The retail value of U.S. cigarette sales is estimated at $85 billion a year, and sales of nicotine-based smoking- cessation products will be about $755 million in 2010, according to data compiled by Bloomberg.
This change might require drugmakers to display tobacco warning labels and pay tobacco taxes as do cigarette and smokeless-tobacco makers. Tobacco products also are facing increasing regulatory scrutiny, leading to the requirements for graphic warning labels and limits on sales to minors.
The FDA tried to block imports of electronic cigarettes in 2009, saying they were potentially dangerous and being sold as unapproved drug-delivery devices.
Electronic cigarettes look like cigarettes. Users inhale nicotine vapor created by a battery-powered heating element.
Smoking Everywhere Inc., a manufacturer, sued the FDA, saying the devices were safe and weren’t promoted to help people quit smoking. They shouldn’t be regulated as drugs or medical devices, the company said. The case was joined by another manufacturer, Sottera Inc., which pursued it after Smoking Everywhere dropped out. The U.S. District Court for the District of Columbia agreed with the device makers. The FDA appealed.
‘Any’ Tobacco Product
A three-judge panel of the U.S. Court of Appeals in Washington issued the Dec. 7 ruling in favor of the manufacturers. Judge Stephen F. Williams wrote the FDA can regulate electronic cigarettes as tobacco products, not as drugs or medical devices. He cited federal law defining tobacco products as "any product made or derived from tobacco."
The FDA’s filing in its Dec. 20 appeal says the decision "will both exacerbate the problem of nicotine addiction and undercut an important tobacco-control measure" by hampering development of smoking-cessation products.
If the ruling holds, the list of potential tobacco products is long, encompassing lozenges and nasal sprays as well as nicotine patches, inhalers and gum.
Marketing Less Restricted
Today, these nicotine-based drug products are often sold in conjunction with a doctor’s visit or in pharmacies. The FDA restricts their advertising, health claims and package size.
If classified as tobacco products, they could be sold in packs costing about the same as cigarettes or a tin of smokeless tobacco. They could be marketed in appealing flavors and styles at convenience stores, gas stations, bars and sporting events. No company has said it will take advantage of this ruling.
The maker of Nicorette gum, GlaxoSmithKline Plc, supports the FDA’s position that smoking-cessation products should be regulated as drugs, said Deborah G. Bolding, a company spokeswoman. Spokesmen for Altria and Reynolds American Inc. declined to comment.
If smoking-cessation drugs are regulated as tobacco products, they may be taxed like tobacco, too. This could depress sales and generate tax revenue for governments. Federal tobacco taxes in 2010 totaled about $18 billion, according to the Congressional Budget Office.
If the full appeals court upholds the panel’s ruling, it might trigger a requirement for warning labels. Smoking- cessation product labels aren’t as dire as the familiar cautions about cancer or emphysema on cigarette packs. It’s not clear those warnings are appropriate for products deemed "safe"
drugs by the FDA.
Categorizing nicotine-based drugs as tobacco products would give smokers easier access to alternative forms of nicotine, reigniting a debate over whether smokers unable to quit should use less harmful forms of tobacco. This argument has been captured in reports from the National Academy of Sciences’ Institute of Medicine and the World Health Organization.
It could also encourage nonsmokers’ use of nicotine products designed to deliver more-addictive doses of the drug, something the FDA now prevents.
(Matt Barry is a senior health-care analyst for Bloomberg Government. The views expressed are his own.)