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FDA delays ‘other use’ rule for tobacco-derived products

The Food and Drug Administration (FDA) pushed back by one year a rule to clarify when products derived from tobacco face regulation as drugs or combination products.

Initially set to take effect in February, the FDA first delayed implementation by one month and now intends for it to take effect on 19 March 2018. An additional comment period will expire on 19 May 2017. Additional information is available at:

PMI to convert Greek cigarette plant to make iQOS sticks

Philip Morris International (PMI) will invest EUR 300 million (USD 323 million) to convert a Greek cigarette factory to into a plant capable of turning out 20 billion tobacco sticks for its iQOS heat-not-burn device, the company said.

Expansion and remodeling the Aspropyrgos plant operated by affiliate company Papastratos will create 400 new jobs in addition to the 800 current ones, PMI said. Construction will begin immediately with operations expected to start in January 2018.

“This investment is further evidence of our progress towards a smoke-free future. We are encouraged by the 1.4 million smokers who have already switched to IQOS around the world, and we expect this momentum to continue,” said Frederic de Wilde, PMI regional president for the European Union.

Aspropyrgos will be the third facility dedicated to iQOS production. Production currently is centred in a specially built facility in Crespellano, Italy and a small scale Industrial Development Centre in Neuchatel, Switzerland.

Treasury consults on tax treatment of heated tobacco products

The Treasury is consulting on the tax treatment of heated tobacco products, which are being promoted as a new innovation in the tobacco market. In these products processed tobacco is heated (but not burned like conventional tobacco) to produce, or flavour vapour. Heated tobacco is not a separate category in its own right in current legislation, so a consultation on their tax treatment aims to help maintain the integrity of the duty system going forward.

The consultation scope does not include e-cigarettes, which do not contain tobacco.

The consultation closes on 12 June 2017.

Letter from New Zealand Associate Minister of Health on e-cigarette Regulations

Download (PDF, 565KB)

Health Ministry sued over soft treatment of iQOS

Dubek, a manufacturer and importer of tobacco products, sued the Health Ministry for showing favouritism by allowing Philip Morris International to skirt advertising restrictions in marketing iQOS, the Jerusalem Post said.

Health Minister Ya’acov Litzman reportedly is waiting to see how US regulators deal with the tobacco heating device. In the meantime, iQOS is being sold and marketed without restriction in Israel. In its complaint to the High Court of Justice, Dubek said this discriminated against its tobacco products, which face restrictions, the Post said.

Tobacco company files suit against Health Ministry

Philip Morris chose Israel to be one of the first countries to market iQOS.

Dubek, Israel’s tobacco manufacturer and importer, filed a suit in the High Court of Justice against the Health Ministry on Monday for showing “favoritism” to the international tobacco company Philip Morris, which is marketing its no-smoke heated- tobacco cigarette iQOS.

Dubek said it is limited in marketing and advertising its own products, while Health Minister Ya’acov Litzman – against the views of public health professionals inside and outside his ministry – allows iQOS to be sold and advertised without limit.

This laxity will continue, Litzman decided recently, until the US Food and Drug Administration decides what to do about the product.

The sale and marketing of iQOS has been prohibited in the US and other countries until the FDA releases its ruling.

A few days ago, Avir Naki, a nonprofit organization that fights smoking, petitioned Attorney-General Avichai Mandelblit to revoke Litzman’s authority on all tobacco legislation and regulation because he has shown a “personal connection” to a number of issues relating to tobacco. Litzman met with Philip Morris lobbyists before announcing his decision.

Dubek said the ministry “has ignored blunt violations of the law for restricting advertising and marketing of tobacco products” by Philip Morris, thus carrying out unfair competition. It also charged that the Tax Authority does not levy sales taxes on iQOS and “causes a huge loss of revenue to the state coffers.” Sales taxes constitute 80% of the price of regular cigarettes.

IQOS, Dubek said, claims to be a “less-harmful product” than conventional cigarettes because the tobacco and additional chemicals are warmed but not burned.

But Philip Morris’s claim has not been proven, Dubek said, also complaining that iQOS is not required to carry any health warnings on the package.

Philip Morris chose Israel to be among the first countries to market iQOS, thus turning its population into “guinea pigs” in a “huge experiment for which we will all pay,” the Israel Medical Association’s Society for the Prevention of Smoking and Smoking Cessation said early this year.

‘War of Innovation’ Rages in Tobacco Industry

A recent Bloomberg report titled “Big Tobacco Has Caught Startup Fever” sheds light on traditional tobacco and cigarette industry leaders’ accelerated race to offer innovative products in light of anti-smoking regulation and campaigns, along with changing consumer preferences. As a byproduct of this shift, market giants such as Philip Morris International Inc. (PM), Reynolds American Inc. (RAI) and Japan Tobacco Inc. have invested heavily in product development, funding tech incubators, launching venture funds and creating apps after the style of Silicon Valley in efforts to develop next-gen reduced-risk tobacco platforms. (See also: Business Groups Increasingly Turn Against Tobacco.)

‘Next-Gen Nicotine Delivery’

Philip Morris, the world’s largest publicly traded tobacco company, demonstrated its commitment to offer “next-gen nicotine delivery” through a new $111 million environmentally progressive research center called the Cube.

As a testament to the Lausanne, Switzerland-based firm’s new greeting on its re-launched homepage, “Designing a smoke-free future,” the high-tech center has three wings named Earth, Wind and Air. The absence of Fire signifies the company’s push for “heat not burn” tobacco products, including its popular IQOS heat stick. Philip Morris has poured more than $3 billion into new tobacco-based inventions as an alternative to the fragmented e-cigarette market. The decision makes sense given that the largest companies already have a competitive edge in the tobacco space.

A Cigarette-Free Future

A wave of tobacco companies shadowing Philip Morris have shown their willingness to deliver tobacco through any means consumers will adopt, whether it be heat-not-burn products, gum, lozenges, dip, e-cigarettes etc.

In January 2016, America’s second-largest tobacco company, Reynolds, announced the formation of RAI Innovations Co., following the nationwide release of its e-cigarette brand Vuse. Later, British American Tobacco Inc. (BTI) announced plans to acquire Reynolds for $49.4 billion. The London-based company’s CEO, Nicandro Durante, told sources that the deal was more about the future of smokeless nicotine than of scale.

“It’s going to be an arms race,” said analyst Nik Modi of RBC Capital Markets. “Who has the best technology, the best science? Who can get their applications through the FDA the quickest? We’re not in a pricing war. We’re in an innovation war.” (See also: Tobacco Giants Push New ‘Alternative Products’.)

Jeff Sessions, Anti-Weed Crusader, Was a Shill For Big Tobacco

The new Attorney General, Jeff Sessions, is concerned about marijuana. Yesterday he said that he doesn’t want it to be “sold at every corner grocery store.” You can’t get weed at many corner stores just yet, but there is a product at those stores that kills about 400,000 Americans each year. And Sessions has vigorously defended the interests of that product. I’m talking, of course, about tobacco.

With more states legalizing marijuana for both medicinal and recreational use, the newly confirmed Attorney General says that he’s concerned about the drug. Sessions says it’s about health. But back in the 1990s and 2000s, he wasn’t so concerned about the real health epidemic of cigarettes.

“States can pass whatever laws they choose,” Sessions told a crowd at the National Association of Attorneys General meeting yesterday. “But I’m not sure we’re going to be a better, healthier nation if we have marijuana being sold at every corner grocery store.”

Oh gosh golly! Marijuana being sold at every corner grocery store! But what about all those corner stores that have a much deadlier product called cigarettes?

Funny you should ask. Because the tobacco industry helped get Jeff Sessions elected to the Senate in 1996. In fact, Session got a bit too much money from R. J. Reyonlds, the makers of Camel cigarettes, during his 1996 campaign. In October of 1997 his staff had to send money back to the company because they had donated more than was legally allowed.

Letter from the US Senate campaign for Jeff Sessions sending back money in October of 1997 that it had received in October of 1996 to get elected (UC-SF Tobacco Industry Documents archive)

Letter from the US Senate campaign for Jeff Sessions sending back money in October of 1997 that it had received in October of 1996 to get elected (UC-SF Tobacco Industry Documents archive)

Sessions would go on to rail against the lawsuits that the tobacco industry was facing in the late 1990s. During a private dinner, Sessions called the lawsuits “extortion” and said that it would lead to “shake downs” of other industries.

“If we let them get by with this extortion of the tobacco industry, then they’ll start shaking down other industries, one after the other,” Sessions said at a private dinner in July of 1997 with Bill Orzechowski, Chief Economist for the Tobacco Institute, a tobacco industry front group that tried to advocate against tobacco control policies.

How do we know Sessions said this? Thankfully, we have an archive of documents at the University of California-San Francisco that came out of a settlement with the Big Tobacco companies in the late 1990s, known as the Master Settlement Agreement (MSA). The Sessions quote about shakedowns comes from an email from tobacco industry insiders that was reporting back to R. J. Reynolds about how legislators would deal with the threats to their industry.

Back in the 1990s, states were pissed that they were paying for healthcare costs from smoking related diseases, and they started suing the tobacco companies one by one. Mississippi was the first to sue in 1994, and by 1997 had won, something nobody had ever done successfully against the tobacco industry before. Other states started to sue, and pretty soon enough states were emboldened that they lumped it all up into one big settlement.

The Master Settlement Agreement included handing over decades of documents showing that the tobacco industry knew tobacco was addictive (contradicting sworn testimony by every major tobacco exec in 1994), that tobacco was harmful to health (another thing that the industry denied for decades), and that the tobacco industry was explicitly targeting kids with their advertising.

Sessions also introduced a pro-tobacco industry amendment in 1997 that would cap how much money lawyers could make from suing tobacco companies. The goal was evidently to hamper legal efforts to go after the tobacco industry, which was spending millions to fight regulation of its product. The Sessions amendment was narrowly defeated.

From a September 11, 1997 Associated Press report:

A chastened Senate voted emphatically Wednesday to undo a $50 billion tobacco-industry break that had been slipped into a tax-cut bill signed into law just last month.

Voting 95-3 to repeal the provision, senators rather contritely agreed to an amendment that unraveled what sponsor Richard Durbin, D-Ill., called a “sweetheart deal” for the industry.

But the repeal was nearly derailed by an amendment from Sen. Jeff Sessions, R-Ala., who tried—and nearly succeeded—in limiting the fees that can be collected by attorneys hired by the states to press damage claims against the tobacco industry.

Sessions argued that the legal fees could amount to billions of dollars and are “too generous, too much of a windfall, and cannot be defended.”

Durbin and his allies defeated the Sessions amendment on a 50-48 vote by arguing that it would put states at a big financial disadvantage in their long and expensive legal jousting with the tobacco industry.

As late as 2004, Sessions was still opposed to FDA regulation of tobacco. And no, that’s not a typo. The tobacco industry fought regulation of its product for decades and FDA was only granted regulatory authority over it in 2009. Again, that’s not a typo.

When the Senate passed a compromise bill on regulation of tobacco by the FDA in 2004, Sessions was disgusted. He fought against regulation of tobacco as a drug using everything from free speech arguments to boilerplate pro-business language.

“One bad bill that couldn’t pass on its own attached to another bad bill that can’t be passed on its own,” Sessions said at the time, referring to the part of the proposed 2004 bill that also provided $12 billion to tobacco farmers who pledged to stop growing the product.

By 2009 he had finally come around and voted to allow the FDA to regulate tobacco as a drug—something that Philip Morris, an enormous tobacco company, was also supporting by 2009—because it was clear that the ridiculous fight against it had been lost.

The tobacco document archive (which is searchable online here) really is fascinating, and a search for “Jeff Sessions” or “Senator Sessions” gives hundreds of responsive documents about how the legislative and lobbying sausage gets made.

If we’ve learn anything about Sessions from the documents, it’s that he’s much less concerned about health than he is about maintaining the disastrous “war on drugs” of the bad old days. That is, as long as those drugs don’t include tobacco, the one that kills hundreds of thousands of Americans each year.

Letter: Government must stop brand expropriation

While the federal government moves ahead with the legalization of marijuana, it continues to seek stricter tobacco industry regulation by banning menthol cigarettes and introducing plain packaging. These tobacco regulations are an easy political win meant to generate headlines and appease a vocal, well-funded tobacco control lobby, but do nothing to further reduce smoking rates.–government-must-stop-brand-expropriation.html

Meanwhile, millions of Canadians purchase marijuana. In fact, most surveys show marijuana use higher than smoking. According to Health Canada’s own data, the youth usage rate for marijuana is almost six times that of tobacco, which is remarkable since marijuana is presently illegal. This is interesting since as an illegal product, marijuana is already effectively sold in a plain pack.

The federal government’s stated objective with marijuana legalization is to get people to switch over from the illegal and unregulated market to the regulated market. The government’s task force on marijuana legalization recommended plain packaging for that product.

Licensed producers of marijuana are now arguing that branding and marketing are necessary to attract consumers from the black market to the legal industry and cite the liquor sector as an example to follow. Branding justifies why it makes sense for consumers to go through the legal system instead of going to somebody they know in the neighbourhood.

The tobacco industry also needs brands to differentiate its products from illegal traffickers. It makes no sense to allow marijuana producers to display their brands to bring consumers through legal channels while taking away branding from the tobacco industry. The only result is sending consumers to the illegal market.

The unlawful production, distribution and sale of cigarettes in Canada has reached unprecedented levels in recent years, with illicit products making up more than 20 per cent of tobacco products. This is creating challenges for public health officials, law enforcement, tax authorities, policy makers and the public. Governments suffer significant revenue shortfalls in tobacco taxes. Efforts on the part of government and other organizations to protect the health of Canadians of all ages are undermined.

Small business owners are losing sales.

Plain and standardized packaging will lead to an increase in Canada’s already rampant illicit tobacco and thereby actually undermine public health objectives.

Unsurprisingly, evidence from Australia shows plain packaging has not achieved any of its stated objectives. Canada will be no different.

Nobody disagrees with the virtues of regulating tobacco and yes, even the tobacco industry believes young people should not smoke. But there are proven means to ensure that young people do not smoke, such as education programs and interventions targeted at at-risk populations. Yet, the government continues to concede to a small but vocal group of anti-tobacco lobbyists who are more anti-industry than pro-health.

With products already hidden from view in stores and 75 per cent of the pack covered with health warnings, nobody starts smoking because of the pack. Plain packaging will only make it easier for counterfeit tobacco manufacturers to copy legitimate products.

No other industry would accept this requirement, as the lobbying from marijuana producers now makes clear. However, all industries should be fearful of this abuse of government power. In the U.K., which passed tobacco plain packaging legislation in 2015, there is a growing chorus of health groups and academics calling for alcohol to suffer the same fate. While it may be tobacco and marijuana facing plain packaging in Canada today, it will be another industry shortly thereafter.

Companies making a legal product have a right to their brands and those need to be protected to ensure consumers have the confidence in the source and quality of the product.

Eric Gagnon, head of external affairs
Imperial Tobacco Canada

Tobacco Giants Push New ‘Alternative Products’

The heat is on for tobacco and cigarette industry leaders to expand their products outside traditional markets in order to meet the evolving demands of a more health-conscious world. As governments push forward anti-smoking campaigns and a growing number of people in the U.S. and even in developing markets quit smoking, many big players have decided to get creative in order to survive.

Working ‘Across the Harm Spectrum’

Cigarette maker British American Tobacco (BTI) plans to quadruple the number of markets in which it offers products such as e-cigarettes and vaping products. The London-based company plans to expand its e-cigarette and vaping offerings from 12 markets to 48 by 2018. After acquiring Reynolds American in a deal worth $49 billion, BAT says the company won’t have the cash to do anything M&A-wise in the upcoming one to three years. Kingsley Wheaton, managing director of BAT’s next-generation products group, says the company is committed to “creating products across the harm spectrum” in order to reduce the public health burden of smoking. Earlier this week, BAT posted stronger-than-expected earnings for full-year 2016, following a previously announced Q4 beat.

Touting ‘No Burn’ Tobacco Products

Philip Morris International Inc. (PM) recently upped its full-year 2017 guidance as it focuses on new IQOS products—heat sticks that “warm” tobacco instead of burning it. The New York City-based international tobacco and cigarette company hopes to leverage pending FDA approval for its “reduced-risk” tobacco products in order to beat out the competition. Philip Morris has touted significant traction in the Japanese market, where its IQOS product now account for over 5% of the market. (See also: Philip Morris Ups FY17 Guidance.)

Earlier this month, the world’s third-largest tobacco company, Japan Tobacco Inc. (JAPAF), raised its dividend despite lowering annual profit forecasts. The company said its new dividend of 140 yen ($1.24) this year, up about 8%, is set to underline a “very strong feeling” on its Ploom Tech tobacco-based e-cigarettes. The product launch, which has been delayed due to supply issues, is set to begin in Tokyo this June, rolling out in other cities in the first half of 2018.