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August 13th, 2015:

E-cig makers warn new regs would extinguish industry

By Lydia Wheeler

Electronic cigarette manufacturers are fighting to change a provision in looming regulations for electronic cigarettes that they warn would all but wipe out 99 percent of the burgeoning industry.

In it’s proposed rule to assert, for the first time, its authority over e-cigarettes, the Food and Drug Administration said all products that hit stores after February of 2007 would have to apply retroactively for approval — a process that companies say would be prohibitively expensive.

As much as 99 percent of the applicable products came after 2007, said Jan Verleur, co-founder and CEO of VMR Products.

VMR, best known for manufacturing the brand V2, claims to be the world’s largest online retailer for e-cigarettes, with over $100 million in sales. But with over 500 “SKUs,” or individual products, Verleur said the FDA’s new regulations could carry a compliance cost that’s five times the company’s revenue size.

“This makes it so any product released after the grandfather date would require premarket approval,” he said of the FDA’s proposed rule. “The process could cost us half a million to million dollars per SKU.”

FDA spokesman Michael Felberbaum said the agency does not believe it has the authority to alter or amend the grandfathering date, since it was set by statute in the Family Smoking Prevention and Tobacco Control Act (TCA) that was signed into law by President Obama in 2009.

“The agency sought comment on whether there are other legal interpretations of the grandfather provision that FDA should consider,” he said.

The agency received over 135,000 comments on the rule, which was first proposed more than a year ago. With the final regulations now months overdue, industry and advocacy groups are pushing the FDA to release a final rule this summer.

“FDA is committed to moving forward expeditiously to finalize the rule,” Felberbaum said of the current timeline, though he declined to elaborate.

While e-cig makers say the rule would benefit the sellers of conventional cigarettes, even major tobacco firms developing electronic brands are pushing back against the rule.

Altria, for instance, supports the FDA’s move to regulate e-cigarettes. But the company, which owns Philip Morris USA, said the Feb. 15, 2007, date no longer makes sense.

“Not revising this date would mean that newly-deemed tobacco products — like e-cigarettes — would be treated much more harshly than originally-regulated products, such as cigarettes, as they will face a substantial equivalence period that is much longer, at least four times longer, than what cigarettes faced when they came under FDA’s jurisdiction in 2009,” company spokesman David Sutton said.

Altria, which owns the e-cigarette companies Nu Mark and Green Smoke, said its goal is to develop and market nicotine products that consumers want in whatever category that may be.

“The e-vapor category has grown significantly since 2008,” Sutton said. “If the adult consumer is looking for that alternative, we want to be providing those types of products to those adult consumers who want to move into that category.”

The FDA said it intends to provide time for all regulated entities, including small businesses, to comply with the requirements of the deeming rule. In it’s rulemaking, the agency said manufacturers will have 24 months to submit their pre-market tobacco applications and will be able to continue selling their products while applications are under review.

The agency estimates that the pre-market application process will cost the e-cigarette industry between $6.67 million to $26.68 million in the first 24 months. For those companies aiming to prove they were on the market in time to be exempt from the application process, projected costs run anywhere from $120,361 to $4.13 million in the first 24 months, according to the FDA.

Pharmacist and inventor Hon Lik first developed the electronic cigarette in Beijing, China, more than a decade ago. But there is debate among industry groups about who was first to market the product in the U.S. and when the product first hit stores. The Consumer Advocates for Smokefree Alternatives Association (CASAA) said it was between 2006 and 2007.

Due to the emerging nature of these products and unanswered questions about their health effects, the FDA has said the benefits of regulating electronic cigarettes “are unknown and therefore cannot be quantified.”

The industry is steeling for a legal battle over the rule. Because the economic impact of the rule is so great, Verleur said, a court would likely grant an industry’s request for an injunction.

“It’s essentially a death sentence for industry,” he said. “It could be held up in litigation for many years.”

In Congress, meanwhile, Rep. Tom Cole (R-Okla.) has introduced legislation to clarify that the FDA has authority to adjust the dates and timelines for deemed tobacco products.

In a statement, Cole said it’s important for regulations to be prospective in nature.

“It is unfair to penalize those products previously unregulated once the FDA decides to regulate something new,” he said. “An arbitrary 2007 date should not be the ‘grandfathering standard’ for all products the FDA may decide to regulate in 2010 or in 2100. My legislation ensures the grandfathering date is linked to the actual regulations that FDA proposes.”

Separately, a $20.65 billion agriculture appropriations bill that cleared the relevant committees in both the House and Senate would keep the FDA’s Center for Tobacco Products from forcing e-cigarettes already on the market to go through the lengthy and costly premarket review process.

However, due to funding concerns, the bill has hit a dead end in both chambers.

Kaohsiung takes heat for Japan Tobacco ties

By Stephanie Chao ,The China Post

TAIPEI, Taiwan — The Kaohsiung City Government has been accused of having illicit interactions with Japan Tobacco Inc. (JTI, 傑太日煙), whereby city officials funded trips to JTI facilities using tax dollars from tobacco surcharges, the John Tung Foundation said yesterday.
The John Tung Foundation demanded that Greater Kaohsiung Mayor Chen Chu (陳菊) investigate and rectify the situation. “Tobacco companies should not have a hand in influencing government policies,” the foundation stated. “We want an apology and explanation from Chen.”

Kaohsiung Information Bureau Director-General Ting Yun-kung (丁允恭) said, paraphrasing Chen’s words, that there are many misunderstandings that need to be smoothed out about the overseas government trips, which were arranged by the Kaohsiung Finance Bureau. All itineraries and budgets for future overseas government trips will be re-examined and adjusted accordingly, Ting proposed.

According to the foundation, annual trips made by Kaohsiung government officials since 2008 were carried out under the name of “investigating private and dodgy tobacco.” The officials were also accompanied by high-ranking JTI executives to each tobacco factory.

At least NT$2 million from bonuses have been injected annually to fund the trips to JTI factories world-wide, the foundation alleged.

Investigations will be carried out, said the Health Promotion Administration (HPA, 國健署), under the reasoning that such ties between the government and a tobacco company leave a “bad impression.”

Director-General of the HPA Chiou Shu-ti (邱淑媞) pointed out that any “government officials visiting a tobacco factory,” regardless of the funding origins, “are unsuitable and inadvisable.”

“We have met with the Finance Bureau, and asked them to understand whether the financial funds used for the Kaohsiung government’s trip to Japan’s tobacco factory originated from the health surcharges on tobacco.”

Cuts will be made to the city’s subsidies for tobacco prevention measures if the trip costs were indeed from the health surcharges, Chiou said.

Alleged Violation of FCTC

Lin Ching-li (林清麗), head of the John Tung Foundation tobacco control division, stated that the trips violated the Framework Convention on Tobacco Control (FCTC). Annual trips were made, with the exception in 2010 and 2014.

The findings were made and reported by a private citizen, the foundation stated. Prompted by the report, the foundation found upon further probing that wording usage in the Kaohsiung investigation reports was similar of that to the JTI’s word usage in its statements about health prices imposed on tobacco product laws.

“Increasing health surcharges on tobacco is the main reason that illegal tobacco products have become more and more popular,” the foundation stated as an example from the report, and pointed out relations between the government and the JTI were glaringly obvious.

Chien Chen-cheng (簡振澄), commissioner of the local finance department, stated that their overseas investigative trips were to understand methods such as “measures in searching for illegal tobacco products” and “regulating under-aged purchasing of tobacco and alcohol.” Reports from these trips are to provide reference for the central government and other local governments, Chien said.