Although yesterday's announcement that the Food and Drug Administration (FDA) will start regulating e-cigarettes is getting the most attention—Reason's Jacob Sullum explains why this is awful news for vapers—the agency's new deeming regulations also have huge implications for the cigar industry.
The threat of FDA restrictions have loomed over the cigar business ever since the FDA took control over cigarettes; yesterday morning, the other shoe finally dropped.
The worst fear of cigar manufacturers and smokers alike has been that the FDA will impose the same onerous pre-market review requirements on cigars that it currently places on cigarettes. In theory, this review process ensures that any new products introduced to market are no more dangerous than what is already for sale. In practice, it halts the introduction of new products, trapping applications in interminable bureaucratic limbo. The history of FDA cigarette regulation shows that cigar smokers are right to be concerned.
A 2012 investigation by the Associated Press found that the FDA had received nearly 3,500 of these "substantial equivalence" applications since the law took effect in 2009. The agency was expected to rule on these applications within ninety days of receipt. At the end of 2012 it had issued zero rulings, with many applications lingering for years.
I followed up for Reason in early 2014 when the FDA finally issued its first rulings on cigarettes. In what the director of the FDA's Center for Tobacco Products, Mitch Zeller, called a "historic" milestone, the agency ordered the removal of an esoteric brand of Indian cigarettes from the market and approved two new cigarettes from Lorillard. But it was soon revealed that the Indian cigarettes had ceased being imported years before, and the Lorillard approvals may have helped the agency stave off legal challenges by the company.
It's one thing for a big tobacco company like Lorillard to push an application through. The experience of David Sley, an entrepreneur behind the brand Hestia Tobacco whom I profiled for The Atlantic, may be more instructive for small cigar producers. As I summarized for Reason:
Merely getting the Hestia brand name approved by the FDA required an entire year of inquiries. Then its substantial equivalence application was submitted in June of 2012. Nearly two years later, hardly any progress has been made on it. Indeed, as of [February 2014] the agency still hasn't determined whether Hestia has sufficiently proved that the cigarette to which it compares itself, Natural American Spirits, was commercially marketed in time to qualify as a valid predicate product. Rather than evaluating criteria relevant to health, Hestia is stuck arguing over old magazine advertisements and attempting to track down American Spirits invoices from seven years ago.
Demands for more information from the FDA included "a comparison of your new tobacco product and predicate tobacco product with respect to heating source"—i.e., how are the cigarettes lit?
Despite being nearly identical to existing cigarettes down to the gram and millimeter—what any sensible person would consider substantially equivalent—Sley's product application was eventually rejected.
Cigar smokers dread the prospect of seeing the products they enjoy come to the same creative standstill. Back in May of 2014, the FDA offered a sliver of hope that premium cigars would face a lighter regulatory burden than other products. The agency's proposed "Option 2" would have sensibly exempted large, handmade cigars made of long-leaf and selling for more than $10 apiece from strict pre-market review. While hardly a perfect solution, it would have allowed the FDA to focus its resources on the small cigars and cigarillos that are more worrisome for youth initiation, while allowing the premium market for adults to continue introducing new products.
As of yesterday, Option 2 is dead. And so, perhaps, is innovation in the cigar business.
Cigars that were on the market in 2007 will be allowed to remain for sale, but any cigars introduced since then will have to endure the same sort of regulatory hassles as Hestia tobacco. If they can't prove they're substantially equivalent to existing products—not just in their composition or their effects on smokers, but in their essentially unknowable potential health impacts on the population as a whole—then they will be ordered off the market.
It's hard to predict what those applications will cost, but the most likely outcome is that the market for cigars will soon become a lot less diverse and a lot more boring. (Cuban cigars, which by definition were not legally on the US market in 2007, will obviously not be grandfathered in.)
As with manufacturers of e-cigarettes, makers of cigars will have two years to submit their applications. Then the FDA will have one year to rule on them, with a possibility for extensions. Given the agency's dismal record on meeting deadlines for approving cigarettes and the flood of new applications for e-cigarettes, cigars, pipe tobacco, and many other products it's about to receive, it's difficult to imagine that these applications will be handled in a timely manner.
The best hope for both e-cigarettes and cigars now lies with Congress. The House Appropriations Committee has approved an amendment that would change the effective grandfather date for new products from 2007 to whenever new regulations take effect, which would allow thousands more existing products to stay on the market. Another provision would deny funding to the FDA if it subjects premium cigars to regulation. The amendments will need to survive passage through both houses of Congress to take effect.
Today's announcements by the FDA are extremely disappointing for cigar smokers, who will likely see a source of their enjoyment much diminished by expensive government regulations that accomplish very little. The news is even worse for e-cigarette users. Michael Siegel of the Boston University School of Public Health, calls the new rules "a huge disaster" that will protect conventional cigarettes from competition by "by essentially decimating the vaping industry, stifling innovation, and forcing dishonest marketing." Jacob Sullum notes that the FDA "privileges the most dangerous nicotine delivery devices (conventional cigarettes) while threatening to eliminate much safer alternatives and blocking the introduction of even better products. All in the name of public health."
The misguided expansion of FDA authority to all tobacco products should stand as a damning example of the unintended consequences of regulation. Or, when one recalls that the law giving the FDA authority over tobacco was backed and negotiated by Philip Morris, perhaps one can cynically conclude that the law is working precisely as intended.
Full disclosure: I spent a year working in the Cato Institute's media department, and Cato did receive at the time less than 1 percent of its funding from tobacco companies. And the owner of Hestia Tobacco and I once exchanged rounds of beers.