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E-Cigarette Rules Are Essentially A Huge Win For Big Tobacco

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The FDA announced Thursday that it would regulate e-cigarettes for the first time.

No one seems particularly impressed by the new effort.

Public health advocates and analysts agree that the proposed rules will do little to constrain the billion-dollar market for these products, which allow users to inhale nicotine through a vapor. And e-cigarette trade groups are overall on board with the rules.

The health risks of e-cigarettes are not well understood, and many people believe the products work as a gateway to more traditional cigarette smoking, particularly among children. The proposed rules would ban sales of e-cigs to minors and require manufacturers to provide a list of ingredients to the agency. But health advocates say there's still plenty of room to tacitly market the products to kids -- a standard Big Tobacco strategy -- and also as a complement or introduction to smoking.

E-cigarette makers would still be allowed to sell their products in kid-friendly flavors like bubble gum, and the proposed rules still permit TV ads and Internet sales, provisions that health experts say make it easier to get the e-cigs into the hands of kids and teenagers.

The Smoke Free Alternatives Trade Association, an e-cigarette advocacy organization, wrote in a statement that they "welcome a ban on access to anyone under 18." But they said they oppose any restrictions on flavor, claiming they're "important to the consumer experience."

The FDA took more than four years to propose these regulations, which are 241 pages long. They're open to public comment for 75 days, and then it will take time to implement the final rules.

“I don’t know what took the FDA so long to come up with this,” said Neil Schluger, the chief of pulmonary, allergy and critical care medicine at Columbia University Medical Center. “One can sort of imagine the battle going on here. On the one hand there are public health groups representing the interests of millions of people, versus tobacco groups with billions of dollars.”

The proposed regulations are "what we want as an industry," said Ray Story, the CEO and founder of the Tobacco Vapor Electronic Cigarette Association (TVECA), an e-cigarette trade group that represents distributors. "We applaud the FDA for finally coming out with these proposed rules."

Still, other trade groups had some problems with the proposal. The Smoke Free Alternatives Trade Association said they don't think e-cigarettes should be governed under the same category as other tobacco products. (In 2009, Congress extended the FDA's powers to regulate e-cigarettes as part of a tobacco control law that included other products like nicotine gels or water pipes.)

While there are some new, smaller companies selling e-cigarettes, Big Tobacco has a big presence in the market. Lorillard, which makes Newport cigarettes, Phillip Morris International and Reynolds American all make popular e-cigarette brands.

“I am nervous now that Big Tobacco has taken major stakes in e-cigarette manufacturing,” said Schluger. “These are companies that they know how to get around just about any regulation on advertising, sales bans -- and they’re really good at that.”

ecigs

A November 2013 chart shown to investors depicting Philip Morris International's small but growing e-cigarette segment.

The rules could help consolidate the industry into the hands of major players by upping the barrier to entry for the market, according to Bonnie Herzog, the managing director of beverage, tobacco and convenience store research at Wells Fargo. Complying with regulations would make manufacturing e-cigarettes more expensive, making it more difficult for less-established players to get into the business.

In a note to clients Thursday, Morgan Stanley tobacco analyst David Adelman called the FDA's outline "very light, non-disruptive, and unlikely to impact the trajectory" of the sector's growth.

It's clear that if smokers used e-cigarettes instead of real ones, they'd be healthier. Still, the Centers for Disease Control found earlier this month that calls related to e-cigarettes made to poison control centers jumped sharply between 2010 and 2014 as the products have increased in popularity. The poisonings resulted from things like second-hand vapor, kids accidentally ingesting parts of the products and adults misusing them, said Tim McAfee, the head of the CDC's Office on Smoking and Health.

ecigs

The solid blue line on the chart below shows a spike in calls for issues related to e-cigarettes made to poison control centers over the past few years.

The bigger problem with e-cigarettes is that e-cigarettes exist in a market alongside traditional cigarettes, McAfee said.

“As long as [cigarettes] are around in as much abundance as they continue to be, the biggest concern about e-cigarettes is how they are going to impact people’s decisions to either start to smoke cigarettes or continue to smoke cigarettes,” he said. “We have plenty of reasons to be nervous.”

Those include how the products are marketed on television with celebrities and images that celebrate smoking, in ads that are reminiscent of cigarette promotion several decades ago, McAfee said.

E-cigarette makers and some public health advocates say that the products actually are helping solve the nation’s cigarette problem, which the CDC estimates kills 480,000 Americans each year. E-cigarettes may help smokers quit their more deadly cigarette siblings.

The FDA initially wanted to regulate e-cigarettes as a smoking cessation product -- like nicotine gum or patches. But the industry fought hard to avoid that fate, which would have made it more difficult to market e-cigarettes to non-smokers.

“It’s certainly possible that e-cigarettes could be useful smoking cessation devices,” Schluger said. “On the other hand, the e-cigarette manufacturing industry has been wanting to have its cake and eat it too.”

Hunter Stuart contributed reporting.

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