All Aboard for FDA?

Now that Swedish Match joined USSTC in supporting the Philip Morris push for FDA Regulation, followed then by North Atlantic Trading and Dosal, the odds of approval in the Senate, after almost certain approval in the House, appear to have gone up, especially since NACS, with its 50 State set of supporters, has also joined the bandwagon by not opposing the bill. Swedish has argued that an Obama-Clinton-McCain world might even lead to including cigars and other tobacco products so it is better to grab the best that can be had especially given Waxman’s concession on allowing a smokeless sampling amendment.

Yet the harm reduction elements of the bill, making it difficult if not impossible to deliver such products, coupled with compelling smokeless to adopt the same warnings as cigarettes, when everyone now knows that smokeless is less harmful, has caused a rift in the tobacco control community with those seeking less harmful products, less supportive, than those who represent the California extremist wing who support it.

Politics sure does make “strange bedfellows.” On which side of the fence do you stand?

44 comments ↓

#1 Johnie Jay on 05.23.08 at 12:32 AM

In my opinion it is really a shame that folks are given in for special interests which in the long run could be very detrimental to the industry. NACS truly puzzles me as I don’t understand why they are not concerned with the portion of the bill that would allow for local ruling bodies of communities to decide that tobacco is illegal in their community and outlaw it there. Am I mistaken? Wouldn’t that have a very negative affect on the c-store industry?
And wouldn’t it be better for UST & Swedish Match if they could have a better warning that told consumers that their moist product was safer alternative than cigarettes?

#2 tatler on 05.27.08 at 7:21 AM

Tobacco users need to be made aware of the relative risks associated with all types of tobacco products.
The public health community agrees cigarettes are one of the highest, but there’s little to differentiate between different types of smokeless. For example; it seems many are agreed that snus is the least harmful.

A growing trend these days with younger smokers is hookah – or shisha water pipe smoking. Many believe the water filters the smoke making it less harmful. This is not correct.

#3 CIG GUY on 05.31.08 at 10:43 AM

Too much government intervention is not good! I mean what does the government do well? Be hard pressed to show me something that the private sector wouldn’t do better.

#4 John Rolfe on 05.31.08 at 1:41 PM

FDA may set the rules but just like in the Pharma industry, it is not FDA that delivers the data. Medical devices approved by the FDA now are providing their manufacturers with liability protection. Pretty soon the US Supreme Court will provide similar protections for drugs as well. FDA approvals, assuming the relatively high bar to approval can be surmounted, will eventually come with similar protections.

#5 Michael Hunt on 06.03.08 at 12:40 PM

It is a downright shame that the American public is being duped into thinking that this bill protects health. It is nothing more than a coverup for Phillip Morris and is all about protecting market share and keeping innovation on the shelf.

#6 Patriot on 06.06.08 at 12:00 AM

Well said MH. The public needs to wake up. In no other industry would this be accepted. Philip Morris needs to lose this battle. FDA regulation is all about the mighty PM locking up share and stopping others from introducing new products. Someone needs to kick sand in the big bullies face and expose this for what it is. PM has strange partners, the US Government & the health organizations.

#7 John Rolfe on 06.06.08 at 8:00 AM

Using the health issue to reduce costs (e.g., advertising costs) and/or to increase costs for competitors (LIP paper) is part of a broad PM strategy that has been underway for several years now. Even litigation is in this category since increasing costs to competitors here too means a larger proportional SG&A expense for them relative to revenues and profits.

The “Marlboro Monopoly Act” designation is not new either. Those in the know, know this reality, but the Waxman-oriented health groups (vs. others like Alan Blum et.al) believe that FDA regulation is needed regardless of the economic impacts – competition in “deadly” products is their least concern – they don’t care whether someone dies by smoking a Camel or a Marlboro. For them all tobacco products are the same, a fact that historically has made the confrontation with tobacco control asymmetric with one side faced with battles against competitors, in and outside of one’s sector, and the other placing all products in the same category. This will not cease especially since the Health Committees are not the anti-trust committees.

#8 Tommieboy on 06.07.08 at 11:39 AM

What is the rationale on flavors being included? Amazing that the liquor industry gets away with all they do. Would love to know how many people die from drunk drivers and then compare that to those that reportedly die from second hand smoke! Any one have any input?

#9 John Rolfe on 06.07.08 at 6:12 PM

The story goes something like this: flavors reportedly attract youth (remember chocolate cigarettes) who then initiate and die young from their initiation…nothing to do with ETS, though your second point is quite important since ETS/innocent death by drunken driving are quite parallel. The problem with this piece is that EPA was prepared to change the confidence interval down from 95% to 90% in a case of twisted statistics — first get the conclusion then play with the data to prove it. As such, there is no good data that I know of about ETS fatalities at this point that one could consider to be unbiased, though with the new technologies for employers to vet their environments and employees via cotinine testing better data may be out there in the future. While we are waiting for this uncertain tally, the tally on drunk driving deaths is a minimum since frequently the perpetrator is not caught.

#10 CIG GUY on 06.10.08 at 9:30 PM

Doesn’t an organization like MADD have the numbers of folks killed by drunk drivers?

#11 Troubadour on 06.11.08 at 3:10 PM

Would seem to me that the argument regarding Menthol would most likely have Waxman pull his rendition from the floor. Pretty amazing!

#12 John Rolfe on 06.12.08 at 2:14 AM

But Waxman is committed to his version of the bill as it now stands and will have to face down the black anti-tobacco groups. He does not intend on pulling it based on my sources.

#13 Troubadour on 06.12.08 at 8:48 AM

Still creates some very interesting dialogue. It may however delay the bill.

#14 MONTE CRISTO on 06.17.08 at 8:46 PM

Troubadour may have it right with FDA as amazing as it sounds the FDA legislation could be shelved. Seems like PM and the Cancer Society have some unraveling of their agenda.

#15 Walter Raleigh on 06.23.08 at 9:46 PM

The American Medical Association is still supporting the present proposed legislation as it is not letting the menthol issue affect it’s support.

#16 CIG GUY on 07.01.08 at 5:52 PM

JUST READ AN ARTICLE IN THE CSP MAGAZINE AND A MOST MEANINGLESS ARTICLE WAS WRITTEN BY PHILIP MORRIS – IT JUST HAD NO VALUE AND JUST PROVES AGAIN THAT PM WANTS TO RESTRICT TRADE THE WAY IT DOES TODAY WITH IT’S PROGRAMS. FOLKS STOP LISTENING TO PHILIP MORRIS AND READ THE LEGISLATION _ IT RESTRICTS NEW COMPANY’S FROM COMPETING BY DEVELOPING UNREALISTIC HURDLES FOR NEW COMPANIES TO COMPETE WITH

#17 John Rolfe on 07.01.08 at 10:07 PM

Hey Cig Guy,

Can you circulate the CSP article? What was it presumably about and what did PM say e.g., that FDA will be good for the industry since it gets government into the tobacco business like the State AG’s are now because of MSA even though the AG’s like to point to the continuing decline in cigarette consumption as the real benefit of MSA?

#18 CIG GUY on 07.01.08 at 11:33 PM

There are 4 articles one from PM (garbage), one from RAI (accurate), one from NATO (to the point) and NACS (wonder what they been smoking) If the FDA regulation occurs as written NACs won’t have to worry about fines and equal playing fields the business will just decline and in case NACS doesn’t know it food is not what a lot of the c-store environment is good at and will never be good at!

#19 Jersey Guy on 07.02.08 at 2:40 PM

I read the article after reading this and I must say. DON’T PEOPLE GET TIRED OF THE PM LINE OF BS?

#20 Copenhagen Charlie on 07.05.08 at 8:09 PM

I’m on the side that says keep government out of the mix. They can’t govern the country properly. Can’t balance a budget. Mislead folks all the time. Look at what the liberal side has done to gas prices because they want to protect the elk and caribou. There are too many people watching Steve Seagal movies! So why would the FDA be able to control cigarettes with all the problems in the area of food and drugs. Really makes no sense than the fact that government wants to control everything we do!

#21 OTP Kid on 07.07.08 at 9:07 AM

What’s the real low-down on NACS supporting FDA? Simple: it appears NACS traded their support for FDA on Tobacco in exchange for their number one issue which is credit card transaction fee reduction.

The decision was so controversial that no one inside of NACS was told of the decision priior to its announcement, only 3 people knew and one was Hank ( I have very good sources at NACS). The supplier board was not informed, the retailer board was not informed, the staff was not informed.

It also appears there may be a movement inside of NACS, contrary to the official position, to undermine the FDA support as a number of people have spoken to their congressional representative explaining that the NACS support does not represent the position of the individual members and they can expect contradictory testimony from those members against the NACS position.

#22 RENEGADE on 07.08.08 at 4:47 PM

I wish I knew who OTP KID was because I’d send you a box of Premium cigars. I sat in a meeting listening to the justification of the NACS decision and was appalled at their logic. I knew there had to be another reason. Any way to find out how one can join the cause to let congress know that it seems like Hank is off on his own little tangent with out the body (NACS Membership)knowing what he’s doing? NACS position is detrimental to the c-store future.

#23 Johnie Jay on 07.11.08 at 1:57 AM

Its amazing to me that NACS has abandoned the category that has brought so much profits to it’s members. I am amazed that they had no breakout on tobacco at the NACS show in Atlanta. And from what I understand this has really upset many. And then the stance they took on the FDA which is absolutely ridiculous. It’s obvious Hank Armour is not lestening to his membership.

#24 OTP Kid on 07.14.08 at 1:25 PM

NACS was more than happy all those years to take the money from the tobacco companies in the form of big booths at the show and Hunter club memeberships (look at the hunter club members and you will see half of them are tobacco companies).

#25 ANTI NACS on 07.15.08 at 1:10 AM

OTP Kid,

It seems to me that since Hank Armour has taken the leadership role in NACS that tobacco is a second class citizen. It really bothers me the way they have treated the tobacco category over the past few years. Now there is no breakout meeting whatsoever and believe me there are enough great topics that could be adressed as long as they didn’t bring in the lost cause of Bonnie Herzog(she’s gone thank god-her value was next to useless).
The other thing that irritated the crap out of me last year in Atlanta was how tobacco was just so broken up. YES you are so right about the Hunters Club and I am aware that one tobacco company has considered not spending the money on Hunters Club. You have to wonder whether Hank can get his head out of the clouds and get back to the ground where his membership is suffering. OH, great job on selling out on the FDA also and then giving the industry the old read between the lines deal! Someone should tell the group at NACS that sellinbg out on tobacco was a stupid move! Maybe they should read the blog!

#26 CIG GUY on 07.16.08 at 9:08 PM

Gotta say I agree with the consensus as it relates to NACS. Sold the tobacco industry out big time! I wonder which tobacco company will be the first to not participate in the Hunters Club program. Lot of money to be paying out to an organization that doesn’t support tobacco!

#27 RENEGADE on 07.21.08 at 9:38 PM

Does anyone know when this legislation will be voted on?

#28 JD on 07.24.08 at 11:06 AM

As of 7/17/08 H.R. 1108 has been moved to the Union Calendar 485. If I can find out more I’ll report.

#29 JD on 07.24.08 at 11:21 AM

OTP,

I agree with you. Over the years as a former employee of a Hunter Club company, the money and the expectations for other industry support were demanded by NACS leadership. In today’s world with tobacco use affecting only 25% of the US population NACS can take the money but really direct their efforts toward deeper issues than tobacco legislation.

#30 OTP Kid on 07.24.08 at 3:14 PM

I have heard there’s going to be an anti-NACS/ FDA gathering in the center of the floor at NACs at a predetermined time, but I haven’t been able to confirm it. Does anyone have any info? It worked for MLK and Ghandi, no reason it won’t help the cause.

#31 kentucky rebel on 07.25.08 at 11:54 PM

Hey OTP Kid,

Are there any details to the Anti-NACS/FDA gathering?
I’m in maybe there should be 4 different gatherings. Why not get in the face of PM, USST & Swedish?

Hey another great idea would be for retailers to boycot selling USST, PM or Swedish products for a day! I know it will not happen as too many retailers don’t understand what is truly at stake and one day their ignorance will lead to their loss of tobacco sales.

#32 NWTobacco on 07.26.08 at 9:20 AM

Absolutely boggles my mind that USST & Swedish have cast support to the present FDA regulation. Really question their thought process. The anti nacs fda rally is a great idea but do you really think there are enough retailers that have enough guts to stand up to NACS. I for one have what it takes and I will support the movement! Maybe the movement should gather at the NACS booth and then proceed to the PM booth, USST booth and Swedish Match booth. They need to know how displeased folks are with their self centered motivated support of FDA regulation that will affect retailers and the tobacco industry in the wrong ways!

#33 OTP Kid on 07.28.08 at 10:56 AM

Sounds like even if nothing is organized at this point, someone should take the lead and coordinate it. We need co-chairman of one retailer and hopefully one supplier. These people can communicate here on the blog and then put together one email that can be forwarded to anyone and everyone in the industry that has an interest. This could be BIG!

#34 NWTobacco on 08.01.08 at 11:32 PM

Hey OTP kid,
You hear that PM sent a letter to some folks that if the legislation gets much more restrictive that they may pull their support as they are claiming it will violate the 1st Amendment? Is this just a smoke screen to cover up their real concern over menthol being attacked? What you think!

#35 John Rolfe on 08.02.08 at 11:16 AM

Given PM’s failure to penetrate the menthol segment and be a force against Newport and Kool, in spite of the enormous buy-downs, what shocks me the most is that they have opposed the effort to prohibit menthol at all, the principal thought in the letter cited by NWTobacco. The only answer that I can come up with here is their fear of a real black-market developing in menthol and what that would mean for Marlboro Lights/Red.

I vote for smokescreen since PM needs FDA regulation to further build out its barrier to entry to solidify its 50 share, essentially to prevent the market from springing open through health claims for a wide assortment of new products that may appeal more to consumers than old Marlboro. So first get the barrier in place by setting the scientific standard so high that, in spite of broad support in the public health community acknowledging that smokeless is relatively less harmful than cigarettes, no one’s smokeless products will ever be able to make health claims to further drive their 6-7% annual growth while PM — not having a viable smokeless product yet — watches the overall cigarette market decline 3-4%. Without a viable smokeless product and fearing the spread of new products, PM’s best strategy is to freeze the market and reduce cost — get rid of all advertising and the possibility of any health claims for anything — while they build the research and production capacity to match and exceed any of these new products if, per chance, one or more do take off without the need for health claims. PM’s history, like Microsoft’s, is a history of being the best follower to new innovation who can then apply marketing skills to someone else’s creation. Now their task is to freeze the 50 share and reduce costs to drive profits while all the while getting the Corporate Social Responsiblity points along the way. And Mr. Waxman and the self-satisfied Tobacco Control fanatics are only too willing to fall for this while more and more people die from consuming PM’s more hazardous products. At some point the Tobacco Control folks will wake up to this latest phase of what began as the “lights fiasco.”

#36 NWTobacco on 08.02.08 at 4:18 PM

The numbers actually are closer to a PM 51% share now. Plus PM actually has done pretty well with menthol as they are closing in on 5% share on Marlboro menthol. So the Marlboro Menthol brand is about half that of the leading Newport brand. At RAI the three menthols (Camel, Salem and Kool) are close to a 6% share. So I’d say PM has actually done very well in the past 5 years of growing their menthol business. The growth of the menthol category over the past 5 years has been driven by PM’s efforts! As a retailer I know their efforts over the past years and how they strategically have targeted Newport! All you have to do is go out to a retail location and look at the cigarette set and you will see Marlboro Menthol strategically positioned right above Newport in the large majority of retail locations. So I’d say PM has an interest.

#37 John Rolfe on 08.03.08 at 10:11 AM

True, Marlboro Menthol, largely on the back of the Marlboro Smooth launch in 2007, is the fastest growing menthol, given the buy one-get one campaigns that have accompanied Smooth, Ultra Smooth, Blend 37 and Virginia Blend, all costly efforts to enable Marlboro to reap a .5 share gain in 2007. With an estimated 14-15 billion units in menthol segment, you are right PM does not want to see these units evaporate. However, we all know how PM has over the years relied heavily on its defensive strategies built around the concept of hurting its competitors more than it gets hurt by the adoption of the same public policy – heck even litigation fell into this category. As long as they can get a disproportionate gain out of it — e.g., if menthol means more to LO and RAI than it does to MO then they just might do it. This is my point NOT that they don’t have a play in menthol.

Newport shipped 33 billion units in 2007 and took about a 33% share of the 100 billion menthol segment which itself was about 28% of the 360 billion unit overall market. Without menthol their goose is cooked and what about RAI? As their units decline at 8% per year, they need what they have already and the Kool-
Salem combo is key for them more important to them than Menthol is to PM.

And given PM’s general cost reduction strategy, why not save the enormous buy-downs / promotional cost that their menthol position is costing them? As a retailer, you sure know how much buy-one, get-one they do to move their menthols!

#38 CIG GUY on 08.03.08 at 11:21 PM

Actually, John Rolfe the amount of buy one get ones has greatly reduced over the past year as the promotions are typically a buy 2 deal with additional funds off. The manufacturers have decided the promo’s were too costly in that they had to pay the huge excise taxes.

Also Marlboro Smooth from what I see in my locations is not moving very much. Ultra Smooth has been discontinued (in test markets) and Blend 27 is not a real mover.

I also challenge your thought that PM has done anything to grow their share. It had everything to do with RAI’s management of their business. Less emphasis in EDLP, discontinuing of buysome promotions, SAP fiasco and in case you didn’t know RAI discontinued soft packings in a lot of the brand lines. PM like Lorillard grew share at the expense of RAI. Lorillard is actually positioned extremely well and will continue to out perform both PM and RAI as there management truly is profit driven.

#39 OTP Kid on 08.04.08 at 6:04 PM

Here’s another perspective for all to consider. In spite of Altria’s share or growth or profitability, or all of us speculating on those things, I offer up one fact. Let’s assume for a minute that menthol is banned and it goes away. Some smokers will stop smoking; however, the balance of those menthol smokers need to find another brand/product. Which company has the best chance to pick up the most smokers? I would argue that the company with the largest share would have the best chance to pick up the most smokers. We can assume the sales/share fall proportionately to existing consumer preferences. I wonder who that might be?

#40 John Rolfe on 08.07.08 at 9:57 AM

Hey Cig Guy we seem to agree on most of this and I am certainly not one to defend mishaps elsewhere in the industry or to argue that LO is not a great play but this is not what we are talking about as OTP Kid makes plain. You believe that Altria is 4-square in defense of the menthol sector and I am not convinced they wouldn’t back down on this if they see opportunities to gain share as a result as OTP kid argues since their principal goal is to cut costs and preserve share and they have the least to lose relatively speaking by the FEDS zapping menthols and their competitors will lose more. If history is any guide, MO will sacrifice the industry’s future for its present so let’s see how this plays out should any of this pass and FDA has a chance to further study this issue. What I’d like FDA to use is the same scientific standard that Waxman used to ban flavors to begin with – no standard at all, just a hunch while at the same time building huge scientific barriers to the introduction of less harmful products. What insanity!

#41 TAZ on 08.10.08 at 10:09 AM

Here is a section of an article that can be found on the blogroll – The Rest of the Story by Michael Siegel. It points out the most damaging portion of the legislation.

The Rest of the Story

These are insightful and important observations about the likely impact of the proposed FDA tobacco legislation.

The key section of the bill is section 911, which sets out the criteria that need to be met before a reduced risk product can be introduced into the marketplace. According to this section:

“the Secretary shall approve an application for a modified risk tobacco product filed under this section only if the Secretary determines that the applicant has demonstrated that such product, as it is actually used by consumers, will–`(A) significantly reduce harm and the risk of tobacco-related disease to individual tobacco users; and `(B) benefit the health of the population as a whole taking into account both users of tobacco products and persons who do not currently use tobacco products.

Section 911(g)(1)(A), the (A) clause above places an insurmountable obstacle in the path of approval of modified risk products, at least for a 10-20 year period (which is enough to remove any incentive for companies to pursue such products). In order to demonstrate that the product, as actually used by consumers, will significantly reduce the risk of tobacco-related disease to individual users, large-scale, long-term epidemiologic studies are necessary. Even ignoring the requirement under 911(g)(1)(B), the (B) clause above (which itself appears to introduce an insurmountable obstacle), the bill as currently written precludes any harm reduction approach to tobacco control both by making it impossible for such products to meet the conditions for approval and by eliminating any incentive (especially economic) to develop such products. Thus, the bill may have the exact opposite effect that many believe it should have. It protects the existing high-risk products on the market.

Section 911 creates a literal catch-22 for reduced risk products. In order to introduce such a product into the market, you need to demonstrate that on an individual basis, it will reduce the risk of tobacco-related disease. However, in order to make such a demonstration, one would need to introduce the product into the market and follow a large sample of smokers for a long period of time – at least 10 years, if not longer. Thus, there is realistically no way to get a reduced risk product onto the market.

This legislation is likely to result in increased, not decreased deaths from tobacco products, because it will make it virtually impossible to research, develop, introduce, and market new potentially less hazardous tobacco products. It essentially freezes the market as it is and entrenches existing high-risk products into the market. It puts an end to any meaningful possibility of harm reduction as a tobacco control approach.

#42 CIG GUY on 08.11.08 at 9:35 PM

I just was looking at the NACS brochure and wow I’m absolutely dumbfounded. It’s all true – NO TOBACCO Session – If I need to be corrected I thought tobacco was about 38 % of a c-store sales??? Is this just not amazing how the management of NACS has just decided to diss the tobacco industry. Folks need to look at how many of the tobacco companies are on the Hunters Club paying big bucks. I really do think someone needs to organize a good old sit down in the old arena protesting NACS disregard for the tobacco industry. Do they even understand that there is still a future for the tobacco industry!!!!

#43 DEERHUNTER on 08.12.08 at 2:45 PM

It’s a shame that we live in a country which allows for left wing extremists to do as they please.

#44 TAZ on 08.14.08 at 6:05 PM

Where’s the FDA?

United States/Japan: Yokota Air Base Pharmacy Pulls Chantix
Medical officials at the US Air Force’s Yokota Air Base in Japan decided to remove Chantix from the base pharmacy, after a May report from the Institute for Safe Medication Practices found an array of health and safety concerns including falls, heart rhythm disturbances, heart attacks, seizures, diabetes and psychiatric disturbances associated with the smoking cessation drug. Yokota has suspended all refills of Chantix, but 374th Medical Support Squadron pharmacy element chief Major Tam Dinh said a patient with approval from his doctor can continue the medication and special order the drug. Chantix, however, is still available in many military smoking-cessation programs in the region, although air crew members can no longer take the drug as per the US Department of Defense’s (DOD) recommendation that “varenicline should not be used by personnel operating aircraft (including aircrew and air traffic controllers) and missile crew members.” In South Korea, where Chantix is available at military treatment facilities, Major Remington L. Nevin said individual healthcare providers are free to exercise their judgment in determining whether their patients should be treated with Chantix. He noted that the DOD recommendation currently does not prohibit the use of Chantix or mandate a formal screening process before prescribing the medication. The medical community at US naval hospitals Yokosuka and Okinawa in Japan are taking a similar approach, leaving the decision about Chantix to the patient and the physician (Stars & Stripes 8/12).

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