Vapor Voice

Category: This Issue

  • Licensed to Thrive

    Licensed to Thrive

    There may soon be a licensed medicinal inhaled nicotine product on the market if Qnovia finds success.

    By Timothy S. Donahue

    The story of the vaping industry tends to be dominated by two countries—the United States and the United Kingdom. In the U.S., the world’s largest vaping market, misinformation and a regulatory roller coaster continue to rattle the business of electronic nicotine-delivery systems (ENDS). Meanwhile, in the U.K., vaping products are being embraced as a harm-reduction tool to end the use of combustible cigarettes.

    Elsewhere, the gamut of vaping regulations ranges from complete bans to minimal rules. There has not been any advocacy group, research project or product development that has been able to bring global regulators under one unified ENDS umbrella.

    Many experts have said over the years that licensing ENDS as medicinal products could lend credibility to vaping products and their tobacco harm reduction potential. Approval from both the U.K.’s Medicines and Healthcare products Regulatory Agency (MHRA) and the Center for Drug Evaluation and Research (CDER), the drug approval division of the U.S. Food and Drug Administration, could provide consumers with confidence that ENDS have the potential to be an effective nicotine-replacement therapy (NRT) product.

    Although several media outlets reported that Johnson & Johnson’s Nicorette QuickMist is the first medically licensed vaping product, it isn’t a vaping product. It’s a mist sprayed into the mouth and is not inhaled. One product, however, does have the potential to make the dream of a medicinal ENDS product a reality. U.S.-based Qnovia is presently working with both the CDER and the MHRA to bring its RespiRx nicotine-containing cessation device to market.  

    Qnovia’s goal is for RespiRx to be the first inhaled prescription smoking cessation therapy product, according to Qnovia CEO Brian Quigley. Instead of using heat to create vapor, the RespiRx device uses an orientation-agnostic vibrating mesh nebulizer. The aerosolizing engine is nothing like a traditional e-cigarette that heats a coil to atomize nicotine based in PG and/or VG. 

    RespiRx is activated when a user inhales on the device. To aerosolize the nicotine, it sends an electrical current that causes the perforated piezo mesh to vibrate more than 100,000 times a second. “It’s that vibrating action of the mesh that then forces the liquid to the holes, creating an aerosol that appears vapor-like, allowing it to be inhaled,” says Quigley. That, he says, is fundamentally different from a traditional e-cigarette product, where the heating process can create undesired thermal byproducts.

    RespiRx uses proprietary software to deliver a precise dose of nicotine. Every time it’s activated, the device fires for three seconds and delivers a targeted dose of the drug. The base is reusable and serves as the housing for the battery and software. The RespiRx nebulizer sits within the pod that houses the nicotine drug product. 

    “The nebulizing unit (cartridge) gets replaced by the patient every one to two days. That interface means that the patient doesn’t have to clean the nebulizer,” explains Quigley. “The biggest challenge with other vibrating mesh products is that they require cleaning if used over an extended period. We’re mitigating that through the design of the interface. There is no cleaning required. We do believe that this will result in RespiRx having a very long use life.”

    Mario Danek, Qnovia’s founder and chief technical officer, agrees that eliminating the cleaning requirement was a priority. “The idea was to create a technology that emulates the form factor of a successful high-adoption consumer product but that is imbued with technologies that would pass CDER’s stringent standard for safety—combined with Qnovia’s purposeful design features, it should bring patient adherence and quit rates to new highs, which historically have been found lacking in NRT,” he says. “Additionally, from a drug delivery platform perspective, those CDER-aligned device safety requirements are just as imperative to Qnovia’s API expansion strategy into other indication areas.”

    RespiRx is a “step-down” therapy, like many NRT products. However, instead of buying different pods with varying levels of nicotine, Qnovia’s device has a dosage-monitoring system programmed into the device. Uniquely, the use regimen is determined based on how much a smoker is smoking, says Quigley. For example, a one-pack-a-day smoker would start with 20 doses per day. The two-pack-a-day smoker would start with 40 doses per day. 

    “Then the device will, over the 12 weeks, gradually reduce the available number of doses to that patient. It is a much more manageable step-down over the 12 weeks, unlike currently available cessation methods. And the device itself will prevent the patient from using more than they’re supposed to use,” says Quigley. “Patients would also have the on-device LCD screen interface to help them understand how to use their doses. That, too, is another benefit of our product versus the existing smoking cessation therapies.” 

    Brian Quigley

    Every smoker smokes differently. One smoker may have their first cigarette after their morning coffee. Another may have to light up the moment they wake up. Quigley says that Qnovia patients can use their daily doses to replace each occasion where they’re used to having their combustible cigarette. They have hand-to-mouth action. They get reinforcements to those behavioral cues that smokers have become accustomed to. 

    “With a piece of gum or a patch, if you have a patch on and you’re having your cup of coffee and you’re fighting through your cravings, it just doesn’t work. I think there’s a lot of benefits to this type of therapy to really help the patient replace their occasion when they need to smoke and then stick with that 12-week step-down program,” says Quigley.

    Choosing sides

    In the U.K., Quigley says the process to become a medicine is less challenging than in the U.S. “Whereas in the U.S., we have to go through a pretty rigorous process and really our competition is once that patient decides they want to try to quit smoking [and] we’re competing against the existing NRTs, which every smoker has tried. Consumers know that none of them are as effective as an inhalable product,” he says.

    If RespiRx decided to be a tobacco product instead of medicine in the U.S., the device may have already been on the market. The FDA’s premarket tobacco product application process is less stringent than the CDER approval process. However, drugs gain approval all the time, while the FDA has approved only 23 vaping products for market, and most of those are technologically obsolete. An NRT comes with less baggage than a tobacco product, and as far as the FDA’s Center for Tobacco Products (CTP) is concerned, vaping products are tobacco products.

    “I think the unfortunate reality facing reduced-risk products is that FDA on the CTP side—they’re in a very tough spot. The industry is kind of stuck in the middle where, yes, the FDA needs to review these applications and approve reduced-risk products, but over the long term, I think FDA will ultimately continue to constrain that industry,” says Quigley. “Ultimately, I think the long-range path of CTP will be to continue to tighten regulations on all tobacco products. That would be a very challenging environment. That space presents a lot of risk.”

    While a much longer and more expensive process, Quigley says the CDER standard is straightforward. It’s about safety and efficacy. It’s a balance between scientific risk and regulatory risk. When the CDER asks a question, it usually requires a study to answer. Studies can be very expensive. “I think that another potential challenge will be that we’ll generate data, and we expect the FDA will be very conservative,” he says. “They could ask us questions that require us to generate additional data that we didn’t think we had to generate. But our view is that we’re going to do this right. If they need data, we’re going to generate it for them. The biggest risk is really the time and money to get through the approval process … but I do believe that we are taking a proactive scientific approach.”

    For Qnovia, the premise that the CDER must be more directly involved with a company working on a new drug than the CTP needs to be when working with the e-cigarette industry was important. Quigley says that he also believes that having less harmful vaping products on the market available to consumers is important in the fight to end combustible tobacco use. He says having e-cigarettes available to former or current smokers who want to continue to have nicotine be part of their life is important. But for Qnovia, its client base is those smokers who are saying they want to end their addiction to nicotine.

    “CDER, for example, has timelines it must adhere to. When we give CDER information, they stick to these timelines. I think it’s a more responsive center than CTP needs to be with e-cigarette manufacturers,” explains Quigley, adding that the company likes the engagement opportunity with the CDER to advance a potential breakthrough therapy for smoking cessation. “The conversation we have with FDA on helping to provide more effective cessation tools is very different than a conversation a tobacco company would have. I do think that we have the opportunity to be viewed as an ally with FDA in their fight against smoking. We’re trying to help solve a problem that is important.”

    Mario Danek

    One of the main issues that the FDA has with vaping products is heat. E-liquid is heated, and that heating process has the potential to create harmful and potentially harmful constituents in the vapor. Quigley says that this is why he doesn’t ever see a vaping product with an atomizer that heats the liquid to vaporize being approved as an NRT product. While e-cigarettes are surely less harmful than combustible cigarettes, there are still potential constituents in the e-liquid aerosol, and the CDER would have a problem approving a vaping product with the potential to have those constituents.

    Qnovia is preparing to submit its investigational new drug application to the FDA. It also expects to begin human clinical trials this year, according to Quigley. Ultimately, Qnovia’s goal is to have its new drug application, its final drug application, submitted to the FDA in 2025.

    “The IND, basically, is where we give them all of our safety data, all of our drug manufacturing and device characterization data. And after that application is submitted, once the FDA gives us the approval, then we can begin human clinicals,” says Quigley. “And we have a phase one, phase two and phase three human clinical plan that we will have to execute.”

    A pharmaceutical company seeking FDA approval to sell a new prescription drug must complete a five-step process: discovery/concept, preclinical research, clinical research, FDA review and FDA postmarket safety monitoring. Importantly, a major difference between the CTP and the CDER pathways to market is that drug applicants have safety standards that e-cigarette manufacturers don’t have. For example, for RespiRx, the container that holds the nicotine needs to be sterilized. It needs to be filled aseptically in an ISO 5 cleanroom environment. The vaping industry would only require an ISO 6-certified lab.

    “I think another element is our airpath safety. It’s something that FDA really cares about on the drug side. When the patient is actually inhaling on the device, not only the aerosol but even the breath path, where they’re drawing air from, has to be totally sealed off and isolated from electronics and other materials,” says Quigley “That’s not the case with standard e-cigarettes. Everything, the breath-activation function and all the electronics have to be sealed off entirely from the drug-containing reservoir and the patient’s airpath. These are more stringent safety requirements that have forced us to do extra work from a design perspective and a safety perspective.”

    Forward thinking

    Qnovia was founded in 2018 in Los Angeles by Danek as Respira Technologies. Danek invented the underlying technology. He rebranded the company as Qnovia last year. The company also moved to Richmond, Virginia, in part because that state offers a more business-friendly environment, according to Quigley, whose tobacco career included a six-year stint as CEO of Altria’s U.S. Smokeless Tobacco Co. subsidiary.

    In addition, many of the partners the company works with are on the East Coast. Qnovia contracts with a Boston manufacturer to make its device and a firm in Pennsylvania to create the medicine administered through the device.

    One controversial aspect of e-cigarettes is unlikely to be a problem for Qnovia: The role RespiRx is to play in a medical context offers an opportunity to make use of flavors. Quigley says flavors could potentially help a smoker make the transition from combustibles and stick through the therapy and ultimately quit.

    “I think that the lens is those flavors; it just becomes a safety question. Which is, you just have to make sure that whatever flavors you wanted to include, you’re actually generating the safety data to support new questions of safety by including those flavors. You have to check the safety box,” says Quigley. “E-cigarettes or e-vapor products are a different experience than what our smoker is used to, and flavors play or can play an important role in helping smokers switch to that reduced-risk platform.

    “There’s also a lot of data that show that flavors are an important part of helping smokers move to reduced-risk products. But now the industry has been put in a very tight, constricting box. Over time, hopefully, that will kind of correct itself, but it’s going to have to happen with data. I think that the industry understands that—regulators and public health officials look at flavors as a youth appeal issue.”

    The industry now must figure out how to ensure that it’s not creating a youth appeal issue but still creating a product that is going to be appealing to a smoker trying to switch to reduced-risk products, according to Quigley. “I think it’s going to be a long, slow road, but vapor products will continue to be a part of the reduced-risk product landscape in the U.S., but I think it’s going to be challenging,” he says.

    RespiRx is expected to hit the market as a prescription-only treatment. Qnovia is also interested in exploring how the technology can be used for asthma, pain management, vaccines and other applications. As far as using synthetic nicotine, Quigley says it is not out of the question but says he is concerned that currently, the FDA doesn’t know enough about synthetic nicotine to be able to approve a synthetic product.

    “We’re using pharma-grade nicotine. It is tobacco derived. I think with synthetic nicotine, the FDA may have lots of questions whereas they have a deep body of evidence and understanding of tobacco-derived nicotine,” says Quigley. “However, if there was data to show that synthetic nicotine is safer because it in no way can have any kind of nitrosamines, for example, it’s something we could consider in the future with strong safety data.”

  • Certified Medicine

    Certified Medicine

    Credit: Krakenimage

    More than a year after the U.K.’s MHRA updated guidance, there are still no medicinal vapes on the market.

    By Pete Lomas

    The U.K.’s Medicines and Healthcare products Regulatory Agency (MHRA) updated its guidance for licensing electronic nicotine-delivery systems (ENDS) as medicinal products on Oct. 29, 2021. The new guidance marked a shift in approach from the MHRA as it began actively encouraging applications and sought to support companies through the process. Over a year on, however, we have to wonder why the industry doesn’t have any medicinal vapes on the market.

    The change in direction by the MHRA was likely spurred by the U.K. government’s desire to meet its “Smoke-Free by 2030”1 target, which stipulates that less than 5 percent of the population should be smokers by the end of the decade. Using ENDS can be a good way to reduce the harmful effects of smoking, and the hope is that this new approach will change the perception of ENDS, bringing them more in line with other nicotine-replacement therapies, including gums, sprays and patches.

    Pete Lomas

    The pathway via which e-cigarette products can be certified as medicinal products is known as a marketing authorization application (MAA). Since nicotine is not a new chemical entity, the MAA can be abbreviated with respect to safety and efficacy information. Instead, the application will rely primarily on a pharmacokinetic study to compare the new product with an appropriate reference medicinal product. Given the intended route of administration, an already approved inhaled nicotine product such as the Nicorette 15 mg Inhalator has been suggested by the MHRA as a suitable comparator.

    As well as conforming to the MAA requirements, any ENDS devices will also need to be proven to be electromechanically safe. In the U.K., this will require it to be U.K. Conformity Assessed marked, following assessment by an authorized approved body.

    Encourage licensing

    In a bid to elucidate the new application process, the MHRA initially ran a webinar titled “Licensing Electronic Cigarettes as Medicines,” which was retroactively made available on YouTube.2 In short, the MHRA is committed to providing as much assistance as is needed to ensure potential applicants understand the process and feel able to make applications in a timely manner.

    But the MHRA has gone beyond simply putting on talks and answering questions—it has also widened the goalposts slightly, making applications more likely to succeed. One way this has been done is by adapting how delivered dose uniformity (DDU) is measured. As a medicinal product, vapes are classified in a similar way to conventional pressurized metered dose inhalers (pMDIs), meaning the criteria that must be met before approval is very similar.

    E-cigarettes, however, are a fundamentally different technology to pMDIs. Whereas pMDIs use a pressurized canister calibrated to deliver an exact amount of aerosol per puff, an e-cigarette is traditionally based on coil and wick technology. This difference makes the DDU per-puff of an e-cigarette much less consistent, and that is before considering self-titration (the patient taking larger or smaller puffs based on preference and habit) is even considered.  

    So, if ENDS are subjected to DDU regulations on a per-puff basis, then most will fall short—what to do then? To address this, the MHRA has instead set DDU requirements that are averaged over 10 puffs, rather than one, thus making it easier for vapes to comply.

    Achieving DDU

    Despite the leeway given by the MHRA, delivering dose uniformity is still very important. For products to reach medicinal standards, they must be designed to be as consistent, puff to puff, as possible. In that respect, any applicant seeking approval will need to focus on three key points: consistent power, consistent delivery of liquid and consistent airflow—achieve all three and a device stands a good chance of complying with the new guidance.

    Modern developments in vape technology will help address the issue of DDU further. Non-heated vaping technologies based on ultrasonics, piezo-ceramic mesh and micro-nozzles are now being used to develop these products and offer greater inhalation consistency. Piezo-ceramic technology, in particular, is well suited for medicinal products as it offers the ability to fine-tune the mesh, vibration frequency or other parameters within the device, depending on the liquid formulation.

    Another key difference between ENDS and their inhaler cousins is that the performance of electronic products tends to vary at the beginning and end of the product’s lifecycle. That means priming and end-of-life doses may not deliver the same uniformity as is expected for the bulk of the product’s use. Within the new guidance, applicants will now be able to define these different doses and exclude them from the uniformity criteria, so long as appropriate justification is provided and information on these differences is communicated to the end users.

    Achieving MAA licensing

    To date, only one e-cigarette product has successfully passed through the MAA process, around a decade ago. However, smokers did not find the product sufficiently satisfying to make a permanent switch. It was withdrawn from the market only a couple of years after launch due to low smoker compliance. Technology has evolved much since then, resulting in products that are much more satisfying for smokers, allowing them to transition away from combustible cigarettes altogether.

    Typically, performing the necessary studies and data gathering for the application would be expected to take 12 months to 18 months. Once collected, the MHRA offers a 150-day accelerated assessment for “high-quality” MAAs, with an intervening “clock-off period” where further clarification and information can be provided, as required. The clock-off period should last no longer than 60 days.

    For applicants with products undergoing a U.S. FDA premarket tobacco product application (PMTA) process, or for the 23 ENDS that have already been approved3 via this route, there is opportunity to reduce the number of new studies that are required for an MAA. The MHRA has said it is happy to discuss what data may be relevant for a U.K. MAA, therefore reducing the need for additional studies in some cases.

    Even if the majority of the data from a PMTA cannot be used directly as part of the MAA, data generated for the PMTA can be used to help strengthen the Pharmaceutical Development section within Module 3 of the application. In addition, a successful product on the U.S. market will provide confidence to regulators of consumer acceptance, which can be an important consideration.

    All told, any applicant beginning data collection for an MAA should anticipate the entire process, from product finalization to market approval, taking in the region of two years. This explains why we are yet to see a product reach approval since the guidance was only updated in October 2021. As we approach the two-year mark at the back end of 2023, it seems plausible that the first medicinally licensed ENDS could come on sale in the U.K.

    Credit: Minerva Studio

    Where to find medicinal vapes

    If the license granted permits the product to be sold and supplied as a General Sales List (GSL) medicine, then the retailer does not need to be a pharmacy. Examples of common GSL medicines include ibuprofen and paracetamol, which can be purchased from retail outlets such as convenience stores and supermarkets, where they are available for self-selection, albeit with appropriate sale restrictions on purchaser age and quantity of the product.

    Most existing nicotine-replacement therapies—products like patches, gum and sprays—are listed as GSL items, and so the assumption is that ENDS would be made available in the same way. That said, approval onto the GSL doesn’t automatically exclude a product from being prescribed to patients by a healthcare professional. Applicants may still wish to secure contracts with healthcare providers to distribute their product through alternative channels, which can include being exclusively sold as a prescription treatment.

    Making a difference

    It is fair to say that the perception of vaping, both in the eyes of the public and healthcare professionals, has declined in recent years. A 2021 survey by Action on Smoking and Health4 (ASH), for example, found that nearly a third (32 percent) of smokers incorrectly believe that vaping is more or equally as harmful as smoking. Whatever the reasons are behind this—I suspect there are several—it needs to change if we are to reach the smoke-free target by 2030.

    The hope is that by licensing ENDS as medicinal products, it will provide credibility that these products are not just safe but have genuine harm reduction potential. MHRA approval will provide customers with confidence that they are making a healthy choice when switching from smoking to vaping.

    A barrier to the success of this reclassification of vapes as medicinal products may be smokers’ perceptions of themselves. Many don’t want to be seen as “patients” per se, and so they might resist being bundled into such a group. Medicines, however, are as much about the prevention of disease as for its treatment, and given that these products will hopefully be available as GSL medicines, resistance to their purchase should be minimal. Most people don’t feel like a “patient” when purchasing ibuprofen after all.

    The impacts of the change in guidance will only become apparent once we start seeing products approved via this route. For now, there are still over 6 million people5 in the U.K. who smoke cigarettes; e-cigarettes, which have been through the rigorous medicinal licensing process, could be a safe, effective and trusted part of the solution moving forward.

    Pete Lomas is a managing consultant at Broughton Group (www.broughton-group.com), a consulting and lab services company.

    1 www.gov.uk/government/publications/the-khan-review-making-smoking-obsolete/making-smoking-obsolete-summary

     2 www.youtube.com/watch?v=OnK4u_pO2RM

    3 www.fda.gov/tobacco-products/premarket-tobacco-product-applications/premarket-tobacco-product-marketing-granted-orders

    4 https://ash.org.uk/uploads/Use-of-e-cigarettes-vapes-among-adults-in-Great-Britain-2021.pdf                                   

    5 www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/bulletins/adultsmokinghabitsingreatbritain/2021#:~:text=In%202021%2C%20the%20proportion%20of,14.0%25%20of%20the%20population

  • Head in the Clouds

    Head in the Clouds

    Credit: James Thew

    A vaping industry veteran uses some time-tested adages to reflect on his 11 years in the space.

    By Chris Howard

    In the new year, as I reflect on my past 11 years of experiences in the vapor space, I think it is better late than never to share some thoughts on where we have been and where we should be headed. Because we are never too old to learn, I thought I would strike while the iron is hot (hopefully you can see the theme here). 

    From 2018 to 2021, the industry suffered incalculable upheaval and uncertainty as we went through a shortened premarket tobacco product application (PMTA) period and a seemingly never-ending series of marketing denial orders (MDOs). While 2022 wasn’t necessarily any better for industry, it sure got a lot worse for the U.S. Food and Drug Administration’s Center for Tobacco Products (CTP).

    To recap, we saw multiple challenges to MDOs that shed some inconvenient light on the CTP review processes. We also witnessed significant delays in the CTP’s ability to meet the Maryland Court-imposed deadlines. Congress regularly attacked the CTP (and the greater FDA) for perceived shortcomings. And, finally, we saw the results of the Reagan-Udall Foundation review that, even with the soft touch given to the CTP, did not paint a flattering picture of the workings of our regulator. In all, it was a rough year for a new center director and the staff.

    With the above in mind, a few time-tested adages can aptly describe my reflection on the vapor industry—which I offer here for your consideration:

    Make a Long Story Short. After nearly seven years since the finalization of the Deeming Rule, the CTP and industry have collectively learned that some of the standards/requirements making up the PMTA process could be streamlined to say the least. By way of example, does the CTP really need for each company to spend thousands of dollars on the same literature review? Are behavioral surveys to show youth aren’t attracted to tobacco-flavored products necessary at this point?

    Are there other commonalities across numerous applications that could now be updated or otherwise removed from consideration given consistent findings? As suggested by the Reagan-Udall Foundation, the CTP should consider providing more detailed summaries of applications that have made it through the process—so that industry can place emphasis on areas that the agency deems to be a higher priority and eliminate superfluous activities that ultimately add little value. Doing this and taking steps to simplify the requirements would ultimately enable both the industry and the CTP to employ a more focused approach, resulting in greater efficiency for all involved.

    You Get Out What You Put In. Applicants who skimped and filed weak applications without regard to the requirements set forth by the CTP have nearly universally learned a valuable lesson. The PMTA process is expensive, and extremely rigorous science is required to show that your products are appropriate for the protection of public health (APPH). While many sought shortcuts and/or complain that the CTP’s guidance is unclear and/or vague, several companies have demonstrated that vapor products can indeed meet the FDA’s high standards.

    Which companies are these? These are the companies who expended significant time and resources to develop robust applications covering each scientific discipline and other requirements set forth in the June 2019 “Premarket Tobacco Product Applications for Electronic Nicotine Delivery Systems, Guidance for Industry” and in the November 2021 Final Rule regarding “Premarket Tobacco Applications and Recordkeeping Requirements.”

    Don’t Hold Your Breath. It’s hard to believe it now, but there was a time when both applicants and the CTP shared an optimism that reviews of applications could be accomplished in accordance with the prescribed timeline. This “certainty” provided an objective framework enabling industry to develop various business plans for all deemed products in the pipeline.

    Unfortunately, the ultimate glut of applications proved to be an insurmountable burden for the FDA—resulting in nearly all timelines falling by the wayside. For anyone with pending PMTAs and for those manufacturers contemplating filing new PMTAs, don’t expect to obtain results quickly. Hopefully, the CTP will adopt some of the recommendations contained in the Reagan-Udall Foundation report to increase its overall efficiency and enable the industry to plan more effectively.

    When Life Gives You Lemons, Make Lemonade. For innovators in the vapor space, initially life was very good. They had a great product that was considered profitable and a key to moving harm reduction forward. Unfortunately, things didn’t go exactly as expected, and life gave everyone in the vapor space lemons—and a huge basket of lemons at that. We had youth vaping; e-cigarette or vaping product use-associated lung injury (EVALI); near constant, questionable scientific studies demonizing electronic nicotine-delivery systems (ENDS); state and federal legislation to tax, limit and ban; a regulatory agency that swept the market nearly clean of flavored products—the list goes on.

    It’s quite easy to despair, but now is the time to make lemonade. As an industry, we need to innovate within the narrow confines provided. We need to continue to ensure that the FDA makes its decisions based on science while we develop improved nonflavored options and better marketing schemes to prevent youth exposure. Smokers deserve our efforts to offer satisfying, reduced-harm products—I’m confident this innovative and adaptable industry can do just that.

    It’s Not Over Until It’s Over. Over the past 11 years, I have seen so many industry advocates walk away from the vapor category due to a variety of circumstances. Unfortunately, with each powerful voice that leaves, the ultimate goal of ensuring that vapor products are an important part of an FDA-sponsored harm reduction platform becomes even more difficult to reach. In my opinion, the story isn’t over. Several vapor products have received market granted orders, and I expect that we will see more in the near future.

    Moreover, additional studies continue to show the obvious health benefits of vapor products as compared to combustible cigarettes and that they are a valuable tool for adult smokers seeking to quit. Maybe owning a vape store and selling thousands of flavors isn’t on the horizon, but helping smokers seeking alternatives can still be a meaningful priority. I encourage past and current members of the vapor community to revisit their priorities with a new focus on educating the public—even if the journey hasn’t been as fulfilling as you hoped it might be.

    Two Wrongs Don’t Make a Right. In case anyone missed it, several young people decided to experiment with vapor products a few years ago. Fortunately, that trend is unquestionably subsiding thanks to the introduction of T21 and the gradual decrease in the “fad” of vaping. It certainly isn’t right to (and no responsible manufacturer should) sell ENDS products to or in a manner attractive to kids. Unfortunately, the handling of the regulation of ENDS and, more particularly, flavored ENDS by both public health commentators and regulators is also wrong.

    In 2016–2017, ENDS were the next best thing. They held the promise and potential to restructure the tobacco use market in the United States from combustible cigarette death and disease to an inhalable nicotine product that reduces risk and disease burden. The “second wrong” in response to Juul, EVALI, the abandonment of harm reduction and an avalanche of inaccurate reporting, propaganda and sensationalism resulted in the gutting of the flavored ENDS space (most of which did not have a youth vaping issue) in the form of refuse-to-file letters and MDOs based on a seemingly arbitrary solution.

    These two wrongs, when coupled, don’t make a right—what these two wrongs make is a missed public health opportunity. Unlike the United Kingdom, which has embraced ENDS and driven down smoking rates, the U.S. has moved in the opposite direction—vilifying, banning and restricting. In this case, the two wrongs will result in increased smoking and increased disease.

    The Perfect is the Enemy of the Good. As the PMTA review picture gains incremental clarity, we often see policy of pursuit of perfection (e.g., ill-defined demands for long-term cessation trials for flavored products). Whether this pursuit is expedient to remove disfavored products or flavors from the market or we are seeing the level of evidence required to gain a market order rise to a standard only found in the drug center is for you to consider.

    However, the net effect is an increasingly complex (and expensive) set of criteria to satisfy the APPH standard. The public health standard, however, should not be a pursuit of perfection—it should be a pursuit of decreasing cigarette smoking mortality and morbidity. While there may be risks associated with some of the reduced-harm products, those risks are dramatically fewer than those posed by cigarettes. Accepting reasonable evidence to support reduction of harm to enact lifesaving and life-extending regulatory policy just makes good sense.

    Don’t Miss the Forest for the Trees. Throughout the public health community, harm reduction principles are embraced and promoted to reduce the harms related with drugs, sex and other potentially harmful activities. For some reason, though, with rare exception, nicotine and combustible cigarette smokers don’t seem to merit a harm reduction strategy.

    In the face of 460,000 smoker deaths each year, prudent regulatory policy would embrace products down the spectrum of risks—not ban them. European regulators have seen the forest—they promote reduced-harm products while discouraging combustible cigarette smoking. In the U.S., unfortunately, we ran into the first sapling off the trail and haven’t really progressed from there. 

    While the past 11 years have provided many ups and downs in the vapor space (a lot of downs), I’m hopeful that we can turn a corner in 2023 and beyond. In the past, it seemed like it was the vapor industry versus the world. Today, however, it is possible that we are at the dawn of a new era of tobacco regulation.

    My hope is that when I look back on the next 11 years, the CTP has learned from the missteps of the past. I hope the center uses the valuable insights it has been provided, like the findings in the Reagan-Udall Foundation report, to reorient the center on not just prohibiting products but rather crafting policy and standards that assist combustible cigarette smokers in moving away from those harmful products. I hope to look back on tobacco control policy that doesn’t just involve saying “no” to every option but rather embraces harm reduction and doesn’t leave smokers behind. Maybe we can have our cake and eat it too.

    Chris Howard is executive vice president of new product compliance and external affairs for Swisher and former senior vice president, general counsel and chief compliance officer for E-Alternative Solutions.

  • Behind Schedule

    Behind Schedule

    Credit: Burdun

    Two branches of federal government have the power to change marijuana’s Schedule I status.

    By Willie McKinney and Emily Burns

    The primary obstacle for the U.S. cannabis industry is that possession and use is still illegal according to federal law. And there could be severe penalties if you’re convicted under those federal laws. This is because the removal of state criminal penalties (decriminalization) doesn’t “undo” or “negate” federal laws criminalizing such conduct, even though they both can coexist due to something called the anti-commandeering doctrine. In short, cannabis users in legalized states still face the reality that their conduct remains federally illegal and punishable by federal authorities under the federal Controlled Substances Act (CSA).

    The current Schedule I status of marijuana means that it’s strictly prohibited for sale or use under federal authority. Yet, over the last several decades, most states and territories have deviated from across-the-board prohibition of cannabis and now have laws and policies allowing for some cultivation, distribution and possession of cannabis. It is difficult to predict when cannabis will be federally legal. It’s even harder to predict how cannabis will be regulated and the impact.

    The CSA classifies drugs and their chemical analogs in five schedules—Schedules I–V:

    • Schedule I means a drug has a high potential for abuse, with no currently accepted medical use in treatment in the United States, and there is a lack of accepted safety for use of the drug under medical supervision.
    • Schedule II drugs have a high potential for abuse but have an accepted medical use, though abuse of the drug may lead to chemical or physical dependence.
    • Schedule III drugs have a lower potential for abuse and are currently accepted for medical use in the United States, and abuse of the drug may lead to lower physical dependence but high psychological dependence.
    • Schedule IV drugs have a low potential for abuse, a low risk of dependence compared to Schedule III and have a currently accepted medical use.
    • Schedule V drugs have a low potential for abuse and a currently accepted medical use.

    Who controls marijuana’s status?

    The legislative and executive branches of the federal government have the ability to change marijuana’s Schedule I status. The executive branch can take action to change marijuana’s status; however, it is bound by the CSA to consider factors such as a substance’s risk of abuse and medical utility prior to altering its scheduling.

    Under the CSA, the Drug Enforcement Administration (DEA), Department of Health and Human Services (HHS) and the U.S. Food and Drug Administration make a decision to reschedule or de-schedule a drug based on the relative abuse potential of the drug. The HHS’ recommendations are binding on the DEA as to scientific and medical matters. The HHS must consider the eight following factors in making its recommendation:

    • the drug’s actual or relative potential for abuse;
    • the drug’s scientific evidence of its pharmacologic effect, if known;
    • the state of current scientific knowledge regarding the drug;
    • the drug’s history and current pattern of abuse;
    • the drug’s scope, duration and significance of abuse;
    • the risk, if any, to public health; and
    • the drug’s psychic or physiological dependence liability.

    Is the drug is an immediate precursor of a controlled substance?

    Over the years, several entities have submitted petitions to the DEA to reschedule marijuana. In August 2016, after a five-year evaluation process done in conjunction with the FDA, the DEA rejected two petitions—one submitted by two state governors and the other submitted by a New Mexico health provider—to move marijuana to a less restrictive schedule under the CSA.

    Consistent with past practice, the rejections were based on a conclusion by both the FDA and the DEA that marijuana continues to meet the criteria for inclusion on Schedule I—namely, that it has a high potential for abuse, has no currently accepted medical use and lacks an acceptable level of safety for use under medical supervision. Some drugs, like Marinol and Epidiolex, are excluded from Schedule I because they have obtained FDA authorization via the drug approval process.

    The federal government could choose to maintain the federal prohibition on marijuana. Given the current political environment, however, this scenario seems unlikely.

    Reschedule, new schedule or de-schedule?

    President Biden recently signed the “Medical Marijuana and Cannabidiol Research Expansion Act,”1 which will ease federal government research restrictions on marijuana and encourage research institutions to produce marijuana strains for research purposes. The bill also calls upon the attorney general to consider the issue of rescheduling (or de-scheduling) marijuana by engaging with officials from the Department of Health and Human Services, which houses the FDA. Once the attorney general finds sufficient evidence that a change in scheduling is warranted, he then initiates the first stages of a standard rulemaking process.

    There are at least three obvious approaches that the federal government could take to address marijuana classification conflict: creating a new schedule, rescheduling under a less restrictive schedule or de-scheduling altogether.

    Creating a new schedule, similar to the recent announcement made by the FDA addressing a new regulatory pathway for CBD outside of the traditional FDA pathways, could be a possibility; however, it is unlikely.

    If marijuana remains a controlled substance under the CSA, under any schedule, it would still maintain the existing conflict between the federal government and states that have legalized recreational marijuana. However, moving marijuana to a less restrictive schedule could help mitigate conflicts between federal law and state medical marijuana laws. If Congress chooses to remove marijuana from the CSA entirely, it could seek to regulate and tax commercial marijuana activities.

    De-scheduling cannabis appears to be the most effective option for the federal government to eliminate the existing conflict between federal and state law as it would allow cannabis to remain on the market as a medical and recreational product. Additionally, changing social attitudes toward marijuana will likely support de-scheduling. 

    Jennifer Guild, vice president of regulatory and quality at Abstrax Technologies, is hopeful that as states learn more from legalization programs across the country, they will “start to reward the responsible suppliers that are taking the initiative to self-regulate and develop their own toxicological programs to address the gap in knowledge that exists regarding the inhalation safety of various flavor ingredients.”

    However, a move to de-schedule cannabis would create new controversies. As Guild points out, testing standards created for flavors and other chemicals may prove impractically stringent, depending on the state. “There are over 678 unique chemical contaminants regulated in cannabis products among 30 state regulations (not including outside of the USA) … and flavors are not typically derived from cannabis nor do they contain any cannabinoids or other cannabis-derived extracts. Therefore, it is not feasible or appropriate for non-cannabis-derived flavors to be routinely tested for these 678 potential contaminants.”

    Regardless, Guild encourages manufacturers to “establish and implement a written quality plan to control potential safety risks [of] the products they manufacture. This risk assessment includes an evaluation of the potential chemical, biological and physical hazards that could be introduced to a party at each stage in the manufacturing operations.”

    Legalized marijuana operates in uncharted territory. There is no track record on the impact of these new laws. While outcomes might be positive, there is simply not enough information available to confidently project national success. For this reason, the federal government should work with states to learn from best practices and then develop a comprehensive program to address marijuana classification. 

    Willie McKinney is CEO at McKinney Regulatory Scientific Advisors.
    Emily Burns is senior regulatory strategy manager at McKinney Regulatory Scientific Advisors.

    1 www.congress.gov/bill/117th-congress/house-bill/8454

  • Taxation Situation

    Taxation Situation

    Credit: enterlinedesign

    Excise taxes on vapor and OTPs can present considerable administrative burdens on businesses.

    By Bryan Haynes, Christina Sava and Robert Claiborne

    Excise taxes on vapor products and tobacco products other than cigarettes, also referred to as “other tobacco products” (OTPs), present considerable administrative burdens on businesses dealing in these products. All 50 states impose excise taxes on most traditional OTPs, and have for a long time, but operators in the vapor category have been subject to rapidly shifting regulatory conditions as states update their OTP laws and other laws to account for vapor products.

    Many of these laws are framed on traditional distribution models, and businesses’ innovations in routing taxable products to market can raise unique compliance questions. Recent legal changes have also raised new issues over the permissibility of state taxation of products coming in from another state. Where excise taxes are imposed on a product, the sale of such products requires licensure at various points in the supply chain, accurate bookkeeping, regular reporting, and tax remittance practices.

    Typically, distributors and wholesalers of these highly regulated products may be the subject of audits by state revenue departments, and manufacturers and retailers may similarly be subject to audit depending on the auditing state. In our experience, it is a rare audit that does not result in an alleged deficiency. Some deficiency determinations are minor and easily paid while others can add up to hundreds of thousands—and even millions—of dollars due, plus interest and penalties. In such cases, it is imperative to engage the assistance of experienced counsel who can assist you in addressing the assessment.

    A final deficiency determination can be crippling to a business. The audit process itself can be time-consuming and disruptive to normal operations, and any ensuing disputes will be even more so. It’s never a bad time to either establish an audit-readiness plan or clean up existing operating procedures to make sure a future audit and possible dispute go as smoothly as possible. We have drawn on our experience representing clients in such disputes to compile this list of best practices for avoiding or contesting OTP and vapor tax assessments.

    Best Practices for Avoiding a Dispute

    1. Understand your state’s licensure requirements. This tip should go without saying, but it is worth repeating given the rapid evolution of vapor products laws and innovations in businesses’ routing of taxable vapor or OTP products to market. If you do any business in traditional forms of tobacco, and begin selling vapor products, it would be prudent to confirm whether your state requires additional licenses, taxes or reporting for these products.
    2. Know your regulator. For any highly regulated business, it’s important to be familiar with your primary regulatory agency and its agents and maintain a good relationship with them. Any time you are communicating with your regulator is a chance to make a good impression, so remain courteous and professional in your dealings with them, whether via email, by phone or in person. If there are occasions where you disagree with the regulator, you can do so respectfully and without being disagreeable.
    3. Keep and organize accurate books and records. This tip is important for all business owners but especially for businesses that deal in excise-taxed products. Being able to produce accurate documentation of your activities can make all the difference in a dispute as well as prevent disputes. State laws typically establish the minimum record-keeping requirements. A good record-keeping system will include:
    1. copies of invoices and receipts;
    2. copies of bills of lading and other shipping documentation;
    3. copies of all communications with state regulators; and
    4. copies of documentation for any tax payments, tax reports and tax returns.

    Make your records readily accessible as you will be asked to produce them during an audit. You will also want to promptly transmit records to your attorneys if you involve them in any phase of the matter. Verify whether your state requires you to maintain physical copies on-site or whether you can organize your records digitally.

    1. Understand the applicable laws. This one is, again, obvious for all businesses but crucial for those dealing in highly regulated products. Keep track of the tax rate applicable to all of your product classes. If there is a question about whether your products qualify as taxable tobacco or vapor products, you should seek clarification and probably involve your attorney. Some laws, for instance, tax liquid nicotine but not certain other forms of nicotine while other laws tax products, such as vape products, that do not contain nicotine at all. Make sure you are signed up for alerts from your regulatory agency. If you don’t understand a change in law or policy, follow up with the regulator or experienced counsel for clarification. If you are going to seek a formal advisory opinion or even informal guidance from a state department of revenue, you will likely want to involve your attorney to ensure that you inform the department of all material facts and legal grounds that may distinguish your product or activities from coverage under the state’s excise tax laws.
    2. File timely returns. Set up a system for making tax reporting easy and automatic. There are third-party providers that can assist if necessary. Filing thorough, well-prepared returns on time each month generates goodwill and can help prevent audits.
    3. Periodically audit yourself. Set up periodic self-audits to ensure your reporting is accurate. Self-audits can help businesses mitigate issues that, if not discovered sooner, may result in large assessments. If you discover an issue, many state excise tax laws require that returns be corrected proactively. If you discover a major issue, it may be prudent to have a discussion with relevant taxing authorities but involve counsel early if you think you’ve discovered deficiencies. Some states have voluntary disclosure programs that may mitigate potential consequences from noncompliance.
    4. If you are audited, make timely and thorough responses. If you are audited, it is critical to be responsive to auditors’ legitimate requests. Initial interactions with auditors can set the tone for the rest of the audit. Review requests for production thoroughly, note the deadlines and begin working on the responses early. Auditors appreciate well-organized productions, which are easier to provide if they are already organized and you’ve given yourself time to put together a thorough response.

    Best Practices for Dealing with a Potential or Actual Dispute

    1. Engage experienced counsel early. Consider contacting counsel the moment a request for records arrives. Counsel does not always have to respond on your behalf, but they can help you evaluate the legitimacy of requests and help you respond. You should contact counsel immediately upon receipt of a deficiency determination.
    2. Be aware of deadlines. This one bears repeating because, in tax matters, missing a deadline can mean you have conceded to the assessment. Review the assessment carefully and note all deadlines. Review statutes, regulations and agency guidance to familiarize yourself with the appeal process, including any additional deadlines that might not have been identified in your notice.
    3. Provide relevant information to your counsel as soon as possible and throughout the dispute. Is the disputed issue one that your business has previously discussed with the tax department? Has the tax department’s position changed at any point? Does the disputed issue concern products that had taxes paid on them in another state? Have there been any changes in the manner in which you conduct your business? What individuals or documents can address the facts in issue? These are just some of the questions your counsel may have, and there will be others depending on the nature of your dispute. It is important to make sure that you fully inform counsel of the relevant facts and documents early on and throughout the matter. 
    4. Keep perspective. Running a business is hard work, and a tax dispute will not make it easier. While you will naturally be eager for the dispute’s resolution, it is important to bear in mind that the dispute process can be lengthy. Most states route tax disputes through a maze of administrative processes before the taxpayer can have its day in court. Either party can have multiple stages for appeal. Also bear in mind that most disputes eventually settle. Keep a cool head, maintain professionalism and know that you’ll eventually be on the other side of this.

    Proactive measures can help you streamline audits and mitigate the risk of tax assessments. If a dispute arises, early engagement with counsel is critical to developing and executing an effective strategy. Troutman Pepper’s tobacco team has substantial experience advising clients in vape and OTP tax matters and, when necessary, assisting them in disputing assessments. In 2022, we assisted clients in successfully disputing more than $45 million in claimed tobacco tax deficiencies.

    When the taxman asserts a deficiency, you don’t have to resign yourself to “be[ing] thankful [he] don’t take it all.”[1]  There is more that you can do before and after that point. Please let us know if we can help.

    Bryan Haynes, Christina Sava and Robert Claiborne are attorneys for the law firm Troutman Pepper Tobacco Practice.

    [1] The Beatles, “Taxman,” on Revolver (1966).

  • House of Cards

    House of Cards

    Credit: Nakul

    If you improve the way that you implement bad policies, you are still left with bad policies.

    By George Gay

    Yet another report has demonstrated that the quest to encourage cigarette smokers to switch to the consumption of less risky tobacco and nicotine products is being subsumed under what now seems to be seen as the loftier aim of counting how many anti-tobacco policies and strategies can dance on the head of a pin. Constantinople is under attack.

    The report, Operational Evaluation of Certain Components of FDA’s Tobacco Program, was drawn up by an Independent Expert Panel convened by the Reagan-Udall Foundation at the request, in July, of U.S. Food and Drug Administration Commissioner Robert Califf.

    I should point out, however, that the direction the report took was not due to some gratuitous decision on the part of those serving on the panel but was rather determined by the terms of reference they were given. According to the report, issued in December, the panel members were charged with conducting “an evaluation of the FDA Center for Tobacco Products (CTP) with the aim of addressing immediate issues and providing recommendations to position the center for greater success in the future.”

    But the key to the direction the panel took was provided in the following sentence. “This report focuses on operational issues; it does not address tobacco policy.”

    In other words (my words), the panel members were given the task of addressing the symptoms afflicting the CTP, not the causes of its malaise. Their task resembled that undertaken by engineers charged with halting or slowing the collapse of the Leaning Tower of Pisa. Theirs was not to ask whether the tottering tower was fit for purpose. Theirs was to underpin the edifice.

    Of course, there was a major difference between the engineers working beneath the tower and the academics working to prop up the CTP. The former had the joy of working on a beautiful, if foundationally flawed, Romanesque campanile that each year attracts countless tourists. All panel members had to work on, however, was the CTP edifice, whose superadditions rival those of a Gaudi building while lacking the charm or joie de vivre.

    But I have digressed and, in doing so, skipped over something mentioned above that might have puzzled—even angered—some readers. I can assure you, however, that I detected no implied irony in the statement that the aim of the report should be, in part, to provide “recommendations to position the center for greater success [my emphasis] in the future.”

    Indeed, the report says that, since its creation in 2009, the CTP has accomplished a great deal. “Between 2009 and 2022,” it says, “CTP published 16 proposed rules, 16 final rules, 35 draft guidances and 50 final Level 1 guidances.” And the report continues in that vein, listing such things as the number of applications the CTP has dealt with, the manufacturing and retail inspections it has carried out, the number of warning letters it has sent out and the amount of money it has collected from retailers in civil monetary penalties.

    There are two things that strike me about this. The first is that it seems as though the tasks listed as having been carried out are merely part of the job description and therefore hardly worthy of remark.

    The other point is more important, I think. There was no mention within the paragraph on CTP achievements as to how many smokers the center estimates it has encouraged to quit their habit or how many it has encouraged to move, either partially or wholly, to less risky tobacco and nicotine products.

    Credit: Postmodern Studio

    This is significant because the CTP’s stated mission is to protect people in the U.S. from tobacco-related disease and death, and you’re a million miles from the coalface of such an undertaking if you’re sitting in your office sending out warning letters to retailers. In fact, we seem to be talking mission impossible. “The lack of clarity about CTP’s direction, its priorities and its near-term and longer-term goals and objectives hinders CTP’s ability to effectively carry out its mission,” the report says.

    Indeed, far from mission-judged achievements, the report is clear that things are not going well. “Tobacco is the leading preventable cause of death in the U.S., with cigarette smoking accounting for more than 480,000 deaths annually, according to the Centers for Disease Control and Prevention (CDC),” the report says. “Despite efforts to curb tobacco use, the smoking epidemic continues to contribute to an enormous, avoidable public health catastrophe.”

    And the report then goes on to provide some statistics on smoking and vaping and their outcomes in respect of U.S. adults and young people. With the exception of the references to vaping, that same summation, including the huge death toll, could have been made before the formation of the CTP. It would seem that no progress has been made.

    On the other hand, the report seems very good given the limits of the panel’s mandate, which saw it address four CTP program areas: regulations and guidance, application review, compliance and enforcement, and communication with the public and other stakeholders. As far as I am able to judge and given the time restraints involved, the panel members seem to have consulted widely, summed up the situation well and presented a host of necessary recommendations to improve the performance of the CTP.

    I would worry, however, that in trying to implement the recommendations, the CTP would simply take on more work at a time when it is said to be overworked and almost overwhelmed to the point of being regularly reactive rather than proactive. Whereas the recommendations, if implemented, would no doubt be timesaving in the long run, it is difficult to see how the CTP can put those recommendations into place in the short term without additional resources, which we are told are in short supply.

    Surely, the only way out of this vicious circle is to go back to basics and trim the policies to the resources available. This would be no bad thing in any case. The level of complexity of the CTP’s proffered solution to the problem of tobacco consumption is out of all proportion to the problem, or how do we put it now? The “challenge,” or, more recently, the “solution opportunity.” Concentrating on operational aspects means that the CTP, having lost sight of its objectives, is going to redouble its efforts.

    While the panel was robust but diplomatic in its presentation, the report will not have made easy reading for those at the top of the CTP. Reading between the lines, I came away with the impression that the performance of the center has been unnecessarily bureaucratic, confused on the question of the interaction between science and policy, verging on the chaotic and, in large part, ineffective. But, in fairness, I must say that this was broadly my opinion before I read the report, so I cannot claim that my reading was impartial.

    In what I thought was the most important aspect of the report, the panel addressed the tricky issue of science and how it informs the CTP’s work. The report notes that some issues before the CTP were fundamental policy questions that had to be informed by science but were not, themselves, scientific issues. “Rather, they are policy issues with profound societal impacts,” the report said.

    And then it went on to make what is a vital point about an issue that, to my way of thinking, has tripped the CTP up on its mission path. One such question that scientific analysis alone would not resolve, the report said, was how to weigh the public health benefits achieved through smokers using electronic nicotine-delivery systems (ENDS) to completely quit smoking combustible tobacco products against the public health harms that might occur if young people used ENDS and thereby acquired a lifelong addiction to nicotine or proceeded to use combustible tobacco products,

    Again, in fairness, I don’t believe that all the problems that have beset the CTP since it was set up as part of the FDA following the passing in 2009 of the Tobacco Control Act can be laid solely at the door of the center. The decision to hand to the FDA responsibility for the oversight of products whose consumption was known to be risky was fraught, especially given the tendency of politicians to use tobacco as a way of burnishing their often tarnished credentials in the eyes of populations made up overwhelmingly of people who do not use tobacco products. Putting the boot into smokers is generally a vote winner.

    The CTP has been confronted, too, with legal challenges, but here it must be prepared to take a large part of the blame because important aspects of what it has done have been characterized by a lack of consistency. The report is awash with stakeholder comments about a lack of clarity, transparency and communication regarding its priorities and its decision-making processes.

    Application processes were said by stakeholders to be extremely cumbersome and time-consuming, with submission requirements vague, frequently changing and favoring established companies. Application reviews were said to be inefficient and unpredictable, which is unsurprising given that FDA employees described the past several years of application review programs as full of ad hoc troubleshooting and abrupt shifts in direction.

    What will have particularly exercised the minds of most of the readers of this magazine are those sections that deal with tobacco harm reduction issues, though much of what was said will have been widely known. At one point, the report notes that the agency announced its intention to apply a harm reduction strategy designed to move tobacco product consumers down the continuum of risk: switching from using combustible tobacco products to noncombustible products.

    “However, stakeholders observed the agency’s more recent marketing authorization decisions appear to reflect a policy shift—specifically a reluctance to authorize any … ENDS other than those that are tobacco flavored,” the report notes. “If such a policy shift occurred, the agency did not specifically announce it in a regulation or guidance, leaving stakeholders to glean it from documents posted on FDA’s website such as a Technical Project Lead (TPL) review of PMTAs [premarket tobacco product applications], MDOs [marketing denial orders] posted in abbreviated form, or from heavily redacted documents provided in response to Freedom of Information Act (FOIA) requests.”

    There are two main points in the report with which I would take issue. My main gripe concerns the following sentence. “Although CTP has a critical mission to protect the public health from tobacco-related disease and death and is regulating products that have no inherent benefit and huge societal costs, it is a government regulatory program with a duty to run efficiently, fairly and transparently.”

    “No inherent benefit”? Unless I am misunderstanding what is being said here, and I hope that is the case, I have to ask how such a distinguished panel can have arrived at this idea. How can the panel say that a product consumed by, we are told, more than 30 million people in the U.S., often at great financial sacrifice, has no inherent value? Is the panel saying that these people have no agency—are zombie consumers?

    The other issue has to do with enforcement of the various rules laid down by the CTP, which were seen by some CTP staff and stakeholders as being cumbersome. There seemed to be a suggestion that a task force should be formed of half a dozen or so agencies, including the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the Department of Homeland Security.

    Wouldn’t this be somewhat heavy handed? Whenever such issues arise, surely it is incumbent upon us to take a step back and ask, is enforcement really the problem? Is it time to increase penalties as some apparently suggest, or is it time to say that perhaps the rules are the problem? And, in this case, it seems to me that the rules are the problem, or rather that the problems arise because the rules are changed without warning and are therefore difficult to follow.

    Overall, given such circumstances, I cannot see how this report will help smokers, even indirectly. The problem lies in the CTP’s policies. If you improve the way that you implement bad policies, you are still left with bad policies.

  • Surfing while Juggling

    Surfing while Juggling

    Five types of innovation

    By Clive Bates

    Where does innovation in the tobacco and nicotine field come from? Is it the far-sighted senior executive assessing the needs of the evolving market and committing R&D budgets to realize the corporate vision? Or is it the genius scientists and engineers toiling 24/7 in the labs to invent the wonder product that will become The Next Big Thing?

    Both are caricatures, of course, but neither explains how innovation really works.

    In his brilliant book, How Innovation Works, author Matt Ridley points out that “Innovation is not an individual phenomenon but a collective, incremental and messy network phenomenon.” For those involved, I would say it is more like surfing while juggling than a straightforward path from idea to implementation. To see why, let’s look at five types of innovation in the tobacco and nicotine market.

    First, disruptive innovation. The most prominent recent case of disruptive innovation in the tobacco and nicotine field is the rise of electrical heating as an alternative to tobacco combustion to create an inhalable nicotine-bearing aerosol. Though the Chinese inventor Hon Lik is usually credited with inventing the e-cigarette, the truly disruptive innovation came before and from outside the tobacco and nicotine industry. It is what makes the e-cigarette and modern heated-tobacco products possible. The critical disruptive innovation was the lithium-ion battery. By the 2000s, battery technology had steadily progressed to achieve a sufficiently high power and energy density, allowing rapid heating and an adequately long life between recharges within a compact form factor. Developments in battery technology were driven by the demands of the giant and ultra-competitive markets for mobile devices like smartphones and tablets.

    For decades, the intense heat, complex reactions and chemical cocktail generated by the combustion of tobacco leaf at 900 degrees Celsius in the burning coal of a cigarette were unmatched and unmatchable as a means of delivering nicotine to the lungs. The combination of electrically heated coil and e-liquid to generate an aerosol is now competitive. The disruption of the dominance of the cigarette, currently underway and likely to last two decades to three decades, is driven by a fundamental energy transition that degrades the advantage of combustion.

    I refer to the second type as system innovation. This is the consequential economic, regulatory and public health reaction to the initial disruption and may involve hundreds of innovative responses. For example, the emergence of e-cigarettes triggered a creative response in the Stop Smoking Service in the city of Leicester, U.K. Under the leadership of its manager, Louise Ross, the service changed its practice to embrace vaping as a low-risk alternative to smoking that could appeal to many smokers who had previously been beyond the service’s reach. Through the power of example, that experience led to further innovation at the National Centre for Smoking Cessation and Training and with the government’s support to guidance on e-cigarettes issued by the National Health Service.

    But this innovation did not happen linearly, driven only by personal inspiration. It is best seen as “emergent,” arising from a wide range of concurrent changes and influences triggered within the public health ecosystem. The disruptive innovation also led to system innovations in regulation, such as the 2014 European Union Tobacco Products Directive. In 2016, the U.S. Food and Drug Administration’s deeming rule brought vaping products into the definition of tobacco products and under the jurisdiction of the Tobacco Control Act. The initial disruptive innovation also led to innovation in the business models of tobacco companies, but also in the tactics of their traditional adversaries. Tobacco companies started moving their business toward a future in noncombustible nicotine products, and the anti-tobacco groups shifted their focus from preventing disease to fighting nicotine addiction.

    For tobacco and nicotine companies, the disruptive innovation and the system responses it triggers are like a “big wave,” both prized and feared by top surfers. Like a wave, the companies didn’t create it and can’t control it, but their challenge is to catch it, ride it well and not wipe out. The case of Kodak and its destruction under the breaking wave of digital photography is probably the most cited case of an innovation wipeout. But it doesn’t have to be a technology shift. In the 1970s, deregulation in the aviation sector enabled the emergence of the innovative low-cost airline business model. It wasn’t long before major airline incumbents were going under as that big wave gathered pace.

    The disruptive and systems innovations generate a changing paradigm: a big wave of opportunity or destruction that businesses must learn to surf. But why does innovation feel like juggling while surfing? The juggling reflects the frenetic activity of keeping a company moving, in financial balance and ahead of its rivals while it navigates a radically changing context. This brings us to three further types of innovation: the innovation occurring within the changing paradigm.

    So, the third type of innovation is evolutionary. It resembles the Darwinist process of evolution in nature. Here, the consumer provides what evolutionary biologists call selection pressure, and innovation emerges from incremental improvement through trial and error, mirroring what biologists recognize as mutation and natural selection. It will usually be incremental, but its impact will not always be gradual. Evolutionary innovation can make radical inroads into a market by solving a particular problem or exploiting an opportunity.

    A good example is pod-based vaping products using nicotine salts. Salts change how nicotine is absorbed in the airways and allow users to consume smaller volumes of higher strength liquids. The effect of the salts is to allow high-strength nicotine liquids to be used without undue harshness with a smaller battery and tank, enabling a compact and convenient device. This addressed the challenge of providing a convenient and discreet product with effective nicotine delivery. It was wildly successful—at least where regulators allowed it.

    I have seen much handwringing about the recent rise of disposable vaping products. But this is another case of evolutionary innovation. The disposables solve the problem of finding a quick and convenient way into vaping for smokers in the early or tentative stages of switching away from smoking. They are simple to use, low cost and convenient. They don’t require an upfront investment in a device, so they lower the cost of consumer trial and experimentation. Like many innovations, these products have downsides, such as the waste generated. But this is manageable and must be set against the potential benefits and in context with other waste material flows.

    The fourth type of innovation is adaptive. This is a variation of evolutionary innovation, but it arises in response to regulation. Ultimately, it is driven by meeting consumer preferences, but it is triggered by regulatory interventions that would otherwise compromise the consumer experience—ether by design or as an unintended consequence. One example is the mentholation cards that emerged after the European Union ban on menthol-flavored cigarettes. These are inserted into cigarette packs to infuse nonmenthol cigarettes with menthol flavor. Another case is the “shortfill” e-liquid containers that became popular as a workaround to overcome the European Union ban on e-liquid containers of more than 10 mL volume. Much larger containers of nicotine-free vaping liquid are sold only partially filled, allowing the nicotine to be added later—often from nicotine liquids stronger than permitted in the EU.

    As the FDA imposed ever more burdensome regulation on nicotine vapes, small companies introduced synthetic nicotine products because the law confined FDA jurisdiction to nicotine derived from tobacco. This example also illustrates the arms race fought between adaptive innovators and responsive regulators. By March 2022, the FDA had prompted Congress to amend the Tobacco Control Act to apply to nicotine derived from any source, not just tobacco. Adaptive innovations can come with novel risks. For example, regulated bans on flavored e-liquids may lead to consumers adding food or aromatherapy flavoring agents not necessarily intended for vaping.

    The fifth type of innovation is user-driven. The early vaping enthusiasts were hybrid producer-consumers, interacting on user forums with a strong problem-solving ethos and a hands-on approach to product design and construction. Users created innovations like “squonkers” or “squonk mods” to facilitate dripping, a niche style of vaping, by incorporating a flexible liquid bottle into the design of the vaping device. But the most impressive innovations from the user side have been social and community in nature. The vaping forums and vape meets created an elaborate technical and moral support infrastructure. This online community blossomed into vape shops as centers of expertise, personalization and encouragement. The vape shops are now de facto cutting-edge stop-smoking services but with a very different offer to the more clinical settings of traditional services. Even the biggest corporate beasts benefit and learn from user innovation. They should take care not to crush it.

    Innovation is a fluid and dynamic business phenomenon with many simultaneously moving parts embedded in an unpredictably evolving, threatening or promising context. Surfing while juggling is hard and risky, but it is no longer a choice in the tobacco and nicotine business.

  • Look Back: Vapor in 2022

    Look Back: Vapor in 2022

    It was more adversity for the vapor industry as many companies are still waiting on PMTA results.

    By VV Staff

    The year 2022 was tough on the vaping industry. While several countries banned or began heavily regulating vaping products, the United States banning most premarket tobacco product applications (PMTAs) probably had the greatest impact on the industry. Industry analysts estimate that 50 percent to 60 percent of vaping-related businesses in the U.S. had closed by late 2022 after the Food and Drug Administration began issuing mass marketing denial orders (MDOs) for nearly all the 6.5 million PMTAs submitted by 500 companies in 2021.

    Companies had until May 14 to submit a PMTA to the FDA to keep their synthetic nicotine products on the market. Companies that failed to secure authorization were supposed to pull their products from the market by July 13. However, the regulatory agency has been using some discretion in its enforcement of synthetic nicotine products as it continues to review both tobacco and nontobacco PMTAs.

    One of the biggest stories of the year is the rise of R.J. Reynolds Vapor Co.’s Vuse e-cigarettes, which took over as U.S. market leader from Juul in 2022. Juul’s fall came after the FDA issued an MDO for Juul Labs’ PMTAs on June 23. On July 5, the FDA stayed the MDO, announcing that it would review the decision after determining “there are scientific issues unique to this application that warrant additional review.” By October, Vuse had expanded its market share lead over Juul to 12 percent in the Nielsen analysis of convenience store data.

    January

    Credit: Selen Geren

    Thirty U.S. states plus the District of Columbia kick off the new year on Jan. 1 with taxes on vaping products. Filipino vapers appeal to Duterte to sign a bill that would legalize vaping. The U.S. Congress begins review the Clarifying Authority Over Nicotine Act of 2021—a bipartisan bill designed to give the FDA the authority to regulate synthetic nicotine products just as it regulates nicotine products made or derived from tobacco. South Africa begins considering taxes on hardware and e-liquids, with high-nicotine products getting higher rates. Malaysia postpones implementing a tax that would have more than doubled the retail prices of e-liquid bottles for open systems. FEELM Air launches in the U.K.

    February

    Credit: Timon

    Triton Distribution makes opening arguments in its battle with the FDA over how the regulatory agency conducted its PMTA reviews. A court of appeals stays Bidi Vapor’s MDO. Judges grant stays to Diamond Vapor, Johnny Copper and Vapor Unlimited in MDO lawsuits. The U.S. Senate confirms FDA Commissioner Robert Califf. Philip Morris International announces its plans to bypass an import ban by manufacturing IQOS in U.S. The FDA posts its first warning letter for vaping hardware products. The letter is issued to China-based Sigelei Vapor for two coil brands. The U.S. International Trade Commission (ITC) issues a general exclusion order that bans the importation of any unauthorized cartridges compatible with the Juul vaping system that infringe Juul Labs’ patents. The FDA submits its proposal to ban menthol to the Office of Management and Budget for review.

    March

    Credit: V. Chalup

    The Swedish government proposes a ban on nontobacco-flavored vaping devices, including menthol. The National Youth Tobacco Survey (NYTS) 2021 finds youth cigarette smoking rates in the U.S. at historically low levels, with just 1.9 percent of high school students reporting current use of cigarettes. U.S. President Joe Biden signs a bill giving the FDA power over synthetic nicotine. Companies have 60 days to file PMTAs. China announces e-cigarette regulations, including flavor bans and compliance of all products produced for export with the regulations and laws in the destination country. If a country does not regulate e-cigarettes, China’s rules for vaping products would apply to those exports, including bans on flavors and synthetic nicotine. Myth of a gateway from vaping to smoking is debunked … again. FDA issues marketing orders to eight Logic brand vaping products.

    April

    Credit: Jarretera

    Mitch Zeller retires as director of the FDA’s Center for Tobacco Products (CTP). Vuse surpassed Juul to become the No. 1 e-cigarette brand in the U.S., according to Nielsen. Smoore International, the largest vaping company in the world, reports 2021 annual revenue of $2.16 billion. Canada proposes the first federal nicotine-only vape tax. China releases its rules listing the requirements for design, chemical compounds and the mechanics for manufacturing e-cigarettes. New York Stock Exchange rules force RLX Technology co-founder Kate Wang to resign from RLX committees. Fontem Ventures, a subsidiary of Imperial Brands, receives an MDO for its MyBlu products. Judge orders the FDA to give PMTA updates every 90 days for products with at least a 2 percent market share. Juul begins settling marketing lawsuits with several states. Hong Kong’s ban on vaping products makes it illegal to use or carry an activated vaping device in no-smoking areas. The FDA publishes rules for the menthol ban. Several Njoy vaping products receive marketing orders.

    May

    For the first time, the FDA issues warning letters for marketing products containing delta-8 THC. Several R.J. Reynolds Vapor Co. Vuse branded e-cigarette products receive marketing orders, including six new tobacco products, through the PMTA pathway. The San Diego City Council passes an ordinance for the second time banning vape flavors, and it’s effective Jan. 1, 2023. In its first status report, the FDA states that it expects to have resolved 63 percent of PMTAs set out in its original priority by June 30. Altria Client Services pays $100.5 million for assets and properties used in Poda Holdings’ business of developing, manufacturing and marketing multi-substrate heated capsule technology. FEELM wins four Red Dot Awards, an international competition for product, communication and concept design. Longtime Centers for Disease Control and Prevention alumnus Brian King succeeds Mitch Zeller at the FDA’s Center for Tobacco Products (CTP).

    June

    Credit: Premium Collection

    Mexico bans all vaping and heated-tobacco products. Mexican President Andres Manuel Lopez Obrador signs a decree that outlaws the sale of e-cigarettes in line with continuing the government’s ongoing anti-vaping policy. Heated-tobacco products are not exempt from the ban as previously reported that they would. Njoy Daily disposables get marketing orders; however, the FDA issued MDOs to Njoy for multiple other flavored Daily e-cigarette products. A study finds e-cigarette or vaping product use-associated lung injury (EVALI) and Covid-19 boosted misinformation on vaping. A federal court jury finds R.J. Reynolds’ Vuse Solo and Alto devices infringe two Philip Morris patents. Zinwi is among the first to get a green light to produce e-liquids under China’s new regulatory framework. Juul receives an MDO, which is subsequently stayed in court. The FDA places Juul’s application back under review. EU lawmakers propose a flavor ban for heated-tobacco products.

    July

    PMI opens its flagship IQOS store in South Africa. Confronted with rising prices for batteries, engineers in Ukraine begin using power cells from vapes to power drones. A U.S. administrative tribunal invalidates two claims in an R.J. Reynolds vaping patent. Panama bans the sale and import of vapes, joining more than a dozen Latin American and Caribbean countries with such restrictions. Brazil also maintains its ban on vaping products. The FDA issues first warning letters for synthetic products. Juul Labs begins exploring financing options to avoid bankruptcy. Juul quarterly revenues drop 23 percent. FDA Commissioner Robert Califf says the nonprofit Reagan-Udall Foundation—a nongovernmental research group created by Congress to support the FDA’s work—will convene experts to evaluate the CTP within 60 business days. Matt Holman, the director of the CTP’s Office of Science, announces he is stepping down. Altria reduces the value of its investment in Juul Labs to $1.3 billion, a nearly 70 percent loss of its original $12.8 billion evaluation. The Philippine president allows a bill that legalizes e-cigarettes to lapse into law.

    August

    Credit: Savvapanf Photo

    CTP Director Brian King states that the agency is “making significant progress” in reviewing synthetic nicotine applications. Chinese car maker BYD gets a vape production permit and its stock price soars. Monroe County becomes the first in New York state to accept e-cigarettes and e-liquids for safe disposal. VPR Brands receives an FDA warning letter for its nicotine gummies. FEELM, one of the largest and most influential e-cigarette brands, earns its production license in China. The U.S. Court of Appeals for the Eleventh Circuit grants petitions for review filed by Bidi Vapor, Diamond Vapor and four other companies challenging the FDA’s rejection of their e-cigarette applications in a 2-1 decision. Great Britain reports record levels of vaping in a report that found 2.4 million vapers are ex-smokers. Vuse’s market grows from 37.4 percent to 39 percent, with Juul declining from 30.7 percent to 29.4 percent. A U.S. appeals court denies a petition to review the FDA’s marketing denial order to Illinois-based e-liquid manufacturer Gripum.

    September

    Credit: Kristina Blokhin

    Juul Labs agrees to pay nearly $440 million to settle a two-year investigation by 33 U.S. states into the marketing of its vaping products, which critics have blamed for sparking a surge in underage vaping. A jury in the U.S. District Court for the Middle District of North Carolina awards Altria Client Services more than $95 million after finding that Reynolds Vapor Co.’s Vuse Alto e-vapor product infringes three Altria patents. The FDA states it sent more than 44 warning letters to manufacturers and over 300 warning letters to retailers for violations relating to nontobacco nicotine. Alaska’s governor vetoes an age-to-vape bill because it also included the implementation of a tax on e-cigarettes. Nicaragua bans the import of e-cigarette products. Altria Group exercises its option to be released from its noncompete deal with Juul Labs. Maine backs out of a Juul settlement claiming it would cancel out school district suits.

    October

    Credit: Charlottes Web

    The Colorado Supreme Court rules that the Colorado attorney general’s office’s lawsuit against electronic cigarette manufacturer Juul Labs cannot include four of the company’s executives. The FDA announces that as of Oct. 7, it has issued refuse to accept (RTA) letters for more than 889,000 synthetic nicotine product applications that did not meet the criteria for acceptance. Magellan CEO Jon Glauser says the FDA acknowledged in writing that it had “erred in failing to inform the company” about its MDOs before announcing the move publicly. An analysis suggests that over 90 percent of FDA warning letters were sent to small online retailers. For the first time, the U.S. Department of Justice files requests for permanent injunctions in federal district courts against six e-cigarette manufacturers on behalf of the FDA. Charlotte’s Web signs the first CBD licensing deal with Major League Baseball. A health regulatory body for Mexico’s government says its scientists have developed a new methodology to analyze the aerosols in electronic nicotine-delivery systems because “no one else has come up with one.” PMI reaches a deal with Altria Group to pay nearly $2.7 billion for exclusive U.S. commercialization rights to IQOS. FDA staff comments for the Reagan-Udall assessment of the performance of the CTP suggest the regulatory agency is in a state of disarray and being influenced by outside forces not scientific research. The FDA issues its first menthol MDOs for the Logic Pro Menthol E-Liquid Package and the Logic Power Menthol E-Liquid Package.

    November

    Credit: Vege Fox

    China’s Ministry of Finance imposes a consumption tax on e-cigarettes sold in China from Nov. 1. China bans celebrities from endorsing vaping products. Logic is granted a temporary stay of the FDA’s menthol MDO. The EU publishes a directive officially banning flavors in heated-tobacco products throughout the union. Magellan sues the FDA and the U.S. Department of Health and Human Services, claiming the agencies violated the Administrative Procedure Act in the PMTA reviews. Maryland and Missouri become the 20th and 21st states to legalize marijuana for adult recreational use, but cannabis reform efforts meet defeat in Arkansas, North Dakota and South Dakota. Vuse’s market share rises from 40 percent in the previous report to 40.4 percent compared with Juul declining from 28 percent to 27.6 percent in Nielson’s four-week period ending Nov. 5. The European Union proposes a bloc-wide vaping tax policy as part of a shake-up of levies on the tobacco industry.

    December

    Credit: Sharaf Maksumov

    Macau’s blanket ban on vaping products goes into effect. The rules prevent people from carrying e-cigarettes across the border with fines up to mop20,000 ($2,505). The Netherlands bans all e-cigarette flavors except tobacco effective Oct. 1, 2023. U.S. President Joe Biden officially signs the first piece of standalone federal cannabis reform. The Marijuana and Cannabidiol Research Expansion Act is aimed at providing federal support to facilitate research of cannabis and its potential health benefits. Juul Labs settles more than 5,000 lawsuits covering more than 10,000 individual plaintiffs. Financial terms of the deal were not disclosed. Costa Rica for the first time gives a company authorization to grow and process hemp. Canada’s Minister of Mental Health and Addictions and Associate Minister of Health released a report finding that vaping products offer the 3.8 million Canadians who smoke a less harmful source of nicotine than tobacco products, and do help people to stop smoking. The Reagan-Udall Foundation submitted its recommendations to the commissioner of the FDA. The report concludes that vaping industry stakeholders observed a lack of “consistent implementation” of what the industry understood to be the policies of the Center for Tobacco Products (CTP), particularly with respect to tobacco harm reduction and the requirements needed to navigate the PMTA process. A separate investigation, conducted by the U.S. Office of Special Counsel (OSC) after a whistleblower complaint, found the CTP had relaxed its standards of review for certain tobacco products and stifled attempts by its scientists to raise concerns.

    Looking ahead

    It’s impossible to predict what the vaping industry will look like by the end of 2023. The U.S. will probably see a decline in product variety because the FDA is unlikely to approve many devices. However, globally, especially in the EU and the U.K., the industry should continue to thrive and expand, according to industry analysts. More importantly, innovation should continue to thrive outside the U.S.

    Gregory Conley, director of legislative and external affairs for the American Vapor Manufacturers Association, said the global fight for fair and sensible regulation of vaping products will continue throughout 2023. “Regrettably, just like years prior, some battles will be lost, and the end result will be fewer adults who smoke fully switching to vaping,” he said. “However, the silver lining is that—as we see today in Australia and Thailand—even prohibitions with criminal sanctions are not enough to stop illicit markets from popping up. This industry will never be able to stop every attempt at prohibition, but it can continue to document and expose how black markets follow whenever these bans are implemented.”

    On the U.S. state level, Conley said his major concern is PMTA registry bills being put forth by the tobacco industry. He explained that these bills would devastate law-abiding vape shops and smoke shops by banning any vaping product that does not have a PMTA granted or explicit enforcement discretion from the FDA. “This means that synthetic nicotine, nicotine-free [products] and CBD/delta products would all become illegal to sell,” said Conley.

    Nationally in the U.S., Conley said the FDA’s policy on vaping products in 2023 is likely to still be characterized by regulatory paralysis and the eternal search for the least politically controversial regulatory option. “Despite declines in youth vaping and the admonishment of federal judges, leadership at FDA remains steadfastly committed to having more combustible cigarettes on the market than vaping products,” he said. “On the plus side, the pace of FDA review has been slow to say the least, so we won’t hear rulings on many applications until 2024 or later.”

  • Innovation Inside

    Innovation Inside

    Smoore is the manufacturer of several vaping products that have survived strict government scrutiny.

    By Timothy S. Donahue

    The U.S. premarket tobacco product application (PMTA) process is one of the world’s most rigorous regulatory pathways to market for nicotine products. Out of nearly 7 million applications, only 23 e-cigarette-style products have been approved for marketing by the Food and Drug Administration. Most of the approved products have been manufactured by a single company.

    Smoore International Holdings, through its subsidiary, Shenzhen Smoore Technology, manufactures the Njoy Ace, Njoy Daily, Logic Power and Logic Pro devices. The Njoy Ace is the most technologically advanced vaping product to receive marketing approval in the U.S. It is the first e-cigarette authorized by the FDA that is equipped with ceramic coils that are manufactured by FEELM, the atomization brand owned by Smoore Technology. The Ace marketing orders mark the first approval by the FDA of a pod-style vaping product.

    Garnering the marketing orders required plenty of forethought and investment from Smoore. Based on PMTA requirements, Smoore established a comprehensive analytical testing and safety assessment system, including the vaping industry’s first corporate toxicology laboratory, which explores the health impacts of exposure to e-cigarette vapor by means of cytotoxicity tests. These test the reaction of living cells to different components of e-cigarette vapor. The company has also developed the third generation of in-house safety standards, Smoore 3.0, which covers all of the necessary PMTA tests, including testing for harmful and potentially harmful constituents.

    In a conversation with Tobacco Reporter, FEELM Marketing Director Sofia Luo attributed the success of Smoore products in the regulatory process to the company’s detailed and lengthy research and development process, which includes a rigorous testing and safety assessment system.

    “FEELM ceramic coils have more than seven years of research and development. It is the first black ceramic atomization coil that presents high harm reduction performance in the electronic atomization industry. It provides more flavor than a cotton coil,” Luo said. “’FEELM Inside’s technology has also been upgraded and optimized continuously since its debut. We believe that only innovation from bottom to top can lead to industry breakthroughs and allow us to provide outstanding products for our clients.”

    Because of their innovative atomization technology, FEELM coils significantly increase Smoore clients’ chances of garnering an FDA marketing order and meeting China’s e-cigarette standard. Currently, the top four Chinese e-cigarette brands with the highest production quotas (amounting to 80 percent of the total) are partnered with the FEELM brand.

    A quality coil is a much-needed component for generating flavor in vaping products. Looking at the current regulatory landscape, tobacco will likely remain the dominating flavor in both the U.S and China. Tobacco taste-only policies could also impact other regions. According to Luo, Smoore has upgraded its ceramic coils, which can be specifically tailored toward tobacco flavors.

    “To comply with the Chinese national standard for e-cigs released this year, domestic brands use materials directly extracted from tobacco for e-liquid production, making it harder for coil manufacturers to produce a suitable device,” explains Luo. “We developed a comprehensive technology solution [that helps Smoore’s] Chinese and overseas clients to study [and develop new innovations] and produce better e-cigarette products. This continuous innovation is the foundation for the advancement of Smoore and the rapid development of the e-cigarette industry.”

    Innovation is important for the industry. Smoore has been a frontrunner in innovation and has applied for 4,300 global patents. The company must also be diligent in protecting its intellectual property. Last October, Smoore filed a complaint under the U.S. Tariff Act accusing 38 American and Canadian companies and individuals of infringing on three of its patents and one of its trademarks. As of April 20, 17 of the 38 defendant companies had signed consent letters or settlement agreements.

    To stay ahead in innovation, Smoore has recruited over 1,500 R&D experts, accounting for more than 40 percent of its total staff. The company has applied for more than 500 vaping-related heating patents. Recently, Smoore launched the FEELM Max, the world’s first ceramic coil disposable pod solution. The ceramic coil allows for a higher level of safety and harm reduction compared to previous devices.

    Smoore presented its FEELM Max disposable technology solution at the Indonesia Electronic Atomization Exhibition (IECIE 2022), which took place at the Jakarta International Convention and Exhibition Center in late October. Speaking at the exhibition, Smoore Vice President Clayton Shen highlighted the importance of technological innovation in driving progress in the vaping industry.

    During his presentation, Shen explained that the closed system is the fastest-growing category in the next-generation tobacco market and will claim a significant market share over time. According to Smoore, ceramic coils solve longstanding coil challenges such as leaking liquid and a burnt taste. FEELM’s ceramic coils, said Shen, are used by many of the leading vapor product manufacturers, such as Relx and Njoy.

    Founded in 2009, Smoore was one of the first companies to join the e-cigarette industry and later became China’s first billion-dollar vapor company. Smoore International Holdings, parent to Shenzhen Smoore Technology, is also the first vapor company to be listed on the Stock Exchange of Hong Kong. Globally, Smoore is considered one of the most valuable vapor industry manufacturers. According to Frost and Sullivan, Smoore is No. 1 in the global vaping device market with a 22.8 percent market share in 2021.

    Smoore is parent to Vaporesso and FEELM, two vaping brands that have gained global recognition for their innovative products. Vaporesso is an open system product brand created in 2015 and is “dedicated to establishing a smoke-free world while raising the quality of life for its users,” according to Luo. “Based on its continuous innovation, strict quality control and substantial commitment, Vaporesso creates products that can fit all levels and styles of vapers.”

    FEELM is a closed system technology brand that has been devoted to providing comprehensive atomization technology for global tobacco giants and independent e-cigarette brands, according to Luo, adding that FEELM manufactures FEELM Inside and FEELM Air, the latest in closed pod systems, and FEELM Max, a disposable system.

     “This year, FEELM has started to bring the advanced technology of ceramic coils to the field of disposable vapes, hoping to bring our consumers of disposable products the same atomizing experiences as a closed pod system. Compared to other disposable products, FEELM presents a better performance on safety and harm reduction,” Luo said. “Developing and upgrading atomization technology to better optimize the user experience has been a goal, and we wanted to support our clients in launching disposable vapes with ceramic coils in the global market rapidly. This has provided end consumers with more choices.”

    When Smoore International announced its financial results for 2021, it reported annual revenues of rmb13.75 billion ($2.16 billion), representing a year-on-year increase of approximately 37.4 percent. The company credited its FEELM brand and its innovative vaping solutions for its growing success. “The driving force of the atomization industry is technological innovations, which brings fundamental breakthroughs in product safety and flavor reproduction,” said Smoore board chairman Chen Zhiping at the time.

    In its effort to provide consumers more choices in harm reduction products, Smoore has now launched Metex, its heat-not-burn division. The company’s goal is to create a new heating technology R&D platform “that connects the present and the future, balancing the beauty of technology and life,” according to the Metex website. Metex aims to provide its business partners with one-stop supply chain solutions, from core heating technology research to product development and final production.

    While Smoore began as an e-cigarette company, the company increasingly views itself as a technology company. Recently, it changed its email address from @smoorecig to @smooretech to better reflect the company’s growing goals. Luo said that changing the email suffix was a way to “better convey our technology” concept to the public, and at least 10 percent of the company’s profits every year are reinvested into its science and technology components, including Smoore’s 14 research institutes that the company has established around the world.

    Smoore is growing rapidly. The company expects the e-cigarette market to continue growing at a significant stride over the next five years. Industry experts say product innovation, too, is going to continue at a rapid pace. Luo said that smoking alternatives are becoming increasingly popular worldwide as more consumers and governments realize the significance of e-cigarettes in supporting harm reduction. Improvements in the manufacturing process, she says, will help increase the options for consumers, and manufacturers will inevitably move from semiautomated production lines toward fully automated production lines.

    “Regarding the technical development in the overall e-cigarette market, we believe that improving safety, taste optimization and improving the efficiency of nicotine delivery are the major trends in the future. We also are conducting in-depth research on these important technologies internally,” Luo said. “As for the device development trend, we believe that consumers prefer to purchase environmentally friendly and carbon-reducing products as we move toward the future. Consumers need more diversified choices.”

    Smoore’s new FEELM Max disposable pod line includes products featuring concepts that help minimize environmental concerns, according to the company. FEELM also published its Carbon Neutral Plan, and the company is committed to implementing increasingly high sustainability standards into its business strategy. “We are moving toward carbon neutrality,” Luo said. “It’s part of [our] strategic plan moving forward.”

    With atomization technology being the foundation for Smoore, the company is looking toward more diversification over the next five years and growing outside the vaping industry. Luo said that the company is increasing its research and development investments for atomization improvements in the medical and beauty/cosmetics industries, for example.

    “In addition to vaping products, Smoore is committed to integrating atomization technology into more industries, distributing these technologies to other industries,” Luo said. “Our medical atomization and beauty atomization products are now being tested. After their launch, they will broaden the business categories of Smoore and increase the scope of our clients. We are very excited about enhancing our future development through multiple driving incentives and wider roads. And we firmly believe that atomization makes life better.”

  • Into Indonesia

    Into Indonesia

    Credit: Daxiao Production

    Chinese e-cigarette manufacturers are expanding into Indonesia to better serve markets.

    By Yutong Song and Alan Zhao

    China’s rules for the vaping industry are stringent. They do, however, allow leniency for most exports. There is one rule, though, that can make shipping product to some countries nearly impossible: China’s regulations state that all products produced for export must comply with the regulations and laws in the destination country, according to 2FIRSTS, a vaping industry vertical media firm. If a country does not regulate e-cigarettes, China’s rules for vaping products would apply to those exports, including bans on flavors and synthetic nicotine.

    To better serve countries that have not yet created regulations for electronic nicotine-delivery system products, manufacturers are opening factories outside of China. Many of those companies are moving into Indonesia where there are more than 70 million combustible cigarette smokers. The preference of Chinese manufacturers for Indonesia is also evident from a set of recent news headlines:

    • “Jinjia Group’s manufacturing base in Indonesia to provide integrated e-cigarette services.”
    • “Smoore Technology Indonesia (STI), a subsidiary of one of the largest e-cigarette manufacturers, has invested $80 million to establish e-cigarette factories in Indonesia.”
    • “The Indonesian factory of Zhijing Precision, an e-cigarette assembly supplier, is to be operational by 2022.”

    The cost factors, such as land and labor, make Indonesia the first choice for e-cigarette companies setting up abroad, but the country has more to offer. Garindra Kartasasmita, secretary general of the Indonesian Vapor Entrepreneurs Association, mentioned in his keynote speech at the IECIE Vape Show that the Indonesian vaping market has been growing since 2013, with an annual rate of 50 percent except for the year 2021, when it shrank by 7 percent due to the Covid-19 pandemic. It is expected to rebound to 50 percent growth in 2022.

    Integration of Production and Sales

    Indonesia is ripe for helping to grow vaping businesses and boost the harm reduction potential of vaping products. One major advantage of moving e-cigarette production into Indonesia is the ease of integration and sales offered by the country’s large population. With 280 million people, Indonesia is the world’s fourth most populous country, accounting for 40 percent of all people in Southeast Asia. Moreover, Indonesia has 70.2 million smokers, which translates into a smoking rate of 34 percent.

    The presence of so many nicotine consumers means e-cigarettes produced in Indonesia could also be sold domestically. Indonesia’s regulatory environment is conducive to the marketing of nicotine products that present lower risks than combustible cigarettes. Indonesia is the only country in Southeast Asia that allows tobacco advertising on television and in the media. It also has a place for e-cigarette bloggers and cross-category blogging, such as beauty and skin care. Indonesia has the second-highest number of posts on Instagram sharing vaping and related devices among all countries.

    E-cigarette brands can be imported and sold in Indonesia only if they are recommended by the country’s National Agency of Drug and Food Control (part of the Ministry of Health) and the Ministry of Industry. Additionally, the products must be certified by the Indonesian National Standard. The policies are a positive for Chinese e-cigarette manufacturers.

    Commenting on Smoore’s plant in Indonesia, Bahlil Lahadalia, Indonesia’s investment minister and director of the Investment Coordinating Board, publicly stated, “We need cooperation, we need jobs, we need opportunities that will make our brothers owners of our country.” And Clayton Shen, president of Smoore Indonesia, expressed his gratitude for the support of the Indonesian government, including the tariff-free incentives granted by the Ministry of Investment for the company’s much-needed machinery that needed to be imported.

    Challenges Ahead

    There are some challenges in the Indonesian market, however. Although the Indonesian market represents a large pie for Chinese manufacturers, it is not easy to navigate the market. A well-known Chinese e-cigarette manufacturer intending to build a factory in Indonesia revealed to 2FIRSTS that logistics is a problem for manufacturers, and currently no good solution is available.

    For example, if the end products are filled and assembled in China and then sent to Indonesia, the amount of time the products could be held at customs is unpredictable. “I had a batch of goods that arrived at customs the end of last month, but they are still in customs as of the 20th of this month,” the manufacturer said. “If it was assembled in Indonesia and sent from the Indonesian factory, the time difference in delivery is not much different from if it were delivered from China.”

    There is also a lack of e-cigarette machinery. Another vaping product manufacturer told 2FIRSTS that “there’s a critical lack of tools and machinery to keep pace with the production lines. Should factories be built here, machinery must be transported from China, which is a critical problem to tackle. It’s a misconception that the only shortage we would face is raw materials.”

    Credit: Donvictori0

    There is also a “workers’ gap” that can often create staff training and production concerns. In addition to overcoming cultural and geographical challenges when training local workers, it’s difficult to have the workers adapt to the Chinese style of work, which is very dedicated and focused on teamwork. An insider told 2FIRSTS that some workers have a “casual attitude to being late.” He said that he had to create numerous incentives to discourage employees from being late for work and/or going home early. “This is very different from the Chinese work habits,” he said.

    Migration or Spillover

    Shenzhen is considered the vaping capital of the world. Located just north of Hong Kong, the city designs and manufactures an estimated 90 percent of the world’s vaping and e-cigarette devices. There are more than 1,000 factories and thousands of support companies that form the supply chain throughout Guangdong Province and the rest of China.

    A joint report from the E-Cigarette Professional Committee of the China Electronics Chamber of Commerce and 2FIRSTS anticipates the global e-cigarette market to grow by 35 percent in 2022. The total market is expected to exceed $108 billion. In 2021, China’s total e-cigarette exports were $19.8 billion and were expected to reach $26.7 billion in 2022. The expansion of China’s e-cigarette industry from Shenzhen to Indonesia can more accurately be described as “spillover” rather than “migration.”

    Just because Shenzhen’s e-cigarette manufacturing hub status is unshakable in the short term does not mean that the global manufacturing layout is cast in stone. In fact, over the past five years, the country’s e-cigarette industry has spilled from the city into China’s Greater Bay Area. We have seen spillover from Shajing of the Bao’an District of Shenzhen to the Dongguan area and in between.

    This spillover has not affected the development of China’s electronic cigarette industry, however. During the same time, there was also a period of rapid industrial growth and improvements on the supply chain side of the industry.

    In a recent interview, 2FIRSTS co-founder and Chief Operating Officer Echo Guo said that years of development not only granted the Bao’an District of Shenzhen a number of e-cigarette enterprises but also brought together supporting supply chains, including industrial design, molds, batteries and other essential needs for manufacturing vaping products. “Here to there is a ‘two-hour traffic circle’ within the whole e-cigarette industry, with all of its subbranches cooperating closely,” said Guo. “Even when the manufacturers and customers exchange new ideas, it would take less than two hours to get a prototype ready.”

    The spillover of China’s e-cigarette industry to Indonesia can also be seen as the absorption and utilization of manufacturing resources by China’s e-cigarette industry, which has broken the boundary of China’s Greater Bay Area and extended to a broader region of the Asia-Pacific. The entire region will now have the opportunity to create greater economic success through the growth of the e-cigarette and vaping industry.