Tobacco stocks rose in the wake of Donald Trump’s victory in the U.S. presidential election, reports The Wall Street Journal.
BAT stocks were up 4 percent this morning; its Reynolds American subsidiary was a large donor to the Make America Great Again action committee, which supported the former president’s bid for reelection. Reynolds has been pushing back against the Biden administration’s proposed menthol ban, which was delayed earlier this year. Under another Trump administration, it is likely that a menthol ban would be completely dismantled.
BAT, Altria and Imperial Brands all have sizable U.S. menthol businesses as the products make up more than a third of the U.S. cigarette market by volume.
Another Trump administration may also lead to a crackdown on illicit imports of disposable vapes, which primarily come from China. During his first term as president, Trump enthusiastically erected barriers to Chinese imports Such measures could boost some tobacco companies’ e-cigarette brands.
Expectations that a Trump presidency will strengthen the dollar, however, could be troublesome for Philip Morris International as the multinational makes around 90 percent of sales in other, primarily emerging market, currencies. A possible increase in inflation could also harm tobacco stocks since they are heavily exposed to price-sensitive, low-income consumers.
The Biden administration has announced a regulatory freeze on all new and pending rules introduced in the last part of the Trump administration. Included in the freeze are the new finalized rules for premarket tobacco product applications (PMTA) and substantial equivalence (SE) that were announced on Jan. 19, the last full day of the Trump administration.
The FDA’s CBD enforcement policy draft guidance, which had been under review at the White House Office of Management and Budget (OMB) since July, was also withdrawn.
Stakeholders and lawmakers have been anticipating the guidance for two years, since the 2018 Farm Bill gave FDA authority over hemp-derived CBD. Representatives from the U.S. Hemp Roundtable and the National Industrial Hemp Council, both of which met with OMB to discuss the draft guide in late July, say the lack of regulatory clarity from the FDA has led to uncertainty in the hemp and CBD industry.
The memo, issued by White House Chief of Staff Ronald Klain, calls on the heads of executive departments and agencies to “propose or issue no rule in any manner – including by sending a rule to the Office of the Federal Register [OFR] – until a department or agency head appointed or designated by the president after noon on January 20, 2021, reviews and approves the rule.” Previous administrations, including those of Trump and Barack Obama, issued similar memos to stop last-minute actions by the outgoing administration.
What this means for the vapor industry is unclear. It does not change the rules concerning the Sept. 9 deadline to submit a PMTA to be eligible to stay on the market for year. Because the rule was not formally published in the Federal Register by the U.S. FDA before the end of Trump’s presidency, the Biden administration could move forward with the rule as is, make changes to the rule or scrap the rules entirely.
An editor’s note on the Federal Register website reads, ” The Food and Drug Administration withdrew this document while it was on public inspection. It will remain on public inspection until the close of business on January 27, 2021. A copy of the withdrawal request is available at the Office of the Federal Register.”
The White House memo also explains that it does not strictly apply to “rules” but also to “any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and any agency statement of general applicability and future effect that sets for a policy on a statutory, regulatory, or technical issue or an interpretation of a statutory or regulatory issue.”
Vapor Voice has reached out to the FDA for a response concerning the status of PMTAs for electronic nicotine delivery system (ENDS) products.
U.S. President Donald Trump signed a $2.3 trillion coronavirus relief and government funding bill into law Sunday night, averting a government shutdown that was set to begin on Tuesday.
Initially, Trump had refused to sign the legislation, calling on Congress to increase stimulus payments from $600 to $2,000 and to get rid of “wasteful and unnecessary items.” The president signaled in a statement Sunday night that he signed the coronavirus relief bill only after securing a commitment for the Senate to consider legislation to increase stimulus checks.
For the nicotine industry, the bill is significant because it contains a provision prohibiting prohibits the U.S. Postal Service from delivering e-cigarettes.
It also subjects e-cigarettes to other rules that currently govern online cigarette sales. Among other things, online retailers will be required to use private shipping services that collect an adult signature at the point of delivery, collect all applicable local and state taxes, and send each taxing state’s tax administrator a list of all transactions with customers in their state.
Critics said the legislation would place a considerable burden on vapor companies. Increasing cost and paperwork.
The new rules could go into effect as soon as 120 days.
What might the new U.S. President’s administration have in store for the vapor industry?
By Patricia Kovacevic
At the time of writing, the results of the U.S. elections are still contested by the presidential incumbent, a Republican, via various vote recount requests and litigation; however, it is a virtual certainty that the U.S. will have a new president, representing the Democratic Party, as of Jan. 20, 2021.
The heads of departments, including the head of the Department of Health and Human Services (HHS), are appointed by the president, subject to confirmation by the Senate, and typically change with the administration. In turn, the Food and Drug Administration (FDA), which is the agency within the HHS with primary jurisdiction over tobacco products (including electronic nicotine-delivery systems, or ENDS) as well as drugs, foods and other products, will be led in the new administration by a new commissioner.
Given the Covid-19 crisis, the new president will be under immense pressure to appoint a new FDA commissioner immediately. Interestingly and somewhat surprisingly, a former FDA commissioner, David Kessler, was recently named co-chair of the new administration’s Covid-19 task force, although Kessler resigned his commissioner role in November 1996 amid controversy for overbilling his travel expenses during his tenure.
Also during Kessler’s tenure, the FDA attempted to regulate tobacco products as “delivery devices for the drug nicotine” to bring tobacco products under FDA jurisdiction. Tobacco companies challenged the rules all the way to the Supreme Court and won (FDA v. Brown and Williamson Tobacco Corp.). The Supreme Court ruled that “Congress has clearly precluded the FDA from asserting jurisdiction to regulate tobacco products. Such authority is inconsistent with the intent that Congress has expressed in the FDCA’s [Food, Drug and Cosmetic Act] overall regulatory scheme and in the tobacco-specific legislation that it has enacted subsequent to the FDCA. In light of this clear intent, the FDA’s assertion of jurisdiction is impermissible.”
Kessler’s wish to see tobacco regulated by the FDA was eventually granted by Congress in June 2009 through the bipartisan passage of the Family Smoking Prevention and Tobacco Control Act. While some speculate that Kessler may be on the short list for HHS commissioner, it is likely that the administration will bring forward new faces. Still, Kessler’s life-long anti-tobacco stance and past working relationship with the current head of the Center for Tobacco Products might give an indication of the increased scrutiny of the tobacco sector in the years to come.
Patricia Kovacevic
The ENDS industry status quo, from a legislation point of view, while far from ideal, is by now familiar to the ENDS industry. The recent premarket tobacco product application (PMTA) filing deadline has come and gone, and, as expected, we have not seen a flurry of warning letters post-September 2020 ordering certain vapor manufacturers to stop selling their products because they did not submit a PMTA.
The FDA is, however, expected to start enforcing this legislation sooner or later. For any dramatic change to occur, the governing legislation, the Food, Drug and Cosmetic Act, would have to be amended, which is not likely to be top of the list for the upcoming Congress given the priorities the new administration announced during the election campaign. Still, the House of Representatives, one of the chambers of the U.S. legislature, remains dominated by the Democrats, the same party whose representatives initiated several tobacco-related bills and called for confrontational hearings on vapor products. The most recent one, in February 2020, was relatively tame compared with the tone of the July 2019 Juul hearing and even with the June 2014 Senate hearing.
Senate races in Georgia will require runoff elections on Jan. 5, 2021. If Democrats gain both Senate seats in Georgia in January, there would be a 50-50 tie in the Senate, and the vice president would have the tie-breaking vote in case the Senate is deadlocked on a piece of legislation. When the House, Senate and White House are controlled by the same party, the chances of the current administration to pass laws in support of its agenda are greatly increased, though divisions exist within each party, and surprises always happen. Furthermore, 34 out of the 100 Senate seats are up for regular election in two years as well as all 435 House seats; these will be a trying two years for Americans in an economic crisis, and the public sentiment can swing in the other direction. Thus, the new president may have only two years, if even that long, to pass a flurry of laws, and there may be more urgent matters than revisiting the Tobacco Control Act, which, for better or for worse, has worked so far.
The FDA already has broad powers to expand requirements and restrictions involving ENDS products, including the authority to impose product standards through notice-and-comment rulemaking. Ingredient caps and bans are among the standards the FDA has the authority to promulgate via regulation.
The latest unified agenda of regulatory and deregulatory actions
As of spring 2020, active regulatory actions include four potential future regulatory actions by the FDA, rolled over from previous agendas, with no clear deadline for publication of a proposed rule:
Requirements for Tobacco Product Manufacturing Practice (colloquially referred to as “Good Manufacturing Practices”)
Tobacco Product Standard for Characterizing Flavors in Cigars (follow-up to the 2018 Advance Notice of Proposed Rulemaking); this is unlikely to move into the final rule stage on account of recent courtroom successes by the cigar industry.
Modified-risk tobacco product applications; this future proposed rule would establish content and format requirements to ensure that modified-risk tobacco product applications contain sufficient information for the FDA to determine whether it should permit the marketing of a modified-risk tobacco product. Additionally, the proposed rule would set forth the basic procedures for modified-risk tobacco product application review and require applicants receiving authorization to market a modified-risk tobacco product to establish and maintain records, conduct post-market surveillance and studies, and submit annual reports to the FDA.
Premarket tobacco product applications and recordkeeping requirements, a 2019 proposed rule, which would have as a next step at some point in the future, likely in 2020, a final rule.
Notably, ingredient bans and nicotine caps are not on the regulatory agenda. A first step toward an ingredient ban would likely be an Advance Notice of Proposed Rulemaking (ANPRM), although the FDA can in theory skip this step and move directly to a proposed rule, open a docket for comment, collect comments and consider whether it has sufficient information to finalize the rule. Given the complexity of the issue and the current research focusing on flavor ingredients in ENDS, if the FDA determines that an exploration of a flavor ban is desirable, the FDA will probably go through the ANPRM step.
One would have to wonder, though, why engage in rulemaking when the FDA already reviews all relevant information about every ENDS product on the U.S. market, present and future, through the PMTA process—thus allowing the agency to make a case-by-case determination—and the FDA will no doubt pay considerable attention to certain flavored products. In the author’s personal opinion, the PMTA process is the FDA’s preferred avenue to make decisions on individual products rather than issuing rules on product categories, which can also be challenged—and the current Supreme Court might entertain challenges to the FDA’s behavior if it came to it down the road.
Meanwhile, the majority of states by number still lean conservative, which likely means fewer developments in taxation, some scrutiny of ENDS but not necessary priority placed on shrinking the lawful ENDS market as there is no immediately quantifiable health benefit from doing so, and many potential harms. Of note are the California litigation and the potential referendum in California to overturn SB 793 (the flavor ban legislation). By the time this you read this article, we should know whether the bill opponents succeeded at collecting the necessary signatures to place the referendum on the November 2022 California elections ballot and suspend the application of the California flavor ban until then and pending the referendum’s outcome.
The question we must also ask, given the political, public health and economic crisis context is whether ENDS are a threat to anyone and why any administration would, at this juncture, prioritize overregulating a harm reduction asset over the important, systemic changes Americans expect from the administration and drastically mitigating the Covid impact. The industry is likely to consolidate and survive.
A global legal and compliance nicotine industry expert, Patricia I. Kovacevic has experience that includes general counsel and chief compliance officer roles at Nicopure Labs as well as leading senior legal and regulatory positions at Philip Morris International and Lorillard. Kovacevic served on the board of directors of the Vapor Technology Association and on the advisory board of the Global Tobacco & Nicotine Forum. She is the founder of RegulationStrategy, a global legal and compliance FDA-regulated industry consultancy.
President Donald Trump has sent back to Congress a Covid-19 relief bill that included language to ban the U.S. Post Office (USPO) from mailing vapor products.Trump had the authority to use a line item veto on the provision and still pass the larger bill, however, he sent the bill back to Congress in its entirety saying he would not sign the proposal without $2,000 individual payments to taxpayers.
Congress banned all electronic nicotine delivery system (ENDS) products from being mailed by the USPS on Monday. The rule change was lumped into the Covid-19/ omnibus budget bill passed yesterday. The proposal, collectively called the Consolidated Appropriations Act, 2021.
The updated provision redefines the word “cigarette” under the Prevent All Cigarette Trafficking Act (PACT Act), which is part of the federal Jenkins Act, to include ENDS products.
By including ENDS products within the PACT Act, manufacturers and retailers will be banned from shipping vaping products to consumers using the USPS within the next 120 days. All orders of vaping products will be required to ship using an alternate (and considerably more expensive) service that verifies the recipient of a package is at least 21 years old.
Beginning 90 days after enactment, all online retailers also will be required to file monthly reports with native, state and local governments disclosing the identity, address and product received for all customers, as well as remit any excise taxes owed.
Many vaping industry advocates are angered by the text of the proposal because legislators used an expansive definition of what qualifies as an “electronic nicotine delivery system” that seems to include products that may not contain nicotine. The term “means any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device,” the legislation states.
Greg Conley, president of the American Vaping Association, said that despite the inclusion of the word “nicotine,” the definition used in the bill is so broad that it appears to capture vaping liquids containing CBD and standalone devices intended for vaping THC or other substances.
“The sponsors of this legislation repeatedly refused to consider common sense amendments that would have protected youth, while also not needlessly shutting down small businesses. Thanks to their intransigence, the language included in the omnibus is so sloppily drafted that it will also ban the USPS from shipping CBD liquids intended to be vaporized, as well as devices intended for use with THC or other non-nicotine substances,” said Conley. “There are still 36 million American adults smoking combustible cigarettes and over 400,000 will die from smoking-related illnesses this year alone. The American people should start questioning why their government is so intent on making it harder for adults to quit smoking.”
According to its website, UPS prohibits the shipment of all cigarettes and little cigars to consumers, regardless of destination state. Other tobacco product shipments must be made using the “UPS Delivery Confirmation Adult Signature Required service, requiring the signature of an adult 21 years of age or older upon delivery.”
Duncan Hunter has been pardoned by President Donald Trump. The vaping industry knows Hunter as the ‘vaping congressman’ after becoming the first person to openly vape on the floor of the U.S. House of Representatives. In 2017, Hunter introduced a bill aimed at curtailing U.S. Food and Drug Administration’s ability to regulate vapor products.
U.S. Rep. Duncan Hunter
Hunter, a former U.S. Representative of California was sentencedin March to 11 months in federal prison after pleading guilty to a single count of unlawfully using more than $250,000 in campaign funds, just one of 60 counts he and his wife, Margaret, faced at the time.
Court documents stated the former Marine and his wife racked up more than $37,700 in overdraft fees and stole the money to cover basic living expenses — including their childrens’ schooling, groceries and pet food for the family rabbits. They then splurged on big ticket items, including luxury hotels, airline tickets, and dinners.
Hunter’s 11-month prison sentence had been postponed due to the coronavirus pandemic and was set to begin in January. Trump’s full pardon means he will serve no time.
President Donald Trump said Friday that the U.S. will be terminating its relationship with the World Health Organization. He said that the UN agency failed to adequately respond to the coronavirus because China has “total control” over the global organization.
He said Chinese officials “ignored” their reporting obligations to the WHO and pressured the WHO to mislead the world when the virus was first discovered, according to an AP story.
He noted that the U.S. contributes about $450 million to the world body while China provides about $40 million.
The U.S. is the largest source of financial support to the WHO and its exit is expected to significantly weaken the organization. Trump said the U.S. would be “redirecting” the money to “other worldwide and deserving urgent global public health needs,” without providing specifics.
