Policy Shift Detected

Tobacco stocks increased Wednesday after investors noticed that the U.S. Department of Health and Human Services fall 2019 agenda makes no mention of a nicotine product standard, according to a report by Barron’s.

The U.S. Food and Drug Administration (FDA) has been mulling over a plan to lower nicotine in cigarettes to minimally addictive or nonaddictive levels. In March 2018, the agency issued an advance notice of proposed rulemaking. The FDA is currently reviewing public comments to its proposal.

Earlier this year, analysts at Morgan Stanley said profits for major U.S. tobacco companies could be cut in half if the FDA adopts a “maximum nicotine” rule, describing the policy as a potential game changer for the U.S. cigarette industry.

By omitting the standard in the fall agenda, some observers felt the FDA could be open to a gradual nicotine reduction, which it had earlier said could lead smokers to simply compensate for the lower nicotine levels.

“This is clearly good news for the tobacco industry: Effectively, the nicotine standard is no longer on the ‘to-do’ list,” said Nico von Stackelberg, an analyst at broker Liberum.

FDA spokeswoman Stephanie Caccomo said the omission doesn’t mean the agency does not consider the regulations priority or that it would discontinue work on their development.