Category: Also in TR

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  • The END in sight?

    The END in sight?

    What the thaw in U.S.-Cuban relations means for the electronic nicotine delivery systems.

    By Givi Topchishvili

    As U.S. President Barack Obama is making his historic visit to Cuba—the first by sitting American president in almost 90 years—the business community is asking itself what the thawing in relationship means to it. Calumet Advisors recently concluded an assessment of risks and opportunities for the vaping sector in the South American market, with Cuba being a part of the study. While our findings show that the current environment in Cuba is not yet ripe for a serious market entry, we do see a number of opportunities and are happy to share some of these observations.

    According to the 2015 revision of the World Population Prospects, the total population of Cuba stands at 11.39 million, and is projected to decrease by 9.2 percent to 10.34 million by 2050. By then Cuba is also projected to become the ninth oldest country in the world, with a median age of 51.9 years.

    On the economic front, the Cuban government continues to balance the need for loosening its socialist economic system against a desire for firm political control. As the government has cut state-sector jobs as part of the reform process, it has opened up some retail services to “self-employment,” leading to the rise of so-called “cuentapropistas,” or entrepreneurs. Approximately 476,000 Cuban workers are currently registered as self-employed.

    Yet despite the recent reforms, the average Cuban’s standard of living remains at a lower level than before the collapse of the Soviet Union and the resulting downturn of the 1990s, with an average income of just $300 per year. That means very limited buying power for most Cuban consumers, especially for non-essential goods and services.

    At the same time, Cuba is home to some of the toughest anti-smoking laws in the region. In 2011 it conducted the Third Survey on Risk Factors of Non-Transmissible Diseases. It polled 9 million people and is recognized as the most important study on the issue to date. The study yielded significant results, such as the fact that 36.4 percent of those interviewed smoked at least once in their lives, and that two out of every 10 women and three out of every 10 men are addicted to cigarettes. As much as 53 percent of all black and mixed-raced people on the island claim to be smokers—a figure of more than double the rate of white Cubans who smoke (24 percent).

    At the moment the Cuban authorities are working on new anti-tobacco legislation that would provide the framework for even tougher restrictions on smokers than exist today, and strengthen commercial limitations on tobacco-derived products. In addition to reiterating provisions that forbid smoking in closed spaces and the sale of tobacco products to people under 18, the proposed legislation would include restrictions on the promotion and sponsoring of tobacco products in the country, prohibit their sale at health, educational, and sporting institutions, and the sale of single units or packages with less than 20 cigarettes. It would also raise the prices of tobacco products.

    Another important factor to consider is the fact that currently all tobacco products are tightly controlled by Tabacuba, the state tobacco monopoly, which will most likely seek authority over the future sale of e-cigarette and vapor products once the market begins to open up.

    Interestingly enough, currently, there are no limitations or restrictions on sale or use of vaping products in Cuba, something that was confirmed by tourists and locals alike.  The actual current size of the electronic nicotine delivery systems (ENDS) market there is under $4 million a year, and to date there are no established local retail or online market for vape devices or e-liquid products.

    It’s clear that the current economic and political environment in Cuba is not yet welcoming enough to make significant investments in market entry. One possible venue for entry that we identified is an exploration of a joint venture with, or becoming a supplier to Tabacuba. Working with government controlled monopolies comes with a price, but as we have seen in analogous places it carries less risk than attempts to bypass it.

    However, the real opportunity for development and expansion of ENDS market at the moment is within the smoking-cessation campaign going on in Cuba. Now is the time to influence the public perception and legislative work pointing at Cuban antismoking environment. It is worth considering respective lobbying efforts, especially with the high number of U.S. and European tourists willing to visit Cuba in the future. It is noteworthy that the U.K. has just ruled on licensing BAT e-cigarettes as quit-smoking medicine, which was announced in January 2016. This U.K. ruling may pave the way for other countries to follow this route and should be closely monitored in general and in the context of entering the Cuban market in particular. With a population base of 11 million people and 3 million tourists annually, Cuba could, potentially, become a large player in the Caribbean vape market.

    Givi Topchishvili is a co-founder of Calumet Advisors, an international strategic consulting company dedicated to the e-cigarette segment.

  • Johnson Creek teams with Republic for distribution

    Johnson Creek Enterprises, the leading manufacturer of e-liquid in the U.S., has teamed up with Republic Tobacco, the nation’s largest distributor of roll-your-own and make-your-own tobacco products and accessories, to distribute Johnson Creek’s e-cigarette hardware and e-liquids nationally in the U.S.

    “This is a perfect fit for both of our companies,” says Christian Berkey, Johnson Creek’s founder and CEO. Steve Sandman, president of Republic Tobacco agrees. “Both retailers and wholesalers have been waiting for a reputable company to supply this growing category,” he says. “Our customers should be very pleased that Republic is stepping into the forefront of the ‘e’ category with such an outstanding producer as Johnson Creek.”

    Johnson Creek was first company in the U.S. vapor industry to produce and manufacture e-liquid for e-cigarettes. It was also the first company to use child resistant caps, plastic shrink-wrapped banding, and to list ingredients on all bottles.

  • Philip Morris embraces e-cigarettes

    Philip Morris USA will launch an e-cigarette under the MarkTen brand in Indiana in August, reports The Wall Street Journal.

    MarkTen is a disposable e-cigarette but can be reused by buying a separate battery recharging kit and additional cartridges. Made in China by a contact manufacturer, the e-cigarette is expected to sell for about $9.50.

    PM USA is the last of the major U.S. tobacco companies to introduce an e-cigarette in an industry-wide effort to diversify beyond the traditional cigarette business, which has become more challenging in the face of tax increases, smoking bans, health concerns and social stigma.

    Last week, R.J. Reynolds Vapor Co., a subsidiary of Reynolds American, announced it would start selling its Vuse e-cigarette to retail outlets throughout Colorado in June.

    Vuse was developed in-house by R.J. Reynolds R&D experts, and will be manufactured in the United States.

    In April 2010, Lorillard acquired e-cigarette maker Blue Ecigs. It has expanded into more than 80,000 retail outlets.

    Analysts estimate sales of e-cigarettes could double this year to $1 billion. Some have even said consumption of e-cigarettes could surpass consumption of traditional cigarette within the next decade. The Food and Drug Administration plans to assert regulatory authority over e-cigarettes in the near future.

    Electronic cigarette maker Njoy said Monday it had raised $75 million in financing from investors including Napster founder and ex-Facebook president Sean Parker.

     

  • Q&A With the FDA

    Q&A With the FDA

    Photo: Tada Images

    Insights into the agency’s thinking as it pursues regulatory authority over the tobacco business.

    By Colleen Zimmerman Blackard

    This article appeared in Tobacco Reporter’s October 1995 issue. To commemorate TR’s 150th anniversary, we will be republishing noteworthy pieces from the past throughout 2024. Additional ‘historical’ articles are available here.

    The swarm brought a little smile to my face. Here, at the Department of Health and Human Services building, home to the Food & Drug Administration in Rockville, Maryland, USA, outside the front entrance’s plate glass doors, were ash­trays. And huddled around, lighting up, inhaling and exhaling, and stubbing out, were 12 smokers.

    Some might have been visitors, surely others were employees. Although running against the clock, I was compelled to stand with them for a moment, light up, and commune with a nod and a smile and an occasional roll of the eyes.

    Then I went inside.

    Like many government buildings, FDA is situated in a maze of blank off­white corridors and shiny tiled floors. A sterile environment for the national government’s hive of health policy.

    FDA Commissioner David Kessler was unavailable to meet with TR. So Jim O’Hara, FDA associate commissioner for public affairs, and Mitch Zeller, special assistant for policy, answered questions instead.

    Here, a summary of what’s on the FDA’s mind.

    TR: Why didn’t Commissioner Kessler pursue his tobacco agenda during the Bush Administration, when he was appointed?

    O’Hara: The genesis of the agency’s thinking dates back to the Bush Administration. Shortly after he was named to his post, he considered a petition from COSH (the Coalition on Smoking OR Health) …. We began seriously looking at the issue in 1991.

    TR: How many people—what percentage of employees—are devoted to tobacco-related issues at FDA?

    O’Hara: We use people as needed to address specific questions. For the nicotine addiction question, a number of people participated at one time or another. It’s almost impossible to count.

    Zeller: But if you take all of these people and put them on a full-time employee equivalent basis, fewer than two dozen have been devoted to tobacco issues. And that’s out of 10,000 employees.

    O’Hara: But if you counted all of the names, it would be a few dozen. Some worked on it for a day, some a week.

    TR: Is the agency neglecting its mission by pursuing tobacco regulatory authority? One congressman has said that expanding FDA authority is not the answer, particularly when approving life-saving drugs can take years.

    O’Hara: The fact is, this agency is reviewing and approving drugs in record time. Historically, during the 1980s, review and approval took 26 to 27 months. In 1994, the median time was 19.1 months. We have significantly decreased the agency’s historical average. And for important therapeutic drugs under the user fee program, the review/approval process is 10.4 months. We’re reviewing and approv­ing drugs faster than ever before. [In future] we will be reviewing all drugs in 12 months, and for important thera­pies, six months.

    To say that the FDA is not pursuing its core mission is wrong.

    TR: FDA wants to regulate tobacco: under what authority?

    Zeller: Under a combination drug and device authority. Nicotine is the drug, and cigarettes and smokeless tobacco are the nicotine delivery devices.

    O’Hara: The law provides us to choose our approach. We have a lot of flexibility on how we approach sales, use and distribution of the product.

    TR: How can tobacco be declared legal by FDA if it can’t declare it “safe” and “effective” as it is required to?

    O’Hara: As I said, under the restrictive device provisions under the statute.

    TR: Doesn’t the Federal Trade Commission have jurisdiction over tobacco advertising?

    Zeller: FTC’s jurisdiction is not exclusive. What we want to do is reduce access and reduce appeal. We have the legal authority to do that. Adult smoking rates are going down; kids’ smoking is increasing. This is a kids’ issue. It’s not about adults; it’s about preventing children from smoking, preventing the next generation from being hooked.

    We have 40 million tobacco users who are addicted. Studies show that nicotine is more addictive than heroin and cocaine. We have a public health issue to grapple with, but the commissioner has said under oath-many times-that he’s not out to ban cigarettes.

    TR: Why not?

    O’Hara: A ban wouldn’t work. The agency’s strategy is to keep kids from getting hooked in the first place.

    Zeller: We can’t do it by ourselves. We have to change the environment in which tobacco is sold. This isn’t a Big Brother issue. We’re providing the tools to help keep kids from using tobacco. And with those tools, anyone who cares can use them. It’s up to the rest of us to use those tools.

    O’Hara: The industry has said repeatedly that we are going to do things we haven’t said and haven’t done.

    TR: Why not have the FTC, or another agency that already regulates the tobacco industry, expand its jurisdiction? Was there any investigation by your agency, or another government agency, to expand jurisdiction already in force?

    O’Hara: The investigation we undertook was within our jurisdiction. But no, I’m not aware of any other investigation [to expand jurisdiction] by any government agency.

    TR: In Dr. Kessler’s letter to Scott Ballin, chairman of the Coalition on Smoking OR Health, he says a strict application of agency provisions could mean, ultimately, removal from the market of tobacco products containing nicotine at levels that cause or satisfy addiction.

    O’Hara: But in the following paragraph he says he would not pursue a ban.

    [Editor’s Note: What Dr. Kessler actually says in the following paragraph(s), in his letter to Ballin of Feb. 25, 1994, is: “Given the widespread use of cigarettes and the prevalence of nicotine addiction, such a regulatory action could have dramatic effects on our society. One must consider the possible effects of the loss of this source of nicotine on the health of some people who are addicted to nicotine and the possible need for a weaning period. It is also important to consider the potential for a black market in nicotine-containing cigarettes.

    “We recognize that the regulation of cigarettes raises societal issues of great complexity and magnitude. It is vital in this context that Congress provide clear direction to the agency. We intend therefore to work with Congress to resolve, once and for all, the regulatory status of cigarettes under the Food, Drug and Cosmetic Act.”]

    TR: How does the FDA define addiction?

    O’Hara: An advisory committee has looked at this. Every major medical group has looked at this question, and each has said cigarettes are addictive.

    The industry has not presented any argument to the contrary.

    Zeller: The industry says cigarettes are not addictive because they do not intoxicate. Intoxication is just one possible criteria. And under no one’s definition is it essential.

    TR: Is it possible the FDA, if it regulated tobacco, would phase down nicotine levels to what it deemed nonaddictive levels?

    Zeller: It’s a theoretical proposition.

    Is there a level below which nicotine in cigarettes is not addictive? We don’t have a clue what that level is. There are researchers looking at it, though, independently.

    TR: When the FDA asserted it had jurisdiction over tobacco, it surely expected a lawsuit, which of course delays action. Isn’t it in youths’ best interest to allow Congress to legislate or work for a voluntary agreement with the tobacco industry, which could take effect quickly, rather than assert jurisdiction and tie up your proposal in court for perhaps years?

    O’Hara: It’s the industry that’s going to tie this up in court. If the industry is serious about wanting to keep kids off cigarettes, it’s time the industry’s actions matched its words. The industry can try to improve the proposal.

    TR: Doesn’t Dr. Kessler’s initiative need congressional approval?

    Zeller: Congress’ approval is not required. Congress can act now, but it does not require an act of Congress for FDA authority.

    TR: What actions has the agency taken so far?

    O’Hara: Documents are on display in the Federal Register, and they’re available on the Internet. We’re accepting comments until November 9th.

    TR: Will FDA extend the comment period?

    O’Hara: The current comment period is November 9. At times, the agency has extended the comment period. But I don’t know of any decision made on this.

    TR: Some tobacco companies have already launched their own efforts to reduce teen smoking, like Philip Morris’ Action Against Access. Do the industry’s efforts go far enough in your opinion?

    O’Hara: The President has said voluntary efforts will not work. If voluntary efforts mean they’re serious, that’s welcome. But what we need are comprehensive, enforceable measures.

    TR: FDA argued it didn’t have jurisdiction over tobacco when antitobacco group ASH petitioned it in 1980.

    O’Hara: The court decision said that if circumstances change, the agency could revisit the issue.

    TR: The President has stated that if teen smoking is not reduced by 50 percent from a 1993 statistic, additional regulations may be introduced. What, in your opinion, would additional regulation entail?

    O’Hara: This is an area open for comment, as to what would be appropriate.

    TR: Some observers say FDA has no intention of regulating tobacco, that actually it is attempting to force the issue in Congress.

    O’Hara: We’ve proposed a rule, Colleen. You can’t be more serious than proposing a rule. The President has said that if Congress wants to act as comprehensively as his approach, he’s willing to take a look at that.

    TR: Do you believe your current proposal will affect adults?

    O’Hara: No. There is nothing in our proposal that affects access to adults to what will continue to be a legal product.