Category: Regulation

  • Trade Body Slams German Vapor Tax

    Trade Body Slams German Vapor Tax

    Photo: katatonia

    The German association for the e-cigarette trade, VdeH, has sharply criticized the passage by the financial committee in Parliament of a tobacco tax reform bill that calls for significant tax hikes on vapor and tobacco-heating products, including nicotine-free variants.

    Until now, e-cigarettes have been subject only to value-added tax. Tobacco-heating products will reportedly be taxed at the same level as combustible cigarettes.

    The plans will not only boost the black market but also destroy numerous small and medium-sized businesses, according to VdeH.

    “The mere fact that e-cigarette liquids are generally taxed more heavily than tobacco cigarettes and thus ignore the 95 percent lower potential for damage is insane health policy,” said VdeH Managing Director Michal Dobrajc in a German-language statement. Taxing nicotine-free products as well as cigarettes defies common sense, he added.

    If you are serious about reducing the smoking rate, then you have to support the industry that is making a significant contribution to reducing it instead of destroying it.

    Michal Dobrajc, managing director, VdeH

    Dobrajc said Germany should learn from the experience of other countries that were forced to lower their vapor taxes as vapers returned to smoking and anticipated revenues failed to materialize.

    “The Tobacco Tax Modernization Act is a disaster in both health and economic terms,” said Dobrajc. “If you are serious about reducing the smoking rate, then you have to support the industry that is making a significant contribution to reducing it instead of destroying it.”

  • MPs Urged to Champion Vaping During Debate

    MPs Urged to Champion Vaping During Debate

    Photo: Gerry

    The U.K. Vaping Industry Association (UKVIA) is asking Members of Parliament to champion the public health benefits of vaping as the Department of Health and Social Care looks to publish a new Tobacco Control Plan (TCP) later this year to support the government’s smoke-free 2030 ambition.

    The U.K. House of Commons will debate the “Recommendations for the forthcoming Tobacco Control Plan” on June 10.

    According to the UKVIA, the upcoming debate is a huge opportunity to refocus efforts in ensuring that England achieves its aim of becoming smoke-free by 2030. The U.K. is estimated to have a smoking prevalence of 14.1 percent, and the forthcoming Tobacco Control Plan is a chance to see this number decrease further, particularly in light of an uptake during the pandemic period, the association writes in template letter to local MPs.

    The UKVIA letter urges MPs to make the following points during the debate:

    • The government must seize the opportunity presented by the U.K. having left the European Union. With the ongoing review of the Tobacco and Related Products Regulations (TRPR) and the forthcoming TCP, the government has the opportunity to diverge from EU law governing tobacco and nicotine policy to level up on health inequalities across the U.K. Independence allows for U.K. regulations to stay relevant, be easily adapted to changing consumer trends and any market and technological developments, with greater ease and less bureaucracy.
    • The government’s forthcoming TCP should be based on the significant and growing body of evidence showing vaping to be an effective alternative for smokers looking to quit and should cement the concept of harm reduction, placing the U.K. as the global leader in tobacco harm reduction. Vaping is twice as effective as other nicotine-replacement therapies, such as gum and patches. Research from University College London has found that e-cigarettes, in one year alone, helped an additional 50,000–70,000 smokers in England quit. Despite the overwhelming and growing evidence in support of e-cigarettes, perceptions of harm from vaping among smokers are increasingly incorrect and out of line with the evidence. This is despite ONS data from Great Britain showing that over half of smokers want to quit.
    • Misinformation and misperceptions about the relative risk of e-cigarettes must be challenged at every opportunity. To do so, the government must work with industry leaders to develop a series of policies that can help the vaping industry communicate directly with existing adult smokers. It is suggested that approved health claims and switching messages, alongside nicotine health warnings, should be available to vape manufacturers and retailers to communicate the facts about vaping. Such claims and messages could be used on both device and e-liquid packaging as well as on posters and leaflets. Similar proposals have been made by the governments of New Zealand and Canada.
    • In light of the University of East Anglia’s study to trial e-cigarettes in NHS A&E departments, greater support is also needed for medical practitioners. The new TCP should support medical professionals by ensuring that clinicians are signposted to the latest clinical evidence on e-cigarettes and that local stop-smoking clinics adopt a consistent approach to the advice given to smokers looking to switch to less harmful alternatives and/or quit smoking combustible cigarettes.

    “Whilst on one hand the current regulations and the existing TCP have allowed the vaping industry in the U.K. to flourish, on the other, they have hindered the ability of the vaping sector to promote vaping as an effective way of switching to a less harmful alternative, thereby preventing the government achieving the aims set out in the Tobacco Control Plan,” the UKVIA wrote. “Parliamentarians should therefore be advocating for fair and proportionate policies and regulations of e-cigarettes to help reduce inequalities and improve public health.”

  • Gathering Clouds

    Gathering Clouds

    Photo: Comugnero Silvana

    How tobacco rules would change China’s vapor business

    TR Staff Report

    On March 22, 2021, China’s Ministry of Industry and Information Technology published a draft of regulations that would subject vapor products to tobacco rules. The news caused share prices of leading Chinese e-cigarette companies, such as RLX Technology and Smoore International, to plunge from the stratospheric heights they had reached prior to the announcement.

    The prospect of operating under the umbrella of China’s State Tobacco Monopoly (STMA) has clearly frightened investors, but what exactly would it mean for the vapor business to be governed by China’s tobacco rules? Bullet Finance, a Chinese-language business publication, recently interviewed Miao Wei (not his real name), a former officer in charge of raw materials at the China National Tobacco Corp (CNTC) who now heads an e-cigarette company.

    With some 350 million smokers, China is the world’s largest tobacco market and the world’s largest potential market for vapor products. In a prospectus accompanying its initial public offer in January on the New York Stock Exchange, RLX Technology reckoned that vaping products have a penetration rate of only 1.2 percent in China compared with 32.4 percent in the U.S. Those numbers suggest considerable opportunity for growth. If Chinese smokers embrace e-cigarettes in meaningful numbers, the vapor business should thrive.

    The tobacco business is a formidable source of income for the state, however. In 2018, it contributed an estimated 5.45 percent of the country’s tax revenue. The government is unlikely to sit by idly as its cash cow deflates. While officials cited health as a reason to regulate vapor products like tobacco, the desire to sustain revenue is likely to be an equally strong motivation.

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    Understanding the System

    To appreciate the potential impact of tobacco-style regulations, vapor executives must understand how the Chinese tobacco industry works, Miao told Bullet Finance. Unlike the vapor business, which comprises numerous private companies competing for business, China’s tobacco sector relies on central planning and coordination. Individual manufacturers have little autonomy under this system.

    From the cultivation of leaf tobacco to the retail sale of finished product, China’s state monopoly guides all tobacco companies’ actions. Prior to the tobacco growing season, the CNTC determines planting areas, establishes production targets and specifies the desired leaf grades. Once the crop has been grown, the CNTC purchases tobacco at set prices. Likewise, the CNTC is heavily involved in the development, selection and procurement of raw materials, such as filters, paper and packaging.

    Significantly, sales and manufacturing functions are split between different entities under China’s tobacco monopoly. Cigarette manufacturers merely fulfill production targets set by the CNTC, which then purchases the products at set prices. The CNTC handles sales to retailers, who must be licensed by the monopoly to carry cigarettes. The CNTC determines how many cigarettes they receive, how much inventory they may carry and at what prices they should sell, which means the monopoly also specifies the retailer’s profit margin.

    Individual cigarette manufacturers have little autonomy under China’s centrally guided tobacco system.
    (Photo: Taco Tuinstra)

    Current Rules

    Unlikely the tobacco industry, the vapor sector has historically been lightly regulated in China, perhaps because of the business’ relative youth and small size. Most hardware and e-liquids produced there are exported. The Shenzhen region supplies more than 90 percent of the world’s vapor products, and China has presumably been happy with the positive trade balance.

    Vaping products in China are not considered tobacco products like they are in Europe and the United States. Instead, e-cigarettes are treated as consumer goods. In the absence of heavy restrictions, the vapor sector has boomed. After the invention of the modern e-cigarette by a Chinese pharmacist, the country has spawned some of the world’s most valuable vapor companies.

    Like RLX Technology, most Chinese vapor companies are light on assets. They design products, register trademarks and handle sales. Production and raw materials procurement are typically outsourced to foundry factories, such as Smoore International. This keeps assets low and minimizes investments. Vertically integrated companies that handle all aspects of the vapor business, such as Boulder International, are rare in China, according to the Bullet Finance article.

    While many of these firms manufacture for export, an increasing number is keen to serve the budding domestic vapor market. In November 2019, however, the Chinese government prohibited the online sales of vapor products, citing concern about youth initiation. Remarkably, the vapor business continued to flourish in the wake of the crackdown, with companies boosting online sales to foreign customers and shifting domestic sales to brick-and-mortar stores. In January 2020, RLX Technology pledged to invest more than cny500 million ($77.35 million) over the three years to open 10,000 outlets in China. Boulder International opened more new Chinese vape stores in the first quarter of 2021 than it did in all of 2020, according to Bullet Finance, raising its store count above 2,000.

    Under a tobacco framework, the CTNC would likely designate and closely monitor suppliers of raw materials.
    (Photo: Smoore International)

    Potential Implications for E-cigarettes

    Integrating e-cigarettes into the tobacco regulatory framework would change China’s vapor industry beyond recognition, according to Miao. The CTNC would designate and closely monitor suppliers of raw materials such as nicotine liquids, salt and heating coils. This would standardize vapor companies’ procurement procedures of raw materials.

    Because the CNTC handles tobacco research and development, it would likely do the same for vapor products. Instead of multiple private players competing to produce technical breakthroughs, product development would depend on the efforts of a single state-run entity.

    A separation of production and marketing functions would force vapor companies to choose what part of the business to specialize in—product design, R&D or manufacturing, for example. The most lucrative part—sales—would be off-limits, however, as that area is reserved for the CNTC under the monopoly system. Many companies would be relegated to contract manufacturers, a big change for some of the leading e-cigarettes firms whose business has been built on heavy marketing and few assets. A company like Smoore, however, would already meet the definition of “manufacturer” under the cigarette monopoly system, according to Miao.

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    In managing the vapor business, the CNTC would also be considering its role as a generator of tax income. Decisions about e-cigarette volumes and pricing would in part be determined by how these variables affect the targeted government revenue. That means it will be difficult to predict the volume and value of e-cigarettes each year and whether the price of vapor products will be higher or lower than that of cigarettes.

    With CNTC setting profit rates, vapor companies are unlikely to achieve the dizzying margins that they recorded as private entities—a prospect that explains the steep drop in vapor stocks following the Ministry of Industry and Information Technology’s March 22 announcement.

    The draft legislation reportedly faces strong opposition not only from the vapor business but also from public health advocates. The Beijing Tobacco Control Association noted that the STMA has historically failed to protect people against the risks of smoking, saying that the monopoly was “essentially performing the corporate functions of a tobacco corporation.”

    Some see positives in stronger industry oversight, however. According to analyst Xiao Yue, who was also quoted by Bullet Finance, the rules could help tackle the problem of false advertisements in the sector and better protect the rights of consumers.

    The comment period ended April 22. China’s State Council has not indicated when it will decide on the proposed legislation.

    With thanks to Amei Zhang, China analyst at TMA

  • FDA Issues Guidance on User Fees

    FDA Issues Guidance on User Fees

    Photo: Grandbrothers

    The U.S. Food and Drug Administration has issued a draft guidance that helps answer frequently asked questions around tobacco product user fees.

    The draft guidance provides information regarding the submission of information needed to assess user fees owed by each domestic manufacturer or importer of tobacco products and how FDA determines whether a company owes user fees in each quarterly assessment. Starting May 27, public comments related to this draft guidance may be submitted through July 26, 2021.

    The Federal Food, Drug & Cosmetic (FD&C) Act requires FDA to “assess user fees on, and collect such fees from, each manufacturer and importer of tobacco products subject to” the tobacco product provisions of the FD&C Act. Under the calculations required by the FD&C Act, the tobacco products that are subject to user fee assessments are cigarettes, snuff, chewing tobacco, roll-your-own tobacco, cigars and pipe tobacco.

    The FD&C Act provides for the total quarterly assessment to be allocated among specified classes of tobacco products. The class allocation is based on each tobacco product class’ volume of tobacco products removed into commerce. Within each class of tobacco products, an individual domestic manufacturer or importer is assessed a user fee based on its market share for that tobacco product class.

  • Commission Evaluates EU Tobacco Directive

    Commission Evaluates EU Tobacco Directive

    Photo: areporter

    The EU Tobacco Products Directive (TPD) has helped protect the health of European citizens, but there is room for improvement, according to a report released by the European Commission on May 20.

    While lauding the decreases in EU smoking rates since the current directive took effect in 2016, the report argues for stronger enforcement at the national level and better consideration of new market developments, such as novel tobacco products.

    “With Europe’s Beating Cancer Plan, we are proposing bold and ambitious actions to reduce the use of tobacco. We have set a very clear objective—to create a tobacco-free generation in Europe, where less than 5 percent of people use tobacco by 2040,” said Stella Kyriakides, commissioner for health and food safety.

    “This means enforcing EU tobacco legislation more strictly and helping it keep pace with new developments. EU legislation on tobacco has clearly had a positive impact on smoking rates in the EU, but to meet our target, we must set our sights higher. The upcoming reviewing of the Tobacco Products Directive will be an important part of this work.”

    With 27 percent of all cancers attributed to its use, tobacco is the single largest avoidable health risk in the EU, according to the European Commission. Europe’s Beating Cancer Plan aims at creating a “tobacco-free generation” by 2040.

    EU legislation on tobacco has clearly had a positive impact on smoking rates in the EU, but to meet our target, we must set our sights higher.

    Stella Kyriakides, commissioner for health and food safety

    The TPD has put in place comprehensive EU tobacco control policy rules, notably through enlarged combined health warnings, a track-and-trace system, a ban on characterizing flavors, the creation of an ingredients database and the regulation of electronic cigarettes. It has also contributed to the improvement of public health through a decrease in tobacco consumption. The report also concludes that, due to market developments, there is scope for improvement in certain essential areas, such as labeling, assessment of ingredients, cross-border distance sales and novel and emerging products.

    Adopted in 2014, and applicable for most of its provision as of May 2016, the TPD concerns the manufacture, presentation and sale of tobacco and related products and aims at facilitating smooth functioning of the internal market, protecting people’s health—particularly of the youth—and meeting the EU obligations under the WHO Framework Convention on Tobacco Control.

    The May 20 report is supported, among others, by a study on consumer preference and perception of specific categories of tobacco and related products and a support study to the report on the application of the directive. It also draws on SCHEER’s opinion on electronic cigarettes and the most recent Eurobarometer survey on attitudes of Europeans toward tobacco and electronic cigarettes.

  • FDA Publishes List of Marketing Applications

    FDA Publishes List of Marketing Applications

    Photo: alotofpeople

    The U.S. Food and Drug Administration’s Center for Tobacco Products has introduced a new webpage on its site entitled “Deemed New Tobacco Product Application Lists.” The webpage lists and features 17 MS Excel files that include over 6 million deemed new tobacco products for which a premarket application was submitted to the FDA by Sept. 9, 2020.

    A court order provided for a one-year period during which time such products might remain on the market pending FDA review. If a negative action is taken by the FDA on the application prior to Sept. 9, 2021, the product must be removed from the market or risk FDA enforcement. If a positive order is issued by the FDA on a product in the below lists, the product will be listed on the positive marketing orders page and may continue to be marketed according to the terms specified in the order letter.

    The FDA stressed it has not independently verified the information provided by applicants about the marketing status of their products. In addition, the list excludes entries of products from companies that did not provide information on current marketing status of their products to the FDA so that the agency could determine whether the existence of the application could be disclosed. 

    “It is important to note that the lists are not comprehensive lists intended to cover all currently marketed deemed tobacco products that a company generally might manufacture, distribute or sell without risking FDA enforcement,” the FDA wrote on its website.

    Companies that submitted their application by the Sept. 9, 2020, deadline can keep their products on the market for one year pending FDA review.

    If a negative action is taken by the FDA on the application prior to Sept. 9, 2021, the product must be removed from the market or risk FDA enforcement. If a positive order is issued by the FDA on a product in the lists, the product will be listed on the positive marketing orders page and may continue to be marketed according to the terms specified in the order letter.

    The publication of the list likely signals the start of enforcement. The FDA has already issued 111 warning letters to vapor companies in 2021.

    Stakeholders in the nicotine business have been anticipating the FDA list for months. In September 2020, the FDA stated that it would publish a list of vapor companies that had submitted PMTAs by the Sept. 9, 2020, deadline. The news came just one week after several retail groups submitted a letter to the agency asking for a published list of applicants.

  • Netherlands Pressed to Restrict ENDS

    Netherlands Pressed to Restrict ENDS

    Photo: vichie81

    Anti-smoking groups and pharmaceutical company Pfizer are urging the next Dutch government to extend smoking bans and restrict tobacco alternatives such as e-cigarettes, reports Dutch News.

    The outgoing government has increased cigarette prices and limited sales outlets as steps toward a smoke-free generation by 2040, and the number of smokers has gone down from 25 percent to 20 percent in the last five years.

    However, even though there are fewer smokers, the total amount of tobacco being consumed has remained stable. “The remaining smokers are smoking more,” campaigner Wanda de Kanter told Financieele Dagblad.

    De Kanter is skeptical about Philip Morris International’s attempts to market its IQOS tobacco-heating device as a less risky alternative to smoking. The multinational is trying to persuade the Dutch government to relax rules around such products. Health institute RIVM has stated that heated-tobacco still contains cancer-causing substances and can damage lung cells.

    I am concerned about these reports, especially in light of the global World Health Organization’s COP9 summit, which takes place in the Netherlands in November 2021.

    John Dunne, Director-General, UKVIA

    The U.K. Vaping Industry Association (UKVIA) warned that cracking down on smoking alternatives would be counterproductive.

    “To further reduce smoking rates in the Netherlands, legislators should be embracing alternative tobacco products, such as vaping—not introducing stricter regulations, which will only serve to facilitate tobacco consumption,” the group wrote in a press note. “Adopting an evidence-based approach, like that which has been successful in the United Kingdom, will help cement the concept of tobacco harm reduction.”

    “I am concerned about these reports, especially in light of the global World Health Organization’s COP9 summit, which takes place in the Netherlands in November 2021,” said UKVIA Director-General John Dunne.

    “Smoking-related illness still kills many thousands of people each year in both the U.K. and the Netherlands. It is imperative on both governments to do all that they can to reduce this number of smoking-related deaths. They should trust the science and the overwhelming evidence and embrace vaping products and e-cigarettes. They are the most popular and effective nicotine-replacement products on the market.”

  • FDA Invites Comments on IQOS 3 Application

    FDA Invites Comments on IQOS 3 Application

    Photo: Кузнецова Евгения

    The U.S. Food and Drug Administration (FDA) today opened a public comment period on Philip Morris International’s application seeking authorization to market the IQOS 3 electrically heated-tobacco system as a modified-risk tobacco product (MRTP).

    PMI’s application requests the same reduced exposure modification orders granted on July 7, 2020, for the IQOS 2.4 system—the first, and only, electronic nicotine product to be granted marketing orders through the FDA’s MRTP process. To authorize MRTP consumer communications, the FDA’s Center for Tobacco Products is required by law to conclude that a product is appropriate to promote the public health.

    The IQOS 3 device contains a number of technological advancements compared to the IQOS 2.4 device, including longer battery life and quicker recharge between uses. It was authorized for sale in the U.S. via the FDA’s premarket review process on Dec. 7, 2020, having met the standard that permitting its sale is appropriate to protect public health.

    This application underscores PMI’s ongoing commitment to make new innovations available to American adult smokers through the FDA process.

    Jacek Olczak, CEO, PMI

    “PMI is fully committed to a smoke-free future, one where we completely replace cigarettes with scientifically substantiated smoke-free alternatives that are a better choice for adults who would otherwise continue smoking,” said PMI CEO Jacek Olczak.

    “Our commitment to a science-based future is unmatched, having invested more than $8 billion since 2008 on smoke-free products. This application underscores PMI’s ongoing commitment to make new innovations available to American adult smokers through the FDA process; the confidence we have in our science; and our belief that public scrutiny and open engagement with governments is vital to achieving a smoke-free future.”

  • FDA to Discuss Scientific Reviews

    FDA to Discuss Scientific Reviews

    Photo: Grandbrothers

    The U.S. Food and Drug Administration Center for Tobacco Products (CTP) will host a virtual meeting June 11 from 13:00 to 15:30 Eastern Daylight Time. The meeting will discuss the scientific review of tobacco marketing applications received by Sept. 9, 2020. It will focus on the application intake process, review progress and allocation of review resources. There will be time allotted for audience questions as well.

    Matt Holman

    The meeting will feature a presentation from CTP Office of Science Director Matt Holman and include a question-and-answer session. Other Office of Science staff participating in the meeting include Todd L. Cecil, deputy director for regulatory management; Crystal Allard, director for the division of regulatory science and informatics; Joanna C. Randazzo, D.C., acting chief for the science policy branch; and Cristi Stark, director of the division of regulatory project management.

    The CTP Office of Science is responsible for identifying, developing and enhancing the science related to tobacco products, their use, and the resulting morbidity and mortality so that regulatory decisions will have the greatest impact on improving public health.

    The Office of Science provides the scientific support for regulations and guidance, reviews tobacco product applications, evaluates the knowledge basis for regulatory decisions and carries out research to fill the gaps in scientific knowledge related to tobacco product regulation.

    For more information, click here.

  • Ireland: Forest slams outdoor smoking ban

    Ireland: Forest slams outdoor smoking ban

    Photo: be free

    Forest Ireland has slammed a government health plan that aims to extend the smoking ban to outdoor areas.

    “There is no justification for banning smoking in outdoor spaces,” said John Mallon, spokesman for Forest Ireland, in response to the Healthy Ireland Strategic Action Plan 2021–2025, which was published May 11. “Smoking in the open air poses no health risk to anyone other than the smoker. Coming out of the pandemic, the last thing the hospitality industry needs is the threat of smoking being prohibited outside pubs, cafes and bars.”

    The action plan would “promote and oversee implementation of the Tobacco Free Ireland Policy,” which includes “progress[ing] and expand[ing] the creation of tobacco-free spaces in community settings,” along with other targeted actions.

    “Tobacco is a legal product, and smokers have a right to light up in outdoor spaces without restrictions designed to force them to quit,” Mallon said in a Forest press note. “The war on smoking has become a war on ordinary people who just want to be left alone to live their lives as they choose without excessive government intervention.”