Tobacco harm reduction advocates have urged Philippine President Rodrigo Duterte to revoke the foreign funding received by the Food and Drug Administration (FDA), reports The Manila Times. The groups are concerned that the funds will unduly influence the drafting of the guidelines for the regulation of heated-tobacco products (HTPs).
“We appeal to President Duterte to rescind the foreign grants received by the Philippine Food and Drug Administration, which cast a dark cloud on the agency’s role as an independent regulator and protector of public health,” said Anton Israel, president of the Nicotine Consumers Union of the Philippines.
The FDA has admitted that it received grants from foreign anti-tobacco groups The Union and Bloomberg, which advocate prohibition for all tobacco products, including e-cigarettes and HTPs.
Israel said the FDA receiving money from the said groups was a violation of the Code of Conduct and Ethical Standards for Public Officials and Employees.
Clarisse Virgino, the Philippines’ representative to the Coalition of Asia Pacific Tobacco Harm Reduction Advocates, said the funds received from anti-vaping groups would jeopardize the FDA’s treatment of tobacco harm reduction products such as e-cigarettes and HTPs.
“E-cigarettes and heated-tobacco products are not pharmaceutical products and should not be regulated as such. What we need is a fair and risk-proportionate regulation that will encourage smokers to reduce their exposure to smoke, which is the one that causes all these diseases,” she continued.
The groups called for impartial and reasonable regulations based on scientific evidence.
By Nicholas A. Ramos, Agustin E. Rodriguez and Bryan M. Haynes
Online businesses selling electronic nicotine delivery systems (ENDS) to consumers must contend with a “patchwork quilt” of state laws. This patchwork of laws creates significant regulatory uncertainty and risk for businesses selling online in this space. There are many legal issues facing online retailers, like bans or restrictions on “flavored” tobacco products, minimum age and age-verification requirements, and state and local licensing and tax requirements. This article discusses some of the key legal issues associated with selling ENDS to consumers online and highlights proposed state legislation that may impose more requirements on the industry.
State licensing
Online retailers looking to comply with the myriad of state laws should first look at the states in which consumers purchase their products and, for each state, identify potentially applicable licensing laws. States may require licensing or registration under tax laws, health and welfare laws, and/or general business laws before online retailers may sell to consumers in their states. Idaho, for example, requires licenses from its Department of Health and Welfare to prevent youth access to tobacco products and electronic smoking devices. Washington, D.C., however, requires a basic business license from its Department of Consumer and Regulatory Affairs.
In addition, online retailers of ENDS should determine whether state licensing law definitions actually cover their products. While states have required licenses for the sale of tobacco products for years, they have only recently added definitions of ENDS to their licensing statutes. ENDS may be covered under licensing laws either because the category is explicitly defined, or the definition of tobacco products is broad enough to cover ENDS products.
Online retailers should also determine whether state licensing laws actually cover remote sales. Some states only require licenses for retailers that have a “place of business” or “business location” in their states. Hawaii, for example, is unique in that it requires ENDS retailers to obtain a registration from the Hawaii Attorney General. At this time, however, the Attorney General only requires retailers to register if they are located in the State, which excludes out-of-state online retailers.
It is also important to keep in mind that most state laws regulating ENDS were only passed within the last 3-5 years. Many of those new laws simply amended existing tobacco product laws, and legislatures may not have carefully incorporated those changes in all of the critical statutory sections. Consequently, there are often situations in which the legal requirements are not clear. In those cases, it may be prudent to reach out to regulators to better understand how they interpret their statutes.
State taxes
When online retailers face ambiguous licensing laws, it may be helpful to look to the purpose of those laws. For example, if licenses are required by a tax department, the online retailer should look at the tax statute to determine who and what is subject to taxes. Many states require licenses to facilitate payment of sales or excise taxes.
Almost all states impose sales and use taxes on remote sales of products. For out-of-state online retailers, most states follow the analysis outlined in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), which generally permits a state to impose sales tax on an out-of-state seller where the seller has a “substantial nexus with the taxing State.” Some states require a business or tax registration to file returns and pay sales taxes.
Missouri, for example, does not tax or regulate ENDS as tobacco products, but it requires online retailers to obtain a retail sales tax license for sales tax purposes. Furthermore, states typically only require sales taxes from remote sellers when a certain sales volume or revenue threshold has been met. Virginia, for example, requires a remote seller to register for the collection of sales and use tax if it received more than $100,000 in gross revenue from sales in Virginia or engaged in 200 or more separate retail sales transactions during the previous or current calendar year.
In addition, like state licensing laws, the applicability of excise taxes to ENDS products sold online can depend on the specific product definitions in the relevant statutes. Some states’ excise tax statutes explicitly define and include ENDS products, while others attempt to fit those definitions into terms like “tobacco products” or “other tobacco products.” Utah, for example, explicitly taxes “electronic cigarette substances,” “prefilled electronic cigarettes,” “alternative nicotine products,” “nontherapeutic nicotine device substances,” and “prefilled nontherapeutic nicotine devices” in its Electronic Cigarette and Nicotine Product Licensing and Taxation Act.
Some states explicitly exclude ENDS from definitions that would subject them to excise taxes. Texas, for example, provides defines taxable “tobacco products” to exclude e-cigarettes, or any other device that simulates smoking using a mechanical heating element, battery, or electronic circuit to deliver nicotine or other substances through inhalation.
It is also important to keep in mind that states tax various parts of ENDS products in different ways. Virginia, for example, imposes an excise tax on liquid nicotine products at the rate of $0.066 per milliliter of liquid nicotine, but the State does not impose taxes on other components of ENDS. Washington, D.C., on the other hand, taxes vapor products by making the tax rate equal to the cigarette tax, expressed as a percentage of the average wholesale price of a pack of 20 cigarettes.
Finally, if online retailers determine state excise tax laws apply to their ENDS products, they must still determine who is required to pay those taxes and when they are due. For example, some states, like Kentucky, require that excise taxes be paid by the licensed distributor that first possesses the ENDS products for sale to a retailer or unlicensed person in the State.
Potential penalties & enforcement climates
Online retailers facing ambiguous licensing statutes should consider two major factors in their risk analysis—statutory penalty provisions and enforcement climate.
Penalties for operating without a license can be steep. In Idaho, for example, it is a criminal offense to sell ENDS without a permit issued by the Department of Health and Welfare. In addition, a court may impose a fine of $1,000 per day beginning the day following the date of citation as long as the illegal ENDS sales continue. In other states, however, penalties are relatively low. In Montana, for example, failure to obtain a vapor product license is punishable by a civil penalty of $100.
Finally, online retailers should consider the enforcement climate surrounding regulation of ENDS products in certain states. For example, Attorneys General in various states have filed lawsuits against an ENDS manufacturers and online retailers. Although these cases do not directly implicate licensing or tax issues, enforcement actions by Attorneys General may suggest a more aggressive enforcement climate when it comes to licensing or tax violations.
Proposed state legislation
Online retailers should expect upcoming state legislative sessions to be fairly active with regard to regulation of ENDS products. In Colorado, for example, there is no current nicotine products or ENDS tax or licensing scheme. But Colorado HB20-1472 established a voter referendum on whether there should be a tax on “nicotine products,” which would include “products that contain nicotine and that are ingested into the body.”
In Georgia, the legislature is considering a bill that will amend its tax and revenue laws “to provide for excise taxes to be levied on certain alternative nicotine products and vapor products” and to “require licensure of importers, manufacturers, distributors, and dealers of alternative nicotine products or vapor products.” HB 1229.
South Carolina is also considering a bill (H.4714) that will “provide for the levying, assessment, collection, and payment of certain taxes on vapor products.”
These are just a few examples of states that are considering ways to regulate and tax ENDS products. Therefore, it is important for online retailers to incorporate accurate state legislative tracking into their compliance strategies.
Conclusion
As with any other new technology, the law is often playing catch up with new business models and products, like the online sale of ENDS products. But given the issues discussed above, online retailers should prioritize compliance with varying state laws to reduce the risks of enforcement action.
Nicholas A. Ramos is an associate with Troutman Pepper. His practical advice enables clients to navigate regulatory compliance and licensing issues, complex investigations, and high stakes enforcement actions that arise under state and federal law.
Agustin E. Rodriguez serves as counsel for Troutman Pepper and has almost two decades of experience counseling tobacco companies in-house and in private practice on tobacco product regulation, taxation and multi-jurisdictional state and local enforcement issues.
Bryan M. Haynes is a partner with Troutman Pepper who specializes in tobacco industry regulatory compliance and enforcement matters. He efficiently assists clients in complying with regulatory obligations and managing risk, consistent with clients’ business objectives.
The U.S. Food and Drug Administration (FDA) has released a draft guidance for tobacco product perception and intention (TPPI) studies. The studies must be submitted as part of a modified risk tobacco product application, a premarket tobacco product application or a substantial equivalence report.
The guidance is aimed at helping applicants design and conduct the studies that can be used to assess, among other things, individuals’ perceptions of tobacco products, understanding of tobacco product information (e.g., labeling, modified risk information), and intentions to use tobacco products.
It is possible for a TPPI study to also include an actual use component (e.g., an actual product utilized in a simulated use setting or a real environment of use); however, a discussion of actual use research is beyond the scope of this draft guidance, according to the FDA.
This draft guidance addresses the following scientific issues for applicants to consider as they design and conduct TPPI studies to support tobacco product applications:
Developing TPPI study aims and hypotheses
Designing quantitative and qualitative TPPI studies
Selecting and adapting measures of TPPI study constructs
Determining TPPI study outcomes
Selecting and justifying TPPI study samples
Analyzing TPPI study results
The agency is accepting public comments related to the draft guidance through Dec. 28. The application deadline was Sept. 9 for deemed new tobacco products that were on the market as of Aug. 8, 2016, and the FDA said it intends to make a public list of what products were submitted on time.
This year’s conference brings together a diverse group of stakeholders, including public health advocates, researchers, manufacturers, lawyers, consumer interest groups, entrepreneurs, governmental agencies and others to discuss effective regulation across the broad spectrum of tobacco and nicotine products in the United States.
Panelists will examine the public health impact of regulating nicotine content across the broad spectrum of tobacco and nicotine products; the ways in which policies can help minimize users’ health risks; and the mitigation of potential unintended consequences.
In the run up to the revision of the European Tobacco Products Directive (TPD), scheduled for 2021, the European Tobacco Harm Reduction Advocates (ETHRA) have launched a major survey to examine nicotine use in Europe.
Among other questions, the poll asks adult consumers about their views on possible regulatory changes. How would users react to increased taxes, flavor bans or to the legalization of snus? Is there a need for greater access to product information? Would lifting the container restriction on e-liquids have any impact? What is missing for people who want to quit smoking?
Available in Danish, Dutch, English, Finnish, French, German, Italian, Portuguese, Spanish and Swedish, the questionnaire will be open until Dec. 31, 2020.
In addition to evaluating the TPD, the European Commission is preparing proposals to amend its Tobacco Excise Directive to harmonize definitions and tax treatment of new products, including vapor, in 2021.
The European Parliament will debate the proposed TPD changes in May 2021.
The ETHRA offers tobacco harm reduction advocates in Europe a platform for exchanging information and sharing experiences.
The U.S. Food and Drug Administration (FDA) has outlined the next steps for products with a submitted premarket tobacco product application (PMTA) now that the Sept. 9 deadline has passed.
According to the FDA, the process will consist of three phases. Phase one is acceptance of the application. Phase two is notification or filing, and phase three consists of review and action. The FDA website notes that “the PMTA process also includes a fourth phase for post-market reporting.”
The FDA plans to prioritize enforcement against electronic nicotine-delivery system (ENDS) products that are still being sold and that don’t have PMTAs submitted as well as any other “deemed new tobacco product” that does not have a submitted PMTA.
The FDA will not enforce the premarket review requirement for premium cigars.
Germany’s Upper House has approved legislation that will further restrict tobacco advertising, according to Xinhua.
The legislation will begin to take effect in 2021: Movies will not be allowed to advertise tobacco products and the distribution of free samples outside specialty stores will not be allowed. Beginning in 2022, outdoor advertising for conventional tobacco products will be banned. From 2023, the ban will include tobacco heaters, and in 2024, the ban will include e-cigarettes.
Germany is currently the only European Union country to still allow tobacco advertising in public spaces.
“Many studies prove that tobacco advertising increases the attractiveness of tobacco products, in particular among children and young people,” said Klaus Reinhardt, president of the German Medical Association.
The ban is aimed at protecting public health and the health of young people.
Bidi Vapor has submitted a premarket tobacco product application (PMTA) to the U.S. Food and Drug Administration (FDA) for its Bidi Stick, according to Kaival Brands Innovations Group, the exclusive worldwide distributor of the Bidi Stick.
The application details 11 flavored varieties with nicotine concentrations of 6 percent weight/volume as part of the company’s proprietary e-liquid formulation.
Bidi Vapor’s application runs more than 285,000 pages, providing science-based evidence demonstrating that Bidi Sticks are “appropriate for the protection of public health.” The applications further support the public need to provide options to adult smokers of combustible tobacco products.
“Both Kaival Brands and Bidi Vapor fully support proper regulation of the category so that all ENDS products meet the highest manufacturing, safety and marketing standards for adult smokers, with the ultimate goal of improving the public health,” said Niraj Patel, president and CEO of Kaival Brands. “We look forward to working with Bidi Vapor as they work with the FDA to construct its regulatory policy based on science and facts.”
The U.S. Food and Drug Administration (FDA) has accepted a premarket tobacco product application (PMTA) from AMV Holdings.
Since receiving the notification, AMV has filed an additional 104 PMTA submissions accounting for more than 5,000 stock keeping units. All these submissions reflect the same file and information structure as the PMTA for which AMV has already received its acceptance for review notification.
“We are proud of our team and their achievement in completing a significant step in a rigorous regulatory process and look forward to the FDA’s review of all our products,” said Mark Kehaya, chairman of AMV Holdings, in a statement.
“We view this multi-year effort as another milestone in leading with science and quality in the vapor industry. We hope that the FDA’s PMTA process will increase consumers’ trust in the industry and the products we offer give combustible tobacco users a reliable alternative.”
AMV Holdings, which includes the brands Alohma, Kure, Madvapes, ELB Labs, and Wholesale Vaping Supply, is a leading manufacturer and retailer of electronic nicotine delivery systems in the United States and Europe.
AMV currently operates 113 retail locations in the United States through a combination of corporately owned, franchised and licensed stores and a further seven stores in Germany and Ireland. AMV manufactures e-liquids through ELB Labs, to distribute to their brick and mortar vape stores, online (B2C) e-commerce platforms, and third-party vape stores for consumers who want to switch from smoking cigarettes to vaping/e-cigarettes.
“It’s exciting to know that we will be able to continue to offer our guests Prime e-liquids in all our retail locations,” said Sam Salaymeh, president of AMV Holdings. “The process with the FDA has enabled us to document our philosophy of providing high-quality standards and superior chemistry of our Prime e-liquid line, that is something we are all proud of. We look forward to providing our guests with the best service and products in the industry for many years to come.”
The U.S. market for nicotine products is set to change dramatically after the Sept. 9 deadline to submit premarket tobacco product applications (PMTAs) to the Food and Drug Administration (FDA).
If a company does not submit a PMTA by the deadline, it must remove its products from the market. If the product was “verifiably” on the market prior to Aug. 8, 2016 (the FDA’s cutoff for new products) and submitted a PMTA application before Sept. 9, the product can stay on the market for up to a year or until the FDA approves or denies the PMTA. For any PMTA submitted after today’s deadline, a product may not be marketed until the FDA grants a marketing order, according to the FDA.
Because the cost of complying with the regulations is staggeringly high, experts expect that many manufacturers will fail to clear the hurdle, and the e-cigarette market will be left largely to the tobacco giants.
Although the FDA estimates a single PMTA costs anywhere from $117,000 to $466,000, those figures are considered low by the industry. The Rocky Mountain Smoke-Free Association estimates a single PMTA costs between $8.6 million and $11.1 million per stock keeping units. It forecasts 14,000 small vape businesses employing 166,000 workers will be destroyed, representing $24 billion in economic activity.
Deep-pocketed Philip Morris International, by contrast, already has four separate PMTAs approved: one for its IQOS heated-tobacco device and three for flavors of its disposable HeatSticks.
Vapor advocates have cautioned that millions of vapers who had used e-cigarettes to quit smoking will revert to combustible cigarettes, which are generally believed to be riskier than vapor products.
As of Aug. 31, the FDA had received applications for around 2,000 deemed products, of which around 40 percent have been resolved, according to Mitch Zeller, director of the agency’s Center for Tobacco Products.
Receiving a marketing authorization to sell vapor products isn’t the end of the process for manufacturers, as described by Broughton Nicotine Services’ Yvonne Wilding in Tobacco Reporter’s September issue. The FDA requires companies to conduct post-market surveillance and studies to determine the impact of the marketing orders on consumer perception, behavior and health, and to enable the FDA to review the accuracy of the determinations upon which the orders were based.
These post-market requirements include a rigorous toxicity study using computer models to help predict potential adverse effects in users. The orders also require the company to monitor youth awareness and use of the products to help ensure that the marketing of the product does not have unintended consequences for youth use.