T H E I N D U S T R Y A U T H O R I T Y O N T O B A C C O R E T A I L I N GOfficial Publication of the International Premium Cigar & Pipe Retailers Association (IPCPR) April 2013

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48 SMOKESHOP April 2013

In recent months, the Food and DrugAdministration (FDA) has comeunder increased scrutiny for its eval-

uation of so-called “new tobacco prod-ucts.” Although FDA must pre-approveany such products that are introducedafter March 2011, FDA has not acted onany of these new product applications,instead burying the applications under amountain of bureaucracy. The result forthe industry is a significant barrier toeven minute changes in products, suchas changing the paper ink on a cigarette,to new companies seeking to enter thecigarette market and to existing compa-nies seeking to introduce innovativenew products.

STATUTORY BACKGROUNDAs most in the industry know, in 2009Congress gave FDA authority under theFamily Smoking Prevention and TobaccoControl Act to regulate cigarettes, roll-

your-own tobacco and smokeless tobacco.Under Section 910 of the Tobacco ControlAct, a “new tobacco product” is definedas one that was not commercially market-ed in the United States as of February 15,2007, or that has changed in any way sinceFebruary 15, 2007. In general, new tobac-co products cannot be commercially mar-keted without an order from FDA.

There was a limited window for newtobacco products that were commerciallymarketed in the United States beforeMarch 22, 2011, so long as the manufac-turer submitted a report before March 22,2011 describing how the new product is“substantially equivalent” to a productcommercially marketed before February15, 2007. Products that fall within thislimited window are known as “provi-sional products.” Products commerciallymarketed as of February 15, 2007 areknown as “grandfathered products” or“predicate products.”

In order to show that the products are“substantially equivalent,” the manufac-turer must demonstrate that there are nodifferences between the two products, orthat any differences between the productsdo not raise different public health ques-tions. In any event, if the manufacturersubmitted the required report, the provi-sional product may be marketed withoutFDA approval unless and until FDAissues an order indicating that the provi-sional product can no longer be sold.

As noted above, products that arefirst commercially marketed in theUnited States after March 22, 2011 mustreceive FDA pre-approval. There arethree pathways to FDA approval of theseproducts. First, the manufacturer cansubmit a report showing that the newproduct is substantially equivalent to agrandfathered product. This report mustbe submitted at least 90 days beforeintroducing the product to market. Thisprocess was intended to be the moststreamlined and simplest to satisfy.

Second, the manufacturer can obtainan exemption from the substantial equiv-alence report by showing that the newproduct has been modified by adding ordeleting a tobacco additive, or byincreasing or decreasing the quantity ofan additive, that the modification is aminor one, and that permitting the newproduct is appropriate for the protectionof public health.

Third, the manufacturer can submit amore detailed report regarding the prod-uct’s health risks, components, additivesand manufacturing process, and FDAmust find that marketing the product isappropriate for the protection of publichealth. For this more complicated andcumbersome process, FDA must act onreports within 180 days.

New tobacco products that are soldwithout the required FDA order aredeemed to be adulterated under Section902 of the Tobacco Control Act and can-

REGULATION FOCUS>

The Big ChillThe FDA’s new tobacco product authority is a significant barrier toproduct changes, market entry, and innovation. Of the approximately3,500 “substantially equivalent” product applications submitted tothe agency since 2009, the FDA has issued exactly zero rulings.>BY TROUTMAN SANDERS TOBACCO TEAM

Left: Startup cigarette maker Hestia Tobaccowas told that an FDA decision on its requestto sell a new brand of all-natural cigarettescould take years. After two years attemptingto provide FDA with required information,Hestia gave up, and will launch Hestia littlecigars in April 2013 instead.

50 SMOKESHOP April 2013

not be legally manufactured or sold.Sales of adulterated tobacco productscan be penalized by up to one yearimprisonment and up to a $1,000 fine, aswell as a court injunction. Adulteratedtobacco products also can be confiscatedby the government.

FDA’S EXERCISE OF ITS NEWTOBACCO PRODUCT AUTHORITYThe limited February 2007 to March 2011window for provisional products causedtobacco product manufacturers to intro-duce many new products, or to makechanges to existing products, before theMarch 2011 deadline. So long as the man-ufacturer submitted the required report,those products can continue to be sold.There are apparently thousands of prod-ucts that fall in this category. FDA has indi-cated that it is not currently evaluating anyof those products, instead reserving itsresources in this area for evaluating prod-ucts commercially marketed after March2011 that require FDA pre-approval.

Manufacturers that have sought tointroduce new products since March 2011,

or to change existing products, are in amuch more difficult position. Again, thoseproducts require pre-approval before theycan be sold, and FDA apparently has notacted on any of those applications, someof which have been pending for almosttwo years, and 90 percent of which have

been pending for more than a year.Further complicating matters is that

FDA has taken a broad view of what con-stitutes a new tobacco product. If, forexample, a manufacturer wanted to mar-ket “Brand A” cigarette as “Brand B,”without changing the cigarette in anyway other than the name, FDA takes theposition that this is a new tobacco prod-uct requiring FDA approval. FDA alsotakes the position that even minorchanges to a product require FDAapproval. If, for example, a cigarettemanufacturer had its filter supplier goout of business, necessitating a supplierchange, FDA takes the position that anychange to the filter, no matter howminute, requires FDA approval. This sit-uation presents obvious challenges in the

context of a supplier potentially seekingto extract super-competitive prices,knowing the manufacturer cannot readi-ly change. FDA also must pre-approvenew manufacturers seeking to sell newproducts, as well as existing manufactur-ers seeking to introduce different andpotentially innovative products.

The ostensible purpose of the newtobacco product requirements is toensure that new products are not moreharmful than products sold beforeFebruary 2007, which in itself is a seem-ingly arbitrary date. In any event, it isdifficult to understand how a months oryears-long review process is needed todiscern that the same product marketedunder a different name is more harmful.It is also difficult to discern how minutechanges to, for example, a tobacco blendor paper ingredients could significantlyalter the risk profile of an admittedlyharmful product.

PUBLIC SCRUTINY OF FDA’S NEWTOBACCO PRODUCT AUTHORITYMore recently, FDA has come under firefor its failure to take action on theseapplications. Articles from theAssociated Press and The Atlantic havehighlighted FDA’s failure to act on theseapplications, the end result of which hasbeen to freeze the cigarette market as ofMarch 2011. New cigarette manufactur-ers effectively have been barred fromselling their products. Existing manufac-turers effectively have been barred fromintroducing new products, or even mak-ing changes to existing products.

Lorillard Tobacco highlighted theseconcerns in a public petition urging FDAto take action on the new tobacco prod-ucts. Lorillard correctly pointed out thatthe Tobacco Control Act’s requirement tosubmit substantial equivalence reports90 days before market introductiondemonstrates Congress’ intent that FDApromptly review those reports. Lorillardalso noted the Tobacco Control Act’srequirement that FDA act, within 180days, on more detailed reports regardinga product’s health risks suggests thatFDA’s review of less significant changesshould be more streamlined. It stands toreason that FDA’s review of relativelyinsignificant product changes should bequicker than FDA’s more rigorous

REGULATION FOCUS>

>If a manufacturer wanted to market “BrandA” cigarette as “Brand B,” without changingthe cigarette in any way other than the name,FDA takes the position that this is a newtobacco product requiring FDA approval.

Hestia Tobacco’s Long, Bumpy Road to MarketDavid Sley, chief operating officer at Hestia Tobacco (www.hestiatobacco.com),thought he was well on the way to bringing his startup organic craft cigarettebrand to market. Sley, a 28-year-old financial worker in Chicago, set out in 2010 tocreate the purest cigarette possible, using only flue-cured all-natural tobacco leaf,additive-free paper, and a natural non-toxic filter. “We savor the tastes and aro-mas of well-aged tobacco,” he said in a Tobacco International interview. Backedby investors, Sley had no problem sourcing stem- and seed-free organic Virginiatobacco, non-toxic filters, and even a natural paper with algae flame retardants,rather conventional ones containing vinyl acetate compounds. But from day one,the FDA was an obstacle, taking a year alone to approve the brand name (Hestiais a Greek mythological figure who was sister to Zeus and goddess of the com-munal fire), failing to approve the alternative fire-safe paper, never answeringwhether cedar aging is a “characterizing flavor,” and requiring a mountain ofadditional—and largely impossible to complete—documentation to support thebrand’s substantial equivalence report. Sley, seeing no light at the end of theever-changing tunnel, now and plans to launch Hestia as a filtered little cigarwhich, at least for now, escapes the FDA’s arbitrary and fickle jurisdiction. —Editor

review of more substantial changes, yetapparently none of the substantial equiv-alence filings have been approved withinthe 180-day window. Lorillard urgedFDA to take action on the new productswithin 90 days, and if FDA fails to do so,Lorillard urged FDA to deem those prod-ucts as “provisional” products that arenot subject to pre-approval.

Unfortunately, FDA has not yetresponded to these more urgent calls foraction to approve new products.

HOW WILL FDA’S NEW TOBACCOPRODUCT AUTHORITY APPLY TOOTHER TOBACCO PRODUCTS?As noted above, FDA’s initial authorityunder the Tobacco Control Act was limit-ed to cigarettes, roll-your-own tobaccoand smokeless tobacco. However,Congress also gave FDA the authority,through the issuance of regulations, toassert the same authority over othertobacco products, including cigars, e-ciga-rettes and pipe tobacco. FDA has indicat-ed that it intends to issue the draft regula-

tions by April 2013, although FDA’s previ-ous self-imposed deadlines have slipped.

How will FDA’s new tobacco productauthority apply to other tobacco products?The answer is difficult to discern, as FDAhas been notoriously tight-lipped on thecontent of the proposed regulations.Presumably FDA will not apply the exist-ing requirements to these other tobaccoproducts, since any product introduced orchanged since 2007 could not be sold with-out FDA approval unless the product wassold before March 2011, and the manufac-turer submitted the required substantialequivalence reports before March 2011.Presumably, manufacturers did not sub-mit those reports in March 2011 becausethey were not subject to FDA authority atthat time. The industry remains hopefulthat FDA will implement a common senseapproach that does not disrupt sales ofproducts that are currently on the market.

WHAT WILL FDA DO NEXT?In response to public criticism, FDA haspromised to expedite its review of new

products. And while FDA has finallybegun to correspond with manufacturersof new products, approximately 500 ofthese products still remain in the pipeline.Nor has FDA indicated that it will expe-dite its review of seemingly straightfor-ward applications involving a simplename change or minor ingredient change.Instead, FDA has apparently adopted a“first in, first out” approach that likelyallows simpler approvals to languishbehind more complicated applications.And, if FDA asserts new product authori-ty over cigars, pipe tobacco and electroniccigarettes, the potential for a bureaucraticlogjam increases exponentially.

In the meantime, the industry contin-ues to press FDAto take action. Ultimately,the issue could be decided in court.

Troutman Sanders Tobacco Team,Troutman Sanders LLP, 1001 HaxallPoint, Richmond, Va. 23219, Tel: (804)697-2206, Fax: (804) 697-1339, Web:www.troutmansanders.com, Email:bryan.haynes@troutmansanders.com.

April 2013 SMOKESHOP 51