FDA Clarification?

[El Presidente]

Over the past month I have been out of the loop on the challenges to the FDA changes as they apply to cigars. 

Specifically

"premarket approval for new products not substantially equivalent to products on the market before Feb. 15, 2007" 

Can someone in the know fill me/us in as to how this challenge is to take place? 

I am assuming (always dangerous) that the FDA legislation needs to be approved by congress.  Should that be correct, is it a matter of the industry lobbying congress directly, is it a matter of a court challenge, or is it both?

One for the legal fraternity here more likely 

[luv2fly]

As far as I know, which is little, the FDA can impose regs.  Is there an ultimate congressional approval needed, I do not know. Should be an approval process IMHO.  Law Dogs, any insight?  Would ask my wife but her thoughts on tobacco are a bit off............

[Blazer]

I am not a lawyer nor do I play one on TV, but my understanding is that, based on the power given to them by the new regulation, FDA has the right to regulate any way they see fit. Many in congress opposed this power grab and tried to limit their abuse by adding language into the their annual budget approval that stated monies could not be used for enforcement against the tobacco companies.This is why the FDA is mandating user fees from tobacco companies in order to staff this group and support their existence. Tom Price will have some oversight here and since he is a cigar smoker, and go figure a doctor, he maybe able to turn some of this draconian law on its head.

[polarbear]

From what I've been able to gather from many of my more well educated US brethren the changes with FDA regulation are mainly designed to bring cigars, vapes and pipes under the same amount of scrutiny and regulation as cigarettes.
The Family Tobacco Control Act was brought into effect early in the Obama administration and previously excluded cigars, vapes and pipe tobacco
That is no longer the case

Technically, the incoming restriction of premium cigars are not a new lot of regulations, instead they are current regulations that now include a wider array of products

 

Someone with a college degree please feel free to correct me if I'm wrong

[SCgarman]

The FDA will have a new czar under the new Trump administration. Everything on the books currently is subject to change. Let's all keep fingers crossed and say a prayer that these onerous regulations are lifted or at least amended!

[polarbear]

An interesting article hinting at the possible future of any cigar maker wishing to do business in the US (HSA included)

While the article relates to cigarettes, its not hard to see that most of the pitfalls and arguments would apply to cigars given how ignorant the regulatory bodies are about the differences between the two

http://www.theatlantic.com/health/archive/2013/03/how-the-fda-is-keeping-new-cigarettes-off-the-market/273679/

[NSXCIGAR]

20 hours ago, El Presidente said:

Over the past month I have been out of the loop on the challenges to the FDA changes as they apply to cigars. 

Specifically

"premarket approval for new products not substantially equivalent to products on the market before Feb. 15, 2007" 

Can someone in the know fill me/us in as to how this challenge is to take place? 

I am assuming (always dangerous) that the FDA legislation needs to be approved by congress.  Should that be correct, is it a matter of the industry lobbying congress directly, is it a matter of a court challenge, or is it both?

It should be, but the US has a history of establishing departments and regulatory agencies that then do whatever they want. The agency itself was never--incorrectly--ruled unconstitutional (as many of FDR's Great Depression-era agencies were in the 1930s) which gives it what is essentially carte blanche to make any and all rules regarding the goods and services they oversee. 

The FDA has absolutely no authority to ban anything, but they do. The courts will simply side with the FDA using their recommendation as gospel. There is absolutely no legal justification for this but it is not questioned.  Anything and everything that the US gov't wants to ban should at least be done so via an act of congress and probably a constitutional amendment as was done for alcohol in 1919. The congress cannot simply establish an agency that is charged with the authority to ban any substance it sees fit, but that's what it did and does. 

So, the FDA is god and needs no additional laws to sanction its rulings or execute its wishes. The FDA has a very wide authority to regulate anything tobacco via the 2009 TCA. The only area where there may be a legitimate challenge regarding the new regulations could be the categorization of e-cigarettes and vaping devices as tobacco products. This may be a challengeable aspect of the new regulations in the courts. But as for tobacco, the FDA is judge, jury and executioner.

As far as the pre-market approval, my understanding is that it encompasses products introduced between 2/15/07 and 12/31/16. There will be some kind of priority approval process for those items, hence the huge surge of new NC brands and vitolas this year. After 1/1/17, all new products will need to submit to the full FDA approval process which can cost several hundred thousand dollars per product (I'm assuming per vitola) and take years, with approval being completely arbitrary and not guaranteed at all. Lots of money to spend for a crapshoot.

[polarbear]

2 minutes ago, NSXCIGAR said:

judge, jury and executioner.

As far as the pre-market approval, my understanding is that it encompasses products introduced between 2/15/07 and 12/31/16. There will be some kind of priority approval process for those items, hence the huge surge of new NC brands and vitolas this year. After 1/1/17, all new products will need to submit to the full FDA approval process which can cost several hundred thousand dollars per product (I'm assuming per vitola) and take years, with approval being completely arbitrary and not guaranteed at all. Lots of money to spend for a crapshoot.

From what I've been told, the expected numbers are:
$250k per vitola per line
Process time is expected to be anything from 6-24months at best per vitola per line
All approval fees are required upfront and are non refundable

Essentially, if HSA wanted to have just the Cohiba Marca sold in the US it would cost $4.5mil US and take up to 30 years to have all the sticks approved.
That's the best case scenario.

[Blazer]

10 hours ago, polarbear said:

Technically, the incoming restriction of premium cigars are not a new lot of regulations, instead they are current regulations that now include a wider array of products

 

Yes and no. There have always been restrictions on tobacco, primarily cigarettes, however the new power given to the FA stems from the Family Prevention Tobacco Control Act approved by Obama in 2009. While the act was designed to limit exposure of marketing & advertising to children, the FDA has done a huge over reach by going after large cigars, vapes, hookas and even non-tobacco liquids used in those devices. As it always does, FDA is trying to play judge, jury and executioner and wants the power based strictly in their shop with outside agencies powerless to do much about it, again, hopefully this will change with the new administration. 

I read an interesting article a while back that had a bit of a conspiracy theory to it, and hey who doesn't like a good conspiracy theory? The article suggested that big tobacco helped FDA shape these new regulations as a way to limit these upstart boutique companies that were eroding their market shares. The article suggested by placing onerous regulation on these little guys, who may not have the money to gain approval for their products, many that have appeared since 2007, they would be forced to sell off their brands to the large houses who could afford the user fees to get all those products approved becoming even larger than they already are. Whether true or not, there has been confirmation that big tobacco lobbyists did work with FDA to draft some of the regulations including what share of the operating expenses large cigar companies should pay to support the enforcement by the FDA over them.

[wabashcr]

13 hours ago, El Presidente said:

Over the past month I have been out of the loop on the challenges to the FDA changes as they apply to cigars. 

Specifically

"premarket approval for new products not substantially equivalent to products on the market before Feb. 15, 2007" 

Can someone in the know fill me/us in as to how this challenge is to take place? 

I am assuming (always dangerous) that the FDA legislation needs to be approved by congress.  Should that be correct, is it a matter of the industry lobbying congress directly, is it a matter of a court challenge, or is it both?

One for the legal fraternity here more likely 

First of all, as others have noted, congress does not need to approve the new FDA regulations.  Congress gave the FDA authority to regulate any tobacco products as it sees fit under the Family Smoking Prevention and Tobacco Control Act of 2009.  Congress passed this act as a response to a Supreme Court ruling against the FDA, and in favor of some tobacco companies, saying that the FDA didn't have congressional authority to enforce their regulations.  So the act essentially closed that loophole and gave the FDA carte blanche w.r.t tobacco.

There are a couple of ways the premium cigar companies are trying to challenge the ruling.  First is via suing the FDA.  The IPCPR, CRA and CAA (all cigar advocacy groups) have filed a joint lawsuit against the FDA. Other manufacturers have stated their intentions to file their own, separate suits.  I am not an attorney.  But my guess is this route is a long shot.  The FDA is certainly not above losing in court, but they craft their regulations knowing full well they will have to survive legal challenges in the courts.  The lawsuit's claims of the FDA being arbitrary, capricious, etc., are not likely to have any success.  Same with the first amendment claims.  The courts have routinely ruled in the FDA's favor in light of similar challenges in the past.

The other possible method of challenging the regulations is to have congress exempt premium cigars from the FDA's control.  There are a couple of ways in congress to attempt to do this.  One is by passing a new law.  Currently HR 662 in the House and S 441 in the Senate are under consideration, but have been circulating for a couple years without gaining enough traction to get out of committees.  There's thought that with the FDA's ruling, there will be more urgency to move these proposals toward a vote.  No guarantees.  There was also an attempt to get a premium cigar exemption included in an omnibus appropriations bill (essentially a bill that funds the government, including the FDA).  However, with a Republican congress and an incoming Republican president, there's no need to pass an omnibus bill to keep things running.  They'll work out their own budget when congress meets again.  It's possible that could still include an exemption for premium cigars, but nobody really knows at this point.

There's still a lot of uncertainty about how the FDA will go about enforcing these new regulations.  It seems like their intent is that most premium cigars will be approved via the substantial equivalence method, which is a lot cheaper, less burdensome, and quicker than the process for new product approvals.  But it's still yet to be seen how this will unfold.  I think a lot of manufacturers are either going about business as usual or are stuck in a holding pattern until clarification comes, either from the FDA or the courts.  

One often overlooked factor in all of this is that the two largest manufacturers who sell in the US, Altadis and General Cigar, are both at least to some degree supportive of the FDA's regulations.  They have enough legacy products grandfathered in, as well as the resources to deal with the regulations for new products.  In their view the regulations merely the cost of the FDA eliminating many of their competitors.  

[PigFish]

Another huge step forward for large government and crony capitalism! Ain't life grand? Isn't it heartening to see companies 'want' government regulations to put smaller business out of business???

@wabashcr is largely correct in what I have read of his post. One should read the act.

The FDA is only restricted by two points. They cannot force the nicotine content in tobacco products to zero, and they cannot 'outright' ban tobacco. They can effectively ban tobacco via the regulatory process, as long as it does not appear to be an 'outright' ban.

All hail the black market! -Piggy

[El Presidente]

Thanks gents. That clears it up for me.

What a kick in the guts for smaller manufacturers/producers. 

[NSXCIGAR]

6 hours ago, Blazer said:

I read an interesting article a while back that had a bit of a conspiracy theory to it, and hey who doesn't like a good conspiracy theory? The article suggested that big tobacco helped FDA shape these new regulations as a way to limit these upstart boutique companies that were eroding their market shares. The article suggested by placing onerous regulation on these little guys, who may not have the money to gain approval for their products, many that have appeared since 2007, they would be forced to sell off their brands to the large houses who could afford the user fees to get all those products approved becoming even larger than they already are. Whether true or not, there has been confirmation that big tobacco lobbyists did work with FDA to draft some of the regulations including what share of the operating expenses large cigar companies should pay to support the enforcement by the FDA over them.

While I don't know if this phenomenon occurred in this case, it quite common and is referred to as "regulatory capture" in the field of political economy. Regulations of any kind generally insulate the established interests from competition by newer, smaller or less established ones. Large legal departments needed for compliance with regulations naturally act as a barrier to entry for newer, less capitalized firms. The new approval process will serve to basically stifle market-disrupting innovation.

Since vaping has become a preferred method for many people to quit smoking cigarettes I'm sure the cigarette companies aren't too perturbed at these new regulations which will essentially torpedo much of the vaping market segment as 90% of today's vaping technology has emerged since 2007.