Recent Reports Reflect How the FDA Props Up the Cigarette Trade

May 17, 2024

Two subscription-only reports have recently highlighted how the Food and Drug Administration is effectively propping up smoking in the United States. The agency has failed to authorize enough safer nicotine alternatives to comprehensively undermine the combustible tobacco market—a situation that ensures cigarette sales remain hugely profitable.

Goldman Sachs’ “Nicotine Nuggets” report, published on April 22, offers a fascinating glimpse into the tobacco industry through the eyes of retailers. Intended to inform investors, the report should provide public health authorities with valuable insights too.

It paints a clear picture of cigarette sales declining. Dollar sales of regulated cigarettes fell 5.1 percent in the year ending April 6. Many consumers are turning to cheaper alternatives.

The authors “remain cautious” on the short-term outlook for the industry, they write, “given continued economic pressures on the tobacco consumer, with many growing increasingly selective in their purchases, turning to more affordable alternatives, such as 4th tier/deep discount cigs, modern oral tobacco and illicit/gray market disposable vapor products.”

But while aspects of this trend are positive, it could and should be bigger and better, turning into the kind of sustained collapse in sales that doesn’t depend on economic hardship. Millions of people, often on low incomes, continue to smoke because US public health authorities give them no confidence in harm reduction alternatives.

And among those people who do switch, large numbers are compelled to use products that aren’t subject to safety standards and consumer protections. If they want flavored vapes, for example, as most adults who switch do, this is their only option.

The situation means FDA enforcement efforts against unregulated vapes are directly targeting major competitors to cigarettes.

While the report says the true size of the unregulated market “is hard to gauge due to limited visibility,” 82 percent of surveyed retailers expect it to grow further—up from 57 percent three months prior.

This could put people at risk. Adulteration of unregulated products is always a possibility, as the 2019 “EVALI” outbreak demonstrated (first falsely attributed to nicotine vapes, but in fact caused by vitamin E acetate turning up in unregulated THC vaping products).

The rise of unregulated vaping products is a direct consequence of the FDA’s overly restrictive regulations, with an applications process that has failed to authorize a single non-tobacco flavored vape. The agency has effectively ceded control of most of the US vapes market.

It’s a situation that means FDA enforcement efforts against unregulated vapes, and related legislation, are directly targeting major competitors to cigarettes identified in the Goldman report.

The report also reflects the surge in popularity of modern oral nicotine products such as ZYN and on!. Retailers and wholesalers report robust growth in this categoryan 18 percent increase year-on-year. Like vapes, these pouches offer a much less harmful alternative to cigarettes, and their popularity illustrates that people who smoke are willing to switch if given appealing options.

All of this should demonstrate to public health that working with market forces here—responding to what people who use nicotine actually want, rather than imposing regulations that suppress their preferences—is a path to significant progress.

The Barclays “State of Global Tobacco” report, published four days earlier on April 18, further strengthens this argument. It shows how, in the current regulatory climate, cigarettes remain extraordinarily profitable. Manufacturers’ operating margins stand at between 38 and 56 percentfar in excess of other regulated staple goods.

The threat that disruptive technologies pose to these profits is being artificially deflated, when manufacturers of safer nicotine products face onerous and often insurmountable regulatory hurdles. Under the current system, it is easier for new cigarettes to gain FDA authorization than new vapes. Cigarettes remain a highly lucrative venture for tobacco companies, thanks in part to the agency.

Something is very wrong with this picture.

It’s time to embrace a smarter approach, one that harnesses nicotine consumers’ choices—which involves simply telling them the truth about relative risks—to hasten a smoke-free future.

The FDA urgently needs to change course. It should be guided by both science and consumer preferences in creating a landscape where people who smoke have good access to a wider range of much less harmful options.

That approach would incentivize the industry to innovate and develop better reduced-risk products, more rapidly undermining the dominance of cigarettes. Some tobacco companies have already moved in this direction: Philip Morris International (PMI) recently stated that 39 percent of its revenues now come from smokeless products. A landscape where these products weren’t placed at a regulatory and messaging disadvantage compared to cigarettes would force companies to move further and faster.

US public health authorities’ strategy of demonization and prohibition-by-stealth toward products that can save lives has protected the cigarette trade and failed people who smoke. It’s time to embrace a smarter approach, one that harnesses nicotine consumers’ choices—which involves simply telling them the truth about relative risks—in order to hasten a smoke-free future. Instead of swimming against the current, the FDA must adapt its regulatory systems to propel us towards a healthier society.

 


 

Photograph (cropped) by Mike Mozart via Flickr/Creative Commons 2.0

The Influence Foundation, which operates Filter, has received unrestricted grants from PMI, as well as a one-off donation from the author’s employer, the Taxpayers Protection Alliance, to support travel to a harm reduction event. Filter‘s Editorial Independence Policy applies.

Martin Cullip

Martin is an international fellow of the Taxpayers Protection Alliance’s Consumer Center. He lives in South London, UK.

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