Tobacco Forges an Electronic Transformation

While electronic cigarettes show promise as a growing tobacco subcategory, two issues are threatening its widespread growth.

One is the looming threat of government regulation, which most agree is inevitable, but at least a year or two away. The other involves ongoing research intent on poking holes in e-cigs’ claim that they are a safer alternative to conventional cigarettes.

Cigarettes, Not Devices
Health questions aside, electronic cigarettes are an emerging cigarette alternative for millions of Americans. As such, lawmakers are attempting to define precisely what e-cigarettes are and are not, so they can begin to pile on regulations. A uniform standard has yet to be applied. Some states consider e-cigarettes to be tobacco products while others don’t.

For example, some states tax electronic cigarettes at the other tobacco products (OTP) tax rate, while others have an ad valorem tax, which is a percentage of the wholesale price. So if, on electronic cigarettes, a kit costs $50 and a state’s OTP tax rate is 20%, then the tax is $10.

“I think the biggest news is that the FDA indicated that it is going to be treating electronic or alternative cigarettes as cigarettes rather than delivery devices,” said Lyle Beckwith, senior vice president of government relations for NACS. “The concern was that they going to regulate them as drug-delivery devices.”

In April, FDA announced it would not appeal the recent decision by the U.S. Court of Appeals for the D.C. Circuit in Sottera Inc. vs. FDA, stating that e-cigarettes and other products are not drugs/devices unless they are marketed for therapeutic purposes, but that products “made or derived from tobacco” can be regulated as “tobacco products” under the FD&C Act.

FDA officials noted they are “aware that certain products made or derived from tobacco, such as electronic cigarettes, are not currently subject to pre-market review requirements of the Family Smoking Prevention and Tobacco Control Act. FDA is developing a strategy to regulate this emerging class of devices as tobacco products under the Family Smoking Prevention and Tobacco Control Act.”

Beckwith called FDA’s position a responsible one to take. “A lot of questions remain, though. For instance, are they going to be taxed like cigarettes? Are they going to require warning labels like cigarettes? There is a lot of uncertainty, things we just don’t know yet,” he said.