Frank Hinton is not afraid to speak his mind. Whether he feels something’s not right in his home state of Kentucky or even at the federal level, whoever is involved will know.
“I always tend to be on the wrong side of the government,” he says, his voice reflecting determination and the twang of the region. “They want to interpret the law one way, and you read it and they’re not interpreting it the way it’s supposed to be.”
So it’s no wonder that Hinton, owner of Murray, Ky.-based Discount Tobacco City and Lottery Inc., was inspired by some tobacco manufacturing friends to actually sue the FDA for its graphic cigarette packaging mandate. “They all know,” he says of his friends, “that I try to speak up when I see something unfair— speak up and try to correct what’s unfair.” Hinton is the only retailer in the charged free speech vs. public health battle wending its way through the court system. And while it was unknown at press time how long the battle will last or what the outcome will be, the appearance of nine gruesome images on cigarette packaging might at least be delayed.
The requirement is for the graphic images—with depictions including corpses, rotted teeth and diseased lungs— to be displayed at the top 50% of front and rear panels on cigarette packages and cartons. Each warning is accompanied by a smoking-cessation phone number, 1-800-QUIT-NOW, and one of nine textual warning statements.
Suit Yourself
Interestingly, the two lawsuits challenging the packaging include some of the same litigants. The difference between the two, according to Bryan Hachtell, a spokesman for Winston-Salem, N.C.-based R.J. Reynolds Tobacco Co. (RJRT), a plaintiff in both suits, is that the first challenges whether the government can constitutionally mandate a 50% warning in text or graphics. The most recent suit challenges the constitutionality of the nine graphic warnings that the FDA has now chosen.
“One talks about the real estate itself, and the other is what they’re actually putting on there,” Hachtell says.
2009 Lawsuit: The first suit involves Commonwealth Brands Inc., Conwood Co. LLC, Discount Tobacco City and Lottery Inc., Lorillard Tobacco Co., National Tobacco Co. and RJRT. A U.S. district judge in Kentucky ruled that the graphic labels and warnings could be required of cigarette manufacturers, and an appeal to the 6th U.S. Circuit Court of Appeals was pending at press time, with a decision unlikely until next year. “It’s just not right to try to dictate how we sell a legal product,” Hinton says of the suit. And while other retailers might be intimidated to participate in such litigation because the “government always scares you to death on everything they do,” he encourages getting involved: “If they don’t begin to stand up for their rights as a retailer to sell a legal product, they’re going to be out of business.”
Hinton says he is most concerned about the “government overstepping their boundaries.” He doesn’t, however, think the packaging will affect sales. “I would say that 99.9% of my people that buy cigarettes know they’re not good for you to begin with,” he says. “So I don’t think that’s going to discourage anybody from buying them.”
2011 Lawsuit: In August of this year, RJRT, Lorillard Tobacco Co., Commonwealth Brands Inc., Liggett Group LLC and Santa Fe Natural Tobacco Co. Inc. fi led the second suit. The suit seeks a preliminary injunction to stay the effective date of the regulation and a declaration that the regulation is unconstitutional. As constitutionality is being determined, the preliminary injunction would postpone the effective date of graphic and textual warnings until 15 months after validity of the rule is determined. According to the motion for preliminary injunction, “Absent preliminary relief, plaintiffs will suffer immediate and irreparable harm. … Those substantial expenditures will have been wasted if this court should hold the rule to be invalid in whole or in part.”
A hearing on the preliminary injunction was scheduled in September, with Judge Richard Leon saying he hoped to have a decision in October.
Floyd Abrams, a partner in the New York law fi rm of Cahill Gordon & Reindel, who is representing Lorillard, explained in a statement about the suit that the regulations violate the First Amendment. “The government can engage in as much anti-smoking advocacy as it chooses in whatever language and with whatever pictures it chooses; it cannot force those who lawfully sell tobacco to the public to carry that message, those words and those pictures,” he said.
Glaringly missing from both suits is Altria Group Inc.
Bill Phelps, spokesperson for Richmond, Va.-based Altria Client Services, says Altria doesn’t discuss litigation plans, potential or otherwise. However, he says, “The lawsuit raises a number of the issues we have previously put on record with the FDA concerning graphic health warnings. As we stated in our fi ling with the FDA on this topic, we believe that certain provisions of the Final Rule raise constitutional concerns.” According to the company’s filing with the FDA, those concerns include the “sheer size” of the warnings, which the company says violates the First Amendment, and that the “size and placement of the proposed warnings impair the communication value of PM USA’s trademarks and trade dress.”
One industry insider feels that Altria’s fi ling is simply par for the course of how the company works with the FDA, choosing a two-way dialogue over legal action. While Phelps declined comment about that possible strategy, he did earlier say, “We continue to work constructively with the FDA, but reserve our rights and options to protect the company’s interests.”
Retail Implication
Meanwhile, although the graphic images primarily appear to be a manufacturer issue at this stage, there is concern about potential effects on the retail side. Thomas Briant, executive director of the Minneapolis-based National Association of Tobacco Outlets, says retailers are affected “because these graphic warning labels will be visible on packages and other advertising in stores and be seen by not only customers who purchase tobacco products, but customers who do not purchase tobacco products.”
From a retail standpoint, he says, “The right of free speech includes the right to not speak. These graphic warning labels, and the 1-800-QUITNOW hotline that needs to be printed on cigarette packages and advertising, effectively mandates that a retailer ‘speak’ to customers about the health effects of smoking to the point that consumers are being ‘told’ not to buy these legal tobacco products. “In that regard, a retailer is being mandated to convey the government’s anticigarette health message when otherwise given a choice, they would most likely choose not to do so.”
An FDA spokesperson says the agency doesn’t comment on proposed, pending or ongoing legislation. When the nine graphic warnings were revealed in June, however, the FDA and the Department of Health and Human Services said they expected the warnings to have a signifi - cant public health effect by decreasing the number of smokers, resulting in lives saved, increased life expectancy and improved health status.
“These labels are frank, honest and powerful depictions of the health risks of smoking and they will help encourage smokers to quit, and prevent children from smoking,” said Health & Human Services Secretary Kathleen Sebelius.
As for the current public health side of the issue, Danny McGoldrick, vice president of research for the Campaign for Tobacco-Free Kids, points to the initial ruling in the District Court of Kentucky. “They’ve already lost this in the courts once,” and the law was drafted very carefully to begin with, he says. “It wasn’t going to do any good to pass a law that wasn’t going to be upheld.”
He also says that both tobacco manufacturers and public health representatives, despite being on opposite sides, are really there for the same reason. “Publichealth people know it’s going to reduce tobacco use, and [manufacturers] know it’s going to reduce tobacco use,” he tells CSP magazine.
Of the lawsuits, he says, “It’s very typical, it’s very predictable, but we’re very confi dent that as this makes its way through the courts that the law will be upheld.”
Will Warnings Work?
Even if the graphic images are upheld, it’s diffi cult to say if they will have the desired impact. And the answer really depends on whom you ask.
More than half of approximately 150 voters (58%) in a CSP Daily News poll did not think cigarette sales would be hurt by the graphic images. Voters were asked, “What will adding graphic warning labels on cigarette packages mean to cigarette sales?” About 37% said there will be a small decline in sales; more than 2% said sales will “drop like a stone”; and nearly 3% expected sales to rise.
And at CSP’s recent Tobacco Category Review meeting, Nik Modi, senior research analyst for New York-based UBS Investment Research, said many warning labels overseas are tougher in terms of requirement, yet “there’s really been no correlation between warning labels and actual consumption.” For example, in Brazil, where a requirement for warning labels to cover 100% of the back of the box was passed in 2004, consumption actually increased between 2004 and 2006; the United Kingdom saw a similar result after its graphic labels were added.
He also points to a report from Michael Siegel, professor at the Boston University School of Public Health, which stated that an MRI scan of the brain suggests that the warning labels activate the area of the brain tied to cravings vs. the part that triggers disapproval. “The way these warning labels are right now, I really don’t think there’s going to be any impact at all—and certainly history would suggest there’s never been an impact,” Modi said.
Even the federal government’s own research casts doubt on whether harsh graphics will curb tobacco consumption. Last December, FDA research found: “The graphic cigarette warning labels did not elicit strong responses in terms of intentions related to cessation or initia- tion.” However, the report did also document that “one possibility is that the observation period is too short to see any change in these types of outcomes.”
McGoldrick says that more than 40 countries currently have graphic warning labels. “And we have evidence from pre- and post-surveys in a number of those places that show that the larger graphic labels get noticed more, they increase knowledge, they increase quit intentions, and smokers stated they helped them in their efforts to quit,” he says.
Research from the International Tobacco Control Policy Evaluation Project (ITC), for example, found that smokers in countries where a warning depicts a particular health hazard of smoking were much more likely to know about that hazard, and smokers who reported noticing warnings were 1.5 to 3.0 times more likely to believe in each health hazard.
Additional ITC research found that according to adult and youth smokers, large, comprehensive warning labels reduce smoking consumption, increase motivation to quit and increase the likelihood that they will remain abstinent following a quit attempt.
The graphic imaging could have another effect that might deter smoking, however. The costs of complying means millions of dollars to manufacturers, which could ultimately be passed down to already economically weary consumers.
Modi said the costs can be “very burdensome, very costly” for manufacturers, and that not many companies below the Big Three have the scale or resources to keep up. (See “The Cost of Complying” on p. 146.) “I think the big will get bigger, and we’ve already seen some smaller players go out of business,” he said.
The Cost of Complying
In a request for an injunction, R.J. Reynolds Tobacco Co. (RJRT) outlined some of the costs the company would incur to modify its approximately 480 distinct package designs. In addition to the monetary costs, the company estimates the effort will require 4,000 hours of RJRT employee time.
Blank metal printing cylinders $1.5 million
Graphics design fi rm work $500,000
Engraving approx. 2,500 printing cylinders $3.8 million
New embossing $700,000
Producing new packaging $5.0 million
Total estimated costs $11.5 million
Graphic Expectations
As two lawsuits against the FDA regarding the graphic warnings await court decisions, manufacturers also were seeking a preliminary injunction to delay the effective dates of the warnings, should the courts decide to keep the graphic imaging, to 15 months after “validity of the rule has been determined” by the court. Meanwhile, here are the current graphic-image requirement dates:
Sept. 22, 2012: Cigarettes for sale or distribution in the United States can no longer be manufactured or advertised without the new cigarette health warnings.
Oct. 22, 2012: Cigarette manufacturers can no longer distribute cigarettes for sale in the United States unless they display the new cigarette health warnings. The FDA’s Center for Tobacco Products has said that retailers will be able to sell through merchandise that was put into the “streams of commerce,” however.
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