Tobacco Regulation to Watch in the New Year and Beyond

Virtually every segment of tobacco and nicotine—from vapor to cigars to cigarettes—is threatened by regulation. And legislation that likely won’t be resolved until 2023, or later, is keeping convenience-store retailers on hold.

“We are not looking to make changes right now,” Aubrey Thornock, senior category manager at Salt Lake City-based Maverik, said of the company’s e-cigarette set in its more than 350 stores. Her team decided new products cannot be added unless they are authorized via the premarket tobacco product application (PMTA) process.

“After completing risk analysis, it is not in our interest to bring in anything new unless it’s already authorized,” she said. “But exiting something that is still under review also isn’t in our interest until the FDA deems it unauthorized.”

While much is ongoing, the PMTA process, changes to Juul Labs Inc., the outlook of synthetic vapor and flavor bans are all areas for retailers to keep an eye on.

Whether the U.S. Food and Drug Administration will authorize any electronic-cigarette products with flavors other than tobacco through the PMTA process remains to be seen.

The FDA has issued 23 marketing-granted orders for tobacco-derived vapor products as of press time in late November. So far, no flavored e-cigarette products have been authorized, but Logic Technology Development LLC put that to the test in late October.

The FDA issued marketing denial orders (MDOs) for the company’s menthol-flavored e-cigarette products, the first menthol vape products to receive a marketing decision based on full scientific review from the FDA.

Logic’s application for its menthol products lacked sufficient evidence to demonstrate that permitting the marketing of the products would be appropriate for the protection of public health, the FDA said. For non-tobacco flavored e-cigarettes, including menthol e-cigarettes, existing evidence demonstrates a known and substantial risk with regard to youth appeal, uptake and use, the agency said.

Shortly after the denial, though, Logic appealed the decision, and the U.S. Court of Appeals for the Third Circuit issued an administrative stay on the MDO. Other products from the Teaneck, New Jersey-based company were previously authorized under the Logic Vapeleaf, Logic Power and Logic Pro brands.

So far, the FDA has completed the review of and made terminations on more than 99% of the nearly 6.7 million products for which applications were submitted by the Sept. 9, 2020, deadline. It expects to finish reviewing PMTAs for Juul, Vuse, Njoy, Logic, blu, Smok and Puff Bar by the end of June 2023.  

The agency is also reviewing synthetic nicotine PMTAs, which were due May 14. More than 200 manufacturers submitted applications for more than 1 million products by the deadline. So far, the FDA has authorized none of them. It has denied more than 889,000.

Meanwhile, the vapor “category in limbo,” according to Bonnie Herzog, managing director at Goldman Sachs, New York. Speaking in a Nov. 9 webinar hosted by the National Association of Tobacco Outlets (NATO), she said, “There continues to be a lot of confusion—not only from consumers, but certainly from the retailers and wholesalers—about how you approach this category.”

While retailers are seeing some sales growth in e-cigarettes, it has slowed substantially from pre-COVID times, Herzog said. Confusion around flavor restrictions, the negative perception of the tetrahydrocannabinol (THC) vaping crisis and Juul’s MDO, which was later stayed, all affected the segment, she said.

The FDA ordered products from San Francisco-based Juul off the market June 26. However, the agency later issued an administrative stay on the order pending additional review.  

Although Juul’s Virginia-tobacco flavored pods and menthol-flavored pods are still allowed to be sold, its performance has deteriorated following confusion created by the MDO, Herzog said.

Vuse, an e-cigarette from Winston-Salem, North Carolina-based R.J. Reynolds Vapor Co., has increasingly taken over Juul’s spot as the No. 1 e-cigarette brand, according to tracked channel data from NielsenIQ, Herzog said.

Once there is some clarity on PMTAs from the FDA, Herzog said e-cigarettes could return to faster growth.

Retailer Deb Austin, category manager at Cape Girardeau, Missouri-based Pajco Inc., said she has been reluctant to bring in any flavored disposables, but with how long the regulatory process is taking, that may change.  

“Vapor is actually up quite a bit for us in our stores,” she said, adding that customers at the company’s nearly 30 Rhodes c-stores have been asking for flavored disposables, too.

Doug Parker, senior director of marketing with Parker’s, Savannah, Georgia, said he’s managing the uncertainty by building in flex space so the chain’s 70-plus stores can try new products. Right now in vapor, he carries Juul, Vuse, Mngo and Juicehead, a newer addition that started on the front counter to make customers aware of it before placing the product on the tobacco back bar.

Juul explored a variety of options, including bankruptcy, after receiving its MDO from the FDA, the company said. But cash from some of its earliest investors is keeping the business afloat while it awaits a final decision.

The company is laying off employees to further secure its financial ability to continue moving forward, a Juul spokesperson told CSP in November.  

“This investment will allow Juul Labs to maintain business operations, continue advancing its administrative appeal of the FDA’s marketing denial order, and support product innovation and science generation,” the spokesperson said. “To further secure the company’s ability to continue moving forward, we are also undertaking a reorganization, including the difficult but necessary step of separating from many valued colleagues.

The Wall Street Journal reported that Juul would lay off about a third of its global staff, or about 400 people. This should reduce Juul’s operating budget by 30% to 40% and allow Juul to stop bankruptcy preparations, the newspaper reported, citing company officials. The company did not disclose the terms of the investment.

Juul has faced other challenges, too. It reached an agreement in September to pay $438.5 million to 34 states and territories to settle a two-year investigation into its marketing and sales practices. And later that month, Altria, which owns a 35% stake in Juul, ended its noncompete agreement with the company, freeing itself up to market new vapor products.

The FDA issued warning letters to Evo Brands LLC and PVG2 LLC, doing business as Puff Bar, for receiving and delivery e-cigarettes in the United States without a marketing authorization order. The Puff Bar products subject to this warning letter are non-tobacco, or synthetic, nicotine products, which the FDA was given control over on April 14.

The FDA also denied PMTAs for 32 Hyde e-cigarettes, submitted by Magellan Technology Inc., Buffalo, New York. The agency said it determined the applications lacked sufficient evidence demonstrating that these flavored e-cigarettes would provide a benefit to adult users that would outweigh the risks to youth. The company must stop selling these products and remove those on the market or risk enforcement action, the FDA said.

“Congress gave the FDA authority to hold manufacturers and retailers who violate the law accountable,” FDA’s Center for Tobacco Products Brian King said. “FDA is actively working to identify violations and to swiftly seek corrective actions, particularly for products popular among youth. We will use all compliance and enforcement tools available to us, as appropriate, to protect our nation’s youth.”

Puff Bar and Hyde, along with Vuse, were the top three disposable brands used among current youth e-cigarette users, according to the 2022 National Youth Tobacco Survey.  

The online study, conducted from January through May, shows that about 33% of middle school students and 14% of high school students reported current e-cigarette use, which it defines as using in the past 30 days. Among those users, nearly 85% reported using flavored e-cigarettes, the report found, and more than one in four reported daily use of an e-cigarette.

Flavored tobacco is being threatened at every level of government.

At a federal level, the FDA has proposed rules prohibiting menthol as a characterizing flavor in cigarettes and all flavors, except tobacco, in cigars. The agency received nearly 250,000 comments on the rules before the comment period closed in April.

As part of the rulemaking process, the FDA must review all the comments. The process won’t be quick.

Thomas Briant, executive director of NATO, Minneapolis, broke down an estimated timeline for implementation of the rules. These steps must be followed in order:

• Nine to 12 months: FDA reading all comments.
• Three months: FDA may draft changes to regulations.
• Two months: The Office of Management and Budget (OMB) conducts a final review.
• Two years: The FDA may consider a two-year effective date delay, but it has to be at least one year.
• Possible litigation may delay regulation further.

In the 2022 Unified Regulatory Agenda and Regulatory Plan, the FDA said it expected to finalize the rules for menthol cigarette and flavored cigars by August. It could still take at least one, if not more years, for the rules to take effect, though.

Parker doesn’t think the menthol ban will happen, and even if it does, it will be years down the road. If it does come sooner, he said the manufactures will come up with a solution to give customers an alternative option to satisfy their needs.

“We’re going to stay with [menthol] as long as we possibly can,” he said. “We heard some people took the approach of an initiative to get rid of it. That’s not our approach, we want to give the guests what they’re looking for each and every day.”

Thornock and Austin also say they’ll keep menthol on shelves until they’re told not to.

“That gives me heartburn a little bit to think they might take it away,” Austin said of menthol cigarettes. “Not just that, but the flavored cigars.”

At least one state might be facing a more immediate problem.

California retailers are threatened with a ban of the sale of most flavored tobacco products after voters approved a ballot question on Nov. 8, supporting a law signed by Gov. Gavin Newson in August 2020 to ban flavored tobacco sales. Sixty-two percent of voters supported the ban of everything from menthol cigarettes to e-cigarette flavors, except tobacco. Only 38% voted against the ban, which excludes hookah and some cigars.

Several other counties and municipalities in the state already have similar bans in place, including San Francisco, Sacramento and Los Angeles. California will also join Massachusetts, the other state with a complete tobacco flavor ban statewide.

The ban, which took effect in December, has faced pushback from tobacco manufacturers.

The U.S. Supreme Court denied R.J. Reynolds Tobacco Co.’s emergency request seeking an injunction against the California flavored tobacco sales ban, but the case isn’t dead yet, one tobacco regulatory expert told CSP Daily News.