Daily Finance.com, 13 de diciembre de 2012

FDA Reviews Put the Brakes on New Tobacco ProductsBy The Associated Press
Posted 8:53AM 12/13/12
Posted under: Company News, Health Care, Altria Group,Lorillard, Government
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By MICHAEL FELBERBAUM

RICHMOND, Va. -- Talk about a smoke break.

Tobacco companies have introduced almost no new cigarettes or smokeless tobacco products in the U.S. in more than 18 months because the federal government has prevented them from doing so, an Associated Press review has found.

It's an unprecedented pause for an industry that historically has introduced dozens of new products annually, and one that reflects its increasingly uneasy relationship with the Food and Drug Administration, which in 2009 began regulating tobacco.

Officials at the FDA say applications for new products have languished because of "significant deficiencies" and because the agency is taking extra care in reviewing products that pose public health risks. Industry executives say cigarettes haven't changed in any meaningful way and the delays don't make sense. They say the changes are as simple as a brand name change, cigarette filters or, in some cases, different packaging.

Since June 2009, when the law allowing the agency to regulate tobacco went into effect, the tobacco industry has submitted nearly 3,500 product applications, according to data obtained by the AP under a Freedom of Information Act request. While none have been ruled upon, the vast majority of these products are already being sold. A grandfather clause in the law allows products similar to those already on the market as of February 2007 to be sold while under review. But 400 products submitted for review since then are being kept off the market.

The reviews, which are supposed to take 90 days, has dragged on for years in some cases. About 90 percent of applications have lingered for more than a year.

The FDA does not have to disclose what the products are, and the companies won't say, citing competitive reasons.

Part of the problem is that the tobacco industry is still learning how to deal with being regulated.

"They have the burden of demonstrating that new products and product changes won't increase youth tobacco use, won't increase toxicity and won't wrongly deter people from quitting," said Matt Myers, president of the Campaign for Tobacco-Free Kids.

The group has raised concerns about new products that it says were illegally introduced by Richmond, Va.-based Altria Group (MO), parent company of Philip Morris USA, the nation's largest tobacco company, and No. 2 tobacco maker Reynolds American (RAI).

Philip Morris USA's Marlboro Black NXT -- a cigarette that can be switched to menthol by crushing a capsule in the filter -- and two new styles of Reynolds' Pall Mall menthol cigarettes shouldn't be allowed to be sold without FDA approval, the Campaign for Tobacco-Free Kids argues. The companies, however, believe they are complying with federal law. The FDA says it is investigating.

It's essential that the FDA move "strongly and decisively to make public either why these product should be allowed to be marketed or to get them pulled off the market immediately," Myers said.
The share of Americans who smoke has fallen dramatically since 1970, from nearly 40 percent to about 19 percent. But the rate has stalled since about 2004, with about 45 million adults in the U.S. smoking cigarettes.

Tax hikes, smoking bans, health concerns and social stigma are all making the cigarette business tougher. The industry's revenue growth has been modest, staying steady only because the companies have raised prices as fewer cigarettes are smoked and others have focused on the small-but-growing smokeless tobacco market. Tobacco companies need new products to keep their brands growing and steal smokers from competitors.

And though they say they only market to smokers, if cigarette makers can't lure new ones, their business will die.

They also can't look for growth overseas. All of the companies sell cigarettes only in the U.S. Their brands are sold in other countries by different companies.

"You try to introduce new products to keep some excitement and freshness out there," tobacco analyst Jack Russo of Edward Jones said. "There are just so many hurdles and regulations and battles to get new products approved. ... It's kind of like you have a new sheriff in town, and you're trying to figure out what the new rules are."

In an interview with the AP, Dr. Lawrence Deyton, director of FDA's Center for Tobacco Products, said the agency is working with companies to get more information about products and hopes the industry will be more transparent about its reasoning that product changes don't affect public health.

Small changes in ingredients or additives can make a cigarette more addictive or harmful, Deyton said. "Though cigarettes seem like a very simple product - chopped-up tobacco rolled in paper ... we know that cigarettes are highly engineered. They're technologically incredibly sophisticated," said Deyton.

The center has an annual budget of more than $450 million, much of it funded by the industry, and more than 365 employees, about 115 of whom work on the application reviews.

"This is new for them ... and this is new for FDA as well. ... We're not playing gotcha," Deyton said.

The FDA isn't exercising common sense, Murray Kessler, CEO of Newport cigarette maker Lorillard Inc., said in an interview.

"These are cigarettes. They haven't changed in 50 years. They've had the most minor changes," Kessler said. "I don't think the spirit of the law ever envisioned this type of cumbersome scrutiny."

For example, Kessler said that under the FDA's guidelines, if the nation's third-biggest tobacco company wanted to take a Kent brand cigarette and rename it "Newport," it would be subject to review even though "it's not substantially equivalent -- it's exactly equivalent."

Lorillard petitioned the agency in June seeking to speed the reviews. The FDA has until around the end of the year to respond.

The slowdown has caused a split in the industry as well. Smaller companies like Lorillard (LO) say larger companies like Philip Morris USA were able to put more products in test markets before the FDA deadline. That let them stay on the market while being reviewed by the FDA.

At a mid-November analyst conference in New York, Kessler reiterated his frustration with the process but said the FDA is communicating with Lorillard on two of its applications for new products and its petition.

Lars-Erik Rutqvist, senior vice president of scientific affairs at smokeless tobacco maker Swedish Match, said the frustration lies in "the fact that it takes so long and there's no explanation why."

"I think there's suspicion within industry that this is how it's going to be in the future and this is more or less a way of punishing the industry," Rutqvist said.

Other industry observers like Richard A. Daynard, professor of law at Northeastern University and chairman of the Tobacco Products Liability Project, say the process wasn't "intended to be a black hole."

"There's certainly a tension in having the FDA regulate a deadly product that has no compensating benefits, but that's their job under this thing and they need to get with it," he said.

Despite the tug-of-war, government processes taking longer than expected isn't new ground, said Ira Loss, an analyst with Washington Analysis who has covered the FDA for three decades.

"This would not be the only division at FDA that has trouble meeting deadlines for review," he said, citing a backlog of applications for generic drugs. "[The industry has] a right to gripe. ... There probably should be [an avenue for recourse], but there isn't. What are you going to do, put people in jail?"