The costly and time-consuming requirements will be burdensome for many small manufacturers.
Wells Fargo Securities weighed in on FDA’s Thursday, May 5, announcement on the final ruling on electronic cigarettes and vapor regulation, which provides a framework for the FDA to regulate previously “undeemed” tobacco products, including e-cigs/vapor products and cigars in the U.S., and is effective in 90 days.
Wells Fargo noted the following points about the regulations:
(1) Costly and Time Consuming Requirements – Newly deemed products are subject to a number of requirements as expected including; submission of ingredients, manufacturing standards, etc. In general, these requirements would be costly and burdensome for many of the smaller manufacturers;
(2) Innovation Could be Stifled – Most new products will require a pre-market tobacco application (PMTA), which could take an average of 1,500 hours to complete, which is clearly a burden to the industry and could realistically slow down or stifle innovation.
Wells Fargo further noted that the grandfather date remains Feb. 15, 2007, with three available “pathways” for products that were brought to the market after this date (i.e., virtually all e-cigs/vapor products). “This again would be costly and burdensome for the entire industry and prove more challenging for the smaller manufacturers since they don’t have the same financial and regulatory resources of big tobacco. The only viable option currently to change the grandfather date is with federal legislation, i.e. the Cole Bill,” said Bonnie Herzog, senior analyst with Wells Fargo.
“Bottom line – The final deeming regulations are broad as we anticipated and would be burdensome for small manufacturers to comply with while increasing the barriers to entry and entrenching big tobacco even further. As such, we anticipate litigation from several manufacturers, which could unfortunately prolong the uncertainty plaguing the entire industry. Our main concern is that these final deeming regulations could realistically stifle innovation, which could dramatically slow industry growth by dis-incentivizing consumer conversion from combustible cigs. This would ultimately have a net negative impact on public health, which is clearly in direct opposition to the FDA’s goal,” Herzog said.