Big Tobacco Could See Big Benefits in FDA Regulations

A new law that gives the U.S. Food and Drug Administration (FDA) power to regulate tobacco products could have the paradoxical effects of cutting smoking and helping the nation's largest tobacco companies, some observers say.

The Richmond Times-Dispatch reported Aug. 10 that some experts believe the new law will shield the industry from critics by bestowing the tacit approval of the federal government, as well as possibly forcing out smaller tobacco companies that cut into the profits of big firms like Philip Morris and RJ Reynolds.

“It will also provide greater legitimacy for the industry, which can only be helpful,” said Citigroup Global Markets analyst Adam Spielman. “The No. 1 threat to industry profits comes via competition from the small discount players. But if these are to stay within the law, their costs will rise. If the law is implemented the way we expect, its main impact will be to boost profitability by reducing competition from the small discount manufacturers.”

“It should provide more predictability for all tobacco businesses,” said William R. Phelps, a spokesperson for Philip Morris parent company Altria. “Innovation in developing reduced-risk tobacco products is going to be the key test. With clear guidelines and a clear oversight, there should be an opportunity for increased competition as new companies and existing ones work to develop products that could possibly reduce the harm from tobacco.”

Some see fears that FDA regulation will hurt smaller tobacco firms as overwrought. “Responsible companies won't be incurring a lot more cost; those that aren't, will,” said Matt Myers, president of the Campaign for Tobacco Free Kids. “It's not a question of large or small.”

Unanswered questions about FDA regulation include whether the agency will strictly review all new products coming to market and whether FDA will seek to control the amount of nicotine in cigarettes. A scientific advisory panel also is due to report to the agency about cigarette ingredients, including menthol.

Industry critic Stanton A. Glantz of the University of California at San Francisco is concerned that the industry will have input into the advisory panel's recommendations. “How can anyone defend having convicted racketeers involved in the public-health policymaking process,” said Glantz, who said the federal law could shield the industry from state efforts to enact tougher tobacco regulations.

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