Will FDA's e-Cigarette Regulation Affect the $1.2 Billion Industry?

The FDA announced yesterday that it will be seeking regulation to prohibit the sale of e-cigarettes to minors. This information came as a preview to a more expansive document that will list more far-reaching initiatives by the FDA to regulate e-cigarettes.

Until now, e-cigarettes have largely dodged regulation. Their decentralized distribution, lack of formal clinical data, and relatively recent entry into the market have confounded attempts by the FDA and others to put existing tobacco restrictions onto the product. Nevertheless, the FDA has been clear in its interest in regulating e-cigarettes as a drug delivery device.

The e-cigarette market for minors is real

Because e-cigarettes deliver nicotine – but not tobacco – current restriction of sales to children under age 18 have not applied. Perhaps in part because of this, e-cigarette use – or vaping – has become a distinct feature in the culture of high school – and even middle school – children. This, in turn, has made regulation of e-cigs to minors a community rallying cry.

Estimates vary, but the CDC reports that as many as 10% of high school students tried e-cigarettes last year. What's more, researchers fear the numbers may be even higher if flavored, non-nicotine vaping is included.

The proposed FDA regulation will cover e-cigarettes that deliver nicotine, but will not apply to the flavored, non-nicotine units. Kids who choose non-nicotine vaping, available in a wide range of flavors such as bubble gum and cotton candy, tend to dismiss the term "e-cigarette" in favor of "e-hookah" or "e-pen." The actual number of under-18 e-cigarette users may be even higher, as many may have been missed in the last head count. The CDC concedes it may not have asked the right question by not including some of the vaping name variations in the study.

While many have raised alarms that young e-cigarette users have an increased likelihood to go on to develop a tobacco smoking habit, it is just too early in the life of this product to see trends. In contrast, e-cigarettes have earned praise from many as a way to quit traditional tobacco use and even wean off nicotine altogether.

Source: ecigarettereviewsite.net

Big tobacco is part of the trend, too

Currently, the e-cigarette market is estimated at about $1.2 billion a year. This may seem like small potatoes compared to the $89 billion tobacco industry. Nevertheless, big tobacco has demonstrated keen interest in the trend. Altria (NYSE: MO  ) , Lorillard (NYSE: LO  ) , Reynolds American (NYSE: RAI  ) , and Philip Morris International (NYSE: PM  ) have all jumped into the e-cigarette market with acquisitions and new product development.

While big tobacco has long dismissed its interest in younger smokers, this market is undeniably the future of the product. According to the 2012 Surgeon General's Report, nine out of 10 adult tobacco smokers began by age 18 and nearly all by age 25.

The growth of both the e-cigarette industry and traditional tobacco products is determined directly by the adoption of these products by youth. If e-cigarette use follows the same trend as tobacco, the future of the e-cigarette industry will be directly tied to how desirable and accessible this product is to minors and young adults.

But is it dangerous?

The FDA concedes that more study is necessary to understand the full effects of e-cigarette use, a conclusion echoed by the American Cancer Society. According to the FDA, further study is needed to determine not just the potential risks when these products are used as intended, but also whether there can be benefits associated with e-cigarette use. The FDA has also stated that more study will help determine whether or not e-cigarette use can encourage young people to go on to use conventional cigarettes.

As data is collected and studies are published, both popular sentiment and the will of regulators may be affected.

Change would come slowly

The new announcement is the first round of what could be a lengthy approval process. While the FDA has taken the first step toward regulation, final approval could take up to a year.

The FDA's proposed product regulations would give companies two years to submit applications from the time the rule goes into effect, but companies would be allowed to continue "business as usual" during the regulatory review phase. The regulations would affect both new and existing products.

Should the ban on sale to minors pass, it may prove difficult to implement. As a comparison, while rules to limit tobacco sales to minors have deterred use, the tobacco trend among youth remains strong. The prevalence of e-cigarette sales via the Internet will no doubt confound enforcement even further.

While parent and community groups have lobbied hard for banning e-cigarette sales to minors, ultimately, it will take some time to assess the effectiveness of the proposed regulations.

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