Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



How the FDA Is Dealing With E-cigs

Although they are not technically tobacco products, as a relatively new product in the tobacco space, electronic cigarettes have attracted a lot of attention.

As Altria (NYSE: MO  ) , Reynolds American (NYSE: RAI  ) , and Lorillard (NYSE: LO.DL  )  each now offer their own take on the e-cig, researchers are trying to figure out how users interact with these products to determine the risks involved with these new, untested products.

The FDA is leading the charge, and has spent $270 million on several research projects to assess the risks of e-cigs before they take over the nation.

Preceding regulation
The FDA has designed its studies, all 48 of them, to address questions central to future regulations. The agency is setting these studies up to research factors such as how e-cig displays and price promotions influence minors' perception of the devices.

Other studies will count the puffs taken by volunteer "vapers" and how people are tinkering with e-cigs to make the devices deliver extra nicotine .

However, the FDA does not expect to complete some of the studies until 2018, which means that until then, e-cig makers can sell their devices without challenges.

Still, the studies could yield some interesting results over the longer term. Indeed, researchers at the University of Louisville are conducting a study in Kentucky that aims to analyze the effects of e-cig organic compounds, flavorings, and particulate matter on lung cells in mice. The researchers expect results from this study in 2015. A study that confirms the risks of e-cigs to humans is still as far as five years away.

Substantial equivalence
In April of this year, the FDA branded e-cigs as "tobacco products." This is potentially a problem. All tobacco products are controlled by the Family Smoking Prevention and Tobacco Control Act, a law passed in 2009 that gave the FDA authority over tobacco products. The problem is that the cut-off date for this stature was Feb. 15, 2007; any products brought to market after this date may only gain FDA approval by demonstrating that their products are "substantially equivalent" to existing devices.

Proving substantial equivalence is notoriously difficult. According to insiders, of the 3,000 or so substantial equivalence applications the FDA has received since 2009, only around 25 have been approved; that's a success rate of 0.83%. These applications relate to tobacco products specifically and do not cover e-cigs.

This is where the big tobacco companies will benefit and their smaller peers will go under. After all, big tobacco has experience in dealing with regulators.

That said, the FDA has not yet decided how it will treat e-cigs. While it has warned the industry that it could treat them like tobacco products, it could be years before the FDA's true intentions become clear.

Companies can continue to sell their products before the FDA's rules come into force, and it is likely that the FDA will give the e-cig industry a grace period of two years or so after it introduces regulations. Still, this adds plenty of uncertainty going forward; smaller producers may not survive tobacco-like regulations.

Foolish summary
The FDA is trying to figure out how it should treat e-cigs because they are a relatively new tobacco product. The agency is undertaking a number of studies in order to give itself more information on the matter and things should become clearer over the next few years. Hopefully, the results of these studies should improve the clarity and understanding of both the risks and rewards of using e-cigs.

Until these results become available and the FDA publishes guidelines, e-cig companies can do what they please. However, when rules and regulations governing the products do come into force, big tobacco will have an edge in complying with the regulations. 

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 17, 2014, at 4:45 PM, binary512 wrote:

    Re: "The FDA is trying to figure out how it should treat e-cigs because they are a relatively new tobacco product. "

    There is no tobacco in e-cigs. And who gave the FDA authority to regulate these products? Congress never did.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3033422, ~/Articles/ArticleHandler.aspx, 9/3/2015 3:30:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rupert Hargreaves

Rupert has been writing for the Motley Fool since December 2012. He primarily covers tobacco and resource companies with a passion for value-oriented investments. .

Today's Market

updated Moments ago Sponsored by:
DOW 16,399.75 48.37 0.30%
S&P 500 1,953.82 4.96 0.25%
NASD 4,750.98 1.00 0.02%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

6/12/2015 4:05 PM
LO.DL $0.00 Down +0.00 +0.00%
Lorillard, Inc. CAPS Rating: ****
MO $53.69 Up +0.56 +1.05%
Altria Group, Inc. CAPS Rating: ****
RAI $42.09 Up +0.84 +2.03%
Reynolds American,… CAPS Rating: ****