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 (MO 1.14%), Reynolds American (RAI), and Lorillard (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.
