FDA's Final Deeming Rule Expected This Month

SILVER SPRING, Md. — The two-year wait for the Food and Drug Administration's (FDA) final deeming rule could be over this month.

According to a report by legislative news outlet​ The Hill, industry and advocacy groups are expecting the agency to release its finalized deeming rule, which would give it authority over tobacco products currently not under its regulatory control, including electronic cigarettes and cigars.

The agency released its proposed deeming rule in April 2014. The proposal was sent to the White House Office of Management and Budget (OMB) for final clearance in October. OMB's approval is the last step before a finalized rule is published.

Despite the growing anticipation, the FDA is still not giving details on a timeframe. Agency spokesman Michael Felberbaum told The Hill he did not have any update to share on the timing of the final rule's release. 

Still, several groups are expecting the finalized version in the coming weeks.

"I do believe they will come out this month," Matthew Myers, president of the Campaign for Tobacco-Free Kids, told the legislative news outlet. "They are facing a serious deadline given the end of the presidential year. Having said that, the proposed rule came out in April 2014 and last spring, they said they would be done by summer. Then last June, they said they'd be done by the end of the summer. I guess they never said which year."

Myers added the delays in releasing the final rule have damaged the agency's credibility. "The need for its release is urgent," he said.

The lack of clarity at the federal level is causing concern in the electronic cigarette and vapor community, mostly over the proposed grandfather date. Under the Family Smoking Prevention and Tobacco Control Act of 2009, the grandfather date for new products is Feb. 15, 2007. However, if that date stands in the new deeming rule, many e-cigarette and vapor products would face an uphill battle to stay on the market.

Ray Story, CEO of the Tobacco Vapor Electronic Cigarette Association (TVECA), told The Hill he believes the agency is hung up on that date, which would effectively require any nicotine-delivery devices that hit stores after Feb. 15, 2007 to apply retroactively for approval.

That provision alone, Story said, would wipe out the e-cigarette industry which didn't take hold until after 2007. "Even though FDA sees it as a serious issue, it cannot change it," he said. "It requires a change of the law."

The agency has said it does not believe it has the authority to alter or amend the date because it was set by statute in the Family Smoking Prevention and Tobacco Control Act signed into law by President Obama in 2009.

Rep. Duncan Hunter (R-Calif.) is working on legislation to change the grandfather date. In an email to The Hill, Duncan's chief of staff Joe Kasper said the legislation is intended to ensure e-cigarettes are not regulated like traditional tobacco products. Kasper also dismissed the FDA's claims that the agency cannot change the date.

"If they signaled support, this would be done by now and so many small businesses nationwide wouldn't have the anxiety that they do," said Kasper. 

Should the FDA release its final rule before Congress acts, Story predicts a legal challenge will follow. 

Even though nothing is set in stone yet, the stocks of tobacco companies have taken a hit recently following The Hill's report and subsequent articles by other media outlets. 

Calling the FDA fears overblown, Vivien Azer, director and senior research analyst at Cowen and Co., said even if that February 2007 grandfather date sticks, it "will likely not have a material impact on our stocks, as our companies already have regulatory capabilities as they have been regulated by the FDA for over five years."

Similarly, Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, said reaction is "overdone."

"As a reminder, regulation of the e-cigarette/vapor industry is broadly positive for the Big Tobacco manufacturers since it will increase the barriers to entry and likely entrench them even further," Herzog said. "The key concern in our mind is if the final regulations stifle or restrict innovation, which would be an overall negative for the industry and public health. We've long believed innovation is crucial for the long-term success of this category."

If the regulations prove restrictive to innovation, Herzog believes it "doesn't mean the end of the category; it just means growth could be slower."