IQOS Will Not Return to U.S. Market in 2022

RICHMOND, Va. — The past year has brought ups and downs for IQOS, the heat-not-burn tobacco product first introduced to the U.S. market in October 2019. 

IQOS is an electronic device that heats tobacco-filled sticks wrapped in paper to generate a nicotine-containing aerosol. Under an exclusive licensing agreement with Philip Morris International (PMI), Altria Group Inc.'s Philip Morris USA (PM USA) subsidiary has been commercializing IQOS in the United States along with Marlboro HeatSticks.

In the first quarter of 2021, PM USA introduced a new IQOS 3 device into all current markets and mid-year, it brought the new product to the northern Virginia market. In addition, Marlboro HeatSticks were available in retail stores statewide across Georgia, Virginia, North Carolina and South Carolina as of the end of April. 

Altria CEO Billy Gifford pointed out during the company's recent fourth-quarter and full-year 2021 earnings call that the team made "excellent progress" in the northern Virginia market, with Marlboro HeatSticks reaching 1.9 percent retail share of the cigarettes category in stores with distribution for the month of October.

However, come November, PM USA had to remove IQOS from the market due to an import ban and cease-and-desist orders from the U.S. International Trade Commission (ITC). As Convenience Store News reported at the time, ITC ruled that Philip Morris International and Altria must stop selling and importing the product.

The Sept. 29 ruling, which went into effect two months later, followed a finding that IQOS infringes on two patents by British America Tobacco Group, the London-based parent company of Reynolds American Inc. 

"At the present time, we do not expect to have access to IQOS devices or Marlboro HeatSticks in 2022," Gifford said. "However, we remain focused on returning IQOS to the market as soon as possible, Our teams are actively working on reentry plans and we expect to be ready to bring IQOS back to U.S. consumers when available."

In a recent interview with the American Journal of Transportation, Philip Morris International CEO Jacek Olczak said the company is going to begin manufacturing IQOS in the U.S. in an attempt to get the product back on the nation’s shelves next year.

The ITC decision left PMI with the options of producing the product domestically or tweaking the design. Changing the design, however, would require authorization from the Food and Drug Administration (FDA) again, according to the report. 

“From the very beginning of us going to the FDA, we had in mind that IQOS would one day not only be sold in the U.S., but manufactured there, if you take into consideration the size of the market and the opportunity for IQOS,” Olczak told the American Journal of Transportation. “It’s just happening sooner because of the ITC decision.”

PMI did not disclose where in the U.S. production will take place, but said it plans to start selling IQOS again in the first half of 2023.

Alternative Tobacco Agreement

PMI and Altria first reached a pact focused on alternative tobacco products in December 2013. The original agreement set the strategic framework to commercialize reduced-risk products and electronic cigarettes. In July 2015, the companies expanded the pact to include a joint research, development and technology-sharing agreement.

Two milestones are necessary for Altria's PM USA to maintain its exclusive license and distribution rights for IQOS in the United States and earn a renewal option for an additional five-year term, according to Gifford.

"The initial five-year term does not expire until April 2024, but we believe that PM USA has already met these milestones based on the performance of IQOS in the Charlotte, [N.C.] and northern Virginia markets," he said. "PMI has communicated that it disagrees with our position. We expect to continue discussing these matters with PMI.

"We firmly believe that heated tobacco products can play an important role in U.S. harm reduction, and we are continuing our efforts to support the category's growth," Gifford continued. "We have gained significant knowledge from our IQOS commercialization efforts, which we expect to use going forward." 

Key learnings include: the need to educate U.S. smokers about a new tobacco category; and the need to support smokers' transition to smoke-free alternatives.

"We demonstrated improved performance in each successive market and gained valuable knowledge in leveraging MRTP [modified-risk tobacco product] claims to transition smokers," Gifford said. "Additionally, we have built a robust post-market surveillance system — all of which, we believe, will position us to successfully achieve our objective of moving beyond smoking."

In addition to PM USA, other wholly owned subsidiaries of Richmond-based Altria Group Inc. include U.S. Smokeless Tobacco Co. LLC and John Middleton Co. Altria's non-combustible portfolio includes Helix Innovations LLC, maker of on! oral nicotine pouches, exclusive U.S. commercialization rights to the IQOS Tobacco Heating System and Marlboro HeatSticks, and an equity investment in Juul Labs Inc.