Over the last five years, the electronic-cigarette (e-cigarette) market has grown from virtually nothing to $1.7 billion in annual sales, and is projected to reach $10 billion by 2017, according to Wells Fargo. Despite this progress, there is a possibility that this growth will be hindered by the recent attempts by the FDA to pass regulations surrounding the e-cigarette industry.
The FDA released its initial proposals for regulating e-cigarettes on April 24th, 2014. The rules would “deem” e-cigarettes as tobacco products and regulate them as such. The House Appropriations Committee approved a spending bill in June that includes language that could protect the e-cigarette industry from onerous legislation. The language is similar to that of The FDA Deeming Authority Clarification Act, in which the “grandfather” date changes from February 2007 to the date that the regulations are passed. This means that e-cigarette manufacturers could avoid costly pre-market approval applications for products that are already on the market.
To get the latest on this issue and its potential impact on the vaping industry, we interviewed our client, The Vapor Bar®, who operates stores throughout Texas as well as West Virginia. The Vapor Bar®’s founder, Schell Hammel, is an entrepreneur and leader in the vaping industry, and has been on the forefront of the FDA regulations issues since the beginning. Schell has over 15 years experience in the medical field and husband co-owner Jeff Hammel has had more than 20 years in pharmaceuticals and biotech.
1. The proposed FDA regulations for vape storeowners are in the spotlight. What is the crux of the FDA proposed regulations?
If the FDA were to pass the deeming regulations as they appear today, every vape shop and e-liquid manufacturer across the country would be compromised. The deeming regulations state that the grandfathered date goes back prior to the time when any real effective vaping product was on the market, according to the Tobacco Control Act, meaning every product would have to apply for a Pre-Market Tobacco Application (PMTA). The cost associated with a PMTA presently could be enough to wipe out all but the largest of vape companies across the nation. The FDA could also propose a modified PMTA, but even with modifications, it could be extremely financially burdensome. The timing for the announcement of the regulations is uncertain although there are many that have varying opinions. There has also been a bill introduced federally to change the grandfather date to the date of when it is introduced. Some are hopeful that it could happen, yet many remain skeptical.
2. What is the potential effect on the vaping industry?
Depending on the regulations passed, we could all be staring at the hefty burden of PMTA’s for all of our products, or something else entirely. Right now, it is anyone’s guess. Based on survey data, we could see many people who have successfully switched to electronic cigarettes migrate back to cigarettes due to the lack of effective products being available.
3. What have you done to protect your business and reduce the potential impact of the regulations on your business?
There are many things we have done to help stay ahead of this. One is to make sure we stay abreast of science and adjust accordingly within our lab. We have been actively pursuing the obliteration of chemicals within e-liquids that have been introduced as harmful, including diacetyl and acetyl propionyl. We have eliminated these from all of our e-liquids thus far, which was a very lengthy and expensive process. We remain in front of the public and customer, trying to educate based on science, human behavior and law. We have worked on innovation that is based on the way the laws may direct our business.
4. Do you think the recent developments and action by the Appropriations Subcommittee is helpful?
We can only hope so. Some are skeptical it will be passed, but hopeful. There are many that would like this provision removed from the bill, and lead the population at large to lump us with big tobacco, when nothing is further from the truth. We are not big tobacco and hope to help others to switch to electronic-cigarettes verses analog cigarettes, which have known ill effects on the population at large, including those who do not smoke.
5. If the FDA regulations pass, what will be your biggest challenges as a business owner?
If they pass as deemed today, I am fairly certain we would have to assess our positioning for the future. These products are not completely successful without the variation of flavors for when a tobacco user reaches a point where their taste buds change. Those flavors are what help keep them successful. We know our business and if those flavors (where each one could cost millions to get approved) were not available, many would be unsuccessful just as many of the NRT drugs on the market are now. What they are proposing will send many e-cigarette users right back to tobacco as evidenced in survey data. Shameful, but it is what will happen, as many others like us, will be significantly impacted in a negative manner.
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