Food and Drug Administration regulations set to cripple the e-cigarette industry are good news for big tobacco, according to one of the world’s largest banks.
In a research note released Wednesday, Wells Fargo analyst Bonnie Herzog warns the FDA’s so-called “deeming” regulations will entrench the existing tobacco industry and stifle e-cigarette innovation.
The FDA regulations, expected to be announced imminently, will require all e-cig products that came on the market since February 2007 to undergo a Pre-Market Tobacco Applications (PMTA) process that could cost millions of dollar for each product.
Vaping businesses, which typically sell dozens if not hundreds of these products, will not be able to meet this financial burden — meaning they will have to close their doors. This would destroy around 99 percent of the e-cigarette market and effectively prohibit the majority of e-cigarette products, with the exception of those made by major tobacco companies.
“As a reminder, regulation of the ecig/vapor industry is broadly positive for the big tobacco manufacturers since it will increase the barriers to entry and likely entrench them even further,” says Herzog.
“The key concern in our mind is if the final regs stifle or restrict innovation which would be an overall negative for the industry and public health.” Leading bodies such as Public Health England have estimated e-cigarettes are around 95 percent safer than combustible tobacco cigarettes. (RELATED: Study: E-cigarettes Are 95 Percent Safer Than Tobacco)
“Wells Fargo is absolutely correct to state that the proposed FDA regulations will benefit tobacco companies,” says Gregory Conley, president of the American Vaping Association. “Without a change in the February 2007 predicate date, the FDA’s proposal will destroy thousands of small businesses and hand over the vapor industry to Big Tobacco.”
Industry bodies and ordinary vapers have campaigned for many months to change the predicate, arguing prohibitive costs and removing quality products from the market is not the way to ensure high standards.
“Changing the predicate date will not stop the FDA from regulating vapor products,” Conley added. “The FDA will be free to set rigorous product standards and require disclosure of all ingredients in products already on the market. The FDA just won’t be able to set technology back a decade by banning tens of thousands of products for no reason other than the inability of small manufacturers to pay huge fees.”
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