Hurdles Await Tobacco FDA Regulation [07/19/04]

Excerpts from: Hurdles Await Tobacco Legislation

By VANESSA O'CONNELL and DAVID ROGERS The Wall Street Journal [07/18/04]

A bill to give the U.S. Food and Drug Administration oversight of tobacco, if enacted, would limit the tobacco industry's ability to market all cigarettes and create strict new rules for lower-tar, reduced-risk and sweet-flavored cigarettes.

But the legislation, passed Thursday by the Senate, faces obstacles in getting through the House of Representatives.

Sweet-flavored cigarettes, one of the hottest new products in the tobacco industry, would be banned entirely under the Senate bill. Tobacco companies would need FDA approval to call lower-tar cigarettes "light" or "ultra light," as is now common practice. Similarly, companies would need regulatory preapproval for marketing of reduced-harm cigarettes.

Altria Group Inc.'s Philip Morris USA supports the FDA legislation as spelled out in the Senate bill, but most other tobacco companies strongly oppose it. Smaller cigarette makers say the proposed curbs on advertising would freeze Philip Morris in its lead in the marketplace. Regulations historically have helped Philip Morris fend off rivals and hold onto its Marlboro brand's No. 1 U.S. position. But Philip Morris faces unprecedented competition from low-priced cigarettes made by a swarm of upstarts. FDA regulation would force the upstarts to abide by a new code of manufacturing practices and ingredients, along with limits on marketing.

In addition to seeking bigger warning labels on tobacco advertising, the FDA bill would limit the ability of cigarette makers to tout their brands with flashy signs and displays at most retail stores, relegating them to using only signs with black text on a white background.

FDA regulation is backed by antismoking advocates, who formed an alliance with U.S. tobacco-state senators to combine new regulation of tobacco with a separate plan. That plan, known as a "buyout," would pay tobacco farmers as much as $13 billion, to give up federal quotas propping up prices for tobacco crops. The buyout would be financed by cigarette makers.

Part of a corporate-tax bill, the combined legislation must now make its way to a conference committee, where House members will have the opportunity to change, approve or quash it.

It could be months before agreement is reached with the House on the tobacco legislation and the corporate-tax bill to which it is now attached. The House has yet to appoint its negotiators, and with Congress going home for the summer at the end of this week, any significant progress will have to wait until after Labor Day.

The two big issues then will be who pays for the buyout and whether the House will agree to accept the Senate FDA language. One option is that cigarette companies might be persuaded by their allies in Congress to finance the buyout as a way of potentially escaping regulation by the FDA.

The House version of the bill has no FDA provision, but unlike the Senate, it charges its $9.6 billion buyout to the U.S. Treasury -- not the cigarette makers.

If Senate Majority Whip Mitch McConnell can get the House and the companies to agree to an industry-financed plan instead, the Kentucky Republican is better positioned to divorce himself of all of the FDA provisions he accepted in a self-described "marriage of convenience" to get the buyout bill off the Senate floor.

Any effort to scuttle the FDA portion would be opposed by Altria. And one question is whether Altria will reach out to negotiators such as Sen. Judd Gregg (R., N.H.), who opposed the bill but is among Senate negotiators and has supported some FDA regulation in the past. Sen. Gregg believes the current proposal is too bureaucratic and costly for the FDA.

The Bush administration has sent mixed signals on the issue. While President Bush has said the emphasis ought to be on preventing young people from smoking -- not regulation -- U.S. Health and Human Services Secretary Tommy Thompson has said he favors giving the FDA the ability to regulate tobacco.

The legislation also would create new hurdles for companies marketing reduced-harm cigarettes. These cigarettes generally position themselves as safer or less addictive than traditional smokes. Brown & Williamson is offering Advance cigarettes, which use a special filter and tobacco-curing process to reduce the levels of toxins, the company says. RJR, the second-largest U.S. cigarette maker, has strengthened its marketing for the Eclipse brand this year, boasting in magazine ads that the cigarettes "may present less risk of cancer, chronic bronchitis, and possibly emphysema." Eclipse cigarettes use a special process to primarily heat tobacco, rather than burn it, with the goal of reducing the smoker's exposure to some of the harmful chemicals in cigarette smoke.

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