Wednesday, October 26, 2005

FDA Tobacco Legislation: A Public Health Disaster - Part I: IMMUNITY

In this two-part series, I will discuss why I think the proposed FDA tobacco legislation would be a disaster for public health.

In contrast to the Campaign for Tobacco-Free Kids, which has claimed that the proposed bills would "protect kids and save lives," my analysis of the legislation concludes that this legislation would actually endanger kids and result in increased mortality. That aspect of my analysis will be discussed in the second post in this series.

Here, I discuss why I think the FDA legislation would be a disaster for public health in terms of social justice and individual legal rights. In essence, I believe that the legislation would largely provide immunity for the tobacco companies from the most threatening potential litigation -- that which involves claims relating to product design, product constituents, product safety, potentially reduced exposure products, and misleading or inaccurate health claims as well as other aspects of product marketing. Clearly, I think, the bulk of potential litigation against the tobacco companies would be preempted by the FDA legislation.

This post, however, focuses on what I feel is the most threatening potential litigation to the industry in the future and the one about which I believe the industry is most concerned -- claims related to potentially reduced exposure products (PREPS).

Ultimately, I argue, as bad as people think the status quo might be, the FDA legislation would be far worse.

The Rest of the Story

A recent research report by J.P. Morgan on PREPS (The Third Innovation: Potentially Reduced Exposure Cigarettes, August 25, 2005) provides an insightful analysis of the legal issues that cigarette companies currently face in the development and marketing of PREPS, as well as how those legal issues would be resolved by enactment of the proposed FDA legislation.

The J.P. Morgan analysis concludes that: "Significant US legal risk surrounds PREPS technology. Without FDA regulation, potential future US legal risk is balanced between: 1) failure to make the health benefits of PREPS available to smokers; and 2) making misleading or unproven health claims about PREPS."

In other words, it is the status quo -- specifically, the absence of FDA regulation of tobacco products -- that is actually the limiting factor in the inability or reluctance of tobacco companies to proceed wholeheartedly with the development, introduction, and marketing of PREPS.

This is because of the fear that cigarette companies might face litigation based on claims that they made misleading or unproven health claims about these potentially reduced exposure products. Because it would take years of epidemiologic research after the introduction of these products to provide any meaningful evidence that there is a health benefit from these products compared to existing cigarettes, it is virtually impossible for the cigarette companies to make any health claims regarding PREPS without facing the risk of litigation based on a claim that they are making misleading or unproven health claims.

After all, if they can't prove a health claim until they market and study a cigarette for 10-20 years, and they can't market a PREP until they can prove the health claims, then they are in a complete bind.

But the FDA legislation would bail them out. How? By regulating the introduction and marketing of PREPS, including the conditions regarding the cigarette companies' ability to make various types of health claims, the proposed FDA legislation would preempt any claims against the industry related to PREPS, and would therefore effectively provide immunity for them, allowing them to proceed with the widespread introduction of PREPS into the market, both nationally and internationally.

According to the J.P. Morgan report: "One of the main obstacles facing PREPS today is the industry's inability to clearly and credibly communicate reduced risk attributes to smokers. No agency or body has the authority to assess health claims made by tobacco companies or set standards for what constitutes a reduced risk to smokers. This means that tobacco companies currently trying to communicate low health risk attributes of PREPS do so at significant risk. ...

FDA oversight would imbue PREPS with a regulatory 'stamp of approval' and allow for more explicit comparative health claims with conventional cigarettes. ... In our view, FDA regulation would effectively insulate tobacco companies from any potential PREPS-related liability claims. This is because regulation would shift responsibility from the tobacco companies to the government, which would approve the validity of health claims on PREPS."

It is critical for public health groups to understand that it is the ability to make actual or implied health claims about PREPS that is most important to the industry's incentive to market these products. They can only be marketed effectively based on the industry's ability to communicate to potential customers, at some level, the claim that these products represent an improvement in health risk compared to conventional or existing cigarettes.

So in many ways, the status quo -- the lack of FDA regulation of tobacco products -- is the single thing that is holding up the widespread introduction and marketing of PREPS, and with that, the widespread use of what would have to be, by definition, unproven and undocumented health claims.

I think it is also important for public health groups to understand that the market potential for PREPS is enormous and these products could be disastrous to the public's health by greatly undermining efforts to encourage smokers to quit smoking. Instead, it is very likely that smokers who would otherwise attempt to quit entirely would switch to PREPS because of the belief (true or false) that use of these products would reduce their disease risk (see my second post of this series for a more detailed discussion of this issue).

In fact, the J.P. Morgan analysis included a survey of smokers which demonstrated that 91% would be willing to try a lower-risk cigarette and 85% would be willing to switch cigarette brands if it would lower their health risk.

The potential impact of PREPS is so profound that J.P. Morgan actually estimated that just a 1% increase in cash flow growth from PREPS would result in a 15% increase in valuation for the two major international cigarette companies viewed as most likely to introduce PREPS - Altria and British American Tobacco (linked to the United States' second leading tobacco company - Reynolds American - through R.J. Reynolds' merger with BAT's Brown & Williamson).

According to the report: "We believe that PREPS could represent the next phase of product innovation, the first in over 30 years. PREPS technology, if applied to existing international brands, looks to us likely to further open up market share gaps between the top two global companies and the rest of the market.

In our opinion, the most important medium-term upside for PREPS is a nation-wide US launch of a PREPS cigarette product under an existing premium brand name; we think this could transform the economics of the global PREPS segment. However, the roadmap to unlocking the market is in the hands of the US Congress, which, to date, has failed to act on the issue of granting the Food & Drug Administration (FDA) regulation over the tobacco industry."

Ironically, it is precisely the lack of FDA regulation of tobacco products that is the only thing holding back the tobacco companies from a huge global market expansion, one that would likely undermine decades of public health campaigns by convincing large numbers of smokers, rightly or wrongly, that their health risks would be lowered by switching to PREPS.

Just as the introduction of "light" cigarettes is believed to have resulted in a large number of smokers switching to these products rather than quitting smoking, the introduction of PREPS would undermine public health efforts to encourage individuals to take the action that would be most beneficial for their health - quitting smoking.

Even more ironically, the key player in the global expansion of the cigarette market, the key facilitator of this expansion which is using every tactic at its disposal to make it all possible, is none other than the Campaign for Tobacco-Free Kids, an alleged public health and anti-smoking group.

To me, even more important than the effects of the FDA legislation on the opening up of a new market of government-sanctioned but still unproven implied health claims is the way in which this legislation would take away individual legal rights. There would simply be no way for consumers to seek justice for any wrongs done to them or damage suffered as a result of any misleading or unproven health claims regarding the introduction and marketing of PREPS. And I just don't think it is ethical to sign away the individual rights of generations of future smokers in order to try to obtain largely unsubstantiated public health gains.

In essence, not only is the Campaign for Tobacco-Free Kids working to open up global markets to the introduction of a new cigarette innovation that kills people, but does so by making them think they are protecting their health, but it is also working to take away the legal rights of American citizens to hold corporations accountable for damages suffered as a result of using their products.

With "enemies" like the Campaign for Tobacco-Free Kids, the major cigarette companies do not really need friends - the Campaign is doing their bidding for them in the halls of Congress.

And the result of that bidding, if successful, would be the global expansion of the cigarette market, the third major cigarette product innovation by the industry in the past half a century, the provision of immunity to cigarette companies to introduce and market a broad new class of deadly products with no fear of liability, the widespread introduction and sanctioning by the government of unproven and undocumented health claims that are sure to mislead millions of smokers, and ultimately, needless deaths due to the undermining of public health efforts to encourage smoking cessation, emphasize the deadly effects of cigarette smoking, and ensure that the public is not led to believe that there is any safe cigarette.

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