Editor's note: As of July 2022, the FDA has issued marketing denial orders (MDOs) to 263 electronic cigarette companies, prohibiting the sale of their products in the United States, and has rejected over a million PMTA applications. This has led to over 40 e-cigarette companies appealing to the FDA to suspend or revoke the MDOs, with the appeal review scheduled for 2025. Huang Zhuohao, a senior consultant at the Shanghai office of the law firm Two Supreme Invited Fangda, has proposed solutions to address the US electronic cigarette regulatory policy.
Author's Bio:
Huáng Zhuōhào, a senior advisor at the Shanghai office of Fangda Law Firm and a licensed lawyer in the state of New York, USA.
The following is the original text, with added subheadings by the editor:
The FDA and E-cigarette Enterprises in Tobacco Control Act.
On July 26, 2022, the United States Court of Appeals for the District of Columbia denied a rehearing request from four electronic cigarette manufacturers: Jucice Co., Cool Breeze Vapor, Ecig Charleston, and Jay Shore Liquids.
Four companies had submitted a Premarket Tobacco Application (PMTA) to the United States Food and Drug Administration (FDA) in 2020, but all received a Market Denied Order (MDO) from the FDA in 2021. The court acknowledged the FDA's decision that there was no evidence to prove that the electronic cigarette products of these four manufacturers met the requirements of the federal Family Smoking Prevention and Tobacco Control Act, which stipulates that they must be "appropriate for the protection of public health.
In 2009, US President Obama signed the Tobacco Control Act, which authorized the FDA to regulate tobacco products. All tobacco products sold in the US are required to submit a premarket tobacco product application (PMTA), evaluated by the FDA based on toxicology, packaging, advertising, and other sales strategies to determine if the product is "appropriate for public health protection." Products that meet the criteria are granted a Market Granted Order (MGO), while those that don't receive a Market Denied Order (MDO). In 2016, e-cigarettes were included in the category of tobacco products and must now also submit PMTA and receive approval. Products that fail to submit PMTA or receive a MDO will be prohibited from importation and sale in the US market, with violators facing warnings or fines.
According to official data released by the FDA, as of July 6, 2022, the FDA has only approved PMTA and granted MGO for a total of 23 e-cigarette products from three companies: U.S.-based R.J. Reynolds Vapor Company (9), Japan-based Logic Technology Development LLC (8), and China-based NJOY LLC (6). At the same time, MDOs have been issued to 263 e-cigarette manufacturers and sellers. Over 40 e-cigarette companies have appealed against the FDA's MDO, which the courts usually suspend pending a full review. While most of these appeals are still in the court or FDA's supplementary review stage, they have put considerable pressure on the FDA, and even resulted in the voluntary suspension of some MDOs. It is foreseeable that in the near future there will be instances of the courts rejecting FDA's MDO.
Lessons from Chinese business practices
What are the implications of this series of lawsuits for Chinese companies?
Currently, a substantial number of Chinese e-cigarette products have not yet applied for PMTA or have applied but received MDO. As a result, the import and sale of these products in the United States have lost their legal basis. While the FDA's enforcement of these products is currently limited to warnings and fines, strict measures are likely to be implemented in the future. Recent reactions from various American e-cigarette companies suggest that the cessation of imports and sales is only a matter of time. This will have a significant impact on the entire Chinese e-cigarette industry.
Chinese e-cigarette companies should consider taking action as soon as possible before strong law enforcement arrives, using the rules of America's game to leverage a larger living space for themselves. Currently, the FDA's enforcement of e-cigarettes in the United States appears to be a legal issue, but behind it is America's policy orientation toward the entire industry. The core issue is how much range is allowed for the e-cigarette industry to survive in the United States. Therefore, companies need to actively respond in both the legal and policy domains.
From a legal standpoint, businesses need to actively sue the FDA for any improper administrative actions and use litigation as a means to pressure the FDA into reaching a settlement with the company. Litigation has long been the primary weapon used by American companies to combat excessive governmental abuse of power. In fact, e-cigarette giant Juul used litigation last month to force the FDA to suspend its marketing denial order and continue legally selling products in the US. Through litigation, Juul also opened up negotiations with the FDA and provided a path for potential settlements in the future.
From a policy perspective, businesses can increase their negotiation leverage by adopting practices that align with American culture and gradually shifting the policy direction. Legitimate channels, such as collaborating with American stakeholders, engaging with the media, government officials and lawmakers, and connecting with independent research organizations can be used to legitimately voice out opinions and influence e-cigarette policies in the United States. Additionally, measures aimed at improving company governance and reputation overseas can strengthen the e-cigarette industry's policy bargaining power.
Currently, the United States is enforcing laws targeting the entire electronic cigarette industry, with intertwined economic interests at play. Chinese companies will only be able to fundamentally change the policy direction of the electronic cigarette industry in the United States by joining forces, coordinating resources, and collaborating effectively.
To learn more about the legal disputes between the FDA and e-cigarette companies, click on the "FDA and E-Cigarette Company Legal Dispute Summary" topic, which is being continually updated by 2FIRSTS.
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