INVESTIGATIONS JULY 12, 2022 The Vaping Industry Has Gone Rogue
If you walk inside a smoke shop in New York looking for a vape that tastes like candy, you might think you’re out of luck. Flavored e-cigarettes have not been allowed in the U.S. since the Food and Drug Administration banned them two years ago. The only choices visible behind the clerk are menthol and tobacco, made by large corporations such as Juul and still allowed by the FDA. But to taste the full rainbow of nicotine flavors out there, you just need to ask: “Do you have Air Bar?”
Out come the boxes, hidden under the counter or in the back, full of disposable vapes in varieties from Aloe Blackcurrant to Watermelon Apple Ice. A lot of the names end in “ice,” which usually indicates the addition of menthol or synthetic coolants to make the vegetable glycerin containing nicotine taste cool after it’s been heated to 400 degrees through a metal coil. You can even get pudding flavor, if you like that. But if you want to know more about this company that’s putting lab-made nicotine and a slurry of other chemicals in your lungs, you are out of luck. No one knows who really owns it.
Air Bar is controlled by Shenzhen Goldreams Technology Co., Ltd, an LLC out of China’s tech-industrial hub, which has become the global capital of vape manufacturing. (Two more disposable-vape brands also operate out of the building that Shenzhen Goldreams calls its headquarters.) Legal documents show that in the United States, Air Bar is marketed by a wholesaler in a strip mall near the Dallas airport whose phone number permanently goes to voicemail. (The company did not respond to requests for comment.) To get the vape in front of customers, shop owners can buy in bulk from distributors in the U.S. or, if they’re willing to risk getting a knockoff, go directly to a manufacturer in China.
Over the past year, Air Bar has become one of the many sleek, disposable vapes that have become extremely popular after filling the enormous demand for flavored products following an FDA crackdown just before the pandemic. These disposables have avoided regulators with a simple trick: They use synthetic nicotine, which the FDA had no authority over until recently. A negligible part of vape-shop business at the beginning of 2020, synthetics were in two-thirds of these stores nationwide by 2021, market research shows. During that window, authorities have been more or less helpless to stop the flavors concocted in labs in Shenzhen from being sold in the States.
But on Wednesday, when it officially closes the loophole that allows synthetic nicotine to be sold, the FDA can finally crack down. And if the agency gets its way, the industry titan Juul could soon be banned as well. But it may already be too late for the agency to chase down many of the corporations whose kid-friendly devices have dodged their authority for some time now. Even if faceless companies an ocean away from FDA jurisdiction are for some reason willing to cooperate with the regulators, counterfeiters are in tow — and easy to get in touch with.
Since Juul first came out of Silicon Valley seven years ago aiming to disrupt Big Tobacco, regulators have been playing catchup. The company launched in 2015 with mango and cucumber pods that experts said would attract teens; it took the FDA five years to ban all vape flavors except for menthol and tobacco. Juul reps told high schoolers on campuses that their vape was a safer alternative to cigarettes; it took at least a year for the FDA to tell them that message was illegal. But the threat of enforcement didn’t matter. Soon enough, it seemed like everyone was pulling on a Juul.
“We as a nation had achieved a remarkable public-health accomplishment in driving teen smoking above 30 percent when I was in high school to below 5 percent as recently as a few years ago,” says North Carolina attorney general Josh Stein, who sued Juul for marketing to minors. “Then e-cigs came on the market, and those gains evaporated like a puff of vapor. That’s predominantly because of Juul, but now there are copycat companies trying to exploit young people’s addictions to make money at the expense of young people’s health.”
But Juul — which once had a valuation as large as Ford and controlled around 75 percent of the market — could soon be gone for good. As part of an extremely delayed process in which the FDA is reviewing tobacco-based e-cigarette products already on the shelves, the agency moved to outlaw the sale of Juul after it found last month that potentially harmful chemicals may be leaching from their plastic pods into the nicotine mix that users inhale. After Juul asked a federal appeals court to temporarily block the ban, the FDA announced last week it would re-review Juul’s application, citing “scientific issues.” During that process, Juul is allowed to keep selling its product, and its chief regulatory officer, Joe Murillo, said in a statement that “we remain confident in the quality and substance of our applications.”
Whatever happens to Juul, many vapers have already moved on. Earlier this year, the company lost its status as the top e-cigarette maker by sales to the R.J. Reynolds–backed Vuse, one of the few vapes the FDA has actually authorized. (The two companies still lead other e-cigarette makers by a huge margin.) And during the pandemic, with stress sending people toward a nicotine fix and Juul restricted to old-fashioned cigarette flavors, the disposable-vape industry soared. Users wanted a product that looked nearly identical to Juul and tasted even better.
They found one in a company called Puff Bar.
The business had been around for at least a year when, in spring 2020, two 26-year-olds from the Los Angeles area — Nick Minas and Patrick Beltran — became Puff Bar’s co-owners and CEOs after taking it over from an entity in China. Or at least they say they did: The pair’s ownership has never been independently confirmed, and the childhood friends have refused to discuss how they got the capital to buy a large vape manufacturer. (Previously, they ran an online e-cigarette store with a P.O. box in Glendale, California, for an address.) With flavors like Orange Mango Guava and ads that said their vapes were an escape from “parental texts,” business was thriving. Sales consistently cleared $3 million per week; in May, the duo bought a $1.7 million house together in the nearby San Rafael hills where they could park their Lamborghinis.
What they were doing technically wasn’t against the law: A footnote in the FDA’s 2020 flavor ban allowed disposable devices to be flavored. But by that July, the regulators caught up, ordering Puff Bar to halt sales for not applying for authorization in the first place. The company went quiet for about six months, until it borrowed an idea spreading among smaller players in the field. A 2009 law passed by Congress gave the FDA the power to regulate tobacco products the same way it oversees what corporations can put in food and pharmaceuticals. So Puff Bar stopped using tobacco as its source of nicotine, synthesized the addictive chemical in laboratories, and ran right through the loophole. By September 2021, according to federal data, over 26 percent of high-school kids vaping regularly and 30 percent of middle-school kids already vaping chose Puff Bar as their preferred brand. Nielsen data showed that Puff Bar sales for the past year up to that point totaled $156 million, even though the FDA had officially shut it down for seven months out of that period.
At the time, Beltran told CBS News that he and his business partner were not trying to “side skirt, you know, kind of laws.” On national television, he said that “if there’s a law that would order us off the market tomorrow, we would pull our products off the market tomorrow.”
Closing the synthetic-nicotine loophole that Puff Bar made infamous could bring serious change to the industry. “Retail establishments won’t be able to say, ‘Gee, I didn’t know this brand wasn’t okay,’” says Matthew Myers, president of the Campaign for Tobacco-Free Kids. “It ought to be pretty clear across the board.” But in practice, it’s going to be a lot harder for the FDA to figure out how to enforce its new rule. First off, it assumes that companies that have been hesitant to cooperate with the FDA will adhere to the law.
“Anything is possible with these folks,” says Illinois representative Raja Krishnamoorthi, who co-authored the law passed in March giving the FDA oversight over synthetic nicotine. “I think that the Puff Bar leadership is very much intent on making sure that they take advantage of any slowness or delay on the part of FDA, any loopholes in the regulatory framework to continue making money. And that’s what they’ve done in the past to great effect. It would not surprise me if they continue with that type of practice.” Puff Bar’s Minas and Beltran did not respond to requests for comment.
“FDA is now basically trying to put the genie back in the bottle,” says a legislative aide for Senator Dick Durbin, who also helped lead the effort to close the synthetic-nicotine loophole. “All these products flooded the market without adhering to the law.”
The counterfeit market is an even bigger problem. “There’s been a metastasis of the Puff brand,” says Stanford professor Robert Jackler, who has researched the company’s marketing and corporate structure. He says that anyone in the U.S. can order knockoffs from manufacturers in Shenzhen on a website called made-in-china.com; some firms listed on the site can make up to 50,000 vapes per day. “If you want to start a cigarette company and have a billion dollars, you probably can’t do it,” he says. “But if you want to start a vaping company and have $100,000, you’re in business. It’s really easy.” One vape-shop owner in Florida said in an interview that at the height of Puff Bar’s popularity last year, 90 percent of the vapes on the market were “fake clones.” He also says the speed of market development — plus a year of bad press — means a lot of customers have moved on: “If I had Puff products in my shop right now, I probably couldn’t give them away.”
Industry groups, who point to evidence that their products offer nicotine for adults without the known carcinogens in cigarettes, argue that the FDA is at fault for this knock-off market. “We’ve told them that in writing, your efforts to crush this industry are creating black and gray markets,” says Jim McCarthy of the American Vapor Manufacturers Association. “People aren’t going to stop using nicotine because the FDA commissioner told them to.”
The scale of the synthetic-nicotine market might be the biggest challenge of all. Counterfeiters aside, many companies, Air Bar included, remain in stores though they’ve already been told by the FDA to stop selling in the U.S. The agency, widely seen as underfunded, has a small number of enforcement officers responsible for in-store crackdowns in the thousands of vape shops in the country; the FDA did not disclose how many officers it will have on the job. Buying these vapes through the mail is already technically illegal, but when has that stopped anyone? Local authorities have not always been helpful with the fight either. New York City, which banned flavored e-cigarettes years ago, has done little to stop the proliferation of synthetic nicotine in the dozens of stores across the five boroughs.
When the synthetic-nicotine loophole closes, there will still be effective ways to stop sales. “Large manufacturers can’t afford to just ignore FDA, and they won’t,” says Myers. Retail chains will be hit too. “Other than vape shops, the largest number of these disposables are distributed in gas stations and convenience stores,” he says. “Very few are truly independently owned,” meaning they, too, probably won’t risk selling illegal e-cigarettes as a corporate policy.
One vape-store owner in New York who doesn’t deal in disposables blames the FDA for the synthetic boom. “The best they could do was to make everything illegal and not enforce any of it,” she says. “That was their solution. So now because flavors are illegal, because the products are illegal, because disposables are illegal, everything is being sold from under the counter. Which means it’s being sold for cash, they’re not paying tax, and it’s being sold to underage kids without showing identification because they’re already selling illegal products, so they don’t give a fuck if they’re selling it to a 15-year-old. So they have done nothing to help the situation. They have only made it worse.”
If the feds actually do come knocking, the store owner expects the flavored-vape market to take a turn for the illicit: “It’s going to become like marjiuana was for the last 50 years. It’s gonna be call a guy, word of mouth, tell a friend, you can get illegal vape flavors from this phone number. Text this person and they’ll drop it off at your house and you’ll pay a $20 delivery fee and nobody gets any money in the government.”
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