US FDA Issues "Marketing Refusal Order" for Juul E-cigarettes

In the field of electronic cigarettes, both China and the United States are actively strengthening regulation, coincidentally without prior coordination.

On June 23rd, the US Food and Drug Administration (FDA) issued a "marketing denial order" to electronic cigarette company Juul Labs Inc., stating that because Juul's e-cigarette products did not pass pre-market tobacco product application (PMTA), the company must stop selling and distributing all products in the United States or face the risk of administrative penalties.

The decision made by the FDA has sent shockwaves through the global e-cigarette industry.

Juul, which is 35% owned by US-based Altria Group, also the owner of cigarette brand Marlboro, currently leads the US electronic cigarette market with a 35.7% market share, according to third-party data. Additionally, Juul generates 90% of its revenue from the US market.

A domestic electronic cigarette industry leader commented that this is a day to remember, which urges us to reflect on our understanding of this industry. The FDA's actions clearly indicate to industry practitioners that quality and safety should be the focus of attention.

Just a few days before Juul was banned from sale, the Chinese State Tobacco Monopoly Administration publicly stated that all levels of the tobacco monopoly administrative authorities will continuously strengthen market supervision and electronic cigarette retailers must strictly comply with electronic cigarette regulatory policy requirements, such as not selling electronic cigarettes to minors or advertising electronic cigarettes.

According to an expert in PMTA certification in China named Zheng Zhi, quoted by Times Finance, apart from Juul, most of the top 5 electronic cigarette brands in the American market are manufactured by the Chinese company Smoore. This lack of competition for these brands is seen as a positive development for Smoore.

Juul has released a statement in response to the decision made by the FDA. The company acknowledges the decision but disagrees with the investigation and outcome, and will explore options to appeal. As a result of this decision, Altria's stock plummeted by 9% on June 22nd, while stocks for e-cigarette companies in Hong Kong, such as Smoore International, have since seen significant growth.

Continuing sales cannot guarantee public safety.

Effective September 9, 2020, the US Food and Drug Administration (FDA) requires all electronic cigarette products sold in the US to undergo premarket tobacco product application (PMTA) approval. Products that have not passed PMTA certification will not be allowed to be sold in the US.

PMTA stands for Premarket Tobacco Application, which refers to the application process that tobacco companies must go through before their products can hit the market. After companies submit their applications, the FDA evaluates the product formula, manufacturing process, health risks and safety for both individuals and groups, especially for teenagers.

Over two years ago, Juul submitted scientific and health data for review by the FDA, also known as the PMTA application. This included one e-cigarette device and two flavored pods, each with two different nicotine strengths of 5.0% and 3.0% respectively. According to Juul, their application contained over 125,000 pages of information, including scientific research and market data.

After conducting an evaluation, the FDA determined that there is insufficient toxicological research data on Juul products, and the results are inconsistent, including data on genetic toxicity and harmful chemical compounds in the oil. Additionally, Juul prevented the FDA from conducting a complete toxicological risk assessment on their products.

The FDA has determined that continuing to sell Juul products does not protect public safety. Therefore, Juul products must cease sales and distribution in the United States, and any existing products must be removed from shelves to avoid legal risk. Retailers should contact Juul to handle their inventory. However, individuals who possess or consume Juul products will not face any penalties.

Juul's highlight moment occurred in 2018 when the company held a 70% market share in the US vaping industry. In July of that year, Juul completed a $650 million funding round, bringing its valuation to $15 billion.

Just five months later, the American tobacco giant Altria spent $12.8 billion to acquire a 35% stake in Juul, valuing the e-cigarette company at $38 billion, higher than SpaceX's valuation at the same time through financing.

Since then, Juul has come under the scrutiny of the US FDA, with the company's flavored electronic cigarettes and trendy marketing techniques being accused of "fueling a trend of underage drug use." In September 2018, the FDA demanded that Juul develop a specific plan to address the issue of youth misuse of their products; in October, the FDA carried out a surprise search of Juul's headquarters, seizing thousands of pages of internal sales and marketing documents.

In 2019, Juul suspended all print, broadcast, and digital advertising. In October of that year, before the FDA announced the impending ban on flavored e-cigarette sales, Juul announced it was halting sales of flavored e-cigarette products in the United States. The company now only offers two nicotine-containing e-cigarette products in the US: mint and original, for which it has submitted PMTA applications.

According to a report from Goldman Sachs on June 14th, Juul leads the electronic cigarette market in the United States with a 35.7% market share.

British American Tobacco's Vuse Solo e-cigarette, which has a market share of 31.1%, received FDA marketing approval in October of last year. However, the company's top-selling Vuse Alto vape e-cigarette is still awaiting FDA approval. In April of this year, several products from US e-cigarette manufacturer NJOY received FDA approval for sale, with the company currently holding a 3% market share.

In response to the FDA's decision, Juul explained that the portion of their product consumed by adolescents in the electronic cigarette market has progressively decreased, which is among the main concerns for regulatory bodies. Juul indicates that data from the National Youth Tobacco Survey in the United States shows only 0.5% of high school and middle school students used their product in 2021, as opposed to 11.5% in 2019.

We respect but disagree with the findings and decision of the FDA, and believe we have provided sufficient information and data based on high-quality research to address all of the agency's concerns," said Juul. "We intend to seek a cessation and are exploring all of our options in accordance with FDA regulations and the law, including appealing the decision and contacting our regulatory agencies.

According to industry insiders, during the appeal process in the United States, Juul's products do not need to be temporarily removed from the market. This appeal process may last for more than a year. This also means that whether or not the appeal is successful, Juul will at least be able to remain in the US market for a while. Prior to this, more than 30 e-cigarette companies that received "marketing refusal orders" from the FDA have filed lawsuits.

Ninety-five percent of electronic cigarette products worldwide are made in China.

The recent ban of Juul e-cigarettes in the United States has quickly caught the attention of industry insiders in China's e-cigarette market. Reports suggest that the American market is crucial for China's e-cigarette industry and many Chinese companies are currently seeking PMTA certification.

Currently, the United States is the world's largest consumer of electronic cigarettes and also the largest export market for electronic cigarettes from China. According to a report from the Electronic Cigarette Professional Committee of the China Electronic Commerce Association, in the first quarter of 2021, 58% of China's electronic cigarette exports in terms of production value came from the United States.