FDA AND TOBACCO

Ted and Henry Camel 

Wall Street Journal, March 13, 2007

It's not surprising that Democrats Ted Kennedy and Henry Waxman are promoting something called "The Family Smoking Prevention and Tobacco Control Act." But you'll never guess who else is thrilled by their proposal: the Marlboro Man himself.

The bill would, for the first time, empower the Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. With this new authority, the FDA could place further restrictions on tobacco product advertising and require lower nicotine content in cigarettes. So why does Philip Morris, by far the largest cigarette company in the world and the maker of the famous Marlboro brand, like the bill?

The answer is familiar to anyone who knows how regulation works in the real world: The tobacco industry leader figures that any new regulation will burden its smaller rivals with disproportionate costs and thus help preserve its own market share and profit.

Wall Street certainly agrees. As Morgan Stanley Research recently told its investment clients, "We want to emphasize that we are not concerned by the prospect of FDA tobacco regulation." It added that FDA regulation could provide "an additional and potentially effective legal defense," and "potentially higher relative costs for smaller manufacturers, which could help to further narrow premium versus deep-discount pricing gaps."

Citigroup analysts are even more bullish: "We believe the results" of regulation "would actually help the major cigarette manufacturers since it would entrench their position further allowing them to maintain market share or increase it."

Let's explain what's going on here. First, the Kennedy bill (co-sponsored by Texas Republican John Cornyn) specifically prohibits the FDA from banning tobacco products, so some in the industry feel this gives the Marlboro Man and the Camel brand a new lease on life.

Second, the call for new advertising restrictions "clearly protects the dominant name-recognized brands," according to Dr. Gilbert Ross, a tobacco specialist at the American Council on Science and Health. Ad restrictions would help Philip Morris freeze in place its 51% of the cigarette market.

Third, the bill would prevent the smokeless tobacco industry from claiming that it is safer than cigarettes, as if they are equally dangerous. The big cigarette makers figure that this will reduce the appeal of smokeless products that are the biggest competitive threat to cigarettes. Never mind that a large share of addicted smokers get sick or die from smoking, while the figure is 1% for users of smokeless tobacco.

Health experts are also skeptical of another common justification to give the FDA new power, which would be to reduce the amount of nicotine in cigarettes. Nicotine is addictive, but by itself it isn't much more harmful than, say, caffeine. What causes cancer is inhaling the toxins in tobacco smoke. An FDA diktat to reduce nicotine in cigarettes could have the perverse effect of inducing the 40 million or so current smokers to light up more often to get their nicotine "high." That might mean more cigarette sales and more deaths.

These low-nicotine cigarettes would be similar to "light" cigarettes, which health groups have long argued and the courts have ruled are no safer than high-nicotine smokes. "The FDA would be essentially repeating the fraud the tobacco companies were recently found guilty of," says Michael Siegel of the Boston University school of public health.

This wouldn't be the first time that politicians assisted Big Tobacco in the name of opposing it. The state Medicaid settlement was supposed to finance antismoking campaigns, but the bulk of the cash has gone to pad state budget coffers and will do so for at least another decade. The tobacco companies merely raised their prices to finance the settlement.

The best way to reduce smoking deaths isn't more regulation with its unintended consequences. The better policy is to make sure that smokers bear the full risk and cost of their unhealthy habit -- through adjusted insurance premiums -- and by encouraging the use of safer tobacco products. The Kennedy-Waxman bill deserves to be called the Marlboro Preservation Act.