Order of Business: H.R. 1256 is being considered under a structured rule making in order certain amendments. The legislation was introduced by Rep. Henry Waxman (D-CA) on March 3, 2009, and was referred to the Committee on Energy and Commerce, which on March 4, 2009, reported the bill by a 39-13 vote.
Under new PAYGO rules in the 111th Congress, savings from prior bills passed by the House may count towards meeting PAYGO requirements. Because the Congressional Budget Office projects a $955 million revenue loss over ten years associated with H.R. 1256’s provisions regulating tobacco due to a 2% reduction in adult smoking after ten years, the majority intends to pass H.R. 1804 under suspension of the rules to offset this lost tax revenue prior to the consideration of H.R. 1256. The rule for consideration of H.R. 1256 provides that, at the time of engrossment, the Clerk will add the text of H.R. 1804 to the end of H.R. 1256, in order to meet PAYGO.
Summary: H.R. 1256 would grant the Food and Drug Administration (FDA) the authority to regulate tobacco products—financed through a tax on tobacco companies—and increase federal regulation of tobacco advertising and marketing. Highlights of the legislation include the following:
FDA Authority: The bill grants the federal government authority to regulate tobacco products through a new Center for Tobacco Products created as part of the FDA; however, the bill limits FDA’s authority to the manufacture of tobacco products, as opposed to the growth of tobacco itself. Some Members may be concerned by the implications of giving an agency charged with approving the safety of food and drugs the authority to regulate an inherently unsafe product, echoing the concerns of then-FDA Commissioner Andrew von Eschenbach, who in a statement to the Energy and Commerce Committee in 2007 stated that regulating tobacco products would dramatically alter the FDA’s mission, and not for the better: “Associating any agency whose mission is to promote public health with the approval of inherently dangerous products would undermine its mission and likely have perverse incentive effects.”
Some Members may also note the statements from many Congressional Democrats that the salmonella and other crises demonstrate that the FDA is not undertaking its current mission effectively, and question whether now is the appropriate time to be burdening the FDA with imposing a sizable new regulatory regime. In addition, some Members may be concerned that the bill’s provisions expressly retaining the Federal Trade Commission’s authority to regulate the sale of tobacco products may result in duplicate and/or conflicting regulatory regimes at the federal level.
The bill contains definitions related to tobacco products. Under the bill, an “adulterated” tobacco product consists of materials “injurious to health.” Using this definition, some Members may question how the FDA will be able to distinguish adulterated from un-adulterated tobacco products, given that tobacco is inherently injurious to human health.
Labeling and Branding Disclosure: H.R. 1256 places numerous restrictions on tobacco products to prevent their “misbranding.” Under the bill language, tobacco products will be considered misbranded if (among other things) “any word, statement, or other information required…to appear on the label…is not prominently placed thereon with such conspicuousness…as to render it likely to be read and understood by the ordinary individual” or if the label excludes “a full description of the components of such tobacco product or the formula showing quantitatively each ingredient of such tobacco product.” The bill also grants the FDA the authority to require prior approval of statements on tobacco labels. Despite language in the bill prohibiting tobacco companies from making such claims, some Members may be concerned that members of the public may construe FDA regulation of tobacco products as the federal government’s “approval” of a product now deemed safe, when in reality tobacco products are inherently unhealthy.
H.R. 1256 requires tobacco manufacturers to disclose to FDA “a listing of all ingredients…substances, compounds, and additives that are…added by the manufacturer,” as well as “any or all documents (including underlying scientific information) relating to research activities, and research findings, conducted, supported, or possessed by the manufacturer” regarding tobacco products, their health risks (including any adverse events), and tobacco marketing. The bill also requires FDA to compile publicly searchable databases of additives and potentially harmful components with respect to each brand of tobacco product.
Registration and Inspection: The bill requires tobacco manufacturers to register their establishments with FDA and provides for inspections every two years to each registered establishment—including those located overseas.
Scope of Regulations: The bill grants FDA the authority to impose restrictions “on the sale and distribution of a tobacco product” where the agency “determines that such regulation would be appropriate for the protection of the public health,” and also permits restrictions on tobacco advertising and promotion. Specifically, the bill requires FDA to promulgate regulations regarding remote (i.e. not face-to-face) sales of tobacco products, and regarding good manufacturing standards “to ensure the public health is protected.”
Product Standards; Menthol Loophole: The bill prohibits most flavor additives in tobacco products following enactment, and gives the FDA the authority to adopt additional standards for tobacco products through a notice-and-comment process. However, the bill expressly prohibits FDA from banning whole classes of tobacco products, or “requiring the reduction of nicotine yields of a tobacco product to zero…because of the importance” of such decision.
As noted above, the bill prohibits most tobacco flavor additives but expressly excludes menthol as the only “FDA approved” additive permitted to remain in tobacco products. Some Members may echo the concerns of then-Health and Human Services Secretary Mike Leavitt, who last year pointed out that this provision—by prohibiting the sale of clove and other flavored cigarettes manufactured overseas, while permitting the continued sale of menthol cigarettes manufactured in the United States—could violate international trade commitments, potentially sparking trade disputes and retaliatory action during a recession.
Studies confirm that African-Americans and other racial minorities comprise a disproportionate number of menthol smokers; Centers for Disease Control data indicate that 75% of African-American smokers use menthol cigarettes. Some Members may also note that seven former Health and Human Services Secretaries wrote to Congress to criticize a menthol “loophole” that “caves to the financial interests of tobacco companies” by “send[ing] a message that African-American youngsters are valued less than white youngsters.”
Notification and Recalls: The bill grants the FDA authority to make public notifications about tobacco products—through public service announcements and other means—if FDA believes the product “presents an unreasonable risk of substantial harm to the public health,” and further grants FDA authority to recall defective tobacco products, subject to an informal hearing.
Pre-Approval of New Products: The bill requires any new tobacco products introduced after February 15, 2007, or any substantially modifications of existing tobacco products, to complete a pre-approval process prior to their commercial introduction, and also grants FDA the authority to withdraw and/or suspend a prior issued approval of such new products on the basis of new information or non-compliance with the regulatory regime put in place by the bill. H.R. 1256 also prohibits FDA to approve any new products if “there is a lack of a showing that permitting such tobacco product to be marketed would be appropriate for the protection of the public health.”
Modified Risk Products: H.R. 1256 prohibits the sale of “modified risk” tobacco products—defined as those advertised as “less harmful than…other commercially marketed tobacco products,” including those labeled as “light” or “mild”—unless where expressly approved by the FDA. The bill permits the commercial sale of modified risk products only where the FDA finds said products will “significantly reduce harm…to individual tobacco users; and benefit the health of the population as a whole.” In cases where long-term epidemiological studies have yet to be conducted on modified risk products, the bill permits the FDA to grant authority to approve the products’ sale for a fixed but renewable term of up to five years, provided certain other requirements are met. Some Members may be concerned that these burdensome restrictions—which effectively prohibit modified risk products unless expressly approved by federal authorities—may hinder the introduction and development of tobacco products that could reduce (but not eliminate) the adverse health consequences associated with tobacco consumption.
The bill also imposes additional marketing restrictions on modified risk products approved for sale, specifically regarding the quantitative comparisons of reduced levels of substances, and requires post-market surveillance of modified risk products—which relate to the FDA’s requirement to revoke approval in cases where additional research finds that the statements of modified risk no longer apply.
State and Local Authority; “Indian Country” Loophole: The bill provides limited federal pre-emption of state and local laws with respect to product standards, labeling and branding, federal registration, and modified risk products; however, state and local governments retain authority in all other areas regarding “the sale, distribution, possession, exposure to, access to, advertising and promotion of or use of” tobacco products.
The bill requires FDA to contract with the states to carry out inspection of retailers to enforce its provisions. However, the bill prohibits FDA from having its state contractors carry out inspections on Indian country lands “without the express written consent of the Indian tribe involved.”
Other Provisions: The bill establishes a Tobacco Products Scientific Advisory Committee to evaluate technical evidence and make recommendations with respect to tobacco products and their effects. The bill also contains provisions designed to accelerate the regulatory approval of certain smoking cessation and nicotine replacement products, and includes delays of up to five years in regulatory compliance and testing requirements for small tobacco product manufacturers (defined as those employing fewer than 350 employees).
“User Fees”: H.R. 1256 imposes “user fees” on tobacco companies to finance the new Center for Tobacco Products within FDA. Fees would total nearly $5.4 billion over ten years: $235 million in Fiscal Year 2010, rising to $712 million in Fiscal 2019 and all subsequent years. Fees would be assessed to classes of tobacco products (i.e. cigarettes, cigars, etc.), and to individual companies within each class, in the same percentages applied to tobacco buyout legislation previously passed by Congress (P.L. 108-357) in October 2004.
Some Members may consider this “user fee” a tax on the tobacco industry, which manufacturers will pass on to their customers. Some Members may also be concerned that tobacco taxes are among the most regressive forms of taxation, and that raising tobacco taxes still higher—on top of the 62-cent per-pack increase in taxes used to finance children’s health insurance legislation (P.L. 111-3)—will place additional burdens on working families during a recession.
Final Rule: The bill would require the FDA to re-issue a 1996 rule (struck down by the Supreme Court as exceeding the agency’s authority in 2000) and would make several amendments to said final rule. The original regulations would restrict tobacco advertising by, among other things, prohibiting billboards within 1,000 feet of schools and permitting only black-and-white advertising. The amendments would prohibit the distribution of free tobacco products at all sporting or entertainment events, and would permit free samples only in a “qualified adult-only facility;” such facilities are specifically defined, and must include “a temporary structure…enclosed by a barrier that is constructed of, or covered with, an opaque material…[and] extends from no more than 12 inches above the ground or floor…to at least 8 feet above the ground or floor.” However, the bill expressly strikes the preambles and findings to several FDA rules promulgated in 1995 and 1996 designed to regulate nicotine as a drug, and tobacco as a nicotine delivery device. Some Members may be concerned at the level of prescriptive detail being written into law by these provisions—particularly as H.R. 1256 exempts the entire final rule from the provisions of the Congressional Review Act.
Retail Penalties: The bill permits FDA to issue “no tobacco sale” orders against retailers that repeatedly violate the federal regulatory regime, subject to a hearing, and also imposes federal penalties for violations by retailers with respect to tobacco purchases. A first offense would not be subject to a fine, provided the retailer has an “approved training program” in place; however, penalties would increase for additional incidents, such that a sixth (and subsequent) offense within a four-year period would warrant a fine of $10,000, regardless of whether the retailer participates in a training program. The bill requires FDA to “consider” applicable state penalties for purposes of mitigating federal sanctions, but does not automatically reduce or eliminate federal sanctions where states have imposed their own (potentially higher) fines.
Advertising Warnings: The bill imposes numerous new requirements on advertising for cigarettes and smokeless tobacco, and prohibits the sale or advertisement of any product not meeting the restrictions. Specifically, the bill requires labels carrying warnings in at least 17-point font or that comprise 70% of the label area, and requires advertisements to carry warnings of at least 20% of the total area (or, in the case of newspaper advertisements, a specific size font related to the overall size of the advertisement). The bill gives the FDA the authority to change required statements through a notice-and-comment rulemaking process, pre-empts state or local activities only with respect to the content of tobacco advertising—permitting more stringent state and local regulations on the “time, place, and manner” of advertisements—and imposes a prohibition on television or radio advertisements for smokeless tobacco.
Some Members may be concerned that these prescriptive requirements exceed the voluntary restrictions that tobacco companies imposed upon themselves as part of the 1998 Master Settlement Agreement with state attorneys general, infringing on companies’ First Amendment rights to promote a product which H.R. 1256 would expressly keep legal. Some Members may also be concerned that the lack of federal pre-emption would permit states and localities to impose more onerous, and potentially conflicting, restrictions on companies’ constitutional right to market their products.
Trade in Tobacco Products: The bill requires tobacco manufacturers to label their products as “sale only allowed in the United States,” and requires federal regulations related to record-keeping, tracking, and tracing tobacco products in order to combat illicit activities.
Cost: According to the Congressional Budget Office, H.R. 1256 would cost the FDA $2.1 billion to implement over five years and nearly $5.4 billion over ten. These costs would be offset by “user fees” assessed on tobacco companies.
CBO also projects a $955 million revenue loss over ten years associated with H.R. 1256’s provisions regulating tobacco, as the budget estimate assumes a 2% reduction in adult smoking after ten years.
Under new PAYGO rules in the 111th Congress, savings from prior bills passed by the House may count towards meeting PAYGO requirements. Because the Congressional Budget Office projects a $955 million revenue loss over ten years associated with H.R. 1256’s provisions regulating tobacco due to a 2% reduction in adult smoking after ten years, the majority intends to pass H.R. 1804 under suspension of the rules to offset this lost tax revenue.
Lastly, CBO notes that the “user fees” imposed on tobacco companies by H.R. 1256 would constitute a private-sector mandate for the purposes of the Unfunded Mandates Reform Act (UMRA), and that other provisions associated with limited pre-emption of state tobacco laws would constitute an intergovernmental mandate under UMRA. Some Members may be concerned by the impact of the billions of dollars in unfunded mandates placed on tobacco companies amount to a tax that will be passed on to consumers.
Amendment Made in Order Under the Rule:
Buyer (R-IN) Substitute: Keeps FDA’s focus on its current mission by establishing a Tobacco Harm Reduction Center within the Department of Health and Human Services (but outside of FDA) to regulate tobacco products. Requires Administrator of the new Center to assess the impact of proposed regulations having an economic impact greater than $50 million. Pre-empts new state and local laws conflicting with the regulatory regime, and prohibits private rights of action. Statutorily requires reduction in tar levels included in tobacco products, but defers prohibition of flavor additives or other chemicals to medical experts within the new Tobacco Harm Reduction Center.
Permits the introduction (without fixed-term time limits) of modified risk products, provided such products result in “measurable and substantial reductions in morbidity and mortality among individual tobacco users.” Requires disclosure of tobacco product ingredients on product packaging.
Focuses tobacco efforts on youth smoking by reducing state substance abuse block grants by up to 40% in the case of states which have not enacted laws imposing civil penalties on sale or distribution of tobacco products to underage minors and restricting certain sales practices (e.g. self-service displays, licensing of tobacco vendors, etc.) to prevent the improper sale of tobacco products to minors. Imposes penalties of up to one year imprisonment for willful violations of regulatory regime. Reduces state substance abuse block grants by up to 40% for states which do not spend at least 20% of their Master Settlement Agreement funds on tobacco control programs.