The Sordid History of the FDA’s Menthol Decision

Late last week, The New York Times reported that the Food and Drug Administration (FDA) will issue a regulation proposing a ban on menthol flavoring in cigarettes, potentially this week. This represents merely the latest development in a long and winding history of the mint-flavored additive lasting nearly a decade.

The Times report quoted FDA Commissioner Scott Gottlieb saying “it was a mistake for the agency to back away on menthol” regulation. Depending upon one’s perspective, the “menthol loophole” either represents a reasonable example of legislative compromise, or policymakers in both the legislative and executive branches valuing African-American lives less dearly than the lives of other Americans.

A Troubled Legislative History

Beginning 3 months after the date of enactment of the Family Smoking Prevention and Tobacco Control Act, a cigarette or any of its component parts (including the tobacco, filter, or paper) shall not contain, as a constituent (including a smoke constituent) or additive, an artificial or natural flavor (other than tobacco or menthol) or an herb or spice, including strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry, or coffee, that is a characterizing flavor of the tobacco product or tobacco smoke.

That language created two policy problems. First, as I noted in my summary of the bill at the time, because the bill banned other cigarette flavors manufactured overseas, while permitting menthol-flavored cigarettes manufactured domestically, the law would likely result in World Trade Organization (WTO) complaints for unfair trade practices. Indeed, Indonesia, which manufactures clove cigarettes, filed just such a complaint following the law’s passage—and won its case at the WTO.

The Times alluded to the other complication presented by the “menthol loophole” in its article this week: “According to the N.A.A.C.P.’s Youth Against Menthol campaign, about 85 percent of African-American smokers aged 12 and up smoke menthol cigarettes, compared with 29 percent of white smokers, which the organization calls a result of decades of culturally tailored tobacco company promotion.”

That “decades of culturally tailored tobacco company promotion” also included contributions to organizations like the NAACP and the Congressional Black Caucus Foundation. Industry documents released as part of the 1998 master settlement agreement demonstrated that “the tobacco industry established relationships with virtually every African-American leadership organization”—both to increase tobacco use, and to head off tobacco control efforts.

The FDA Looked the Other Way

Despite the condemnation from the HHS secretaries for its double standards against African-Americans, the bill passed as written in 2009. In an irony of ironies, the first African-American president signed it into law in June that year.

While it did not ban menthol outright, the legislation required a study on its effects, and gave the FDA the authority to ban the additive. Despite occasional rumors that FDA might outlaw menthol—and appeals from the African-American community for a ban—the Obama administration did not take action on the matter.

As a small government conservative, I question the value of establishing and maintaining an FDA bureaucracy to regulate an inherently unhealthful product. I by no means condone the decades of deception the tobacco industry used to sell their products.

This post was originally published at The Federalist.

Substitute Amendment on 9/11 Bill

As you may be aware, Sens. Gillibrand and Schumer have released an updated substitute of the 9/11 bill (H.R. 847).  A CBO cost estimate is available here.

The health title remains unchanged from the House-passed bill; the changes in the most recent draft are a reduction in the amount of new money placed into the 9/11 Victim Compensation Fund (to reflect recent class action settlements) and changes to the pay-fors.  The changes are summarized below, and a summary of the original legislation is available here.

As a reminder on process, Sen. Reid has said he will at some point (the time has not yet been announced) move to reconsider the cloture vote on the motion to proceed to the House-passed bill.  If that motion succeeds, then Sen. Reid will be able to amend the House-passed bill with the updated Gillibrand substitute.  We will have more information on the status of the legislation as it becomes available.

Changes Made in the Gillibrand Substitute

9/11 Victim Compensation Fund:  The substitute reduces the total value of the Victims’ Compensation fund by $1.2 billion dollars to slightly under $3 billion dollars for the first ten years.  This reduces the total amount of federal funds paid for compensation under Title II to $7.18 billion (down from $8.4 billion).  The New York Senators represent that this change was made possible as a result of the settlement reached last month with Ground Zero workers.

Government Procurement Excise Tax:  The substitute imposes a 2% “excise tax” on federal procurement payments (by definition, made pursuant to a contract with the U.S. Government) for the provision of goods or services, if provided by a country not party to the WTO Government Procurement Agreement (GPA) (or, presumably, a US-FTA partner).

This provision may be problematic under U.S.-WTO obligations. The GPA is a pluri-lateral WTO agreement to which the US is party with more than 40 other WTO Members.  With respect to procurement obligations, the U.S. is free to differentiate its treatment between non-GPA WTO members and U.S. producers.  However, with respect to an excise tax, such differentiation may conflict with the U.S.’s WTO obligations covering internal taxation with respect to the importation of goods.  For example, if the excise tax is not considered to be a law governing procurement, then it may violate the national treatment obligation which requires the U.S. to treat imports in a manner equal to domestic products.  There may be additional arguments raising trade concerns, but this example is illustrative.

The substitute also specifies it “shall be applied in a manner consistent with United States obligations under international agreements.” It is therefore possible that it would not be applied with respect to the procurement of goods from any other WTO member.  Under this scenario, the vast majority of government procurements likely to be affected would be with respect to Iraq and Afghanistan, which are not full members of the WTO.

It is unclear how JCT/CBO is calculating its score.  The score may include revenues which may reflect contracts with suppliers in WTO Member countries that are not signatories to the GPA, which may be WTO inconsistent (and technically not covered since the bill requires consistency with US international obligations) and also apparently uses, for the bulk of the numbers, contracts with suppliers in Afghanistan and Iraq.  Moreover, the scoring assumes that current spending levels in Iraq and Afghanistan will continue for 10 years at current levels.

Extension of Travel Promotion Act Fees:  The substitute extends and re-directs travel promotion fees created earlier this year to fund the 9/11 health programs.   In March 2010, the President signed into law the Travel Promotion Act (Sec. 9 of PL 111-145, the United States Capitol Police Administrative Technical Corrections Act of 2009), which created a nonprofit corporation to market the United States as an international travel destination.  The corporation is partially funded by a $14 assessment on international visitors from nations that have US-visa waiver programs (i.e., visitors from nations that are not required to obtain a visa for temporary travel to the United States), as well as matching funds from the travel and tourism industry.   Of the $14 fee, $10 is funneled into the Travel Promotion Fund created by the Act to cover operating expenses of the nonprofit corporation.  The remaining $4 is redirected to the general fund to cover the costs of administering the Electronic System for Travel Authorization (ESTA) — authorization that all nationals of visa waiver countries must obtain prior to travelling to the United States.  The Travel Promotion Act authorizes the imposition of this tax on foreign travelers through the end of FY 2014.  The 9/11 bill would extend the collection of the $14 fee past the FY 2014 sunset through FY 2021 and, beginning in FY 2015, redirect all the revenue from the fee into general fund where it can be used to offset health care costs in the 9/11 bill.

H1-B Visa Fees:  The bill extends until September 30, 2021 (from September 30, 2014) the Emergency Border Security Appropriations Act of 2010, passed in August, which raised fees on H1-B and L-1 visas for those companies that have more than half their U.S.-based employees on such visas.

Coburn Substitute Amendment (#4696) to Food Safety Bill

Senator Coburn has offered a substitute amendment (#4696) to the food safety bill.  This morning Sen. Coburn also filed notice of intent to offer a motion to suspend the rules to allow the consideration of a vote on his amendment.  Details and timing of any potential vote are unclear, but a motion to suspend the rules to allow the amendment to be considered would be subject to a 2/3rds vote threshold (i.e., 67 Senators assuming all present and voting).
Summary
  • Requires HHS and the Department of Agriculture to “establish a plan to ensure effective information sharing” between the two agencies regarding food safety and inspection.
  • Requires HHS to submit a report to Congress within one year regarding “a strategic plan on information technology” for food safety data collection and electronic recall records, as well as recommendations for a “more expeditious process for approving new technologies” to improve food safety.
  • Grants FDA authority to inspect records regarding articles of food “related to” an emergency that “presents a threat of serious adverse health consequences or death.”
  • Provides for biennial registration of facilities with the FDA.
  • Permits FDA to issue requirements to reduce hazards in high-risk foods.  Requires FDA to make “a careful examination of the effect on small businesses” and include exemptions “for firms that will be adversely impacted” by the requirements.
  • Allows FDA to issue export certificates and charge a fee of up to $175 for such certification, with such fees to cover salaries and expenses of FDA employees.
  • Requires FDA to accredit independent third party entities to inspect domestic and foreign facilities to ensure compliance with federal requirements.  Requires such third parties to submit inspection reports to FDA within 10 days of inspection; conditions “that could cause or contribute to an unreasonable risk to the public health” require immediate FDA notification.  Requires FDA to consider inspections performed by accredited third parties when establishing inspection schedules for FDA employees.
  • Provides that food imports coming from international facilities successfully inspected by accredited third parties “shall not be detained or refused admission but shall receive permission for expedited entry.”
  • Requires FDA to participate in frequent meetings with foreign governments to discuss regulatory harmonization.
  • Clarifies that provisions of the legislation should not be construed as violating World Trade Organization standards or other international obligations of the United States.

Update and Summary on Food Safety Bill

As previously indicated, a cloture vote on the motion to proceed to the food safety bill (S. 510) is the third in a series of votes scheduled to take place beginning on Wednesday.  Timing of the vote series on Wednesday remains TBD; however, the series of votes has been structured in such a manner that if cloture on the motion to proceed to the food safety bill is successful, that vote will take precedence over the prior motions.

As you may be aware, there are three primary issues outstanding regarding the food safety bill: Sen. Tester’s amendment to exempt small farms from the legislation’s requirements; Sen. Feinstein’s proposed ban on bisphenol-A (BPA); and Sen. Coburn’s concerns regarding potential duplicative oversight and excessive spending.  Discussions continue regarding those issues, and we will keep offices informed if agreements can be reached.

Text of the updated manager’s package can be found here; the CBO score is online here.  A summary of the bill, including the changes made by the manager’s package, follows below .  We will have more information as it becomes available.

 

Noteworthy

  • S. 510 is intended to respond to several food safety outbreaks in recent years by strengthening the authority of the Food and Drug Administration (FDA) and redoubling its efforts to prevent and respond to food safety concerns.
  • The legislation expands current registration and inspection authority for FDA, and re-focuses FDA’s inspection regime based on risk assessments, such that high-risk facilities will be inspected more frequently.  The bill also requires food processors to conduct a hazard analysis of their facilities and implement a plan to minimize those hazards.
  • The bill requires FDA to recognize bodies that accredit food safety laboratories domestically and third-party auditors overseas.  The bill enhances partnerships with state and local officials regarding food safety outbreaks, and establishes a framework to allow FDA to inspect foreign facilities.
  • The bill does NOT change the existing jurisdictional boundaries between FDA and the Department of Agriculture, and includes protections for farms and small businesses.
  • The bill gives the FDA the power to order mandatory food recalls, in the event that a food company cannot or does not comply with a request to recall its products voluntarily.

 

Title I – Prevention

Records Inspection:  Expands and clarifies FDA’s records inspection authority, such that FDA can inspect records regarding an article of food “and any other article of food that [FDA] reasonably believes is likely to be affected in a similar manner, will cause serious adverse health consequences or death to humans or animals.”

Registration:  Requires facilities to renew registration with the FDA every two years, and to agree to potential FDA inspections as a condition of such registration.  Gives the FDA Commissioner the power to suspend facilities’ registration in the event FDA determines the facility “has a reasonable probability of causing serious adverse health consequences or death.”  A suspended facility shall not be able to “introduce food into interstate or intrastate commerce in the United States.  A hearing would occur within two business days on any suspension.  If the suspension is found warranted, the facility must submit a corrective action plan before its suspension could be lifted.  The bill also states that the commissioner cannot delegate to other officials within FDA the authority to impose or revoke a suspension.

Small Entity Compliance Guides:  Requires FDA to develop plain language small entity compliance guides within 180 days of the issuance of regulations with respect to registration, hazard analysis, safe production, and recordkeeping requirements.

Hazard Analysis:  Requires facilities to analyze at least every three years their potential hazards and implement preventive controls at critical points.  Further requires facilities to monitor the effectiveness of their preventive controls, take appropriate corrective action, and maintain records for at least two years regarding verification of compliance.  The bill gives FDA the authority to waive compliance requirements in certain instances, and allows FDA to exempt facilities “engaged only in specific types of on-farm manufacturing, processing, or holding activities that the Secretary determines to be low risk.”  The language also delays implementation for smaller establishments for up to three years.

Performance Standards:  Requires FDA to review evidence on food-borne contaminants and issue guidance documents or regulations as warranted every two years.

Produce Safety:  Establishes a process to set standards for the safe production and harvesting of raw agricultural commodities (i.e. fruits and vegetables).  Requires FDA to promulgate regulations regarding the intentional adulteration of food—applying to food “for which there is a high risk of intentional contamination”—within two years, and issue compliance guidance as appropriate.  Includes delayed implementation of up to two years for smaller establishments.

Fees for Non-Compliance:  Imposes fees on facilities only in cases where a facility undergoes re-inspection to correct material non-compliance, or does not comply with a recall order and thereby forces FDA to use its own resources to perform recall activities.  Importers would be subject to fees for annual re-inspections or for participation in the voluntary qualified importer program established under title III of the bill.  Requires FDA appropriations funding to keep pace with inflation in order for fees to be collected.  The bill gives FDA the authority to lower fee levels on small businesses through a notice-and-comment process.

Safety Strategies:  Requires FDA, the Department of Agriculture, and the Department of Homeland Security to coordinate to create an agriculture and food defense strategy, focused on preparedness, detection, emergency response, and recovery.  Requires reports from FDA on building domestic preventive capacity—including analysis, surveillance, communication, and outreach—and requires FDA to issue regulations on the sanitary transportation of food within 18 months of enactment.

Food Allergies in Children:  Requires FDA to work with the Department of Education to develop voluntary guidelines to manage the risk of food allergy and anaphylaxis in schools and early childhood education programs.  Authorizes new grants of up to $50,000 over two years for local education agencies to implement the voluntary guidelines.

Dietary Ingredients and Supplements:  Requires FDA to notify the Drug Enforcement Administration if FDA believes a dietary supplement may not be safe due to the presence of anabolic steroids.

Refused Entry:  Requires FDA to notify the Department of Homeland Security, and by extension the Customs and Border Protection Agency, in all cases where FDA refuses to admit foods into the United States on the grounds that the food is unsafe.

Title II – Detection and Response

Targeted Inspections:  Requires FDA to prioritize inspection of high-risk facilities, based on a risk profile that includes the type of food being manufactured and processed, facilities’ compliance history, and other criteria.  Requires FDA to inspect high-risk facilities once in the five years after enactment, and every three years thereafter; low-risk facilities would be inspected once in the seven years after enactment, and every five years thereafter.  Foreign facility inspections would be required to double every year for five years.

Laboratory Testing:  Requires FDA to establish within two years a process to recognize organizations that accredit laboratories testing food products, and to develop and maintain model standards for accrediting bodies to use during the accreditation process.  Requires food testing for certain regulatory purposes to be conducted in federal laboratories or those accredited by an approved accrediting body, with results sent directly to FDA.  Includes reporting and other provisions designed to support early detection among laboratory facilities.

Traceback and Recordkeeping:  Establishes a series of pilot projects within nine months of enactment on “methods to rapidly and effectively identify recipients of food to prevent or mitigate a foodborne illness outbreak.”  Requires FDA to issue within two years a notice of proposed rulemaking regarding recordkeeping requirements for high-risk foods.  Permits FDA to request that farm owners “identify immediate potential recipients, other than consumers,” in the event of a foodborne illness outbreak.  Delays implementation of regulations for up to two years for smaller establishments.

Surveillance:  Directs FDA to enhance foodborne illness surveillance systems to improve collection, analysis, reporting, and usefulness of data on foodborne illnesses, and establishes a multi-stakeholder working group to provide recommendations.  Reauthorizes an existing program of food safety grants through fiscal year 2015.

Mandatory Recall Authority:  Provides FDA the authority to order recall of products if the products are adulterated or misbranded “and the use of or exposure to such article will cause serious adverse health consequences or death.”  Requires FDA to provide an opportunity for voluntary recall by the manufacturer or distributor prior to ordering a recall and provides the responsible party the opportunity to obtain a hearing within two days regarding any FDA order for a mandatory recall.  Requires federal agencies to establish and maintain a single point of contact regarding recalls, and requires FDA to take appropriate actions to publicize mandatory recalls through press releases, an internet Web site, and other similar means.  Also gives FDA authority to order the administrative detention of food products when the agency has “reason to believe” they are adulterated or misbranded.  Directs that only the commissioner has the authority to order a mandatory recall, a power that may not be delegated to other FDA employees.

State and Local Governments:  Directs FDA, working with other federal departments, to provide support to state and local governments in response to food safety outbreaks.  Requires the Department of Health and Human Services to set standards and administer training programs for state and local food safety officials.  Creates a new program of food safety centers of excellence, and amends an existing program of food safety grants to fund food safety inspections and training, with an extended authorization through fiscal year 2015.

Food Registry:  Permits FDA to require the submission of reportable food subject to recall procedures (excepting fruits and vegetables that are raw agricultural commodities).  Requires grocery stores with more than 15 locations to post information about reportable foods prominently for 14 days.

Title III – Food Imports

Foreign Supplier Verification Program:  Requires importers to undertake a risk-based foreign supplier verification program to ensure that imported food meets appropriate federal requirements and is not adulterated or misbranded.  Requires FDA to establish regulations for the foreign supplier verification program within one year of enactment.  Importers’ records relating to foreign supplier verification would be maintained for at least two years.

Voluntary Qualified Importer Program:  Directs FDA to establish within 18 months a voluntary program of “expedited review and importation” for importers.  Eligibility would be determined by FDA using a risk assessment based on such factors as the type of food being imported, the compliance history of the foreign supplier, and the compliance capacity of the country of export.

Import Certification:  Permits FDA to require as a condition of importation a certification “that the article of food complies with some or all applicable requirements” under the Food, Drug, and Cosmetic Act.  Requires FDA’s determination of certification requirements to be made based on risk assessments.  Requires notices for imported food to list any country that previously refused entry for that food.  Permits FDA to review foreign countries’ controls and standards to verify their implementation.

Foreign Government Capacity:  Requires FDA to “develop a comprehensive plan to expand the technical, scientific, and regulatory capacity” of foreign entities exporting food to the United States.  Permits FDA to inspect foreign food facilities, and requires the refusal of imported food if a registered exporter refuses entry of FDA inspectors into an overseas facility.  Directs FDA to establish a system to recognize bodies that accredit third-party auditors to certify eligible foreign food facilities meet federal compliance requirements.  Requires FDA to establish overseas offices in countries selected by FDA to “provide assistance to the appropriate governmental entities of such countries with respect to measures to provide for the safety of articles of food.”

Smuggled Food:  Requires FDA to work with the Department of Homeland Security and Customs officials to develop a strategy to identify smuggled food and prevent its entry.

Title IV – Other Provisions

Funding and Staffing:  Authorizes such sums in funding for fiscal years 2011 through 2015.  The bill also sets staffing goals of 4,000 new field staff in fiscal year 2011, and a total of 17,800 through fiscal year 2014.

Employee Protections:  Creates a new process intended to prevent employment discrimination against individuals reporting food safety violations.  The Department of Labor is directed to review and investigate complaints of such discrimination through an administrative process, subject to appeal in federal court.

Jurisdiction:  The bill notes that nothing within its contents shall be construed to alter the division of jurisdiction between the Department of Health and Human Services and the Department of Agriculture.  Likewise, the bill notes that it shall not be construed in a manner inconsistent with American obligations under the World Trade Organization and other relevant international treaties.

Information Alert: H.R. 1108, Tobacco Regulation Bill

Today the House will consider H. R. 1108, the Family Smoking Prevention and Tobacco Control Act, which would provide authority for the Food and Drug Administration (FDA) to regulate tobacco products.
  • The White House, in its Statement of Administration Policy on H.R. 1108, issued a veto threat against the bill on the grounds that it would increase taxes and “undermine one of the nation’s premier public health and regulatory institutions and potentially lead the public to mistakenly conclude some tobacco products are safe.”
  • The Club for Growth is also scoring a NO vote on H.R. 1108, objecting to a bill that “gives sweeping control of the tobacco market to FDA” and imposes over $5 billion in new tax increases.
  • The bill includes more than $5 billion in taxes on tobacco companies, ostensibly termed “user fees,” to finance the FDA’s work regulating tobacco products.  CBO notes that these provisions greatly exceed the thresholds established in the Unfunded Mandates Reform Act (UMRA).
  • H.R. 1108 places stringent restrictions on the introduction and marketing of new products that would reduce or modify the inherent risks associated with the consumption of tobacco.  Some conservatives may be concerned that such onerous restrictions on the introduction of reduced risk tobacco products could inhibit the use of products reducing the risks associated with tobacco consumption while potentially serving as a barrier to entry for new market competitors.
  • The Food and Drug Administration has publicly stated it does not want the authority to regulate tobacco products granted in H.R. 1108, as it would contradict its mission to promote and protect the public health.  In the Commissioner’s opinion, “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.”
  • This morning, Energy and Commerce Chairman Dingell, discussing the recent salmonella outbreak, was quoted in The Wall Street Journal as saying that “there’s a total inability of FDA to carry out its mission.”  On top of questions which Democrats themselves have raised regarding FDA’s competence, some conservatives may question whether the food safety concerns that have arisen recently make now an appropriate time to expand the agency’s regulatory remit and mission.
  • While establishing FDA authority to regulate tobacco products, H.R. 1108 would also retain the FTC’s authority to regulate tobacco advertising and distribution on the federal level, and would provide only limited pre-emption of state laws, allowing more stringent state restrictions on tobacco advertising and promotion.  Some conservatives may be concerned that these multiple layers of regulation will impose undue bureaucratic and logistical difficulties on tobacco manufacturers—even though H.R. 1108 would explicitly retain tobacco as a lawful product.
  • Because the bill bans clove and other flavored cigarettes—many of which are manufactured in foreign countries—while expressly permitting production of menthol cigarettes, Indonesia or other foreign governments could file complaints at the World Trade Organization claiming discrimination against their products.  Some conservatives may be concerned that passage of H.R. 1108 could ultimately result in retaliatory measures being taken against American-made products—and could lead to trade disputes with a negative effect on economic growth.
  • Some conservatives may be concerned that a 190-page bill seeking to establish new federal authority to regulate a multi-billion dollar industry is being considered under expedited procedures on the suspension calendar.

Legislative Bulletin: H.R. 1108, Family Smoking Prevention and Tobacco Control Act

Order of Business:  The bill is scheduled to be considered under suspension of the rules on Wednesday, July 30, 2008.

Summary of Changes Made:  The latest draft text would make several substantive changes to the bill.  First, the revised text would require the Secretary of Health and Human Services to contract with states to enforce the FDA-promulgated regulations with respect to tobacco products.  However, the bill would also prohibit the Secretary from contracting with states to enforce the tobacco regulations on Indian tribal lands—or directly engage in enforcement activity on tribal lands—without the express written consent of the tribe involved.  This last change was made to resolve a jurisdictional issue raised by the Natural Resources Committee, which has jurisdiction over Indian tribal matters.

Some conservatives may note that the language discussed above creates a significant loophole in the enforcement mechanism for tobacco products—namely, that Indian tribal areas could represent a “no-man’s land” with respect to tobacco enforcement.  Some conservatives may question whether this loophole could allow unregulated products to be bought and sold on tribal lands, effectively undermining the entire regulatory regime for tobacco products which H.R. 1108 is intended to establish.

The bill includes two new offsets to pay for federal tax revenue lost as a result of the projected 2% reduction in tobacco use, which the Congressional Budget Office (CBO) estimates would cost $114 million over five years, and $446 over ten.  To offset this foregone revenue, the bill would incorporate the text of a measure (H.R. 6500) making changes to the Thrift Savings Plan (TSP) for federal workers.  That bill would require auto-enrollment of workers in the TSP, costing $225 million over five years, and $736 million over ten, due to revenue loss associated with additional employees making pre-tax TSP contributions.  However, H.R. 6500 (as incorporated into H.R. 1108) would result in a net revenue gain, due to an additional provision establishing an after-tax savings component (similar to the Roth IRA or Roth 401(k) options) in the TSP, which CBO estimates would generate $382 million in revenue over five years, and $2.0 billion over ten, resulting from employees substituting pre-tax TSP contributions with after-tax ones.

The second offset for the lost tobacco tax revenue would come from the elimination of unused sick leave in the calculation of survivors’ annuity benefits for participants in the Federal Employees Retirement System (FERS).

Press reports indicate that further language may be added to the bill requiring a study of the so-called “menthol loophole;” however, such language was not available at press time.

Summary:  H.R. 1108 would amend the Federal Food, Drug, and Cosmetic Act to grant new authority to the Food and Drug Administration (FDA) to regulate tobacco products and advertising, and amend the Federal Cigarette Labeling and Advertising Act to impose new restrictions on tobacco product labels and disclosure.  Specific bill provisions include the following:

Findings and Purpose.  The bill contains 13 pages of findings purporting the need to regulate tobacco products to protect the public health, and language designed to ensure that the bill does not affect the authorities of the Secretaries of Agriculture or Treasury.  The bill also includes severability language providing that judicial invalidation of one or more sections of the legislation will not result in the nullification of the entire regulatory regime proposed by the bill.

Regulatory Authority.  H.R. 1108 gives FDA the authority to regulate tobacco products, which are defined as “any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product” and establishes a new Center for Tobacco Products within the FDA to exercise regulatory authority.  The bill states that tobacco does not qualify as a drug or medical device for purposes of FDA regulation, and limits the FDA’s regulatory authority to tobacco leaf in the possession of tobacco manufacturers (thus excluding tobacco growers).

Adulterated and Misbranded Products.  The bill defines adulterated and misbranded tobacco products, defining the former to include products that “consists in whole or in part of any filthy, putrid, or decomposed substance,” and defining misbranded products to include those that are “false or misleading,” as well as those which do not adhere to the registration, labeling, and other regulatory regimes established under the bill.  The bill grants the FDA, through the Secretary of Health and Human Services, the right to pre-approve statements made on tobacco product labels.

Information Disclosure.  The bill requires all tobacco manufacturers to disclose to the Secretary the names and descriptions of all ingredients, components, and compounds in tobacco products, including the nicotine content of same.  The bill grants authority to the Secretary to obtain information from tobacco companies on the health effects of smoking and requires the Secretary to publish “a list of harmful and potentially harmful constituents” in tobacco products by brand.

Registration and Inspection.  H.R. 1108 requires all tobacco manufacturers to register their names and places of business with the Secretary and requires the Secretary to make such information public.  The bill also requires inspection of every domestic tobacco manufacturing establishment at least once every two years, and a requirement that overseas tobacco manufacturing establishments have “adequate and effective means” for the Secretary to ensure that tobacco products manufactured overseas should be refused entry into the United States.

General Authority.  The bill would permit the Secretary to restrict by regulation the sale, distribution, and advertising of tobacco products “if the secretary determines that such regulation would be appropriate for the protection of the public health.”  In exercising this authority, the Secretary may not 1) “prohibit the sale of any tobacco product in face-to-face transactions by a specific category of retail outlets;” 2) set an age limit on the sale of tobacco products higher than 18 years of age; or 3) require use of a physician’s prescription in order to obtain tobacco products.  However, the bill does require the Secretary to promulgate regulations addressing the sale, distribution, and marketing of tobacco products remotely so as to discourage the purchase of tobacco products by underage individuals.

Product Standards.  H.R. 1108 would ban all “artificial or natural flavors” except for menthol, and requires all tobacco products to meet domestic standards with respect to pesticide use.  The bill permits the Secretary to impose further restrictions should the regulations be in the interest of the public health.  However, “because of the importance of a decision of the Secretary to issue a regulation” banning all cigarettes or reducing the level of nicotine permitted in tobacco products to zero, the bill explicitly prohibits the Secretary from taking either action.

Notification and Recalls.  The bill grants the Secretary the authority to order notification to the public, through public service announcements or other means, of tobacco products that “present an unreasonable risk of substantial harm to the public health…and no more practicable means is available…to eliminate such risk.”  The bill also authorizes the Secretary to order recalls in the event that “there is a reasonable probability that a tobacco product contains a manufacturing or other defect not ordinarily contained in other tobacco products on the market that would cause serious, adverse health consequences or death.”

Record-Keeping.  H.R. 1108 requires tobacco companies to create and preserve records, as established by regulation, designed to determine that tobacco products are not adulterated or misbranded and to protect the public health, and to provide reports of any corrective action taken by tobacco manufacturers to remove products from the market for health reasons.  The bill language states that identities of any patients discussed in applicable records should remain confidential, unless disclosure is necessary “to determine risks to public health of a tobacco product.”

Review of New Tobacco Products.  The bill requires pre-market review for all new tobacco products introduced after February 15, 2007, unless the product is “substantially equivalent” to existing products.  The application for pre-market review requires full disclosure of the products’ components, and research of the health effects of same.  The bill would require the Secretary to reject such new tobacco products if “there is a lack of a showing that permitting such tobacco products to be marketed would be appropriate for the protection of the public health,” among other conditions necessary for approval.  The bill also permits the Secretary to withdraw pre-market approval, due to a company’s non-compliance with regulations or new information on the public health effects of a product, effectively removing the product from the marketplace.

Modified Risk Tobacco Products.  H.R. 1108 places restrictions on the introduction or marketing of modified risk tobacco products.  Specifically, the bill requires that any product marketed as modified risk must “significantly reduce harm and the risk of tobacco-related disease to individual tobacco users” and “benefit the health of the population as a whole,” including both tobacco users and non-users.  In the event that the Secretary cannot make such a determination without long-term epidemiological data that is not available, the Secretary may issue a temporary approval of not more than five years for the marketing of modified risk products, provided that “the reasonably likely overall impact of use of the product remains a substantial and measurable reduction in overall morbidity and mortality among individual tobacco users,” and the product is subject to annual post-market surveillance review.  The bill also places additional restrictions on the marketing, advertising, and comparative claims presented by modified risk tobacco products.

Judicial Review.  The bill provides a process for individuals adversely affected by regulations issued pursuant to the bill, or whose application for pre-market approval was denied, to seek judicial review with the U.S. Court of Appeals for the circuit in which the party resides or has a principal place of business, subject to review by the Supreme Court.

Regulatory Requirements.  H.R. 1108 requires the Secretary to issue regulations within three years of enactment regarding tobacco product testing and disclosure of product constituents, and permits the Secretary to require label or advertising disclosure of tobacco product constituents.  The bill provides for delays of regulatory and testing requirements for “small tobacco product manufacturers,” defined as those employing fewer than 350 individuals.  The bill also clarifies that none of its provisions prohibit the Federal Trade Commission (FTC) from regulating tobacco advertising or sales.

Limited Pre-Emption.  H.R. 1108 pre-empts state laws relating to tobacco product standards, mis-labeling, adulteration, labeling, and related product standards; according to the Congressional Budget Office (CBO), this pre-emption language constitutes an intergovernmental mandate as defined in the Unfunded Mandates Reform Act.  However, the bill retains states’ ability to enact more stringent standards with respect to tobacco advertising and promotion.

Scientific Advisory Committee.  The bill establishes the Tobacco Products Scientific Advisory Committee to provide technical expertise and recommendations to the Secretary regarding the regulation of tobacco products.

Smoking Cessation.  The bill requires the Secretary to consider approving the extended use of nicotine replacement products “for the treatment of tobacco dependence.”

User Fee.  The bill assesses user fees on tobacco companies and funds FDA regulation of tobacco activities in the amount of $85 million in Fiscal Year 2008, increasing each year until reaching $712 million in Fiscal Year 2018 and each subsequent year.  The bill assesses user fees by class of tobacco products (e.g. cigarettes, cigars, etc.), and allocates them to companies within a class of tobacco products, based on the percentages outlined in tobacco buyout legislation (P.L. 108-357) passed in October 2004.

Restores 1996 Rule on Tobacco Advertising.  The bill requires the Secretary to publish within 180 days of the bill’s enactment a final rule on regulation of tobacco identical to regulations published on October 28, 1996, with an effective date of one year following the bill’s enactment.  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 bill would modify the original regulation to permit the free distribution of smokeless tobacco only, and only in quantities of fewer than 15 grams (0.53 ounces) in certain “qualified adult-only facilities.”  The bill exempts the final rule, as modified, from review under the Congressional Review Act.

Nullifies Earlier Documents.  H.R. 1108 would nullify the precedent of certain documents issued by FDA during 1995-96 as they relate to a prior attempt to classify nicotine in tobacco products as a drug for purposes of FDA regulation. (H.R. 1108 would make tobacco subject to FDA regulation, but as a “tobacco product,” not a drug or medical device.)

New Penalties.  The bill would add failure to comply with the bill’s requirements as grounds for imposition of fines and/or criminal penalties, along with other offenses relating to counterfeiting tobacco products or “the charitable distribution of tobacco products.”  The bill also gives the Secretary the authority to impose a “no-tobacco sale order” against retail outlets and establishes a new system of federal fines against retail establishments selling tobacco products improperly, authorizing fines of up to $10,000 for establishments with six or more violations within a four-year period.

Studies.  The bill would require the Government Accountability Office to submit studies regarding youth smoking as well as cross-border trade and counterfeiting in tobacco products, and requires a specific study by HHS on raising the minimum age to purchase tobacco products, as well as an FTC report on concentration within the tobacco industry.

Labeling Requirements.  The bill requires all cigarettes and smokeless tobacco sold in the United States to bear clear warnings about the risks associated with tobacco use and prescribes the wording, typeface, and font size associated with such warnings. (Tobacco products manufactured domestically for international use are exempt from this requirement.)  H.R. 1108 further requires that all advertising, including matchbooks, contain language from the warning labels, and prescribes the proportions by which such labeling warning must relate to the overall size of the advertisement.  The bill gives the Secretary of HHS the authority to alter or increase the size of the labeling requirements, permits states to further regulate the type and manner, but not the content, of cigarette advertising, and extends a prohibition on television and radio advertising to smokeless tobacco products subject to the jurisdiction of the Federal Communications Commission.

Tar and Nicotine Disclosure.  The bill gives the Secretary the authority to conduct a rulemaking process to determine whether to require the disclosure of tar, nicotine, and other constituent levels in tobacco advertising, subject to a memorandum of understanding with the Federal Trade Commission.

Shipping Requirements.  H.R. 1108 requires that all packaging and shipping containers shall bear statements stating “sale only allowed in the United States” and requires the Secretary to issue regulations regarding the maintenance of records by entities manufacturing, transporting, or distributing tobacco products.  The bill also requires tobacco manufacturers and distributors to notify the Attorney General and the Secretary of the Treasury upon obtaining information “which reasonably supports the conclusion” that tobacco products formerly held by the entity have circumvented payment of applicable taxes or “diverted for possible illicit marketing.”

Cost to Taxpayers:  According to the Congressional Budget Office (CBO), H.R. 1108 would result in $2.1 billion in mandatory spending over five years, and $5.3 billion over ten, related to the Food and Drug Administration’s regulation of tobacco.  The bill would offset these costs by imposing a “fee” on tobacco companies to finance the FDA regulation.

CBO also estimates a decline in revenues of $114 million over five years, and $446 million over ten, related to a 2% reduction in overall smoking levels due to tobacco regulation, and loss of commensurate tobacco tax revenue.  In order to pay for this reduced revenue, H.R. 1108 incorporates provisions relating to the federal Thrift Savings Plan (TSP).  The bill would establish a system of auto-enrollment in TSP for all federal employees, causing a minor revenue loss, but would on balance generate additional tax revenue by establishing a new plan to permit after-tax TSP contributions, similar to a Roth IRA or the recently-established Roth 401(k) option.

Finally, CBO estimates a five-year increase in spending subject to appropriation of $3 million as a result of H.R. 1108’s enactment.

Committee Action:  The bill was introduced on February 15, 2007, and referred to the Energy and Commerce, which held a hearing and, on April 2, 2008, reported the bill as amended by a 38-12 vote.

Possible Conservative Concerns:  Numerous aspects of H.R. 1108 may raise concerns for conservatives, including, but not necessarily limited to, the following:

  • Process.  Some conservatives may be concerned that a 190-page bill seeking to establish new federal authority to regulate a multi-billion dollar industry is being considered under expedited procedures on the suspension calendar.
  • User Fee as Tax Increase.  The bill includes more than $5 billion in assessments on tobacco companies, ostensibly termed “user fees,” to finance the FDA’s work regulating tobacco products.
  • Restricts Free Speech Rights.  In addition to codifying federal restrictions, which tobacco companies agreed to in their 1998 settlement with state Attorneys General, H.R. 1108 places additional federal restrictions on tobacco advertising.  Some of the federal restrictions on advertising content in H.R. 1108 include the following specifications for the size of warning labels on tobacco products:

The text of such label statements shall be in a typeface pro rata to the following requirements: 45-point type for a whole-page broadsheet newspaper advertisement; 39-point type for a half-page broadsheet newspaper advertisement; 39-point type for a whole-page tabloid newspaper advertisement; 27-point type for a half-page tabloid newspaper advertisement; 31.5-point type for a double page spread magazine or whole-page magazine advertisement; 22.5-point type for a 28 centimeter by 3 column advertisement; and 15-point type for a 20 centimeter by 2 column advertisement.

Some conservatives may be concerned that the highly prescriptive restrictions described above, and elsewhere in H.R. 1108, constitute an undue intrusion on companies’ constitutional free speech rights to advertise a product that most Americans already know is unhealthy.

  • Hinders Introduction of Reduced Risk Tobacco Products.  H.R. 1108 places stringent restrictions on the introduction and marketing of new products that would reduce or modify the inherent risks associated with the consumption of tobacco.  The bill states that a reduced risk product may be marketed only if the product will “significantly reduce harm and the risk of tobacco-related disease to individual tobacco users” and also will “benefit the population as a whole,” including persons who do not consume tobacco products.  Some conservatives may be concerned that such onerous restrictions on the introduction of reduced risk tobacco products could have the effect of inhibiting the use of products that could reduce the risks associated with tobacco consumption while potentially serving as a barrier to entry for new market competitors.
  • FDA Improper Agency to Regulate Tobacco.  As FDA Commissioner Andrew von Eschenbach testified before the House Energy and Commerce Committee in October 2007, the FDA has heretofore been structured as an agency to promote and protect the public health.  In the Commissioner’s opinion, requiring FDA to “approve” tobacco products as a result of H.R. 1108 would dramatically change the agency’s focus: “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.”

  • Other Important Priorities for FDA.  Energy and Commerce Oversight Subcommittee Chairman Bart Stupak (D-MI), in holding a hearing on FDA’s decision to approve an antibiotic despite receiving false clinical trial data, called the incident “a microcosm of the failure by all FDA stakeholders—FDA, pharmaceutical sponsors, and third-party monitors—to ensure the integrity of clinical trials used to support the safety and approval of new drug applications.”  On top of questions which Democrats themselves have raised regarding FDA’s competence, some conservatives may question whether the food safety concerns that have arisen in recent months make now an appropriate time significantly to expand the agency’s regulatory remit and mission.
  • Multiple Layers of Regulation.  While establishing FDA authority to regulate tobacco products, H.R. 1108 would also retain the FTC’s authority to regulate tobacco advertising and distribution on the federal level, and would provide only limited pre-emption of state laws, allowing more stringent state restrictions on tobacco advertising and promotion.  Some conservatives may be concerned that these multiple layers of regulation will impose undue bureaucratic and logistical difficulties on tobacco manufacturers—even though H.R. 1108 would explicitly retain tobacco as a lawful product.
  • Little Impact on Tobacco Use.  The CBO estimate of H.R. 1108 notes that under its budgetary model, smoking by adults would decline by only 2% after 10 years.  Some conservatives may question whether this marginal reduction in smoking levels warrants the significant intrusion on free speech rights and government-run regulatory bureaucracy that would be created under the legislation.
  • Billions in Unfunded Mandates; UMRA Point of Order.  The Congressional Budget Office, in its score of H.R. 1108, calculates that the fee imposed in the bill would constitute an unfunded mandate on tobacco companies of $249.1 million in Fiscal Year 2009, and more than $2.3 billion over five years, greatly exceeding the threshold established in the Unfunded Mandates Reform Act ($136 million in 2008, adjusted annually for inflation).   CBO also notes that the bill includes several unfunded mandates that would both pre-empt existing state tobacco regulations and require tribal governments manufacturing or distributing tobacco products to comply with the new federal regulatory regime.
  • Violates Trade Agreements.  HHS Secretary Leavitt, writing to Energy and Commerce Committee Ranking Member Barton on H.R. 1108, noted that the legislation could be viewed by foreign governments as a hostile trade action.  Because the bill bans clove and other flavored cigarettes—many of which are manufactured in foreign countries—while expressly permitting production of menthol cigarettes, Indonesia or other foreign governments could file complaints at the World Trade Organization claiming discrimination against their products.  Some conservatives may be concerned that passage of H.R. 1108 could ultimately result in retaliatory measures being taken against American-made products—and could lead to trade disputes with a negative effect on economic growth.
  • Menthol Loophole.  As noted above, H.R. 1108 would prohibit the use of all “artificial or natural” cigarette flavorings—with the exception of menthol, which is permitted under the bill.  Because data from the Centers for Disease Control indicate that 75% of African-American smokers consume menthol cigarettes, seven former Secretaries of Health and Human Services, representing both political parties, 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.”

Because the bill is being considered under suspension of the rules, no amendments addressing the menthol issue can be considered.  Some conservatives may note that the House Democrat leadership would apparently rather retain the support of the major tobacco company (Philip Morris) supporting the legislation than permit a vote on amendments that seven former HHS Secretaries believe are in the best interests of African-Americans.

Administration Position:  Although a formal Statement of Administration Policy (SAP) was unavailable at press time, a letter from Health and Human Services Secretary Leavitt to Energy and Commerce Ranking Member Barton indicated that the Administration “strongly opposes” H.R. 1108.

Does the Bill Expand the Size and Scope of the Federal Government?:  Yes, the bill would grant new authority to the Food and Drug Administration to regulate tobacco products.

Does the Bill Contain Any New State-Government, Local-Government, or Private-Sector Mandates?:  Yes, the bill imposes new fees on tobacco companies, which CBO estimates would total $235 million in Fiscal Year 2009, $2.1 billion over five years, and nearly $5.4 billion over ten years, all greatly exceeding the thresholds established in the Unfunded Mandates Reform Act ($136 million in 2008, adjusted annually for inflation).

Does the Bill Comply with House Rules Regarding Earmarks/Limited Tax Benefits/Limited Tariff Benefits?:  The Committee on Energy and Commerce, in House Report 110-762, reports that “H.R. 1108 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e) or 9(f) of rule XXI.”

Constitutional Authority:  The Committee on Energy and Commerce, in House Report 110-762, cites constitutional authority under Article I, Section 8, Clause 3 (relating to the regulation of interstate commerce) and Article I, Section 8, Clause 1 (relating to legislation promoting the general welfare of the United States).

Weekly Newsletter: July 28, 2008

Tobacco Bill Coming Soon

This week the House could consider legislation (H.R. 1108) granting the Food and Drug Administration (FDA) the authority to regulate tobacco, possibly under suspension of the rules. The bill would establish a new center within FDA to regulate tobacco products and assess tobacco companies more than $5 billion in “user fees” over the next ten years to pay for this regulation.

Some conservatives may be concerned by the regulatory regime the bill would establish, which would require an agency charged with promoting food and drug safety to regulate a product inherently unsafe and unhealthy. Some conservatives may also object to the multiple layers of regulation the bill would create, by leaving intact the Federal Trade Commission’s ability to regulate tobacco advertising and distribution and providing only limited pre-emption against additional state-based regulations and restrictions. Some conservatives may question whether the highly prescriptive restrictions in the bill— including advertising limitations on the use of color advertising and regulation of the font size of tobacco disclaimer warnings, all of which raise significant constitutional questions about their free-speech implications—constitute good public policy, particularly as the Congressional Budget Office estimates that H.R. 1108 will reduce smoking levels by only 2% over 10 years.

Lastly, some conservatives may object to provisions in the bill that could prompt an international trade dispute. Last week, HHS Secretary Leavitt wrote to Energy and Commerce Committee Ranking Member Barton about H.R. 1108, observing that, because the bill prohibits all tobacco flavorings except menthol, foreign countries which manufacture clove or other flavored cigarettes may take action against the United States for providing unfair and disparate treatment for a particular type of manufactured cigarette. As press reports indicate that H.R. 1108 may be considered under suspension of the rules, some conservatives may be concerned by the lack of procedural opportunities available to address this disparity, such that the United States can live up to its obligations under international free-trade agreements.

A Policy Brief on H.R. 1108 (as reported by the Energy and Commerce Committee) can be found here.

Democrats Ignore Medicare Funding Warning

Last week Democrats responded to the Medicare trustees’ finding that the Medicare program faces significant future funding shortfalls—by resolving to ignore the problem. The resolution concerned a provision inserted into the Medicare Modernization Act at the behest of the RSC, which provided for the President to submit, and Congress to consider under expedited procedures, legislation to remedy Medicare’s funding problems when the program is projected to consume more than 45% of its funding from general revenues (as opposed to the Medicare payroll tax and beneficiary premiums). The Democrat majority’s action turned off this funding “trigger” for the balance of the 110th Congress, preventing those who believe in entitlement reform from taking action to force a House floor vote on Medicare reform legislation.

Many conservatives may be disappointed by the actions of Congressional Democrats, which prevented the President’s reasonable and modest proposals for Medicare reform—means testing that would make wealthier individuals like Warren Buffett and George Soros pay $2 per day more in Part D prescription drug premiums and liability reform to reduce the costs associated with defensive medicine practices— from receiving a vote in Congress. Many conservatives may believe that solving Medicare’s $86 trillion in unfunded obligations—and a Hospital Trust Fund scheduled to be exhausted in little more than a decade—will not be helped by Democrats’ apparent eagerness to ignore the problem. However, when Democrats like Florida’s Alcee Hastings note that “the perceived problem with Medicare funding has already been addressed,” many conservatives may be concerned that this lack of awareness will only hasten the day when Medicare’s funding shortfalls jeopardize the viability of the program—and wonder what policy-makers will tell their senior constituents when it does.

There are RSC Policy Briefs related to the Medicare trigger: Legislative Background; Talking Points on Trigger; Questions for House Democrats; Size of Medicare Program; White House Trigger Bill; Medicare Trustees Report

Article of Note: Fuzzy Math

Last Wednesday the New York Times reported on the many financial discrepancies surrounding the health care plan of Sen. Barack Obama (D-IL). While Sen. Obama has been consistent in saying that his health plan would save every American family $2,500 per year, many observers have come to question the factual basis for a “best guess” assertion by his advisers early last year. Independent estimates, including those by the Congressional Budget Office, have questioned whether the savings from such initiatives as health information technology and chronic care management will materialize, particularly in the four-year timeline Sen. Obama has promised—such that even a statement by Obama’s own advisers backtracked from any assertions that the purported savings would materialize by a date certain.

Many conservatives may be skeptical of Sen. Obama’s claims, particularly as the liberal Commonwealth Fund released a report in December with a menu of options for savings that would by their estimates achieve a total reduction in spending of only 6% in 10 years. Some conservatives may also be concerned that, in an attempt to reduce health care costs—whether by 8%, 6%, or some lesser amount— Sen. Obama would rely first and foremost on imposing price controls on physicians, pharmaceutical manufacturers, and insurance companies, along with rationing care through a government-controlled comparative effectiveness institute. Many conservatives may believe that such bureaucratic restrictions would in the long run prove far more effective at growing the size of government than slowing the growth of health care costs.

Read the article here: New York Times: “Health Plan from Obama Sparks Debate