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E-Cigarette Regulation: Up in Vapor?

Lack of a federal policy creates a potential federal-state supremacy issue
By Michael Kilpatrick Morton, JD

The federal regulatory framework for cigarettes and other tobacco products, one of the most comprehensive regulatory regimes currently in effect, has a new smokescreen to feel its way through, as more and more people try to find a way to overcome their addiction to nicotine–electronic cigarettes (e-cigarettes). However, a side-effect of the rise in the production and marketing of e-cigarettes and other vapor products is that these products are making their way into the hands of minors, with different fruit and candy flavors. The confusion surrounding their federal regulation, taxation, and state regulation is caused in large part by not knowing what these products actually are.

As of March 2015, the FDA had not published a final rule either defining e-cigarettes or vapor products or expanding the definition of “tobacco products” to include e-cigarettes and other vapor products. In response to the slow-turning wheels of the federal government, several states, including Missouri, New York, and Vermont, have passed legislation that will likely conflict with the final FDA regulations. This article focuses on the Missouri law, the newest law enacted to address this issue.

E-Cigarettes and Vapor Products in Youth

In a Morbidity and Mortality Weekly Report from November 2014, the Centers for Disease Control and Prevention (CDC) analyzed the results of the 2013 National Youth Tobacco Survey. In 2013, 22.9% of high school students reported current use (at least one day in the past 30 days) of at least one tobacco product. Of all high school students surveyed, 4.5% reported e-cigarettes as one of their “tobacco” products of choice; 0.6% of high school students reported solely using e-cigarettes. Of all middle school students surveyed, 2.9% reported e-cigarettes as one of their “tobacco” products of choice and only 0.4% reported solely using e-cigarettes. Coupled with the rest of the numerical data, it is inferred that minors who use e-cigarettes are also concurrently using another tobacco product.

While the survey studied tobacco use among middle and high school students, the CDC included e-cigarettes and other non-tobacco vapor products as a separate subset of data. This data suggests that as minors find alternatives to conventional tobacco products, federal regulatory action is necessary; however, classifying a non-tobacco product that contains nicotine is more difficult than one would think.

The federal government has been clear in its messaging: a stringent regulatory framework is needed to regulate the marketing and sale of e-cigarettes. In a letter dated Aug. 1, 2014, Congress pushed FDA Commissioner Margaret Hamburg to enact a strict final rule under the Family Smoking Prevention and Tobacco Control Act, more than five years after its passage.

This Act gives the FDA the authority to publish regulations on the sale and marketing of all tobacco products, which includes the ability to define “tobacco product” to include e-cigarettes and other vapor products. The letter, which noted that the percentage of minors who had tried e-cigarettes more than doubled from 2011 to 2012, asked Commissioner Hamburg to expedite the finalization of a proposed rule. Published on April 25, 2014, the proposed FDA rule would, among other things, prohibit sales of e-cigarettes to minors.

In his annual report, acting U.S. Surgeon General Boris Lushniak admitted that while the scientific research surrounding e-cigarettes is still unclear, nicotine has adverse effects on adolescent brain development, making the presence of nicotine in e-cigarettes unsafe for youth. If and when the FDA implements a final rule on the marketing and sale of all tobacco products, such action will subsequently affect the taxation policy surrounding e-cigarettes and vapor products indirectly, since the FDA wants to include e-cigarettes within the definition of tobacco products.

FDA Regulation and the Federal Food, Drug, and Cosmetic Act

Under the proposed rule, the FDA would deem tobacco products subject to the Federal Food, Drug, and Cosmetic Act. The FDA claims it can regulate product standards of deemed tobacco products that fall under the federal definition of “tobacco product” by the authority given to it by the Federal Food, Drug, and Cosmetic Act. Under federal law, “tobacco product” refers to “any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product.” The FDA states that e-cigarettes would fall under that definition, and therefore be subject to FDA regulation because of their nicotine content.

The FDA acknowledges that “customarily marketed tobacco products”—those not for therapeutic purposes—are currently subject to the Tobacco Control Act, and fall under FDA authority. However, e-cigarettes and other vapor products are not yet included in the definition of “tobacco product.” A rule that deems e-cigarettes and other vapor products to be tobacco products subject to the Federal Food, Drug, and Cosmetic Act would fix that problem. But until the FDA publishes a final rule, e-cigarettes will go largely unregulated in terms of product standards, age restrictions on sales, and marketing.

Show-Me State Opts Not to Wait

Some states have acted in a more timely fashion, defining e-cigarettes and vapor products in such a way as to fall outside of existing tobacco regulations and taxation frameworks. For example, Vermont includes e-cigarettes in its definition of “tobacco substitute.” The state included this in omnibus taxation legislation, with the goal of taxing tobacco substitutes at 92% on the wholesale market. However, though HB 884 passed both state houses and was signed by the governor, “tobacco substitutes” language was removed from the list of products to be taxed at 92%.

The Missouri legislature went further and passed SB 841 during the 2014 legislative session, prohibiting the sale of e-cigarettes and vapor products to minors and exempting them from federal tobacco regulation or taxes. SB 841 created new definitions to exempt e-cigarettes and other vapor products from federal tobacco regulation.

New Definitions for E-Cigarettes and Vapor Products

The legislation now defines an alternative nicotine product as:

Any non-combustible product containing nicotine that is intended for human consumption, whether chewed, absorbed, dissolved, or ingested by any other means.

An alternative nicotine product does not include any vapor product, tobacco product or any product regulated as a drug or device by the FDA under chapter V of the Food, Drug, and Cosmetic Act.

By specifically removing vapor products from this definition, the Missouri legislature created a new subgroup of non-combustible products that contain nicotine, thus circumventing any impending federal FDA regulation.

The bill also differentiated vapor products from alternative nicotine products by providing a separate definition, which defines vapor product as:

Any non-combustible product containing nicotine that employs a heating element, power source, electronic circuit, or other electronic, chemical or mechanical means...that can be used to produce vapor from nicotine in a solution or other form.

Any electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device and any vapor cartridge or other container of nicotine in a solution or other form that is intended to be used with any electronic cigarette...or similar product or device. However, a vapor product does not include any alternative nicotine product or tobacco product.

These two definitions, taken together, create a new group of products to be regulated, but on the state level, rather than by the FDA. The Missouri legislature did the same with other provisions. The bill prohibits the taxing or regulation of alternative nicotine and vapor products as tobacco products, except for local and state sales taxes.

That statutory change exempts these products from Missouri’s 17-cent sales tax on tobacco products and from federal regulation under the Federal Food, Drug, and Cosmetic Act, since vapor products are not tobacco products or alternative nicotine products in Missouri. The state also acted on the issue of sale of vapor products to minors before the FDA could publish a final rule. The legislation further prohibits sales of both alternative nicotine products and vapor products to minors.

Looming Federal Showdown?

While Missouri’s prohibition would bar any nicotine product from reaching the hands of minors, not everyone was pleased. In his veto, Missouri Governor Jay Nixon claimed that “[SB 841] would limit any additional state regulation of these products and would contravene pending federal regulations.” The Governor further insinuated that “this prohibition may be part of a larger strategy by the tobacco industry to stop the implementation of FDA regulations or ensnare them in protracted litigation.

Thus, if the proposed FDA regulations are published as proposed, SB 841 would contradict the regulations because new Missouri law prohibits the regulation of alternative nicotine products or vapor products as tobacco products. This would present an issue of preemption—Missouri cannot have a law that contradicts the FDA regulation defining e-cigarettes and other vapor products as tobacco products.

States Wait for a Final Rule

Many interested parties are waiting for the FDA to publish and implement a final rule on its authority under the Federal Food, Drug, and Cosmetic Act. Whether other states seeking to enact similar legislation will wait until the FDA publishes its final rule remains unknown. Nevertheless, the final rule will have a great impact on the federal government, the tobacco industry, and state legislatures.

Michael Kilpatrick Morton, JD, is counsel for the Nevada Legislative Counsel Bureau in Carson City.

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