Moving to Ban Juul, the FDA Delivers a Blow to Big Nicotine

Marlboro maker Altria, which has a stake in the e-cigarette maker, takes a hit, too.

The US Food and Drug Administration’s announcement on Thursday that it’s ordering the removal of Juul, the popular electronic cigarette, from store shelves is a stinging rebuke to the Silicon Valley startup, which vowed to transform smoking but instead helped spark a new generation of teenage nicotine addicts.

When the e-cigarettes made by the company that would become Juul Labs Inc. hit the market in the summer of 2015, with flashy billboards in New York’s Times Square and youthful Instagram models flaunting the sleek nicotine device, it was clear the company was in for a reckoning. A generation earlier, Big Tobacco had been denounced for hawking cigarettes to young people and for lying to the American public about the deadly and addictive nature of its product.

Then along came Juul, the brainchild of two Stanford grads who pushed the classic Silicon Valley smash-and-grab growth strategy. They followed a postmodern version of Big Tobacco’s playbook by packaging a highly addictive nicotine potion in a chrome shell (at first without clearly disclosing that the shell contained nicotine) and marketing it to a new generation of young people who had increasingly spurned cigarettes. Suddenly, just as youth smoking rates had fallen to record lows, teens across America became hooked on atomized nicotine. Parents, public-health officials, and the FDA were incensed. While nicotine itself isn’t the deadly agent in cigarettes (combustion is), it is terribly addictive—as addictive as heroin—and can interfere with the development of the adolescent brain.

The decision by the FDA, after a two-year scientific review, was more than a reckoning: The agency responsible for protecting the health of the American public inflicted a potential deathblow to an American company that just a few years ago had attained a $38 billion valuation and had dominated more than 70% of the market.

Anti-vaping advocates and lawmakers hailed the decision, saying the company’s comeuppance was long overdue. “I applaud the FDA for following the science and for clearing the market of the Juul products that have led countless young Americans to a potential lifelong addiction to nicotine,” said Representative Raja Krishnamoorthi (D-Ill.), chair of the Subcommittee on Economic and Consumer Policy, and an outspoken opponent of Juul. “If you don’t know the story behind e-cigarettes and vaping, ask a high school student in America,” said Senator Dick Durbin (D-Ill.) in a speech on the Senate floor.

In 2019 almost 30% of high school students reported using e-cigarettes, mostly Juul. Former FDA Commissioner Scott Gottlieb warned that e-cigarette use had become an “almost ubiquitous—and dangerous—trend among teens.” Since then, the portion of high school students vaping has dropped to 11%, and the most popular product is a newer entrant, Puff Bar, not Juul.

Yet it apparently wasn’t the company’s appeal to young people that led the agency to pull Juul off the market. A 2016 rule gave the FDA the authority to grant or deny “marketing orders” to e-cigarettes and other alternative tobacco products based on whether they met the standard of being “appropriate for the protection of the public health.” The agency found that Juul didn’t meet that standard because the company failed to provide sufficient evidence “to assess the potential toxicological risks of using the JUUL products”—even though Juul spent more than $150 million and hired an army of scientists to make its case.

Even though the FDA stressed that it didn’t believe Juul posed an “immediate hazard” to human health, it’s difficult to know exactly what concerns the agency harbored because its so-called marketing denial orders aren’t available to the public. It did mention that “some of the company’s study findings raised concerns due to insufficient and conflicting data” on issues such as genotoxicity, which essentially indicates that the agency wasn’t satisfied the science Juul provided was sufficient to rule out the possibility that its product might cause cellular damage.

The agency also said Juul’s data on “potentially harmful chemicals” that could leach from the pods was insufficient and “precluded the FDA from completing a full toxicological risk assessment.” While such chemicals weren’t named in the press release, there have been studies showing Juul users might be inhaling heavy metals, since there’s a tiny heating element made of chromium, nickel, and iron submerged in the pods that transforms the liquid nicotine into vapor.

On Friday, a federal judge granted Juul an emergency order that would allow its products to remain on store shelves pending an appeal of the FDA’s decision. “We remain committed to doing all in our power to continue serving the millions of American adult smokers who have successfully used our products to transition away from combustible cigarettes,” said Juul Chief Regulatory Officer Joe Murillo.

Juul is the largest e-cigarette company in the US—with almost 40% of the market—and brought in $1.3 billion in annual sales last year, down from its $2 billion peak in 2019. More than 90% of the company’s business is in the US, with the remainder mostly in Canada and the UK, and a tiny bit in France, Italy, and the Philippines. Without the US market, the company is but a wisp of vapor.

Investment firms such as Tiger Global Management LLC and Fidelity Investments Inc. that plowed money into Juul on its ascent have seen their bets sour over the years, as the company’s valuation plunged amid new regulations on e-cigarettes, a series of public-health controversies, and an increasingly competitive market. Altria Group Inc., which makes Marlboro cigarettes, paid $12.8 billion for a 35% stake in Juul in 2018. It now values that investment at about $1.6 billion. The potential upside for Altria, according to Goldman Sachs Group Inc. tobacco research analyst Bonnie Herzog, is that more Juul users facing a world without Juul could turn back to smoking Marlboros instead.

One undeniable winner is Juul’s competition. Recently, R.J. Reynolds Vapor Co.’s Vuse, which is No. 2 in the market, along with the third-largest, NJOY, won FDA authorization to keep their products on the market.

The FDA is at an inflection point, as the tobacco industry morphs into Big Nicotine. Even as combustible cigarette sales decline by a few percentage points a year, the market for potentially less harmful products—such as e-cigarettes and nicotine toothpicks, pouches, gums, and lozenges—is growing. In 2021 the value of the global nicotine market was about $935 billion, up 25% since 2016, according to market research company Euromonitor International. The cigarette maker Philip Morris International Inc. has vowed to phase out sales of combustible cigarettes and become a “majority smoke-free business” by 2025. It’s snapped up companies with expertise in pulmonary drug delivery and indicated it could develop new products that would deliver a range of “sensorial experiences,” such as cannabis or even botanicals like chamomile for relaxation.

For years the FDA’s been trying to figure out how it can solve one of America’s most intractable health problems: smoking. Cigarette smoking causes 480,000 deaths every year, making it the largest cause of preventable disease and death. Over the past two decades, an increasingly influential public-health movement has argued that the government should do everything it can to hasten an “endgame” for the deadly products. A cornerstone of that strategy is reducing nicotine in cigarettes to nonaddictive or minimally addictive levels. In theory, that would not only help current smokers kick the habit but also prevent a new generation from adopting a lifelong addiction. (Nearly all adult smokers begin the habit before the age of 18.) Just two days before the FDA’s Juul decision, the Biden administration laid out a plan to require companies to reduce the amount of nicotine in cigarettes.

But another component of the endgame strategy has always been to present smokers with less-harmful options on a “continuum” of risk, including nicotine-replacement therapies such as the patch, gums, and pharmaceutical quitting drugs like varenicline. And e-cigarettes.

Juul and other e-cigarette makers have cast themselves as part of the solution to the smoking problem. Now, with Juul off the market, critics of the agency’s decision—and backers of e-cigarettes—say smokers are losing the most popular alternative to the cigarette. Anti-vaping advocates say that smokers have plenty of options already, including quitting cold turkey, and that e-cigarettes pose too great of an addiction risk to young people.

For decades the industry has fought federal efforts to regulate smoking, tobacco, and nicotine at every turn. The FDA, which finally obtained authority to regulate tobacco products in 2009, has found itself in the middle of a series of pitched battles dating to the Tobacco Wars of the 1990s. Faced with a company that treated nicotine as a fashion accessory, and barreled into the market with classic Silicon Valley move-fast-and-break-things abandon, it has struck one of its most consequential decisions yet.

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Lauren Etter – Bloomberg – 2022-06-25.