FDA Rules May Vaporize The E-cigarette Industry

vapeBy Kevin Gomez

In the last three years, the electronic-cigarette business has exploded. According to Wells Fargo Securities, the “vaping” industry has gone from estimated revenue of $1 billion in 2012 to $3.5 billion in 2015. Although much more research is needed to assess e-cigarettes health effects, some medical professionals say it is at least healthier than smoking. New rules that expand the Food and Drug Administration’s (FDA) authority to regulate vaping, however, will likely halt growth and favor large companies over smaller ones.

E-cigarettes, or “vapes,” have a small heater that vaporizes a mixture of glycerine and propylene glycol infused with nicotine and flavorings, commonly called “e-juice.” This chemical reaction creates a breathable smoke-like mist for users to inhale. E-cigarettes come in many different styles. Customization vapes, called “mods,” have a digital component which controls  nicotine levels and the voltage/wattage of the heater.

A study by the Center for Disease Control and Prevention (CDC) shows that electronic-cigarette users are mostly cigarette smokers, and another study from Emory University shows most users are attracted to their purportedly less harmful effects.  However, the American Lung Association, American Heart Association, and other medical groups are concerned that e-cigarettes could pose a serious health risk to children and adults. Although some studies support e-cigarettes relative health benefits, scientists are not in complete agreement.

Currently, close to 7,000 vape stores exist in the US, UK, and Canada according to an online vape shop database, and over 210 stores in Florida.

The current vape market is relatively unregulated. Under the FDA’s proposed rules, however, e-juice makers would have to register products with the FDA, undergo a review process, and publicly report ingredient listings. Regulatory consultants at SciLucent LLC claim the costs of introducing an e-juice flavor under the new rules would amount to between $2 million to $10 million per product. Stores will also no longer allow customers to sample e-juice flavors on premises before purchasing them. This would be a significant blow to boutique e-juice makers, whose more exotic flavors would not only be more expensive, but also aren’t likely to be purchased without consumers trying them first.

Vapes purportedly offer relative health benefits to smokers at a lower price than cigarettes. According to the CDC, cigarette smoking in the United States has declined from 273 billion cigarettes sold in 2013 to 264 billion in 2014. While sin taxes on cigarettes, which make the unhealthy habit more expensive for smokers, have contributed to this fall, a study from the Massachusetts Institute of Technology, contends that “widespread and readily available information about the severe side effects of cigarette smoking” has had the greatest impact.

In an attempt to curb declining cigarette sales, big tobacco companies have entered the e-cigarette market, but are pushing for the new rules that will likely eliminate their competition. Reynolds, the second largest tobacco company in the US, has created its own e-cig, the “Vuse,” and has strongly supported FDA intervention into smokeless tobacco products. The added regulatory costs of new FDA rules can be easily absorbed by large tobacco companies, but will be more difficult for smaller companies.

Ironically, a heavy-handed approach to regulating vapes may actually tip the scales in favor of traditional big tobacco. With increased momentum in favor of regulation, the FDA’s proposed rules could halt growth in an emerging industry and reduce access to a smoking alternative.

About DeVoe Moore Center

The DeVoe L. Moore Center is conducts economic research and policy analysis focused on state and local policy issues and is located in the College of Social Sciences and Public Policy at Florida State University in Tallahassee. As an educational institution the DMC provides professional research experience to undergraduate and master’s students through an extensive program of internships and independent study, preparing them for a future in public policy, economic development, public sector accountability and entrepreneurship.
This entry was posted in Entrepreneurship, Regulation and tagged , , , , , , , , . Bookmark the permalink.

One Response to FDA Rules May Vaporize The E-cigarette Industry

  1. LiberteKev says:

    Reblogged this on gomek916's Blog and commented:
    Vaporizing the e-cig biz.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s