12 Thoughts: FDA Wants to Reevaluate How to Regulate Premium Cigars

By Sept. 8, 2020 cigar manufacturers and others will have to submit documentation to the U.S. Food & Drug Administration (FDA) for premarket approval to keep their tobacco products on the market in the U.S.

Or not.

That deadline had been delayed from August 2018 to August 2021, then moved up to May 12, 2020 and then delayed again to Sept. 8, 2020. And now FDA has said that it is planning on allowing premium cigar companies to avoid the deadline on a case-by-case basis. In other words, it’s going to kick the can down the road and just pretend premium cigars don’t exist for now.

Or not.

Yesterday, the Department of Justice sent a letter to Judge Paul W. Grimm of the U.S. District Court for the District of Maryland outlining a proposed plan that would allow cigar companies to file for a deferred premarket approval process until after the agency studies the health risks associated with premium cigars and determines whether, and or/how, it should regulate premium cigars. The agency says that it will allow companies to do this as opposed to requiring them to file for substantial equivalence by Sept. 8.

It’s the latest in a process that formally began in March 2018 when the agency announced that it was considering looking into whether it should be regulating premium cigars. It’s also the result of lobbying by some in the cigar industry of the Trump administration—which oversees the FDA and other executive agencies—to exempt premium cigars from regulation.

1. THIS SHOULD BE A GOOD THING

While I think that it will not be as good as it sounds, this should be a good thing for most premium cigar companies.

FDA’s plans—if the court(s) signs off on them—would indefinitely delay the need to submit substantial equivalence. If you look at the major pillars of the deeming regulations, this is sort of the last big one to get substantially delayed or overturned:

• Substantial Equivalence — (Likely) Delayed until after FDA gathers more research.
• Harmful and Potentially Harmful Constituents (HPHC) Testing — Presumably indefinitely delayed as well by yesterday’s filing. Notably, also it has been delayed by FDA before.
• Ban on Packaging Changes — Thrown out by a court in 2016.
• Warning Labels — Thrown out by two courts in 2020.

Yes, the companies still have to pay user fees—likely still less than 6 cents per cigar—and new products aren’t 100 percent legal, but the doomsday scenario that many predicted FDA regulations would be just hasn’t come to life.

2. AND THIS COULD END UP BEING A VERY GOOD THING

If Grimm were to sign off on FDA doing this and FDA gets some of the details about the process for deferment finalized, this is almost certainly a good thing. (See point #4-6 for the counters to this.) It would mean that there’s an indefinite delay and if the delay doesn’t end until after FDA completes its research, it’s likely a multi-year delay.

There’s also the chance—though I would peg it at very, very slim—that FDA concludes that it doesn’t need to regulate premium cigars. I think that’s very unlikely, though it’s possible that FDA could come to the conclusion that it either doesn’t need to do substantial equivalence or, more likely, that it will modify what that process looks like just for premium cigars.

3. BUT, IT’S NOT GOING TO SAVE ANYONE MUCH MONEY IN THE SHORT TERM

Here come the caveats.

Most cigar companies have probably already invested the resources in the substantial equivalence process. If a company hasn’t already spent the bulk of that time or money, it is just being careless, multiple times.

With the most recent deadline a month away, companies really needed to be in the final stages of getting their substantial equivalence filings prepared. I think many expected that the deadline would be pushed back due to a separate lawsuit and the coronavirus COVID-19 pandemic—that has not happened yet—but that’s not something on which anyone should have been banking.

If substantial equivalence is delayed than FDA certainly isn’t going to have any timeline for when cigar companies might have to do testing for harmful and potentially harmful constituents (HPHCS). That testing is the most expensive part of the regulations, though an actual price tag is still rather unknown because an accurate testing protocol hasn’t been created.

4. REGARDLESS OF WHAT HAPPENS IN NOVEMBER, THIS IS TEMPORARY

The largest caveat to all of this is that we are now over 3 1/2 years into the Trump Administration—billed as the most anti-regulatory administration in U.S. history—and it’s just now that FDA is deciding to take a step back.

Yesterday’s announcement—which is not yet enacted—is largely just a temporary reprieve. There’s nothing that would prevent FDA from reversing course and abandoning all efforts to study premium cigars more and just make cigar companies adhere to the existing regulations.

The odds of that happening would seemingly increase with any other president in office, including Joe Biden. And even if Trump wins, FDA could still reverse course and abandon these plans.

5. IF YOU THINK EXEMPTION WAS LIKELY, THIS IS A BAD THING

Personally, I’m skeptical of an exemption from FDA regulation happening. It’s always been the pipe dream and I suppose it will continue to be that until it happens and I’m wrong.

But some people are rather bullish about it happening; specifically, that lobbying the Trump administration and Congress to exempt premium cigars was close to resulting in an exemption of regulation for premium cigars.

Yesterday’s letter is a massive problem for those efforts.

Because FDA can spin this to the White House and members of Congress that FDA has given the industry substantial relief—and it might have—it will make it more challenging for those lobbying efforts to convince the White House that more action is needed.

Furthermore, because the relief is—most likely—at best temporary, what FDA has to give up for getting the White House to back off the pressure is relatively limited.

6. If Things Fall Apart, the Cigar Industry Could Look Quite Dumb

My hope in 2016 was that the cigar industry could use pressure from the incoming anti-regulatory administration to create a long-term framework within which the industry thought it could prosper.

Here’s what I said about this two years ago:

I’ve advocated something similar since 2014 and it generally fell on deaf ears until August 2016, when the industry was suddenly regulated. The conversations I would have with many people changed from we will not be regulated to we just need sensible regulations. Many of those people, seemingly at the invitation of FDA’s ANPRM, have moved back into the exemption is a must stance.

I understand it—shoot for the moon—but there is one downside: time.

If FDA was to exempt premium cigars now and a Democrat was to win the White House in 2020 or even in 2024, it would likely leave the cigar industry very vulnerable to future regulations. Yes, it would mean some period of time with no regulation which would help a lot of companies, it would serve as a delay in any rules—which would help everyone—but it also would mean that the blindside scenario comes back into play unless you are willing to get the exemption and then go negotiate, a strategy that the cigar industry doesn’t  seem to want to embrace.

The government holds nearly all the power. The only thing restricting a government agency are the courts, another branch of the government. As such, it’s oftentimes not about leverage, as much as it is finding someone you can work together with.

Instead—and I understand why—the people lobbying the White House have focused on a full exemption. This would be great if it were to be granted, but a full exemption isn’t a permanent one and at some point, FDA will be back to regulate premium cigars.

But that’s the best-case scenario.

The worst-case scenario for the cigar industry is that whenever Trump exits office—in 2021 or 2025—that the cigar industry hasn’t gained an exemption, doesn’t have a long-term framework and is still in limbo. It would be frustrating if—after four or eight years of an anti-regulation administration—nothing is in place for the long-term.

7. THIS WAS A CUNNING MOVE BY FDA

Cunning. Just, so good.

FDA probably didn’t need to do what it did yesterday, specifically telling Judge Grimm of its plans and asking him for approval. It said that it thought what it was trying to do fell under a narrow window he gave the agency to make changes, that it could use its discretion on a “case-by-case” basis.

So if it thought it was acting properly under the window it was already given, why did it need to ask for permission?

It knows that Grimm probably has an opinion on this, one that most people suspect will be less friendly towards the premium cigar industry given Grimm’s reluctance to provide much of any softening of the product approval deadline.

The agency also knows—because it asked—that the plaintiffs in the Maryland case are opposed.

It could have avoided all of this. The agency could have just made this letter public, or better yet, filed a formal guidance indicating that this was what it was going to do. It also could have done this at any point.

Instead, FDA—or DOJ asking on FDA’s behalf—asked the parties involved in the Maryland case knowing that it would complicate FDA’s ability to enact FDA’s own plan.

When the agency opened the ANPRM to reevaluate whether it should be regulating premium cigars it almost certainly knew that there wasn’t any new scientific evidence in regards to premium cigars. As the agency notes in its letter, because of the “small market” of premium cigars there just isn’t that much literature on the health impacts. It also knew that if someone found evidence—positively or negatively—that they would let FDA know.

If FDA wanted to study the issue more it could have announced that it wanted more information at any point in time, even before 2018.

Instead, it has waited until nearly the last possible minute to announce the deferment knowing that some in the Trump administration wanted more than just deferment, but that deferment would probably satisfy most demands and be temporary.

And by going back to the Maryland-based court, it muddied the waters significantly. Even if it had waited this long to make this announcement, it could have made the lives of the cigar industry a lot easier by not asking Grimm for permission before it acted.

8. Regardless, I’M GUESSING THIS ENDS UP IN THE SAME PLACE

It’s even more cunning when you consider that at worst, this just all ends up in the place that it was going to end up anyway.

There are a lot of possible outcomes, but the one that seems most likely to me—a person who didn’t go to law school—seems like a court ruling on emergency relief in the next 32 days.

My theory is that the cigar industry will ask the courts—probably the D.C. District Court that is hearing the lawsuit about substantial equivalence and how it relates to cigars—for emergency relief suspending FDA’s ability to enforce the Sept. 8 deadline for cigars that would meet the premium definition.

This would be based on a number of things:

• It would give Grimm time to figure out its position on the matter.
• It would give the D.C. Court more time to consider whether all of the substantial equivalence requirements for cigars should be thrown out or modified beyond FDA’s suggestion, an ongoing legal battle that had a hearing a few weeks ago.
• It would give this fight—the one about whether FDA can give the deferment—time to make its way to a higher court, which seems likely.
• Most importantly, it would give time for FDA to figure out the process for deferment, something where details are scant. It would also give FDA the ability to do this in a manner that adheres to the agency’s own guidelines, something that probably isn’t possible given the current timeline.

I suspect that regardless of whether FDA sent the letter to Grimm or not, this is where we would be. If the agency had just announced these plans, the plaintiffs in the Maryland lawsuit would have had their objections. Quite honestly, the cigar industry would still have its objections. Because two courts are hearing cases related to this matter, it seems like a third court would need to get involved to be the decision-maker anyway.

9. IT IS NOT CLEAR HOW DEFERMENT IS GOING TO WORK & I Have Some Questions

The cigar industry will likely argue that deferment just highlights another example of FDA making up rules as it goes while also not providing clear guidance.

There are some legitimately obvious gaps in the process of how deferment might work and many of them are critical. Here is a list of questions that I have:

• How long will FDA take to process a deferment application?
• If a deferment application is rejected will cigar manufacturers have a grace period where their products can remain on the market for a certain period of time while a substantial equivalence report is submitted? If so, how long is that period?
• If a manufacturer applies for both deferment and substantial equivalence what happens if FDA were to reject the substantial equivalence filing?

10. The Most Important Question to Me

Will FDA process substantial equivalence applications for premium cigars after today?

I really don’t know how the answer could be “yes.”

To me, the agency has backed itself in a bit of a corner from a legal perspective. If the agency needs more time to study the issue, how can it be trusted to accurately to do this now?

If an application is accepted in 2020 but the agency studies the issue for three years, finds out some concerning information and then changes the process in 2024—why should we continue to let the cigars that were approved under a system that FDA (hypothetically) admits wasn’t a good system remain on the market? Isn’t that a public health risk?

As cunning as I think FDA’s strategy is—and it probably is the best one it has at this point—this is a bit of a problem for the agency in the context of the D.C.-based lawsuit. If Judge Amit P. Mehta rules on the larger questions about substantial equivalence quickly this is likely all moot, but if this lawsuit keeps going, this isn’t going to help.

11. FDA DEFINES “PREMIUM CIGAR”

Last month, a federal appeals court ruled that FDA could not require warning labels for all cigars. It technically overturned a previous ruling that said FDA could not require warning labels “premium cigars.” I wrote—point #3—that one of the unintended consequences of that ruling was that it meant that FDA was no longer going to be forced to define what a “premium cigar” was.

I had no idea that 30 days later, we’d have an answer.

It defines “premium cigars” as those that meet all of the following criteria:

1. is wrapped in whole tobacco leaf;
2. contains a 100 percent leaf tobacco binder;
3. contains at least 50 percent (of the filler by weight) long filler tobacco (i.e., whole tobacco leaves that run the length of the cigar);
4. is handmade or hand rolled (i.e., no machinery was used apart from simple tools, such as scissors to cut the tobacco prior to rolling);
5. has no filter, nontobacco tip, or nontobacco mouthpiece;
6. does not have a characterizing flavor other than tobacco;
7. contains only tobacco, water, and vegetable gum with no other ingredients or additives;
8. and weighs more than 6 pounds per 1,000 units.

This definition is close to other proposed definitions from the cigar industry and others, with some minute changes. It will cover most cigars at your local cigar shop with some notable exceptions being flavored/infused cigars and some of the cigars J.C. Newman makes at its factory in Tampa, which are rolled using antique machines.

Fortunately, many of the cigars that aren’t covered by this definition were already marketed prior to Feb. 15, 2007, which qualifies the for special status that prevents FDA from removing them from the market, a process known as grandfathering.

Regardless, it’s nice to finally see an actionable FDA definition, even if—like pretty much everything else mentioned here—it isn’t set in stone.

12. THE SONG & DANCE CONTINUES

Earlier this week I wrote:

 It was another round of a song and dance where the agency seems publicly non-committal about wanting to regulate premium cigars while also regulating premium cigars.

That was in reference to the 2018 ANPRM and today we have yet another round of the song and dance.

From the moment FDA considered the possibility of regulating premium cigars it has been clear that the agency has been caught in between its mission to regulate all tobacco products and the complications of regulating an industry like premium cigars. Premium cigars are different, the industry is different and the scientific data that FDA so desperately needs to justify its action or inaction doesn’t exist. Furthermore, the benefit to FDA regulating premium cigars just isn’t very much and it is one that is probably outweighed by all of the headaches it has to go through to justify them.

Today is just another in a long list of examples of the agency being in a no man’s land that has existed from the start.

Charlie Minato

I am an editor and co-founder of halfwheel.com/Rueda Media, LLC. I previously co-founded and published TheCigarFeed, one of the two predecessors of halfwheel. I have written about the cigar industry for more than a decade, covering everything from product launches to regulation to M&A. In addition, I handle a lot of the behind-the-scenes stuff here at halfwheel. I enjoy playing tennis, watching boxing, falling asleep to the Le Mans 24, wearing sweatshirts year-round and eating gyros. echte liebe.