Three cigar trade groups have filed an updated complaint in their lawsuit against the U.S. Food & Drug Administration’s (FDA) deeming regulations and their impacts on the cigar industry.
The amended complaint includes arguments specifically regarding the recent decision by a federal court in Maryland which moved up the deadline for when substantial equivalence submissions are due from August 2021 to May 12, 2020.
Substantial equivalence is expected to be the main approval process for cigars once FDA’s regulations are fully in effect. In short, a manufacturer would argue that its product is substantially equivalent to an already approved or grandfathered product, and as such poses no additional health risks and does not market towards children.
A group of doctors and health groups sued the U.S. Food & Drug Administration (FDA) in Maryland arguing that the agency did not have the authority to delay the implementation of certain regulations. The FDA lost the lawsuit and the Maryland court asked the two sides to present alternatives timelines for regulation, specifically product approval. Ultimately, the court accepted a plan from FDA that moved up the deadline to May 2020.
The updated complaint from the three cigar trade groups—the Cigar Association of America (CAA), Cigar Rights of America (CRA) and the Premium Cigar Association (PCA), formerly IPCPR—is now 15 counts.
Last week, the U.S. District Court for the District of Columbia ruled against the same plaintiffs regarding a longshot procedural argument that sought to invalidate the Maryland ruling. Today’s filing has been in the works for a while and is expected to be the main vehicle for the cigar industry to fight FDA in court.
It covers everything from whether FDA properly evaluated the financial impacts of the rules from 2014-2016 to the recent Maryland decision and its effect on the broader regulation.
Count 1 — FDA’s Grandfather Date & the Substantial Equivalence Process
Throughout the lawsuit, the trade groups point out that the original bill that gave FDA the authority to regulate cigars was passed in 2009 using a grandfather date—a date by which all products introduced by that time would gain automatic approval—of Feb. 15, 2007. By the time the rule actually went into effect—August 2016—the grandfather date no longer served the same purpose.
The original rule would have meant that manufacturers would have had guaranteed product approval for most of what was on the market, but the seven-year delay meant that a significantly greater number of products weren’t eligible for grandfathering.
It should be noted that the Feb. 15, 2007 date was the day the bill was originally introduced in Congress. It took over two years for the bill to be signed into law and another seven years before FDA actually began enforcing the deeming regulations. The plaintiffs argue that this is actually a nine-year gap.
Furthermore, because the substantial equivalence process relies on cigars that have either been approved or are grandfathered, the delay also impacts manufacturers who do not have products that were introduced after Feb. 15, 2007 because they don’t have the predicate products needed to gain approval for other products through substantial equivalence.
This count also claims that FDA arbitrarily created deadlines for certain parts of the deeming regulations, deadlines that were not established in the original Congressional bill. The plaintiffs are specifically referencing the Maryland decision, where the judge ruled FDA didn’t have the authority to arbitrarily set deadlines for itself.
Counts II & III — User Fees
Both of these arguments center around whether FDA properly instituted the user fee structure. Cigar companies are required to pay user fees based on the taxes they pay on cigars. Those user fees, generally no more than 5 cents per cigar, are used to help fund the $712 million budget that FDA uses to regulate tobacco industries.
Part of the argument here centers around FDA’s decision to not charge user fees to vaping and e-cigarette companies. The agency has argued that while FDA regulates e-cigarettes and vaping products, it can’t impose user fees on the category because it was mentioned in the bill passed by Congress.
Count IV — Failure to do Proper Cost-Benefit Analysis
In order to enact rules like the deeming regulations, FDA is required to conduct a cost-benefit analysis to determine what impacts the regulations might have.
At various points, the agency said it was unable to fully evaluate the impacts the regulations would have on the premium cigar industry. The agency did estimate that as many as 50 percent of the active cigar SKUs could be removed due to regulation, though also has acknowledged that it does not have an accurate number of how many cigar SKUs exist today.
It also argued that it couldn’t quantify the impact the regulations would have on retailers because general market trends could mean an independent loss of sales for some retailers and some product categories regardless of regulation.
Count V — Not Evaluating Option II
In 2014, FDA introduced the deeming regulations as a draft document. In it were two options for premium cigars, which the agency asked for feedback regarding:
- Option 1 — All cigars would be regulated the same
- Option 2 — “Premium cigars” would be exempted from the regulations
Ultimately, the agency chose Option 1. What’s at stake in this count is whether the agency actually seriously evaluated these two choices. It should be noted that FDA didn’t write the exemption language, it actually was included by another executive agency. The plaintiffs argue that FDA never took Option II seriously, which could be illegal.
Counts VI & VII — Warning Labels
These two counts deal with FDA’s warning label requirements, something that was debated ad nauseam in a separate, but now combined Texas lawsuit, albeit without much resolution.
Of note, the May 2020 deadline does not apply to warning label rules for cigars and pipes as they are indefinitely on hold until the outcome of this lawsuit is decided.
Count VIII — Retailers as Manufacturers
This count covers retailers who might now be considered “manufacturers” under the new rules, including both pipe tobacco retailers who blend their own pipe tobacco in stores and cigar retailers who create cigar samplers. Under the strictest interpretation of the deeming regulations, both of these things could be illegal.
Count IX — Pipes as Components
This deals with whether FDA has the authority to regulate physical pipes.
Count X — The Maryland Deadline Change
There are multiple places where the date change in Maryland is mentioned but Count X is all about it. In this section, the plaintiffs argue that the decision to move up the regulatory deadlines, particularly given that they will have less than a year from the time the change was announced to when the submissions are due, is not legal and will cost cigar companies substantially.
There’s also an argument made as to the health groups that sued FDA to get the date change. Specifically, U.S. District Court Judge Amit P. Mehta—the judge overseeing this lawsuit—denied an attempt by those groups to enter the cigar lawsuit.
Count XI — FDA Can’t Regulate Premium Cigars Without Finalizing Premium Cigar Rules
Last year, FDA announced an Advanced Notice of Proposed Rulemakings (ANPRM) regarding whether and how it should regulate premium cigars. The ANPRM sought comment from the public and industry about whether the agency should change its approach to premium cigar regulations.
While the process doesn’t mean the agency has to change anything, the ANPRM is still open, meaning the agency hasn’t closed the book on making changes. The cigar industry has argued—and has found sympathy for the argument—that FDA shouldn’t be allowed to implement cigar regulations if it isn’t sure it will change those regulations.
Count XII & XIII — The Deadlines
The plaintiffs argue that the Maryland decision creates a double bind: either A. the judge in Maryland was wrong, in which case the May 2020 deadline should be thrown out; or B., the judge was correct and all of FDA’s deadlines were arbitrary and should be thrown out.
Count XIII also deals with whether FDA should be allowed to regulate cigars without having all of its cigar regulations finalized, beyond just the ANPRM.
Currently, FDA has announced that it plans to introduce an overhauled substantial equivalence process with no timeline about when that might be finalized. It also has indefinitely delayed the process for testing of products because it has not finalized guidelines for the testing process.
Count XIV — Premium Cigars are Different
This is another carryover from the Texas lawsuit, which dealt with the questions of whether premium cigars should be treated differently from all cigars.
Count XV — FDA Didn’t Evaluate the Costs of Regulation Appropriately
While this deals with the costs of regulation, this is different from Count IV as this argument deals with whether the agency can prove that the costs of the regulations justify the public health benefit.
Depending on how the court rules on specific counts, the outcomes vary. Some just throw out parts of the regulations— user fees, for instance—while other claims would seek to either legally invalidate the rules entirely, or enough to where FDA would have to go back to the drawing board.
The two parties delivered a joint status report shortly after the amended complaint was filed.