I wasn’t planning on doing this explainer type post, but given that I keep receiving text messages and emails about the subject, here we are. On Tuesday, Dr. Scott Gottlieb, the commissioner of the U.S. Food & Drug Administration (FDA), resigned. His departure has been described as unexpected, surprising and, by this article, abrupt.
It brings to an end a nearly two-year tenure of someone who was criticized for having heavy ties to the industry he was supposed to regulate, yet many in the cigar industry feel like Gottlieb didn’t do anything, let alone enough, as far as pro-business moves in their fight with the agency.
For whatever reason(s)—he says it’s to be with his family—Gottlieb is gone. I’ve received a variety of questions about the move, though three have been the most common: 1. Who is the replacement? 2. Was this expected? 3. Is this good for the cigar industry? To answer the first question, the White House was said to be surprised by the move so there is no immediate replacement. As for the next two, here are some thoughts.
1. It was abrupt, but not unexpected
Just last Friday, Gottlieb was said to be at the White House, pitching one of the most ambitious plans regarding the regulation of e-cigarettes and vaping products, a personal pet project of the commissioner. The Washington Post, which broke the news of his resignation, indicated that senior staffers were surprised given Gottlieb’s recent hirings. And I think it’s safe to say that no one thought he would be resigning the first week of March, but it wasn’t completely out of the blue.
I had—through cigar industry sources—had heard rumblings that Gottlieb was looking to depart late last year. In January, I was on a podcast with William Cooper, of Cigar Coop, who predicted that Gottlieb would leave this year. And as Cooper and others noted, Gottlieb had to publicly deny he was leaving in January, something he attempted to clarify yesterday.
2. Gottlieb seemed indifferent to cigars
It’s probably worth reading the next section before making any new judgments on Gottlieb personally, but I would best describe Gottlieb’s approach to cigars as indifferent. As I pointed out once Gottlieb was nominated, he had written an article for the New York Post arguing that cigars were not part of Congress’ intent with the Tobacco Control Act. That gave me and others hope that Gottlieb might roll back some part of FDA’s regulations of cigars.
There were some wins for the cigar industry during Gottlieb’s tenure, though the most important—a decision to delay warning labels—was the result of a court, not an action by FDA. Gottlieb’s FDA did begin the opening stages of reevaluating the regulation of premium cigars, but over a year after the process started, Gottlieb himself said the agency was still evaluating it. As part of Gottlieb’s more aggressive language towards e-cigarettes, he indicated that it was his intention to ban all flavored tobacco, including flavored cigars. So overall? Gottlieb’s tenure seems neither a win nor a loss for the cigar industry.
Sources close to the lobbying efforts indicated they were disappointed that Gottlieb would often defer to Mitch Zeller, head of FDA’s Center for Tobacco Products, on most issues regarding cigars. Given the general opaqueness of FDA, it’s unclear if that was actually the case, but it seems obvious that Gottlieb’s tobacco focus—for better or worse—was not on cigar regulation.
3. It’s unlikely FDA would decide to reduce existing regulations
I think that it’s important to remember that there’s not a ton of logic behind arguing that FDA would ever reduce its own regulations. For me, there are three basic problems.
First, while there might not be any scientific evidence that can show cigars pose a statistically significant risk to a person’s health, there’s no evidence to show that they present no risk or positive health benefits.
Second, and similarly, the people at FDA are tasked with regulating tobacco. That is what they have been told to by Congress and it seems unlikely they would decide they don’t want to do even if the evidence about the actual dangers of occasional cigar smoking or underage use is not statistically significant. FDA’s stance is basically: tobacco is dangerous; cigars are tobacco; a small risk of danger from tobacco warrants our intervention in your humidors.
Finally, without the evidence showing cigars provide a positive public health benefit, it would be very challenging for the FDA—even if it wanted to—to decide to rollback cigar regulations while also fighting for stricter e-cigarette regulations. In a world of lesser cigar regulations, the e-cigarette and vaping industries would argue that FDA decided—without any evidence of benefits to public health—to show favor to one segment, which should also extend to their category, etc.
I will concede that it is very possible that some at FDA believe that regulating premium cigars is not the best use of their time or resources, but the legal implications in regards to e-cigarettes would likely outweigh the desire of leniency towards premium cigars.
4. The big battles are yet to come
While Gottlieb leaving might inspire a lot of commotion, it shouldn’t overshadow what’s actually going on in regards to cigars.
This upcoming Monday, the FDA and the three cigar trade groups suing the agency are expected to deliver a plan to the court about how to go about delaying the requirements for testing harmful and potentially harmful constituents (HPHCs) in cigars, currently set for November. It’s likely by early next year, those two sides will be in a D.C. appeals court arguing about warning labels on cigars. On Tuesday, as the news of Gottlieb’s resignation was breaking, the U.S. District Court for the District of Massachusetts ordered that FDA must speed up its own internal timeline regarding the requirements of graphic warning labels on cigarettes, a case that could also have implications on cigars.
No one is quite certain when FDA will announce its own rules regarding HPHCs, but when it does there will likely be a bevy of lawsuits from multiple sides. Cigar companies will likely object to the estimated cost, as one lab indicated to halfwheel it will be around $18,000 per SKU to use the same HPHC testing panel used for cigarettes. There will also be separate issues about how many labs will be able to process these results and whether it’s feasible for the cigar industry to even meet the timeline FDA will issue. And much like in Massachusetts, health groups will be on the other side suing FDA for not moving as fast as they would like.
All of this will go back to one of the central complaints the cigar industry has had in its legal battles with FDA: did the agency know what it was doing when it enacted the rules?
5. Gottlieb leaving is certainly not good on a timeline
Unless you are going to argue that Gottlieb was never in favor of lighter cigar regulation, which is a valid position, Gottlieb’s departure is definitely not good on one front: time.
Even if the Trump Administration were to get a nominee through quickly, Gottlieb leaving will almost certainly push back any chance of relief by months. This is problematic on two counts.
First is the very real legal bill that continues to grow as the lawsuit(s) continue. Internally, the cigar industry has a large disagreement between some of the largest manufacturers and everyone else; between the smallest manufacturers and everyone else; retailers and manufacturers, etc. The longer the lawsuit goes on, the bigger the bill grows and the cigar industry is likely going to undergo a massive change, largely related to funding this lawsuit.
Secondly is a concern about 2020. There is a chance—this website probably isn’t the place to go to discuss how great one of—that a Democrat takes control of the White House during the 2020 elections. That will mean another new head of FDA and almost certainly a less business-friendly one. The cigar industry seems to have grown aware in the last few months that this could happen and there’s a sense of urgency of trying to get things done before it happens.
6. FDA Isn’t Going Away
In closing, I am reminded of a conversation I had year ago with Marvin Samel, co-founder of Drew Estate, after he had finished living in Washington D.C., largely there to grapple with the upcoming FDA issue that I now write about.
Samel told me the best advice he ever got, one that I’ve repeated multiple times, was that the first round of FDA—i.e. what we are dealing with now—wasn’t going to be that bad. It wasn’t going to put anyone out of business that had a strong and healthy business. It wasn’t the doomsday scenario that many had been told about. However, the first round meant that FDA regulation had come and it would be here to stay and the second round wouldn’t be as pleasant.
His point, which will remain true until proven otherwise, is that FDA isn’t going anywhere. Gottlieb, Zeller, Trump or whoever—FDA is here today and almost certainly here, in one way or another, forever.