Judge Overrules FDA On E-Cigarettes

This week, a Federal judge lifted an import band on so-called "e-cigarettes" from China, much to the Food and Drug Administration's dismay. E-cigarettes are little tubes that look like regular cigarettes, but convert liquid nicotine into an inhalable vapor that simulates the taste of tobacco. But unlike cigarettes, these devices contain virtually no cancer-causing carcinogens, according to their distributors. Why did the judge overrule the FDA here? And more importantly, why is the FDA so against e-cigarettes?

First, here was the judges' reasoning, via the New York Times:

"This case appears to be yet another example of F.D.A.'s aggressive efforts to regulate recreational tobacco products as drugs or devices," Judge Leon wrote.

With the passage of landmark tobacco legislation last year, he added, the Food and Drug Administration's new tobacco division will be able to regulate the contents and marketing claims of e-cigarettes in the same way it is about to begin regulating traditional tobacco products. But the agency's drug division cannot ban the devices, the judge ruled.

That seems like pretty good logic. But why does the FDA say it doesn't want to allow e-cigarettes?

The Food and Drug Administration issued a brief statement: "The public health issues surrounding electronic cigarettes are of serious concern to the F.D.A. The agency is reviewing Judge Leon's opinion and will decide the appropriate action to take."

So the FDA narrative says it's a safety concern. Yet, if the claims of the distributors are true -- and these devices really do stimulate smoking, but without any of the cancer -- why hasn't the FDA rushed to study the devices for the several years they've been available? After all, if the FDA finds that they're safe, and they catch on, they could prevent cancer in millions of Americans. Shouldn't that deserve their being pushed to the front of the FDA's queue?

The problem with this logic is that it assumes that the FDA's only goal in regulation is ensuring Americans' safety. Yet, if that was its only concern, then why would cigarettes remain legal at all? There are no health benefits, but they cause cancer. Instead, the FDA would rather regulate. Imagine how much money the government can make by taxing a product that people literally can't resist.

Of course, big tobacco would certainly concur with the FDA's decision to ban e-cigarettes. After all, it could seriously damage its business. As the NY Times article notes in its last sentence:

Traditional cigarette makers have not been involved in the fledgling industry.

These two parties seeing eye-to-eye shouldn't be surprising. Despite the popular misconception that big tobacco and federal regulators would conflict, the two generally agree. Big tobacco actually fights for greater tobacco regulation.

But wait! Doesn't big tobacco hate regulation? That is, after all, the prevailing narrative. It's also naïve. I don't want to run through the whole argument here about why big business, particularly big tobacco, generally loves to be regulated. Instead, I'll just give you a just a taste by turning to Tim Carney, lobbying editor of the Washington Examiner.

Carney has argued, at length, in two books now (which I'd highly recommend, by the way), that big business loves regulation -- it almost always ensures that smaller competition has a hard time gaining a foothold in the market. Regulation protects big businesses' market share. If you want to better understand why big tobacco, in particular, loves regulation here's an excerpt from an article he wrote back in 2007:

All regulation adds to overhead, which disproportionately hurts the smaller companies and is more easily absorbed by bigger companies. The Waxman and Kennedy bills would likely lead to federally mandated ingredient testing at the cost of the cigarette company.

It would also give the FDA authority to regulate nicotine and other ingredients. All of these costs will make it much more expensive to manufacture cigarettes, but Philip Morris, with its economies of scale, will be less affected. If legislation adds to your costs, but adds to your competitors' costs even more, it's a net gain for you.

One of the ways that the government managed to pass its recent tobacco reform bill was by enlisting big tobacco's support. So the FDA and big tobacco have a symbiotic relationship. The government gets billions of dollars from excise tax revenue on and lawsuits related to cigarettes. Big tobacco gets regulation that makes it harder for smaller companies to compete. So the FDA needs to keep up its end of the bargain here and not allow a threat like e-cigarettes to take hold in the U.S. -- even if they did turn out to be good for the American people.