Six Things: What FDA's 2021 Delay Means for Cigars

July 28, 2017

By Charlie Minato

Today, the U.S. Food & Drug Administration (FDA) announced that it would extend deadlines for two provisions that deal with how companies apply for approval of tobacco products, one of which will directly affect thousands of cigars.

That process is called substantial equivalence, something that cigar manufacturers originally were expected to have submitted to the agency in February of next year, a deadline that was then pushed back until May of next year and now sits at Aug. 8, 2021.

Substantial equivalence is arguably the single most important and yet unknown part of the deeming regulations which FDA announced last year and enacted in August. In short, any cigar introduced after Feb. 15, 2007 would have to gain approval from FDA through a process called substantial equivalence. In it, the manufacturers would be expected to prove to FDA through a series of documents and presumably testing that the product in question was substantially equivalent to an already approved product. This would likely include showing that the cigar used similar tobaccos to an already approved product and that testing showed the cigar was not anymore harmful than a previously approved product; though once again, none of this has been explicitly described.

The problem with substantial equivalence is FDA did little to explain what exactly it would entail. There were references to testing in a broad concept, estimates about the costs and time needed to create a substantial equivalence report, but nothing that showed exactly what the agency was looking for to the point where it’s not known whether there is a testing procedure in existence that could produce the results FDA is seeking.

As we’ve written about before, the costs regarding FDA regulation remain largely unknown because the agency never defined its requirements for substantial equivalence.

Today changed none of that, but it did signal the agency was delaying the substantial equivalence process and was going to take comments about what exactly that process should look like. It is one of the biggest wins the cigar industry has had since the regulations went into effect, arguably only matched by a court decision against FDA that opened the door for packaging changes.

While much remains unknown, there are a few, or half dozen, takeaways from today’s news.

1. NO OTHER DEADLINES HAVE BEEN CHANGED (YET)

Multiple sources have told halfwheel they expect in the coming days for FDA to announce an additional three-month delay for all other deadlines because of the agreement in place between FDA and the cigar trade groups as part of a lawsuit.

However, today’s announcement doesn’t explicitly push back any other deadline outside of substantial equivalence and PMTA,1 to the point that even the substantial equivalence exemption request deadline, currently Nov. 8, 2017, hasn’t officially been pushed back yet.

2. THE SMART MONEY WAS RIGHT: DELAYS

The regulations have been in effect for less than one year and we’ve already seen the two most important deadlines receive extensions to the tune of triple the amount of time companies will have to meet compliance.

  • Substantial Equivalence Due — Originally 18 Months; Now Five Years
  • PMTA Due — Originally Two Years; Now Six Years

Most of the people I would consider “informed” about the FDA process that I’ve spoken to have never believed that the original set of deadlines would ever stand.

It’s a belief I’ve shared and gone on record about in the past. Anyone who read the deeming regulations and then tried to go through the process of substantial equivalence quickly realized one thing: FDA might have announced regulations in May 2016, but the agency certainly didn’t announce how it was going to regulate.

Even today’s announcement is vague. There are still no actual dates on when FDA will even announce the opening of public comments about substantial equivalence framework, let alone when the agency will finalize and publish said framework.

It’s been clear since we first wrote about FDA’s decision to regulate cigars on May 5, much of the most complex parts of regulations are part of substantial equivalence, and most of those details were left blank in the 499-page document released that day.

3. SMALLER & NEWER COMPANIES GET A BIG WIN

Today’s announcement is a win for every cigar company, but it’s particularly good news if you are a smaller and/or newer company.

Today means you have four more years to stay on the market and try to establish your company and its brands. It’s four more years to sell your products and it’s four more years where you can try to build the business into one that can afford regulation going forward, not just these regulations.

This isn’t a walk in the park. Smaller brands will still have to comply with warning labels and ad restrictions, but the bigger, complex and costliest burden—substantial equivalence—is on hold. All companies can now continue to sell products that were introduced prior to Aug. 8, 2016 with minimal compliance concerns until Aug. 8, 2021, at which point they will have either needed to have applied for substantial equivalence or remove the product from the market.

Some retailers, particularly the larger catalog retailers, have taken positions over the last year where they would not bring in new product unless they have assurances the brands will be compliant with FDA regulations. While those concerns are not entirely alleviated, they certainly are drastically reduced today and I suspect that’s no longer a valid excuse, at least for a year or two, about why a retailer won’t carry a cigar.

As I’ve said before, there are other issues about why retailers might not want to bring in new product; but today means that at least for the next two or three years, FDA probably shouldn’t be one of them.

4. THE PHANTOM BRANDS WERE AN EVEN BETTER IDEA

Last year, many companies quietly rushed a plethora of new cigars onto the market prior to Aug. 8 with the hopes of introducing them more fully at a later date. I dubbed these cigars phantom brands and while we’ve seen some of them introduced to market, most are not being actively sold today.

Rocky Patel has gone on record saying his company has over 1,500 SKUs it added prior to Aug. 8 and five of the 34 companies halfwheel surveyed earlier this month said they had introduced over 1,000 SKUs each. Based on what I know, I feel confident saying there were over 15,000 phantom SKUs added to the market between May and August of last year. For context, the 15,000 number is greater than the number of SKUs FDA believed was on the market in 2014, a number the agency later backtracked from because it admitted the estimate was off base.

Whatever the case, the phantom brands proved to be a good bet.

While the theory of phantom brands made sense, add a bunch cigars in August so you have new product to introduce over the coming years; the actual economic were much more challenging to make work on larger scales.

Under FDA’s old substantial equivalence deadline, companies only a year and a half years to introduce and sell the phantom brands before substantial equivalence was due, meaning a company like Rocky Patel would likely have at least 1,300 phantom brand SKUs that were not actively being sold on the market, but needed to be submitted for substantial equivalence by February.

Even with the most conservative estimates of costs, Rocky Patel then would need to invest millions of dollars in substantial equivalence costs, all for products the company wasn’t selling, something that seemed unlikely to happen, at least for every SKU.

All those concerns remain today, but now the company will have four more years to add those phantom brands to the national marketplace and profit off their success. It’s still almost certain that not every phantom brand from every company will go through the substantial equivalence process, but the number just got a lot smaller today.

5. THE LAWSUIT IS WORKING

I’ve said all along that delays were going to happen, but no one predicted it would be quite this fast. We are less than one year into regulations and nearly every single deadline has been delayed—and the two most important deadlines have been significantly delayed.

The pressure set by the lawsuit(s), forcing FDA to justify each part of the regulation and forcing the agency to prove that it knew what it was doing when it announced the deeming regulations last May is the direct cause of at least the three-month delays and a likely cause of why today’s announcement happened today and not later in the year.

Many consumers, retailers and manufactures have complained about what the Cigar Association of America (CAA), Cigar Rights of America (CRA) and the International Premium Cigar & Pipe Retailers Association (IPCPR) did before and immediately following the May 5, 2016 announcement of the deeming regulations. It’s been a little more than year and the organizations have far exceeded expectations and not just ones set by people with condescendingly low bars.

6. THE HOPE OF A COMPLETE REEVALUATION/RESTART OF THE PROCESS IS ALIVE AND WELL

Over the last month there’s been a lot of chatter by those close to the situation about a complete restart or reevaluation of the rules, a process where FDA would likely announce a suspending of the cigar-related or all parts of the deeming regulations and start over from scratch. That chatter has done nothing but pick up today.

Predictably, no one wants to go on the record; but no one I spoke to today argued that the complete reevaluation is off the table.

No one I’ve spoken to thinks this would be a reversal in the sense there would be no regulation, but many people think it’s quite possible FDA decides to restart the process from scratch. This is the long-term (realistic) top prize for cigar makers: get an anti-regulation administration to throw out the old rules and have the cigar industry work with FDA to come up with a set of rules most companies can live with.

We still aren’t there, but carefully worded press releases from both FDA and the CRA and IPCPR leave plenty of room for that option to be alive. While some on the pro-cigar side are speculating that it’s more likely than not to happen; it’s worth nothing, the anti-tobacco side has become increasingly concerned with FDA’s actions in regards to the lawsuit and today’s decision.

If the barometer about your current position is based solely on how bad the opposition is feeling, it was a pretty good week for the cigar industry.

FDA Extends Deadline--Will Reconsider Premium Cigars

July 28, 2017

By Andrew Nagy

Today, the U.S. Food and Drug Administration announced a new, comprehensive plan on its approach to regulating tobacco products that includes extending the pre-market application deadline for cigars. 

In a short speech, Dr. Scott Gottlieb, who was appointed commissioner of the FDA in May, spoke mainly about reducing the levels of nicotine in cigarettes to protect children. The commissioner, though, did mention that the agency will take a fresh look at the treatment of premium cigars under the agency's current regulatory structure. He also hinted that premium cigars could be exempted from the FDA's Final Deeming Rule in the future. 

Gottlieb said that the agency will open a new rulemaking process to engage with the premium cigar industry to better understand its products. 

"...I'm also asking the tobacco center leadership to explore a process by which it could ask for new information related to the patterns of use and resulting public health impact of so-called premium cigars," said Gottlieb. "The Final Deeming Rule covers all cigars, but I want the center to consider opportunities that could provide to interested parties to develop and submit new information or data on this issue. This will take the form of an advanced notice of proposed rulemaking to develop a new adminiatrative record to explor these questions. We'll explore any new and different questions raised, and seriously consider any additional data submitted revelant to the appropriate regulatory status of premium cigars." 

To punctuate the agency's new approach to premium cigars, the FDA is extending its deadline by several years for manufacturers to submit their pre-market applications, to August 8, 2021. This new deadline applies only to cigars that were on the market as of August 8, 2016. However, under the guidelines that the FDA outlined today, products with pre-market applications already submitted to the agency can continue to be sold for the duration of the application review process. 

According to the FDA, the new 2021 date does not apply to deadlines that have already passed, or to the "other provisions of the rule, including, but not limited to, required warning statements, ingredient listing, health document submissions, harmful and potentially harmful constituent reports..." (The deadline for many of these rules was extended back in May.)

Additionally, Gottlieb said that the agency will be releasing a new draft guidance in hopes of clarifying exactly what cigar manufacturers need to include in their applications. 

"Among other things we will advance rules that will lay out what needs to be in applications for substantial equivalence, modified risk tobacco products, and premarket tobacco product applications, and whether and how we would exempt premium cigars from regulation," Gottlieb said. 

Many in the cigar industry, from cigar manufacturers to the heads of cigar industry took today's FDA announcement as positive news. 

"This has been a long and complicated process, which is not over. However, we commend the objective approach announced today by the commissioner of the FDA," said Mark Pursell, chief executive officer of the International Premium Cigar & Pipe Retailers Association, and Glynn Loope, executive director of the Cigar Rights of America, in a joint statement. 

In an interview with Cigar Aficionado, Loope also said that "such distinctive treatment of premium cigars in Gottlieb's remarks is clear evidence that he has received this inudstry's message from those that have reached out to him."

"Since the Final Deeming Rule was published last year, there has been tremendous anxiety within the premium cigar industry about FDA regulation and how to comply with its many expensive and arduous requirements," said Drew Newman, general counsel for the J.C. Newman Cigar Co. "Today's announcement gives us all some breathing room, allowing us to continue rolling cigars just as we have been doing for 122 years, while giving the FDA time to reconsider the regulation of premium cigars and provide more guidance to the premium cigar industry."

"This is a good first step," said Marvin R. Shanken, editor and publisher of Cigar Aficionado, "but, there's a lot more that needs to be resolved."

To learn how to write the FDA and show your support for premium cigars, check out Cigar Aficionado's form letter by clicking here.  

Senator Rubio Fights for Small Businesses

July 20, 2017

Senator Rubio Fights for Small Businesses and the Premium Cigar Industry in Appropriations Hearing

Earlier today, Senator Marco Rubio (R-FL) stood up for premium cigar retailers and manufacturers around the country in a speech before the Senate Appropriations Committee. During consideration of the Fiscal Year (FY) 2018 Agriculture Appropriations Bill, which funds the FDA, Senator Rubio urged his colleagues to support a provision that acutely defines premium cigars and exempts them from current FDA regulations. 

Despite bi-partisan and bi-cameral support, the Senator stated his disappointment that the Senate bill currently does not contain the language but implores his colleagues to address it soon. As he put it, "The industry's future is at stake...I truly think it's a matter of fairness." The House's Agriculture Appropriations bill contains the cigar exemption provision. 

An issue of great importance to his constituents in Florida and around the country, Senator Rubio implored his colleagues to understand the true impacts of current FDA regulations. "This isn't about curtailing tobacco use, because it's already on the decline. This is about thousands of small businesses and their employees that frankly have done nothing wrong but now the government is singling them out."

Responding to concerns over youth use of tobacco, Senator Rubio offered the following. "We all share the goal of eliminating underage tobacco use and it is already illegal to sell tobacco to anyone under 18 years of age." He rightly pointed out that there is no such problem amongst premium cigars, "(this) is not a product that either preys on, seeks to market to or has a problem with underage use." Rubio added that the premium cigar industry "has done nothing wrong and in my view is being treated unfairly."

In addition to Senator Rubio--Senator Joe Manchin (D-WV) declared his support on this critical issue. While urging opponents of exemption to speak frankly and openly with the tobacco retailers and constituents in their states, Manchin continued laying out the case for premium cigar exemption. "I'm all for curtailing addiction to tobacco use but...You don't see kids going around smoking these fine cigars. It supports such a robust business...It does not add to any type of addiction of support any type of addiction."

IPCPR strongly supports and commends Senator Rubio for taking a stand against punishing government regulations that threaten our retailers and the industry. "Having a Member of Congress the caliber of Senator Rubio stand up and advocate on behalf of retailers, manufacturers and the thousands of jobs at stake is a tremendous boost to this industry. Floridians and retailers across the country are proud to have him as a true supporter" said Ken Neumann, President of IPCPR's Board of Directors. Neumann also applauds Senator Manchin's comments, noting that they demonstrate the bi-partisan nature of this issue. 

IPCPR will continue to fight on behlaf of their retailers on capitol hill and pursue legislative solutions to this crippling rule. For more information or any questions on this issue, please contact Daniel Trope, IPCPR Director of Federal Government Affairs at

Group Seeks Referendum on Flavored Tobacco Ban in S.F.

-July 12, 2017

By Rachel Swan

A San Rafael lawyer has filed a referendum measure to strike down the Board of Supervisors' ban on flavored tobacco, which passed unanimously in June. 

Attorney Joel Aurora, of the polital law firm Nielsen Merksamer, submitted the referendum Friday, at which point he had 30 days to gather 19,040 signatures from San Francisco voters--10 percent of the vote count from the last mayoral election. 

We think the Board of Supervisors is limiting freedom of choice for San Francisco voters," said Jaime Royas, a spokesman for the group Let's Be Real San Francisco, which is running the referendum campaign. 

The group represents tobacco manufacturers R.J. Reynolds and Altria, as well as several vaping advocacy groups and the Arab American Grocers Association, whose members opposed the supervisors' ordinance, saying it hurt immigrant busineses owners. 

Supervisor Malia Cohen, who sponsored the flavored tobacco ban, called the referendum a "ridiculous attempt to put profit over people's health."

"This petition shows that they are desperate," Cohen said. "My legislation threatens the sale of their products, including Newport cigarettes, the No. 2 brand for all cigarette sales in the U.S. and the No. 1 brand in menthol sales."

She added: "They know that children will stop picking up a lethal habit if we remove flavored tobacco from the market."

If Nielsen Merksamer gathers enough signatures to ratify the referendum measure, the ordinance would be suspended and the supervisors will get a chance to reconsider their vote. They could decide either to repeal the ban or to send it to voters in the June 2018 election. 

That election ballot will also include the District 8 supervisor race.