British American Tobacco $BATS (+1,86%) announced that it has suspended a pilot plan to introduce an unlicensed disposable vaporizer in the U.S. as the Food and Drug Administration (FDA) cracks down on unregulated products and expedites licensing.
BAT's previously unreported about-face highlights the complex battle by big tobacco companies against a wave of unregulated products, largely from China, that is cutting into profits in the $22 billion U.S. market for smoking alternatives.
The company also manufactures Lucky Strike and Dunhill cigarettes.
Marlboro maker Philip Morris International said in September it was ready to take a similar step with versions of its Zyn nicotine pouch.
BAT's Reynolds American will pause the pilot launch of Vuse One, which it acquired in April, for now, a spokesman told Reuters, after the US subsidiary unveiled plans earlier this year to launch without FDA approval.
Although it is only a pilot project, the plan marked a significant shift in the way big tobacco companies deal with FDA regulations, which they believe are hampering their competitiveness. It sparked widespread interest from investors, competitors and regulators.
"The planned pilot launch of Vuse One in select states has been postponed," the Reynolds spokesperson said, adding that it would focus on its existing portfolio, including a nicotine pouch that is already sold without FDA approval.
》PMI Plan A: Playing by the rules《
Tobacco companies have been lobbying the U.S. government and the FDA for years to destroy the booming market for unlicensed e-cigarettes, often with fruity or sweet flavors and imported from China.
They are also pushing for reform of the FDA system for issuing the necessary licenses to sell new nicotine products. In some cases, companies wait years for approval, more often resulting in rejection.
The FDA has recently stepped up its crackdowns on unapproved e-cigarettes, targeting companies in the supply chain. It also launched a pilot project to test a simplified application process.
PMI CEO Jacek Olczak $PM (-0,8%) told Reuters last week that the "Plan A" is to comply with the regulations, as the FDA has signaled an acceleration of the application process. He expressed hope that PMI would not have to resort to launching a product without approval.
"My preferred scenario is clearly to stay within the FDA guidelines," he said after the PMI results.
Altria $MO (+0,57%)manufacturer and distributor of the Marlboro brand in the US, is still planning to test launch an updated version of its nicotine pouch brand On! The product is due to be launched in the fall. The product is already available online, a spokesperson said, although it does not have an FDA license.
》SALE OF PRODUCTS WITHOUT A LICENSE ILLEGAL《
The FDA told Reuters it was aware of reports that a small number of manufacturers had plans to launch new tobacco products in the US without a license.
"The agency takes such matters seriously," it said, adding that it had made public contact with certain manufacturers and retailers and would continue to monitor their actions.
In a previously undisclosed letter, the FDA told Reynolds on Sept. 17 that selling new nicotine products without approval was illegal and asked the FDA to provide information about Vuse One sales that have already occurred.
Reynolds told Reuters that the decision to postpone the pilot project had nothing to do with the warning and had already been made before the letter.
"We will launch Vuse One at the appropriate time," the spokesperson said.
While the FDA's plans to simplify the applications were welcomed by the industry, they raised concerns. Six advocacy groups, including the Campaign for Tobacco-Free Kids and the American Lung Association, wrote to the FDA in October that the details of the pilot program reported by Reuters were concerning.
The pilot program "appears to be a significant departure from the agency's previous rigorous evaluation process," they said.
Bret Koplow, acting director of the FDA's Center for Tobacco Products, said the FDA's evaluations would remain rigorous and consistent with U.S. law under the pilot.
In a statement responding to the activists' letter, he said the program is an exciting opportunity to explore more efficient processes.