Smoke screen/Phillip Morris Wants The FDA to regulate cigarettes

Philip Morris, the nation’s largest cigarette manufacturer and historically a leading opponent of tobacco regulation, has broken with the rest of the industry and is embracing the government intervention it has spent decades fighting.

NEXT WEEK, Senate health committee Chairman Ted Kennedy, a longtime Philip Morris nemesis, is holding hearings on a bill that would put cigarettes under the oversight of the Food and Drug Administration. In a shift that has surprised both allies and opponents, Philip Morris lobbyists say they are eager to see the Kennedy bill move forward.

Philip Morris believes in “soup to nuts regulation of the entire industry, and we think that the FDA should be involved in all of that,” says chief legislative counsel Mark Berlind. He says the company wants to see federal oversight of cigarette ingredients, warning labels, manufacturing, and marketing-with, he adds, a few limitations. But more on that later.

Philip Morris’ flip-flop has left the rest of the tobacco industry feeling confused, angry, and jilted. “They are impenetrable to me. Their strategy is impenetrable, their positions are impenetrable,” says a veteran lobbyist for one of the cigarette makers opposing FDA regulation, who spoke on the condition his name not be used. “I find their positions to be nuts.” By endorsing even limited regulation, he says, Philip Morris is opening a Pandora’s Box.

The smaller companies — R.J. Reynolds, British American Tobacco, Lorillard, and chewing tobacco and cigar manufacturers — all stridently oppose FDA regulation.

“It’s as fractured as the industry has been on an issue,” says Robert Campagnino, senior tobacco analyst for Prudential Securities.

It wasn’t so long ago that Marlboro-maker Philip Morris was public enemy No. 1 in Washington. In 1998, Philip Morris spearheaded a $100 million tobacco-industry advertising and lobbying blitz to fend off the legislation sponsored by Sen. John McCain to put the industry under FDA control.

Its fight was successful, and today cigarettes have less federal oversight than hot dogs. But $74 billion in punitive-damage judgments and more than 1,500 current lawsuits can make even the most recalcitrant corporation rethink its strategy. “We want people to know that we are dealing with the issues that arise from this product, and we think that FDA regulation is the best way to get there,” says Philip Morris’ Berlind.

Philip Morris’ quest for governmental approval is not masochistic: There are solid business reasons for it. The company, which commands more than half of the U.S. tobacco market, earned $20 billion last year from domestic cigarette sales. But that market is, literally and figuratively, dying off at 2 percent to 3 percent a year. Philip Morris sees the future in a line of “safe” cigarettes it is developing. An FDA stamp of approval for them would be a major marketing asset. With its commanding share of the U.S. market, the company figures it can work within FDA rules to swamp its smaller competitors.

“The way they calculate it is they are going to lock in their market share so they can go to the investors and say, ‘Look, we’re practically a utility. We can guarantee this revenue stream. There aren’t any risks out there from government, we’ve solved them all,’ ” says James Derderian, who was chief of staff to the Republican-controlled House Commerce Committee during the late 1990s tobacco wars.

Philip Morris’ struggling rivals can’t afford its boldness. R.J. Reynolds is desperate for a larger share of the U.S. market. The company sold off its profitable foreign operations to Japan Tobacco in 1999, leaving it with billions in potential liability and a shrinking customer base. British American Tobacco, while fighting regulation in the United States, is simultaneously pitching itself as a responsible corporate actor abroad, leading the industry’s fight against smuggling and corruption.

The smallest of the opponents, Loews Corp.’s Lorillard Tobacco Co., calls the Kennedy bill the “Marlboro monopoly act.” “It will virtually eliminate our ability to communicate with adult consumers, thereby locking in Marlboro’s dominant position,” says Lorillard spokesman Steve Watson.

Philip Morris doesn’t accept all the regulation proposed in the Kennedy bill. Probably the most controversial change Philip Morris seeks is to limit the FDA’s ability to ban cigarette ingredients. Berlind says Philip Morris just wants to prevent the FDA from making cigarettes so unpalatable that nobody will smoke them. But according to a longtime policy adviser to the company who spoke on condition of anonymity, Philip Morris is really worried that the FDA will ban nicotine. “If they say you can have half as much nicotine, and then have half as much again, and pretty soon you have a product nobody will buy,” says the adviser.

Public-health advocates are dubious of the Philip Morris reversal — they’re especially leery of Philip Morris’ desire to advertise its new smokes as “safe” — but they are starting to accept that the tobacco giant has changed strategy. “In the beginning I was cynical and thought this was a concerted ploy by the industry, but now I do think there is a real split,” says American Lung Association chief lobbyist Paul Billings, who has been fighting the tobacco industry for a decade.

Philip Morris actually began its campaign to get an FDA stamp of approval right after the Bush administration took office, according to lobbyists who do work for the company. Philip Morris tried to get the administration to sponsor an FDA bill, but Bush advisers decided the president should stick to tax refunds and avoid a messy tobacco fight.

Appalled at their former ally’s betrayal, the remaining tobacco companies have banded together to block any potential regulation. They have scored a lobbying coup by hiring former Rep. Tom Bliley, the pro-tobacco ex-chairman of the Commerce Committee. Bliley was once known as “the congressman from Philip Morris” because his district included the company’s Richmond, Va., manufacturing headquarters. Capitol Hill scuttlebutt has it that Bliley and Philip Morris never really got along, so his working for the competition is not a surprise.

“Bliley is there to make sure that members realize that there’s more than Philip Morris in the industry,” says a lobbyist for one of the cigarette-makers in the anti-FDA coalition. He says that Bliley, who did not return a call, has been telling his former GOP colleagues that taking up tobacco control legislation is a waste of time because it’s controversial, tedious, and in the end accomplishes nothing.

But as Bliley should know more than anyone, Philip Morris has spent decades (and millions) getting Congress to do what it wanted — which was usually nothing. Now it wants something done, so something may happen.

"They do what they have to do for their business. I think I can tell that you are not a capitalist. "

The FDA would have no choice in banning tobacco products if the FDA had to make a ruling on it.

We would then have a whole new class of criminals by the mere stroke of a pen. Can you imagine the enormity of trying to police such a class of "new" criminals? Everyone one from the growers (then called dealers) to the importers (then called smugglers) to the end consumers (then called users).

Heck, maybe these politicians want another Boston Tea Party, 3rd millennium style. Then they could impose Marshall law and all sorts of other cool stuff. [/sarcasm]

Since PM seems to be OK with FDA regulation, only one possibility of what's going on behind the scenes makes sense to me.

PM, the antis, and the states are all in this together. Remember, PM has a lock on the market--over 50% of the market I'm pretty sure. I figure that the tobacco industry (PM primarily), the states, and the anti-smoker intdustry are all in it together. Even if only 10% of adult Americans smoker, PM figures it will still have over 50% of the market, the states will still get their money, and the antis will still have a market for their products.

SheLion,

I've been thinking this one over for a while, and I believe that PM might just have a decent medium term strategy here. This post might be a bit long, but bear with me.

Tobacco smokers have been around (in Western countries) for over 400 years. At various times kings, imams, dictators, and elected representatives have persecuted the participants in this particular pastime/drug (sorry for the alliteration, but it was irresistable), even to the extent of hanging, shooting and quartering them. Hilter's anti-smoking nazism was mild, by comparison!

Regardless of what has been done to the smoker over the centuries, however, we have not only survived as a group, but thrived. In fact, wherever smoking has been introduced, it has been taken up by, on average, between 20% and 60% of the population. Of course, this must mean that it's terribly addictive. (But, hang on, in countries in which the dangers of smoking have been extrapolated, exaggerated and generally embroidered, more people are ex-smokers than are smokers! Wow! Must be terribly addictive!)

So, the take-up rate must mean that a whole lot of people get something really good from smoking. In fact, history would tend to indicate that:- (a) about 25% of the population get something from it for a period of time in their life; (b) 25% of the population get something from it for their entire life; (c) 45% of the population get nothing from it; and (d) 5% of the population hate it with the zeal of fascists. Throughout the entire course of history, even the 5% occasionally have their day - we're just unfortunate enough to be living through it.

PM know that, even though James I and other random idiots throughout history have actually killed people for smoking, it has survived and thrived. That within a relatively short period of time (by the standards of a 400 year old company), the nico-nazis will have had their day and faded into obscurity. Just look at the "Carry Nation" puritans who tried to ban smoking in the early 1900's - they crashed and smoking returned with avengence.

PM know that, regardless of what happens in the next ten, twenty, thirty years, they'll still have a viable product and, eventually the nico-nazis will run out of puff (before the average smoker will!).

So, what are PM doing? Well, by getting FDA approval, cigarettes become a drug (that is, a "pharmaceutical", not an illegal narcotic). Far from taxing pharmaceuticals to the hilt, our society actually subsidise them to the hilt!

In the end, the FDA is both a political and a practical body. They are not going to deny 25% of the population of their favorite pastime. And PM see both legitimacy and an end to the continual persecution of their product and of smokers if cigarettes are put into the same category as Celebrex, Viagra, Zyban, Nicorettes, etc.

What's wrong with buying your smokes from the Drug Store? I remember buying them from an old Druggist as recently as five years ago! Apparently, they all used to do it.

Anyway, PM don't really worry about the FDA banning their product (because they won't and can't), they just want legitimacy and the same type of "protection" given to tobacco which is given to other drugs. Will they get it? Who knows. Will smoking stop or even reduce if the FDA gets control? 400+ years of experience says, "No".

If I was an executive of PM, I wouldn't even be bothering to ask whether people would still be smoking in 100 years time - that's a given. All I'd be asking is, "How can we survive the shakedowns of the next five years?" Because within five years, the hysteria and lawsuits will be over, but it could conceivably kill the company in the meantime.

One legitimate answer would be to get FDA approval and get into the arena of subidised drugs, rather than hyper-taxed vice!

Anyway, that's my two cents worth (actually, long enough to be two bucks worth, plus Govt cigarette-related-post taxes, making it $10).

"I don't want any of your statistics. I took your whole batch and lit my pipe with it. I hate your kind of people. You are always ciphering out how much a man's health is injured, and how much his intellect is impaired, and how many pitiful dollars and cents he wastes in the course of ninety-two years' indulgence in the fatal practice of smoking"
Mark Twain, 1865

Disclaimer: My comments are most definitely not intended to be an endorsement of PM, who treat their customers in the same way as banks and stockbrokers - disposable, interchangeable and dispensable.

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