Week of October 27 Regulatory Intelligence Recap

Trade Press and Regulatory Summary:

• Exclusive: BAT pauses unlicensed US vape launch as FDA action accelerates - Reuters

BAT's Reynolds American will pause the pilot launch for Vuse One, which it acquired in April, for now, a spokesperson told Reuters, after the U.S. subsidiary had laid out plans for the launch without FDA authorisation earlier this year.

While only a pilot, the plan marked an assertive shift in big tobacco's approach to FDA rules the industry says stymie its ability to compete and triggered broad interest among investors, rivals and regulators.

The FDA told Reuters it was aware of reports that a small number of manufacturers have had plans to introduce new tobacco products to the U.S. without authorisation.

"The Agency takes such matters seriously," it said, adding it had made public contact with particular manufacturers and retailers and would continue to monitor their actions.

In a previously unreported letter, the FDA wrote to Reynolds on September 17 to say selling new nicotine products without authorisation was unlawful and asked it to provide information on any sales of Vuse One that had already occurred.

Reynolds told Reuters the decision to postpone its pilot was unrelated to the warning and taken before the letter.

"We will bring Vuse One to market at the appropriate time," the spokesperson said.

• The counterintuitive economics of smoking - The Economist

In recent years, the operating margin on a cigarette sold in America has grown from about 50% to about 60%. This year cigarette- and cigar-makers are expected to make $22bn of operating profit in the world’s largest economy.

Not bad for a dying industry. In the past decade the number of American adult smokers has fallen by 20m or so. The number of cigarettes sold has fallen by more than a third. And industry insiders expect the decline over the next decade to be even steeper. Normally, when customers vanish, an industry suffers: just look at Blockbuster or local newspapers. So how is the tobacco industry thriving? It is, in part, because cigarette manufacturers have read their textbooks. They understand price elasticities.