4 January 2019
The New York Times
WASHINGTON — The Food and Drug Administration is accusing Juul and Altria of reneging on promises they made to the government to keep e-cigarettes away from minors.
Dr. Scott Gottlieb, the agency’s commissioner, is drafting letters to both companies that will criticize them for publicly pledging to remove nicotine flavor pods from store shelves, while secretly negotiating a financial partnership that seems to do the opposite. He plans to summon top executives of the companies to F.D.A. headquarters to explain how they will stick to their agreements given their new arrangement.
Dr. Gottlieb was disconcerted by the commitments the companies made in the deal announced Dec. 19, under which Altria, the nation’s largest maker of traditional cigarettes, agreed to purchase a 35 percent — $13 billion — stake in Juul, the rapidly growing e-cigarette start-up whose products have become hugely popular with teenagers. Public health officials, as well as teachers and parents, fear that e-cigarettes have created a new generation of nicotine addicts.
“Juul and Altria made very specific assertions in their letters and statements to the F.D.A. about the drivers of the youth epidemic,” Dr. Gottlieb said in an interview. “Their recent actions and statements appear to be inconsistent with those commitments.”
In October, after meeting with Dr. Gottlieb, Altria had agreed to stop selling pod-based e-cigarettes until it received F.D.A. permission or until the youth problem was otherwise addressed. In doing so, Howard A. Willard III, Altria’s chief executive, sent the F.D.A. a letter agreeing that pod-based products significantly contribute to the rise in youth vaping.
But the new deal commits the tobacco giant to dramatically expanding the reach of precisely those types of products, by giving Juul access to shelf space in 230,000 retail outlets where Marlboro cigarettes and other Altria tobacco products are sold. (Juul currently sells in 90,000 stores.)
It is a development that startled the F.D.A., which in September had threatened to pull e-cigarettes off the market if companies could not prove within 60 days that they could keep the products away from minors. Altria, Juul and three tobacco companies sent the detailed plans spelling out how they would comply with the agency’s request. Now, those plans appear in jeopardy, Dr. Gottlieb said.
“I’m reaching out to both companies to ask them to come in and explain to me why they seem to be deviating from the representation that they already made to the agency about steps they are taking to restrict their products in a way that will decrease access to kids,” Dr. Gottlieb said.
It is possible that the F.D.A. will pressure Altria to keep Juul flavor pods off its shelf space, but the tobacco company is not likely to consent.
David Sutton, an Altria spokesman, said the company is merely a minority investor in Juul, and does not control its business.
“We didn’t buy Juul; we didn’t merge with Juul,” Mr. Sutton said. “They are an independent company. Our commitment to preventing youth from using any tobacco product including e-vapor is unchanged.”
Chris Bostic, deputy director for policy at the Action on Smoking and Health, a nonprofit health advocacy group, was skeptical.
“This rings so many alarms,” Mr. Bostic said. “It seems like this goes counter to what Altria promised. It’s certainly not a different company when you are a major owner.”
The requested meeting between Dr. Gottlieb and the companies is likely to take place as the agency releases guidelines for a tough new set of vaping industry restrictions that were first announced in November. Dr. Gottlieb has made ending the youth vaping epidemic the cornerstone of his term as commissioner. He also plans to ban menthol cigarettes and flavored cigars, and to reduce the amount of nicotine allowed in cigarettes to nonaddictive levels.
Victoria Davis, a spokeswoman for Juul, said the company is sticking to its plan to curb youth vaping.
“We are as committed as ever to preventing underage use of e-cigarettes, including Juul devices,” Ms. Davis said. “We are moving full steam ahead on implementing our action plan to limit youth usage, and this is unchanged since we announced our plan in November. We will respond to the letter when we receive it, and look forward to a constructive dialogue with F.D.A.”
The contretemps with the F.D.A. is only the latest headache in Washington for Juul, a company that has had much more success capturing market share in an emerging industry than in navigating the government scrutiny that comes with it.
Juul, based in San Francisco, has quickly captured more than 70 percent of the nation’s e-cigarette business since its 2015 launch. But the company spent 2018 fending off federal regulators, lawmakers and parents who attacked Juul for the soaring rate of vaping and nicotine addiction among teenagers who have never smoked. According to the 2018 National Youth Tobacco Survey, released in November, the number of middle and high school students who vape has risen to about 3.6 million.
Juul also revamped its advertisements, and said it would suspend retail sales of teen-friendly flavors like mango, fruit and crème, restricting them to Juul’s own site, which has an age verification system. Kevin Burns, the chief executive, said Juul would continue to sell only its mint, tobacco and menthol flavors in stores.
Although individual employees made political contributions earlier, the e-cigarette company first created a political action committee in 2018, and began making political contributions shortly thereafter. Preliminary data for last year shows that Juul and its employees donated about $200,500 to federal candidates and political parties, according to the Center for Responsive Politics, which tracks campaign spending. The company also spent nearly $900,000 in 2018 on lobbyists and advisers to reposition itself as a public health company eager to disrupt the tobacco business.
That’s a fraction of what large tobacco companies spend. Altria spent more than $7 million on lobbying last year, and early reports for the 2017-18 campaign cycle, which have not all been filed, showed the company and its employees donated more than $2.8 million to federal candidates and political party committees, mostly Republican.
Juul had weak ties to the Trump administration and congressional Republicans and sought better connections.
Now, Juul will have access to Altria’s deep lobbying pockets and more experienced government relations team, but such support cuts both ways.
“Altria should be very careful about using its significant investment to influence Juul policy,” said Marc Scheineson, a partner at Alston & Bird, whose clients at the firm include small tobacco companies. “This development is likely to make F.D.A. even more skeptical,” he said, of products like Juul and other alternative nicotine delivery systems that “are designed to wean smokers off combustible products and not create a new generation of dual-tobacco users.”
Indeed, sources within the public health community fear that the inserts that Altria has agreed to include in Marlboro and other cigarette packs, advertising Juul, might encourage smokers to use both products, rather than quit.
After Altria purchased its stake in Juul, Precision Strategies, a public relations firm founded by former aides to President Barack Obama, ended its contract with the company.