FDA authority to regulate cigar products

In 2009, the Family Smoking Prevention and Tobacco Control Act (TCA) was signed into law and granted the US Food and Drug Administration (FDA) regulatory authority over tobacco products, although this initially only included cigarettes, smokeless tobacco and roll-your-own tobacco. Afterwards, sales of mass merchandise cigars, which are generally mid-sized cigarillos with a wide distribution chain, increased while taking advantage of features banned for cigarettes, such as flavourings and small pack sizes, in order to maintain strong sales.9 Unlike cigarettes, which have a minimum pack size of 20 and cannot be sold in characterising flavours, except menthol, cigarillos are widely available in a variety of flavours and can be sold as singles and in small pack sizes (eg, 2-packs and 3-packs),10 allowing them to be sold at very low price points.

Under its deeming rule, FDA extended its regulatory authority to cover all tobacco products, including cigars, effective 8 August 2016. After that date, tobacco products subject to the deeming rule, except grandfathered (we recognise that the term ‘grandfathered’ has disturbing historical roots that date back to Reconstruction. We use this term—not because if its repugnant historical origins—but because the FDA has assigned a specific meaning to it in this context. See US Food & Drug Administration, Grandfathered Tobacco Products (6/17/2020), accessed at https://www.fda.gov/tobacco-products/market-and-distribute-tobacco-product/grandfathered-tobacco-products) tobacco products, were technically not allowed to be marketed without FDA authorisation. However, the FDA exercised its enforcement discretion and established a process which allowed tobacco products that were already in the market to continue to be sold during an interim period—providing time for manufacturers to submit and the FDA to process applications for marketing authorisation. Nevertheless, the deeming rule prohibited the introduction of new tobacco products into the marketplace after 8 August 2016 without prior FDA authorisation. Thus, the definition of a new tobacco product is crucial to understanding the deeming rule’s implications for a substantial number of tobacco products, including cigars. The TCA defines a new tobacco product as (1) any tobacco product that was not commercially marketed in the USA as of 15 February 2007; or (2) any modification of a tobacco product where the modified product was commercially marketed in the USA after 15 February 2007.

Given the legal significance of certain dates related to the TCA and deeming rule, it helps to think of cigars in three categories based on when they were initially introduced to US commercial markets (see figure 1): (1) those that were grandfathered (ie, commercially marketed as of 15 February 2007), (2) those that were newly introduced after the grandfather date but before the deeming rule’s 8 August 2016 effective date (‘deemed’ cigars) and (3) those introduced to the market illegally after 8 August 2016 (‘postdeeming' cigars). Of note, both deemed and postdeeming cigars are technically considered ‘new tobacco products’. Consequently, manufacturers must apply for FDA authorisation, and while a cigar’s application is pending, the cigar may stay on the market for up to 1 year grace period from the date of the application, unless the FDA decides the fate of an application before that year expires.11 Then the manufacturer must abide by the FDA’s decision. If the grace period expires without an FDA decision, the product must be removed from the market until the FDA addresses the application, subject to case-by-case exceptions. Although grandfathered cigars do not need FDA authorisation to be marketed, they are under the deemed regulatory authority of the FDA and would be impacted by any future product standards (eg, flavour ban) or marketing restrictions (eg, minimum packaging) just like cigars with an FDA authorisation.

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Figure 1

Cigar product categories based on when the product was introduced to the tobacco marketplace. FDA, US Food and Drug Administration.

Tobacco manufacturers have three ways to seek FDA authorisation to legally market a new tobacco product, as detailed in Jenson et al 12 and table 1. In a Premarket Tobacco Product Application (PMTA), the applicant must demonstrate that the product is appropriate for the protection of public health. As combustible tobacco products, cigars are inherently dangerous,1 and therefore, cigar manufacturers are unlikely to seek or receive PMTA orders. To obtain a substantial equivalence (SE) order, the applicant must demonstrate that the new product has the same characteristics as a predicate product, which could be a grandfathered product, or another product with an existing SE order from FDA, or if the product has different characteristics, that the product features do not raise different questions of public health. To obtain a Request Exemption from Demonstrating Substantial Equivalence order (EX REQ), the applicant must demonstrate that there was only a minor modification in the changing of additives (eg, flavours) to a product that is already legally marketed; the change cannot increase the appeal to, or use by, minors. Thus, obtaining SE orders claiming that the product is substantially equivalent to a predicate cigar appears to be the most likely authorisation pathway for most deemed and postdeeming cigars.

The cigar market has diversified under Deeming: Swedish match as an example

Despite FDA deeming, which should have frozen the cigar marketplace as of 8 August 2016, the cigarillo marketplace continues to diversify, with new brands, styles, flavours and pack sizes entering the market regularly. Of particular notice are the cigar products manufactured by Swedish Match North America (Swedish Match). Swedish Match is well-known for its non-combustible tobacco products including General Snus, which FDA recently granted a modified risk order,13 and Zyn, a tobacco-free nicotine pouch which currently dominates this new market.14 15 Both products are touted by the company as important alternatives to cigarettes and e-cigarettes in the USA.16 However, more than a third of the company’s sales come from cheap, flavoured cigarillos sold only in the USA. 16 The most familiar Swedish Match cigarillo brands that deserve attention are Garcia y Vega’s Game brand, White Owl and Night Owl, which are increasingly promoted in a variety of flavours and pack sizes using innovative promotional tactics. Of note, White Owl and Game—have among the highest flavoured market share within their own brand.3

Night Owl—a new brand with pipe tobacco, presumably to compete with Black & Mild—was released nationwide in 2019—after deeming—and is currently available in four varieties: Classic, Wine, Tropical and Black Cherry.17 As a part of its promotional activities for Night Owl, Swedish Match has been selling 2-packs of Game and White Owl cigarillos with a free Night Owl cigarillo in the packaging (figure 2). The FDA bans ‘free samples’ of tobacco. However, because the free Night Owl accompanies the purchase of a cigar, the FDA treats these so-called ‘free samples’ as permissible discounts.18 This limited-edition offer is available in at least two flavour combinations; the Night Owl website features a 2-pack of Game limited-edition Blue Raspberry cigarillos with a free Tropical Night Owl cigarillo, as well a 2-pack of limited-edition Spiked Lemonade White Owl cigarillos with a free Classic Night Owl.19

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Figure 2

Game and White Owl promotions of free Night Owl cigars (https://www.nightowlcigar.com/).

Swedish Match has also taken existing flavours and repackaged them in new ways. For example, they recently released a limited-edition White Owl 3-pack described as a ‘Summer Sampler’, which includes three individually wrapped cigars that are different flavours—Blue Raspberry, White Peach and White Grape.20 21 They also released a limited-edition Fourth of July-themed pack called Firework, which includes Cherry Blast, Sparkling Wine and Rocket Raspberry cigarillos individually wrapped in red, white and blue packaging, respectively (figure 3).22 23 In April 2020, Swedish Match released White Owl Duos, which contain combinations of flavours that are characterised as complimentary. The most recent flavour combinations are Berries and Cream (figure 4) and Mango and Pineapple, however, the company plans to release new flavour combinations every 4 months including Coconut and Rum, which is ‘coming soon’, according to the White Owl website.22 23

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Figure 3

Firework White Owl Cigars (https://www.whiteowlcigar.com/cigarillos/%23limited-edition).

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Figure 4

DUOS White Owl Cigars (https://www.whiteowlcigar.com/cigarillos/%23limited-edition).

There are three possible ways in which Swedish Match introduced the flavoured cigars described previously into the market, they are: (1) grandfathered cigars that appear new because they changed their labels, (2) new products that submitted SE applications identifying a predicate cigar that was likely manufactured by another company and (3) adulterated tobacco products on the market illegally because they were new products that did not seek FDA authorisation by the 9 September 2020 deadline.

In the case of Night Owl, it does not appear that Swedish Match previously manufactured a mass-merchandise cigarillo sized pipe-tobacco cigar. However, one manufacturer can use another manufacturer’s cigar as a predicate. Thus, Swedish Match could refer to Black & Mild cigars as predicates, which are pipe-tobacco cigars and are available in some of the same flavours as Night Owl. To do this, it is unclear if Swedish Match would need proprietary information from Black & Mild, which seems improbable since they are competitors. Alternatively, Swedish Match could rely on its own analysis of Black & Mild cigars. It is difficult to assess if such an application, without a competitor’s proprietary information, would have a better than remote likelihood of success. As of October 2020, FDA’s website does not reflect any FDA marketing orders for Swedish Match cigars. It is possible that Swedish Match submitted an application for Night Owl prior to the 9 September 2020 deadline, however, FDA has not made public the list of products for which they have received applications. If not, we believe that Night Owl may be on the market illegally without FDA marketing authorisation, which would mean it is adulterated.

What constitutes a ‘new’ product under the TCA and deeming rule? It’s complicated

Although the TCA defines a new tobacco product (see FDA authority to regulate cigar products section), the FDA issued industry guidance interpreting that definition in a way that specifically applied to product labels and the quantity or size of products within a package. Specifically, the FDA proposed that if a tobacco manufacturer changed either the label of a tobacco product or the quantity of products within a package, it would be treated as a new tobacco product. A number of leading tobacco manufacturers challenged the FDA’s interpretation of the definition of a new tobacco product.24 The court accepted the FDA’s position that when a manufacturer changes the quantity or size of cigars in a package (eg, number of cigars in a package or the length, width or weight of a cigar), and that product entered the market after February 15, 2007, it would be treated as a new tobacco product. Although the court's decision regarding size is clear, its ruling creates confusion regarding cigar labels. The court rejected the FDA’s interpretation with respect to a change in a label that renders the product label ‘distinct’ (this paper only contemplates changes in a label that render the product label ‘distinct’ from its predecessor. It does not address minor or cosmetic changes to labels that are unlikely to result in a consumer perceiving a product as distinct from its predecessor) from its predecessor.25 As a result, a tobacco manufacturer can change a label of an existing cigar, and if the cigar’s physical attributes are unchanged, the cigar would not be treated as a new product. This ruling makes it difficult to determine when a seemingly new cigar is actually new for the purposes of FDA regulations. Furthermore, this ruling begs the question as to whether tobacco manufacturers will relabel grandfathered cigars, perhaps in an effort to boost sales. To the extent grandfathered cigars are relabeled, they would appear to be new, but they would not fit the definition of a new tobacco product. While grandfathered cigars may be relabeled legitimately, some manufacturers may make questionable or even surious claims that certain cigars are relabeled grandfathered cigars, leaving FDA enforcement authorities to discern the difference.

In regards to flavours, an internal analysis of sales data from Nielsen National C-Track demonstrates that it is unlikely that all current flavours on the market correspond with a predicate cigar. Between 2008 and 2015, sales of flavoured cigars increased by nearly 50%.9 Separate from overall sales, the variety of distinct flavour names on the market also increased. In 2007, Nielson National C-Track data showed 92 distinct flavour names. By 2016, the number of distinct flavour names increased by 178, and by 2019, it increased by an additional 49 distinct flavour names. To be clear, this analysis measured distinct flavours identified by universal product codes (UPC); not distinct flavoured cigars. For example, if two brands sold separate cigars labelled ‘Grape’, under this analysis it would count as one distinct flavour. Together, deemed cigars and postdeeming cigars have a total 227 distinct flavours based on UPC codes. It strains credulity to think that each of the cigars with 227 distinct flavours will correspond with a predicate cigar from the 92 distinct flavours that were on the market in early 2007.

Potential pathways to market for flavoured cigarillos

By 9 September 2020, manufacturers of deemed and postdeeming flavoured cigars will have been forced to make revealing decisions about their pathway of choice to stay on the market legally, even though those decisions were not publicly available when this paper was published. For deemed and postdeeming cigars, there are three likely alternatives. First, a deemed cigar may have submitted an SE application, identifying a predicate cigar—presumably one of the cigars with one of the 92 flavour names that were on the market in 2007. That strategy may work for some deemed flavoured cigars. However, many others, especially those with innovative flavours, many of which are smaller than more traditional cigars, are unlikely to be able to identify a credible predicate cigar that is a substantial equivalent. Indeed, table 2 highlights that Swedish Match voluntarily submitted cigars to FDA for a determination of their grandfathered status.26 As of 30 October 2020, a total of 17 White Owl Cigars were determined by FDA to be grandfathered and added to the online database. Of note, only seven flavours are listed and most of the cigars are larger than cigarillos. As such, many applications should be denied.

Second, manufacturers may submit SE applications identifying as a predicate a deemed cigar that already received a SE order. This approach, however, is still limited, although one step removed, to the same finite pool of flavoured grandfathered cigars. Third, for many deemed and postdeeming cigars, cigar manufacturers may be leaving cigars on the market without having submitted SE applications, in effect, defying the premarket authorisation process. This third option takes advantage of an ambiguity in the FDA’s process. The FDA encourages cigar manufacturers to voluntarily identify grandfathered products, but it does not require them to do so.27 Since grandfathered cigars (1) are not required to self-identify and (2) do not need premarket authorisation, when a cigar is on the market without having submitted an application, it is not immediately clear if the cigar is grandfathered or adulterated. This places a heavy enforcement burden on FDA. It remains to be seen whether many of these flavoured deemed and post-deeming cigars remain on the market illegally. Nevertheless, the FDA may be challenged to take enforcement actions commensurate to the potential myriad of adulterated cigars on the market within a reasonable period of time. To date, we are aware of no efforts that the FDA has taken against cigar manufacturers regarding the potential promotion of cigars that are being illegally marketed.28

Deemed and postdeeming cigars that applied for FDA authorisation via the SE pathway can continue selling the product until the FDA renders a decision or until 1 year after the application was submitted. To the extent the FDA has not issued orders on all pending applications, manufacturers may be required to remove corresponding products from the market until the FDA renders its decisions. The standards for SE review do not explicitly require the FDA to apply more rigorous scrutiny to a SE application for postdeeming cigars that inexcusably flouted the 8 August 2016 deadline. But evidence may show that at least some postdeeming cigars tried to capitalise on flavours that appeal to minors, which may cripple their applications. It is also possible that some manufacturers removed their unauthorised cigars from the market as of September 2020. Further, the practice of releasing new, unauthorised cigars may continue even after 9 September 2020. It is worth noting that different cigar manufacturers may pursue different strategies, resulting in a combination of scenarios playing out at once.