Post-Holiday Roundup: 2019 Concludes With Big Changes for Tobacco, Cannabis, and Food and Beverage Industries

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A new decade is upon us, as are substantial federal and state policy, regulatory, and enforcement developments for the tobacco, cannabis, and food and beverage industries.  Over the past few weeks, alone:

  • President Trump signed H.R. 1865 into law, which bans the sale of tobacco products to anyone under the age of 21;
  • The Trump Administration (the Administration) finalized its partial ban on flavored e-cigarette products, while the U.S. Food and Drug Administration (FDA) issued its enforcement policy on unauthorized flavored e-cigarettes that appeal to children;
  • The U.S. Department of Agriculture (USDA) approved the first set of state and tribal plans for domestic production of hemp under the U.S. Domestic Hemp Production Program;
  • Illinois began adult use cannabis sales; and
  • FDA issued final Nutrition Facts label (NFL) rule guidance, just days before the NLR went into effect for companies with annual sales over $10 million.

Minimum Age for Tobacco Sales Increased to 21

On December 20, 2019, President Trump signed H.R. 1865 into law, changing the “Minimum Age of Sale of Tobacco Products” within Section 906(d) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) from 18 to 21 years of age.  This new requirement applies to the sale of cigarettes, cigars, and e-cigarettes, alike.  Nineteen states and over 500 localities had previously adopted 21 as the minimum tobacco purchase age, but in light of recent concerns surrounding youth access to, among other things, e-cigarette products (more on that, below), national uniformity is a significant public health win.

This change went into effect immediately:  FDA published a note on its website the same day President Trump signed the legislation into law, explaining that “[i]t is now illegal for a retailer to sell any tobacco product – including cigarettes, cigars and e-cigarettes – to anyone under 21.”  The Health and Human Services (HHS) Secretary is tasked with publishing a final rule in the Federal Register within 180 days of enactment to update associated regulations with the new minimum age requirement.  

Partial Ban of Flavored E-Cigarettes Announced; FDA Issues Enforcement Policy

After first announcing its intention to ban most flavored e-cigarette products in September 2019 in an effort to curb youth access to e-cigarettes (and, seemingly in response to vaping-related deaths and injuries, which we discussed in our prior post, here), the Administration finally moved forward with a “partial” flavor ban on January 2, 2020.  FDA had previously prepared one version of the ban in early November 2019 for President Trump’s review (which would have required candy, fruit, mint, and possibly menthol flavors to be removed from the market within 30 days, and which would have outlined an enforcement policy addressing such products that lack premarket authorization), but, because of supposed political concerns raised by the vaping community, the Administration declined to move forward.  The vaping community’s “#wevapewevote” social media campaign, along with analyses of the number of vapers in swing states that was posted on Twitter and elsewhere, seems to have been quite effective in convincing the Administration to reconsider its approach to the partial flavor ban.

FDA’s latest version of the partial ban includes an enforcement policy on “unauthorized flavored cartridge-based e-cigarettes that appeal to children, including fruit and mint”.  Tobacco and menthol flavored e-cigarettes are excluded from the policy, as are e-liquids used in open tank systems available at vape shops, which FDA concluded will “balance the public health concerns related to youth use of ENDS products with considerations regarding addicted adult cigarette smokers who may try to use ENDS products to transition away from combustible tobacco products”.  Companies that “do not cease manufacture, distribution and sale of” these identified, unauthorized products within 30 days are subject to FDA enforcement action.  

By way of background (see our earlier discussions here and here), on July 28, 2017, FDA announced a comprehensive plan to overhaul the Agency’s tobacco regulatory efforts.  Under this plan, the deadline for marketing applications for non-combusted products such as electronic nicotine delivery systems (ENDS) or e-cigarettes was August 8, 2022; however, the U.S. District Court for the District of Maryland moved this deadline up significantly, to May 12, 2020.  But, as long as an e-cigarette product was on the market as of August 8, 2016 (i.e., the effective date of FDA’s Deeming Rule), the manufacturer could continue to market its product until the May 2020 marketing application deadline (and during FDA’s review of its application).  

Despite this deadline, however, FDA has now indicated that it will prioritize enforcement of the following products, beginning on February 1, 2020:

  • Any flavored, cartridge-based ENDS product (other than a tobacco- or menthol-flavored ENDS product);
  • All other ENDS products for which the manufacturer has failed to take (or is failing to take) adequate measures to prevent minors’ access; and
  • Any ENDS product that is targeted to minors or likely to promote use of ENDS by minors.

A few key takeaways and observations:

  • Unless something changes, it appears that FDA, and state and local inspectors contracted by the Agency, could start retail enforcement sweeps on February 1st.  Retailers should plan to stop selling all flavored (except tobacco- and menthol-flavored) cartridge-based products by then.  The exact definition of “cartridge-based” is not yet clear.  Also unclear is which ENDS products are currently undergoing premarket review at FDA.  This information is important as a flavored product may remain on the market as long as a premarket tobacco product application (PMTA) is pending before FDA.  
  • The partial ban seems to be a win for JUUL, the maker of popular pod-based vaping products.  The San Francisco-based company decided to remove many of its popular flavors mid-last year in response to pressure from regulators and public health advocates.  The partial ban should serve to re-even the playing field for JUUL.
  • Not only is the ban merely partial, as tobacco- and menthol-flavored products are carved out from it, but it is not necessarily permanent.  If and when FDA approves a flavored ENDS product PMTA, that product could come back on the market.  With that said, it is not clear if a flavored, cartridge-based product could ever meet the rigorous “public health” standard by which FDA is required to review tobacco products.
  • While the partial, and possibly temporary ban has been viewed as a win for the vaping industry, it is important to recognize that all vaping products, cartridge-based, open tank, and otherwise will eventually need to undergo PMTA review.  Again, for products on the market as of August 8, 2016, the PMTA submission deadline is May 12th of this year.  The PMTA process is not for the faint of heart. As noted by the U.S. Small Business Administration, in the Deeming Rule, FDA estimated that PMTA costs would be between $28,566 and $2,595,224 per ENDS delivery unit, with an average cost of $466,563, and between $12,112 and $398,324 per e-liquid used in such devices, with an average cost of $131,643.  We think these projections are grossly underestimated, and believe the real costs to be substantially higher.  As suggested by the estimates above, a separate PMTA is needed for each delivery unit model, as well as for each and every flavor SKU.  SBA further noted that over 90 percent of tobacco manufacturers and tobacco retailers are small businesses, meaning that these costs will be particularly significant for the vast majority of industry.  One final note: Although some vape shops might not realize it, if they mix e-liquid flavors, FDA considers them to be manufacturers.  Unless they cease flavor mixing — something that vape shops have used to attract customers and achieve profitability — they, too, will need to submit PMTAs.

USDA Approves Hemp Plans for First Set of States and Indian Tribes

As we discussed in a prior blog post, in late October 2019, USDA issued its long-awaited hemp production interim final rule, which provided states and Indian tribes with the opportunity to submit plans concerning the monitoring and regulation of hemp production for USDA’s approval. On December 27, 2019, USDA approved the first set of plans submitted by Louisiana, New Jersey, and Ohio, and the Flandreau Santee Sioux, Santa Rosa Cahuilla, and La Jolla Band of Luiseno tribes. USDA approved these plans in the middle of its public comment period on the interim final rule, which was extended until January 29, 2020.  

USDA approval is significant, as hemp growers must be licensed or authorized under an applicable state, tribe, or USDA production program in order to produce hemp. At least 20 additional states and 16 Indian tribes have submitted, or are in the process of drafting, a hemp plan for USDA’s review.

Although USDA appears to be making plan approval decisions on a rolling basis, interested stakeholders are still able to submit comments to the interim final rule docket via the docket link until the end of the month.  

Illinois Begins Adult Use Cannabis Sales

On New Year’s Day, Illinois began cannabis sales through its new adult use program.  The Illinois Department of Financial and Professional Regulation (IDFPR), the state agency charged with implementing and administering the program under the Cannabis Regulation and Tax Act that passed last year, reported over 77,000 transactions and over $3.1 million in cannabis product sales on January 1st, alone.  January 2nd saw approximately $2.25 million in sales, and the first five days' total was close to $11 million.  In fact, sales have been so strong that some dispensaries have temporary ceased sales because of product shortages.

While only 37 adult use dispensaries were approved as of the kickoff date, a total of 75 licenses are to be awarded by May 1, 2020.  Those interested in applying can find the necessary forms on IDFPR’s website. Applications for craft grow, infuser, and transportation licenses will be available on the Illinois Department of Agriculture’s website by January 7, 2020.

New Nutrition Facts Label Requirement Goes Into Effect for Largest Firms, FDA Issues Related Guidance Days Before Deadline

On May 27, 2016, FDA published final rules on the new Nutrition Facts label for packaged foods.  Despite rollout delays, which we discussed previously, the Agency finally seemed poised to move forward with the NFL rules as of late March 2018, as we also discussed previously.  However, it was not until December 30, 2019, just two days before the NFL rules were set to go live for firms with annual sales over $10 million, that FDA issued its final NFL guidance aimed at conventional food and dietary supplement manufacturers.  Manufacturers with less than $10 million in annual food sales will have an additional year to comply.  The guidance addresses a number of topics, including: (1) the definition of a single-serving container; (2) reference amounts customarily consumed (RACCs), which are used by companies to determine serving sizes; (3) dual-column labeling, including formatting issues for products that have limited space for nutrition labeling; and (4) a variety of other issues, such as requirements relating to the labeling of chewing gum and to multi-unit retail food packages.

Per the guidance, a single-serving container is a product that is packaged and sold individually (i.e., that bears an NFL and contains less than 200 percent of the applicable RACC for that product.  The entire content of a single-serving container must be labeled as one serving.  The Agency provides as an example of a single-serving container a 20-oz bottle of soda.  The RACC for carbonated beverages is 12 oz (360 mL); a 20-oz bottle of soda contains approximately 167 percent of the RACC and meets the definition of a single-serving container.

By contrast, products that are packaged and sold individually and that contain at least 200 percent and up to and including 300 percent of the applicable RACC (e.g., a 75-gram bag of chips that is 250 percent of the RACC of 30 grams for chips) must provide an additional column within the NFL that lists the quantitative amounts and percent daily values (DVs) for the entire package, as well as a column listing the quantitative amounts and percent DVs for a serving that is less than the entire package (i.e., the serving size derived from the RACC), unless an exception applies.  The first column must list nutrition information based on the serving size for the product, and the second column must list the nutrition information based on the entire contents of the package.

The dual-column labeling requirements also apply to products in discrete units.  If a discrete unit weighs at least 200 percent and up to and including 300 percent of the applicable RACC, the serving size will be the amount that approximates the RACC, and the product label must provide dual-column labeling for the discrete unit, unless an exemption applies.  The first column would list the nutrition information based on the serving size, while the second column would list the nutrition information for the individual unit.

With regard to dual-column labeling exemptions for small packages, an exemption is available for products that have: (1) a total surface area available to bear labeling of less than 12 square inches; or (2) a total surface area available to bear labeling of 40 or less square inches and the package shape or size cannot accommodate a standard vertical column or tabular display on any label panel.  Some other notable exemptions from the requirement include: (1) raw fruits, vegetables, and seafood for which nutrition labeling is provided voluntarily on the product or in advertising, or as is required when claims are made about the product; (2) products that require further preparation (e.g., pancake mix) and for which an additional column of nutrition information for the “as prepared” form of the food is voluntarily provided; (3) products that are commonly consumed in combination with another food (e.g., cereal and milk) and for which an additional column of nutrition information for the combination is voluntarily provided; (4) products for which an additional column of nutrition information for two or more groups for which Reference Daily Intakes (RDIs) are established (e.g., both infants and children less than 4 years of age) and provided; (5) popcorn products for which an additional column of information per 1 cup popped popcorn is provided; and (6) varied-weight products.

The Agency has provided samples of numerous labeling formats here.

In explaining the reasoning behind the NFL rules, and the guidance, Claudine Kavanaugh, Ph.D., MPH, RD, Director of the Office of Nutrition and Food Labeling in FDA’s Center for Food Safety and Applied Nutrition, noted that:

The new Nutrition Facts label has updated serving sizes for many foods. We know that Americans are eating differently, and the amount of calories and nutrients on the label is required to reflect what people actually eat and drink – not a recommendation of   what to eat or drink. The new label, including this dual column layout, will drive consumers’ attention to the calories and Percent Daily Value of nutrients that they are actually consuming.

Despite the Agency’s issuance of draft guidance in November 2018, the timing of the final guidance — so close to the NFL rules’ compliance date — is interesting, to say the least.  Fortunately, however, FDA announced that it does not plan to take enforcement action until July 1st, focusing in the meantime on working to educate manufacturers that are not in compliance.

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We are continuing to monitor these developments and will provide updates, as appropriate. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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